File No. 33-48894
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
PREFFERED ADJUSTABLE RATE TRUST, SERIES 2
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : August 1, 1994
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the issuer has registered an indefinite amount of
securities. A 24f-2 Notice for the offering was last filed on
May 27, 1994.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
FIRST TRUST PREFERRED ADJUSTABLE RATE TRUST, SERIES 2
519,110 UNITS
PROSPECTUS
Part One
Dated July 19, 1994
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.
The Trust
The First Trust Preferred Adjustable Rate Trust, Series 2 (the "Trust") is a
unit investment trust consisting of a portfolio of adjustable rate preferred
stocks (Adjustable Preferred Securities). At June 16, 1994, each unit
represented a 1/519,110 undivided interest in the principal and net income of
the Trust (see "The Trust" in Part Two).
The units being offered by this Prospectus are issued and outstanding units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of units will accrue to the Sponsor. No proceeds from
the sale of units will be received by the Trust.
Public Offering Price
The Public Offering Price per 100 units is equal to the aggregate value of the
Adjustable Preferred Securities in the Portfolio of the Trust, plus or minus
cash, if any, in the Income and Capital Accounts of the Trust divided by the
number of units outstanding, multiplied by 100, plus a sales charge of 4.5% of
the Public Offering Price (4.712% of the net amount invested) excluding income
and principal cash. At June 16, 1994, the Public Offering Price per 100 units
was $472.71 (see "Public Offering" in Part Two). The minimum purchase is
$1,000.
Please retain both parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
FIRST TRUST PREFERRED ADJUSTABLE RATE TRUST, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 16, 1994
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: United States Trust Company of New York
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Number of units 519,110
Fractional Undivided Interest in the Trust per 100 units 1/519,110
Public Offering Price:
Aggregate Value of Adjustable Preferred Securities in
the Portfolio $2,319,181
Aggregate Value of Adjustable Preferred Securities per
100 units $446.76
Income and Principal Cash in the Portfolio $25,443
Income and Principal Cash per 100 units $4.90
Sales Charge 4.712% (4.5% of Public Offering Price,
excluding Income and Principal Cash) $21.05
Public Offering Price per 100 units $472.71
Redemption Price and Sponsor's Repurchase Price per 100 units
($21.05 less than the Public Offering Price per 100 units) $451.66
</TABLE>
Date Trust Established July 22, 1992
Mandatory Termination Date August 1, 1997
<TABLE>
<S> <C>
Calculation of Estimated Net Annual Dividends per 100 units:
Estimated Gross Annual Dividends per 100 units (based on
the most recent quarterly dividend declared by each
issuer, which is subject to periodic adjustments) $32.68
Estimated Annual Expense per 100 units 2.00
______
Estimated Net Annual Dividends per 100 units $30.68
======
</TABLE>
Evaluator's Annual Fee: $.30 per 100 units outstanding. Evaluations for
purposes of sale, purchase or redemption of units are made as of the close of
trading (4:00 p.m. Eastern time) on the New York Stock Exchange on each day on
which it is open.
Supervisory fee payable to an affiliate Maximum of $.25 per 100
of the Sponsor units outstanding annually
Trustee's Annual Fee: $.84 per 100 units outstanding.
Capital Distribution Record Date: Fifteenth day of each December.
Capital Distribution Date: On or prior to the thirty-first day of each
December.
Income Distribution Record Date: Fifteenth day of each month.
Income Distribution Date: The last day of each month.
A unit holder who owns at least 2,500 units may request an "In-Kind
Distribution" upon tendering units for redemption or upon termination of the
Trust. See "Rights of Unit Holders - How are Income and Capital Distributed?"
in Part Two.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust
Special Situations Trust, Series 36,
First Trust Preferred Adjustable Rate Trust, Series 2
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Special Situations Trust, Series
36, First Trust Preferred Adjustable Rate Trust, Series 2 as of March 31,
1994, and the related statements of operations and changes in net assets for
the year then ended and for the period from the Initial Date of Deposit,
July 22, 1992, to March 31, 1993. These financial statements are the
responsibility of the Trust's Trustee. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of March 31, 1994, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Special
Situations Trust, Series 36, First Trust Preferred Adjustable Rate Trust,
Series 2 at March 31, 1994, and the results of its operations and changes in
its net assets for the year then ended and for the period from the Initial
Date of Deposit, July 22, 1992, to March 31, 1993, in conformity with
generally accepted accounting principles.
ERNST & YOUNG
Chicago, Illinois
June 24, 1994
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
FIRST TRUST PREFERRED ADJUSTABLE RATE TRUST, SERIES 2
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Adjustable rate preferred securities, at value
(cost $2,431,569) (Note 1) $2,540,885
Dividends receivable 13,001
Cash 449,723
__________
3,003,609
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Accrued liabilities 126
__________
Net assets, applicable to 528,510 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $2,431,569
Net unrealized appreciation (Note 2) 109,316
Distributable funds 462,598
__________
$3,003,483
==========
Net asset value per 100 units $568.29
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
FIRST TRUST PREFERRED ADJUSTABLE RATE TRUST, SERIES 2
PORTFOLIO - See notes to portfolio.
March 31, 1994
<TABLE>
<CAPTION>
Standard & Optional
Name of Issuer Poor's Redemption Par or
Number of Adjustable Preferred Stock Provision Stated Value Market
of Shares Preferred Securities Ratings(1) per Share(2) per Share Value
<C> <S> <C> <C> <C> <C>
14,810 BankAmerica, Series A BBB+ $50.00 $50.00 $738,649
7,429 Cleveland Electric Illumination,
Series L B (3) 100.00 100.00 679,754
12,576 First Chicago Corporation BBB+ 50.00 50.00 630,372
5,378 Niagara Mohawk Power
Corporation, Series A BB+ (3) 25.00 25.00 132,433
7,140 Wells Fargo & Company, Series B BBB 51.50 50.00 359,677
__________
$2,540,885
==========
</TABLE>
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
FIRST TRUST PREFERRED ADJUSTABLE RATE TRUST, SERIES 2
NOTES TO PORTFOLIO
March 31, 1994
(1) All ratings are by Standard & Poor's Corporation as of March 31, 1994.
(2) All of the Adjustable Preferred Securities are currently redeemable at
the option of the issuer. Optional redemption provisions, which may be
exercised in whole or in part, are initially at prices of par or stated
value plus a premium, then subsequently at prices declining to par or
stated value.
(3) Standard & Poor's Corporation states: "Preferred stock rated "BB", "B",
and "CCC" are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay preferred stock obligations.
"BB" indicates the lowest degree of speculation and "CCC" the highest
degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
FIRST TRUST PREFERRED ADJUSTABLE RATE TRUST, SERIES 2
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
the Initial
Date of
Deposit,
Year July 22,
ended 1992, to
Mar. 31, Mar. 31,
1994 1993
<S> <C> <C>
Dividend income $313,282 282,516
Expenses:
Trustee's fees and related expenses (8,524) (4,891)
Evaluator's fees (1,700) (1,276)
Supervisory fees (1,484) (1,030)
____________________
Total expenses (11,708) (7,197)
____________________
Investment income - net 301,574 275,319
Net gain (loss) on investments:
Net realized gain (loss) 49,956 1,000
Change in unrealized appreciation or depreciation (34,821) 144,137
____________________
15,135 145,137
____________________
Net increase in net assets resulting from operations $316,709 420,456
====================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
FIRST TRUST PREFERRED ADJUSTABLE RATE TRUST, SERIES 2
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from
the Initial
Date of
Deposit,
Year July 22,
ended 1992, to
Mar. 31, Mar. 31,
1994 1993
<S> <C> <C>
Net increase in net assets resulting from operations:
Investment income - net $301,574 275,319
Net realized gain (loss) on investments 49,956 1,000
Change in unrealized appreciation or depreciation
on investments (34,821) 144,137
______________________
316,709 420,456
Units issued (575,010 in 1993) - 5,535,623
Units redeemed (84,834 in 1994) (705,776) -
Distributions to unit holders:
Investment income - net (307,455) (229,390)
Principal from investment transactions (1,592,059) (799,985)
______________________
(1,899,514) (1,029,375)
______________________
Total increase (decrease) in net assets (2,288,581) 4,926,704
Net assets:
At the beginning of the period (representing
613,344 and 38,334 units outstanding) 5,292,064 365,360
______________________
At the end of the period (including
distributable funds applicable to Trust
units of $462,598 and $45,944 at March 31,
1994 and 1993, respectively)
$3,003,483 5,292,064
======================
Trust units outstanding at the end of the period 528,510 613,344
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
FIRST TRUST PREFERRED ADJUSTABLE RATE TRUST, SERIES 2
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
The adjustable rate preferred securities are stated at the closing sale prices
of listed adjustable rate preferred securities and the bid prices of over-the-
counter traded adjustable rate preferred securities, as reported by Securities
Evaluation Service, Inc. (the Evaluator), certain shareholders of which are
officers of the Sponsor.
Investment income -
Dividends on each adjustable rate preferred security are recognized on such
adjustable rate preferred security's ex-dividend date.
Security cost -
Cost of the adjustable rate preferred securities is based on the market value
of such securities on the dates the securities were deposited in the Trust.
The cost of securities sold is determined using the average cost method.
Sales and redemptions of adjustable rate preferred securities are recorded on
the trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
The Trust pays a fee for Trustee services to United States Trust Company of
New York, which is based on $.84 per annum per 100 units outstanding based on
the largest aggregate number of units outstanding during the calendar year.
In addition, the Evaluator will receive an annual fee based on $.30 per 100
units outstanding. The Trust also pays recurring financial reporting costs
and an annual supervisory fee payable to an affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at March 31, 1994 follows:
<TABLE>
<S> <C>
Unrealized appreciation $121,736
Unrealized depreciation (12,420)
________
$109,316
========
</TABLE>
<PAGE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
underlying value of the adjustable rate preferred securities on the date of an
investor's purchase, plus a sales charge of 4.5% of the public offering price
which is equivalent to approximately 4.712% of the net amount invested.
Distributions to unit holders -
Income distributions to unit holders are made on the last day of each month to
unit holders of record on the fifteenth day of such month. Principal
distributions to unit holders, if any, are made on or prior to December 31 to
unit holders of record on December 15.
Selected data per 100 units of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from
the Initial
Date of
Deposit,
Year July 22,
ended 1992, to
Mar. 31, Mar. 31,
1994 1993
<S> <C> <C>
Dividend income $55.46 47.48
Expenses (2.07) (1.21)
_________________
Investment income - net 53.39 46.27
Distributions to unit holders:
Investment income - net (54.17) (37.53)
Principal from investment transactions (294.93) (130.43)
Net gain (loss) on investments 1.18 31.41
_________________
Total increase (decrease) in net assets (294.53) (90.28)
Net assets:
Beginning of each period 862.82 953.10
_________________
End of each period $568.29 862.82
=================
</TABLE>
Dividend income, Expenses and Investment income - net per 100 units have been
calculated based on the weighted average number of units outstanding during
each period (564,842 units and 595,090 units during the periods ended
March 31, 1994 and 1993, respectively). Distributions to unit holders of
Investment income - net and Principal from investment transactions per 100
units represent the trust's actual distributions during each period. The net
gain (loss) on investments per 100 units includes the effects of changes
arising from issuance of 575,010 additional units during the period at net
asset values which differed from the net asset value per 100 units of the
original 38,334 units ($953.10 per 100 units) on July 22, 1992.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 36
FIRST TRUST ADJUSTABLE PREFERRED RATE TRUST, SERIES 2
PART ONE
Must be Accompanied by Part Two
____________________
P R O S P E C T U S
____________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: United States Trust Company of New York
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
Preferred Adjustable Rate Series
The First Trust (registered trademark) Special Situations Trust
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated May 23, 1994
The Trust. The First Trust Special Situations Trusts (the "Trusts"
and each a "Trust") are unit investment trusts consisting of portfolios
containing adjustable preferred stocks.
The objective of the Trust is to provide for income and the preservation
of capital by investing each Trust's portfolio in adjustable preferred
stocks ("Adjustable Preferred Securities"). See "Portfolio" appearing
in Part One for each Trust. Each Adjustable Preferred Security
currently pays dividends at a rate which is subject to periodic
adjustments based on changes in interest rates. See "Portfolio"
appearing in Part One for each Trust. Each Trust has a Mandatory
Termination Date as indicated in Part One for each Trust. There
is, of course, no guarantee that the objective of the Trust will
be achieved.
Each Unit of a Trust represents an undivided fractional interest
in all the Adjustable Preferred Securities deposited in such Trust.
The Adjustable Preferred Securities deposited in each Trust's
portfolio have no fixed maturity date and the value of these underlying
Adjustable Preferred Securities may fluctuate with changes in
interest rates and with the financial condition of the issuers.
The Adjustable Preferred Securities are subject to redemption.
See "Portfolio" appearing in Part One for each Trust.
Public Offering Price. The secondary market Public Offering Price
per Unit will be based upon the aggregate underlying value of
the Adjustable Preferred Securities in the Trust (generally determined
by the closing sales prices of listed Adjustable Preferred Securities
and the bid prices of over-the-counter traded Adjustable Preferred
Securities) plus or minus a pro rata share of cash, if any, in
the Capital and Income Accounts of the Trust plus a sales charge
as indicated in Part One for each Trust. The minimum purchase
is as indicated in Part One for each Trust. The sales charge is
reduced on a graduated scale for sales involving at least a minimum
number of Units or a minimum dollar amount. See "How is the Public
Offering Price Determined?"
Estimated Annual Distributions. The estimated net annual dividend
distribution to Unit holders (based on the most recent quarterly
dividend declared with respect to the Adjustable Preferred Securities
in a Trust) is as indicated in Part One. The estimated net annual
dividend distributions per Unit will vary with changes in fees
and expenses of each Trust, with changes in dividends received,
which may occur on a frequent basis, and with the sale, redemption
or liquidation of Adjustable Preferred Securities; therefore,
there is no assurance that the annual dividend distribution will
be realized in the future.
Dividend and Capital Gains Distributions. Distributions of dividends
received by the Trust will be paid monthly in cash on the Distribution
Date to Unit holders of record on the Record Date as set forth
in the "Summary of Essential Information" appearing in Part One
for each Trust. Distributions of funds in the Capital Account,
if any, will be made at least annually in December of each year.
Any distribution of income and/or capital gains will be net of
the expenses of a Trust. See "What is the Federal Tax Status of
Unit Holders?" Additionally, upon termination of a Trust, the
Trustee will distribute, upon surrender of Units for redemption,
to each Unit holder his pro rata share of the Trust's assets,
less expenses, in the manner set forth under "Rights of Unit Holders-How
are Income and Capital Distributed?"
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE
REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
Secondary Market for Units. The Sponsor may maintain a market
for Units of the Trusts and offer to repurchase such Units at
prices which are based on the aggregate underlying value of Adjustable
Preferred Securities in the Trusts (generally determined by the
closing sale prices of listed Adjustable Preferred Securities
and the bid prices of over-the-counter traded Adjustable Preferred
Securities) plus or minus cash, if any, in the Capital and Income
Accounts of the Trust. As of the date of this Prospectus the Sponsor
is maintaining a secondary market. If a secondary market is not
maintained in the future, a Unit holder may redeem Units through
redemption at prices based upon the aggregate underlying value
of the Adjustable Preferred Securities in the Trust (generally
determined by the closing sale prices of listed Adjustable Preferred
Securities and the bid prices of over-the-counter traded Adjustable
Preferred Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust. For certain
Trusts, a Unit holder tendering at least the amount specified
in "Summary of Essential Information" appearing in Part One for
such Trust for redemption may request a distribution of shares
of Adjustable Preferred Securities (reduced by customary transfer
and registration charges) in lieu of payment in cash. See "How
May Units be Redeemed?"
Termination. Commencing on the Mandatory Termination Date for
each Trust, Adjustable Preferred Securities will begin to be sold
in connection with the termination of such Trust. The Sponsor
will determine the manner, timing and execution of the sale of
Adjustable Preferred Securities. Written notice of any termination
of a Trust specifying the time or times at which Unit holders
may surrender their certificates for cancellation shall be given
by the Trustee to each Unit holder at his address appearing on
the registration books of the Trust maintained by the Trustee.
At least 60 days prior to the Mandatory Termination Date of a
Trust the Trustee will provide written notice thereof to all Unit
holders and will include with such notice a form to enable Unit
holders to elect a distribution of shares of Adjustable Preferred
Securities (reduced by customary transfer and registration charges)
if such Unit holder owns at least the amount specified in "Summary
of Essential Information" appearing in Part One for each Trust,
rather than to receive payment in cash for such Unit holder's
pro rata share of the amounts realized upon the disposition by
the Trustee of Adjustable Preferred Securities. To be effective,
the election form, together with surrendered certificates and
other documentation required by the Trustee, must be returned
to the Trustee at least five business days prior to the Mandatory
Termination Date of the Trust. Unit holders not electing a distribution
of shares of Adjustable Preferred Securities will receive a cash
distribution within a reasonable time after a Trust is terminated.
See "Rights of Unit Holders-How are Income and Capital Distributed?"
Page 2
Preferred Adjustable Rate Series
The First Trust Special Situations Trust
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust is a series of investment
companies created by the Sponsor under the name of The First Trust
Special Situations Trust, all of which are generally similar but
each of which is separate and is designated by a different series
number (the "Trust"). Each Series consists of an underlying separate
unit investment trust consisting of a portfolio containing adjustable
preferred stocks ("Adjustable Preferred Securities"), created
under the laws of the State of New York pursuant to a Trust Agreement
(the "Indenture"), dated the Initial Date of Deposit, with Nike
Securities L.P., as Sponsor, United States Trust Company of New
York, as Trustee, Securities Evaluation Service, Inc., as Evaluator,
and First Trust Advisors L.P., as Portfolio Supervisor.
The objective of the Trusts is to provide for income and the preservation
of capital through an investment in Adjustable Preferred Securities.
See "Portfolio" appearing in Part One for each Trust. Each Adjustable
Preferred Security currently pays dividends at a rate which is
subject to periodic adjustments based on changes in interest rates.
The Adjustable Preferred Securities in each Trust consist of preferred
securities of companies which are considered to be concentrated
within the banking industry and the public utility industry. There
is, of course, no guarantee that the objective of the Trusts will
be achieved.
What are the Expenses and Charges?
At no cost to the Trusts, the Sponsor has borne all the expenses
of creating and establishing the Trusts, including the cost of
the initial preparation, printing and execution of the Indenture
and the certificates for the Units, legal and accounting expenses,
expenses of the Trustee and other out-of-pocket expenses. The
Sponsor will not receive any fees in connection with its activities
relating to the Trusts. However, First Trust Advisors L.P., an
affiliate of the Sponsor, will receive an annual supervisory fee,
which is not to exceed the amount set forth under "Summary of
Essential Information" appearing in Part One for each Trust, for
providing portfolio supervisory services for each Trust. Such
fee is based on the number of Units outstanding in the Trust on
January 1 of each year except for the year or years in which an
initial offering period occurs in which case the fee for a month
is based on the number of Units outstanding at the end of such
month. The fee may exceed the actual costs of providing such supervisory
services for a Trust, but at no time will the total amount received
for portfolio supervisory services rendered to unit investment
trusts of which Nike Securities L.P. is the Sponsor in any calendar
year exceed the aggregate cost to First Trust Advisors L.P. of
supplying such services in such year.
The Evaluator will receive a fee as indicated in the "Summary
of Essential Information" appearing in Part One for each Trust.
The Trustee pays certain expenses of the Trusts for which it is
reimbursed by each Trust. The Trustee will receive for its ordinary
recurring services to the Trust an annual fee as indicated in
Part One for each Trust. For a discussion of the services performed
by the Trustee pursuant to its obligations under the Indenture,
reference is made to the material set forth under "Rights of Unit
Holders."
The Trustee's and Evaluator's fees are payable from the Income
Account of a Trust to the extent funds are available and then
from the Capital Account of the Trust. Since the Trustee has the
use of the funds being held in the Capital and Income Accounts
for payment of expenses and redemptions and since such Accounts
are noninterest-bearing to Unit holders, the Trustee benefits
thereby. Part of the Trustee's compensation for its services to
the Trust is expected to result from the use of these funds. Both
fees may be increased without approval of the Unit holders by
amounts not exceeding proportionate increases under the category
"All Services Less Rent of Shelter" in the Consumer Price Index
published by the United States Department of Labor.
The following additional charges are or may be incurred by the
Trusts: all legal and annual auditing expenses of the Trustee
incurred by or in connection with its responsibilities under the
Indenture; the expenses and costs of any action undertaken by
the Trustee to protect the Trusts and the rights and interests
Page 3
of the Unit holders; fees of the Trustee for any extraordinary
services performed under the Indenture; indemnification of the
Trustee for any loss, liability or expense incurred by it without
negligence, bad faith or willful misconduct on its part, arising
out of or in connection with its acceptance or administration
of the Trust; indemnification of the Sponsor for any loss, liability
or expense incurred without gross negligence, bad faith or willful
misconduct in acting as Depositor of the Trusts; all taxes and
other government charges imposed upon the Adjustable Preferred
Securities or any part of the Trusts (no such taxes or charges
are being levied or made or, to the knowledge of the Sponsor,
contemplated). The above expenses and the Trustee's annual fee,
when paid or owing to the Trustee, are secured by a lien on the
Trusts. In addition, the Trustee is empowered to sell Adjustable
Preferred Securities in the Trusts in order to make funds available
to pay all these amounts if funds are not otherwise available
in the Income and Capital Accounts of the Trusts. Since the Adjustable
Preferred Securities are all preferred stocks and the income stream
produced by dividend payments is unpredictable, the Sponsor cannot
provide any complete assurance that dividends will be sufficient
to meet any or all expenses of the Trusts. As described above,
if in the unlikely event dividends are insufficient to cover expenses,
Adjustable Preferred Securities will have to be sold to meet Trust
expenses. These sales may result in capital gains or losses to
Unit holders. See "What is the Federal Tax Status of Unit Holders?"
The Indenture requires a Trust to be audited on an annual basis
at the expense of such Trust by independent auditors selected
by the Sponsor. So long as the Sponsor is making a secondary market
for the Units, the Sponsor is required to bear the cost of such
annual audits to the extent such cost exceeds $.50 per 100 Units.
Unit holders of a Trust covered by an audit may obtain a copy
of the audited financial statements upon request.
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the Federal
income tax consequences of the purchase, ownership and disposition
of the Units. The summary is limited to investors who hold the
Units as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code
of 1986 (the "Code"). Unit holders should consult their tax advisers
in determining the Federal, state, local and any other tax consequences
of the purchase, ownership and disposition of Units in a Trust.
Neither the Sponsor nor Chapman and Cutler has reviewed the Adjustable
Preferred Securities deposited in a Trust. Rather, they have assumed
that (i) the Adjustable Preferred Securities qualify as equity
for federal income tax purposes and that, accordingly, amounts
received by a Trust with respect to the Adjustable Preferred Securities
will qualify as dividends as defined in Section 316 of the Code
and (ii) such dividends would generally be eligible for the dividends
received deduction if the Adjustable Preferred Securities were
directly held by a Unit holder for at least 46 days.
Based on the above, in the opinion of Chapman and Cutler, special
counsel for the Sponsor, under existing law:
1. Each Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated
as the owner of a pro rata portion of the assets of a Trust under
the Code; and the income of a Trust will be treated as income
of the Unit holders thereof under the Code. Each Unit holder will
be considered to have received his pro rata share of the income
derived from each Adjustable Preferred Security when such income
is received by a Trust.
2. Each Unit holder will have a taxable event when a Trust disposes
of an Adjustable Preferred Security (whether by sale, exchange,
redemption, or otherwise) or upon the sale or redemption of Units
by such Unit holder. The price a Unit holder pays for his Units,
including sales charges, is allocated among his pro rata portion
of each Adjustable Preferred Security held by a Trust (in proportion
to the fair market values thereof on the date the Unit holder
purchases his Units) in order to determine his initial cost for
his pro rata portion of each Adjustable Preferred Security held
by a Trust. For Federal income tax purposes, a Unit holder's pro
rata portion of dividends, as defined by Section 316 of the Code,
paid by a corporation with respect to an Adjustable Preferred
Security held by a Trust are taxable as ordinary income to the
extent of such corporation's current and accumulated "earnings
and profits". A Unit holder's pro rata
Page 4
portion of dividends paid on such Adjustable Preferred Security
which exceed such current and accumulated earnings and profits
will first reduce a Unit holder's tax basis in such Adjustable
Preferred Security, and to the extent that such dividends exceed
a Unit holder's tax basis in such Adjustable Preferred Security
shall generally be treated as capital gain. In general, any such
capital gain will be short-term unless a Unit holder has held
his Units for more than one year.
3. A Unit holder's portion of gain, if any, upon the sale or redemption
of Units or the disposition of Adjustable Preferred Securities
held by a Trust will generally be considered a capital gain except
in the case of a dealer or a financial institution and will be
long-term if the Unit holder has held his Units for more than
one year. A Unit holder's portion of loss, if any, upon the sale
or redemption of Units or the disposition of Adjustable Preferred
Securities held by a Trust will generally be considered a capital
loss except in the case of a dealer or a financial institution
and, in general, will be long-term if the Unit holder has held
his Units for more than one year. Unit holders should consult
their tax advisers regarding the recognition of such capital gains
and losses for Federal income tax purposes.
4. The Code provides that "miscellaneous itemized deductions"
are allowable only to the extent that they exceed two percent
of an individual taxpayer's adjusted gross income. Miscellaneous
itemized deductions subject to this limitation under present law
include a Unit holder's pro rata share of expenses paid by the
Trust, including fees of the Trustee and the Evaluator.
Dividends Received Deduction. A corporation that owns Units will
generally be entitled to a 70% dividends received deduction with
respect to such Unit holder's pro rata portion of dividends received
by a Trust (to the extent such dividends are taxable as ordinary
income, as discussed above) in the same manner as if such corporation
directly owned the Adjustable Preferred Securities paying such
dividends. However, a corporation owning Units should be aware
that Sections 246 and 246A of the Code impose additional limitations
on the eligibility of dividends for the 70% dividends received
deduction. These limitations include a requirement that stock
(and therefore Units) must generally be held at least 46 days
(as determined under Section 246(c) of the Code). Proposed regulations
have been issued which address special rules that must be considered
in determining whether the 46-day holding requirement is met.
Moreover, the allowable percentage of the deduction will be reduced
from 70% if a corporate Unit holder owns certain stock (or Units)
the financing of which is directly attributable to indebtedness
incurred by such corporation. It should be noted that various
legislative proposals that would affect the dividends received
deduction have been introduced. Unit holders should consult their
tax advisers with respect to limitations on and possible modifications
to the dividends received deduction.
Recognition of Taxable Gain or Loss Upon Disposition of Securities
by the Trust or Disposition of Units. As discussed above, a Unit
holder may recognize taxable gain (or loss) when an Adjustable
Preferred Security is disposed of by the Trust or if the Unit
holder disposes of a Unit. For taxpayers other than corporations,
net capital gains are subject to a maximum stated marginal tax
rate of 28%. However, it should be noted that legislative proposals
are introduced from time to time that affect tax rates and could
affect relative differences at which ordinary income and capital
gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Tax Act") raised
tax rates on ordinary income while capital gains remain subject
to a 28% maximum stated rate. Because some or all capital gains
are taxed at a comparatively lower rate under the Tax Act, the
Tax Act includes a provision that recharacterizes capital gains
as ordinary income in the case of certain financial transactions
that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Unit holders and prospective
investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
Special Tax Consequences of In-Kind Distributions Upon Redemption
of Units or Termination of a Trust. As discussed in "Rights of
Unit holders-How are Income and Capital Distributed?", under certain
circumstances a Unit holder who owns at least the amount specified
in "Summary of Essential Information" appearing in Part One for
each Trust may request an In-Kind Distribution upon the redemption
of Units or the termination of a Trust. The Unit holder requesting
an In-Kind Distribution will be liable for expenses related thereto
(the "Distribution Expenses") and the amount of such In-Kind Distribution
will be reduced by the amount of the Distribution Expenses. See
"Rights of Unit holders-How are Income and Capital Distributed?"
Page 5
As previously discussed, prior to the redemption of Units or
the termination of a Trust, a Unit holder is considered as owning
a pro rata portion of each of the Trust assets for Federal income
tax purposes. The receipt of an In-Kind Distribution upon the
redemption of Units or the termination of a Trust would be deemed
an exchange of such Unit holder's pro rata portion of each of
the shares of stock and other assets held by such Trust in exchange
for an undivided interest in whole shares of stock plus, possibly,
cash.
There are generally three different potential tax consequences
which may occur under an In-Kind Distribution with respect to
each Adjustable Preferred Security owned by a Trust. An "Adjustable
Preferred Security" for this purpose is a particular class of
stock issued by a particular corporation. If the Unit holder receives
only whole shares of an Adjustable Preferred Security in exchange
for his or her pro rata portion in each share of such security
held by a Trust, there is no taxable gain or loss recognized upon
such deemed exchange pursuant to Section 1036 of the Code. If
the Unit holder receives whole shares of a particular Adjustable
Preferred Security plus cash in lieu of a fractional share of
such Adjustable Preferred Security, and if the fair market value
of the Unit holder's pro rata portion of the shares of such Adjustable
Preferred Security exceeds his tax basis in his pro rata portion
of such Adjustable Preferred Security, taxable gain would be recognized
in an amount not to exceed the amount of such cash received, pursuant
to Section 1031(b) of the Code. No taxable loss would be recognized
upon such an exchange pursuant to Section 1031(c) of the Code,
whether or not cash is received in lieu of a fractional share.
Under either of these circumstances, special rules will be applied
under Section 1031(d) of the Code to determine the Unit holder's
tax basis in the shares of such particular Adjustable Preferred
Security which he receives as part of the In-Kind Distribution.
Finally, if a Unit holder's pro rata interest in an Adjustable
Preferred Security does not equal a whole share, he may receive
entirely cash in exchange for his pro rata portion of a particular
Adjustable Preferred Security. In such case, taxable gain or loss
is measured by comparing the amount of cash received by the Unit
holder with his tax basis in such Adjustable Preferred Security.
Because a Trust will own many Adjustable Preferred Securities,
a Unit holder who requests an In-Kind Distribution will have to
analyze the tax consequences with respect to each Adjustable Preferred
Security owned by a Trust. In analyzing the tax consequences with
respect to each Adjustable Preferred Security, such Unit holder
must allocate the Distribution Expenses among the Adjustable Preferred
Securities (the "Allocable Expenses"). The Allocable Expenses
will reduce the amount realized with respect to each Adjustable
Preferred Security so that the fair market value of the shares
of such Adjustable Preferred Security received (if any) and cash
received in lieu thereof (as a result of any fractional shares)
by such Unit holder should equal the amount realized for purposes
of determining the applicable tax consequences in connection with
an In-Kind Distribution. A Unit holder's tax basis in shares of
such Adjustable Preferred Security received will be increased
by the Allocable Expenses relating to such Adjustable Preferred
Security. The amount of taxable gain (or loss) recognized upon
such exchange will generally equal the sum of the gain (or loss)
recognized under the rules described above by such Unit holder
with respect to each Adjustable Preferred Security owned by a
Trust. Unit holders who request an In-Kind Distribution are advised
to consult their tax advisers in this regard.
General. Each Unit holder will be requested to provide the Unit
holder's taxpayer identification number to the Trustee and to
certify that the Unit holder has not been notified that payments
to the Unit holder are subject to back-up withholding. If the
proper taxpayer identification number and appropriate certification
are not provided when requested, distributions by a Trust to such
Unit holder (including amounts received upon the redemption of
Units) will be subject to back-up withholding at a specified percentage.
Distributions by a Trust will generally be subject to United States
income taxation and withholding in the case of Units held by non-resident
alien individuals, foreign corporations or other non-United States
persons. Such persons should consult their tax advisers.
Unit holders will be notified annually of the amounts of income
dividends includable in the Unit holder's gross income and amounts
of Trust expenses which may be claimed as itemized deductions.
Page 6
Dividend income and long-term capital gains may also be subject
to state and local taxes. Investors should consult their tax advisers
for specific information on the tax consequences of particular
types of distributions.
Unit holders desiring to purchase Units for tax-deferred plans
and IRAs should consult their broker for details on establishing
such accounts. Units may also be purchased by persons who already
have self-directed plans established. See "Why are Investments
in the Trusts Suitable for Retirement Plans?"
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Trusts for New York tax matters, under the existing income
tax laws of the State of New York, each Trust is not an association
taxable as a corporation and the income of each Trust will be
treated as the income of the Unit holders thereof.
Why are Investments in the Trusts Suitable for Retirement Plans?
Units of a Trust may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans. Generally, the Federal income tax relating to
capital gains and income received in each of the foregoing plans
is deferred until distributions are received. Distributions from
such plans are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred
rollover treatment. Investors considering participation in any
such plan should review specific tax laws related thereto and
should consult their attorneys or tax advisers with respect to
the establishment and maintenance of any such plan. Such plans
are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
PORTFOLIO
What are Adjustable Preferred Securities?
Each Trust consists of different issues of Adjustable Preferred
Securities, all of which may be issued by companies that are listed
on a national securities exchange or the NASDAQ National Market
System or are traded in the over-the-counter market. The Trusts
consist of Adjustable Preferred Securities of companies which
are considered to be concentrated within the banking industry
and the public utility industry.
The Trusts consist of such of the Adjustable Preferred Securities
listed under "Portfolio" appearing in Part One for each Trust
as may continue to be held from time to time in each Trust and
any additional Adjustable Preferred Securities acquired and held
by a Trust pursuant to the provisions of the Trust Agreement together
with cash held in the Income and Capital Accounts. Neither the
Sponsor nor the Trustee shall be liable in any way for any failure
in any of the Adjustable Preferred Securities.
Because certain of the Adjustable Preferred Securities from time
to time may be sold under certain circumstances described herein,
and because the proceeds from such events will be distributed
to Unit holders and will not be reinvested, no assurance can be
given that a Trust will retain for any length of time its present
size and composition. Although the Portfolio is not managed, the
Sponsor may instruct the Trustee to sell Adjustable Preferred
Securities under certain limited circumstances. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Adjustable
Preferred Securities such as those acquired in connection with
a merger or other transaction. If offered such new or exchanged
securities or property, the Trustee shall reject the offer. However,
in the event such securities or property are nonetheless acquired
by the Trust, they may be accepted for deposit in the Trust and
either sold by the Trustee or held in the Trust pursuant to the
direction of the Sponsor (who may rely on the advice of the Portfolio
Supervisor). See "How May Adjustable Preferred Securities be Removed
from a Trust?" Adjustable Preferred Securities, however, will
not be sold by a Trust to take advantage of market fluctuations
or changes in anticipated rates of appreciation or depreciation.
Holders of preferred stocks of the type of Adjustable Preferred
Securities held in each Portfolio have the right to receive dividends
at an adjustable rate, when and as declared by the issuer's Board
of Directors but do not participate in other amounts available
for distribution by the issuing corporation. The adjustable dividend
rates on the Adjustable Preferred Securities, in general, are
adjusted quarterly based on changes in interest rates on certain
U.S. Treasury notes and obligations. The adjustable dividend rates
generally have a maximum rate which may not be exceeded and a
minimum rate below which the actual dividend rate on the Adjustable
Page 7
Preferred Securities may not fall. Although one of the objectives
of a Trust is to invest in instruments that will pay dividends
that will increase with a general increase in interest rates,
at any given time the adjustable dividend rate of a particular
issuer may not correspond with the investment risk of such issuer
or with interest rates in general. In such cases, the Adjustable
Preferred Securities may trade at a price which is at a discount
from the par or stated value of the Adjustable Preferred Security
or at a price which is less than the price at which the Adjustable
Preferred Security was deposited in the Trust. In cases of a decline
of the issuer's creditworthiness or an increase in interest rates,
there is the risk that the value of a Portfolio and hence the
Units will decline. The Sponsor cannot predict future economic
policies or their consequences on interest rates, or the course
or extent of interest rate fluctuations or preferred stock prices
in the future.
Issues of preferred stock generally provide that the preferred
stock may be liquidated, either by a partial scheduled redemption
pursuant to a sinking fund or by a refunding redemption pursuant
to which, at the option of the issuer, all or part of the issue
can be retired from any available funds, at prices which may or
may not include a premium over the involuntary liquidation preference,
which generally is the same as the par or stated value of the
Adjustable Preferred Securities, except as noted under the "Portfolio"
in Part One for each Trust. In general, optional redemption provisions
are more likely to be exercised when the Adjustable Preferred
Securities are valued at a premium over par or stated value than
when they are valued at a discount from par or stated value. Generally,
the value of the Adjustable Preferred Securities will be at a
premium over par when market interest rates fall below the coupon
rate, as adjusted from time to time.
An investment in Units should be made with an understanding of
the risks which an investment in preferred stocks entails, including
the risk that the financial condition of the issuers of the Adjustable
Preferred Securities or the general condition of the preferred
stock market may worsen and the value of the Adjustable Preferred
Securities and therefore the value of the Units may decline. Adjustable
Preferred Securities may be susceptible to general stock market
movements and to increases and decreases of value as market confidence
in and perceptions of the issuers change. These perceptions are
based on unpredictable factors including expectations regarding
government, economic, monetary and fiscal policies, inflation
and interest rates, economic expansion or contraction, and global
or regional political, economic or banking crises. Adjustable
Preferred Securities are also subject to Congressional reductions
in the dividends-received deduction which would adversely affect
the after-tax return to the investors who can take advantage of
the deduction. Such reduction also might adversely affect the
value of preferred stocks in general. Holders of preferred stocks
have rights to receive payments from the issuers of those preferred
stocks that are generally subordinate to those of creditors of,
or holders of debt obligations or, in some cases, other senior
preferred stocks of, such issuers. Adjustable Preferred Securities
do not represent an obligation of the issuer and, therefore, do
not offer any assurance of income or provide the same degree of
protection of capital as do debt securities. The issuance of additional
debt securities or senior preferred stock will create prior claims
for payment of principal and interest and senior dividends which
could adversely affect the ability and inclination of the issuer
to declare or pay dividends on its preferred stock or the rights
of holders of preferred stock with respect to assets of the issuer
upon liquidation or bankruptcy. The value of preferred stocks
is subject to market fluctuations for as long as the preferred
stocks remain outstanding, and thus the value of the Adjustable
Preferred Securities in the Portfolio may be expected to fluctuate
over the life of a Trust to values higher or lower than those
prevailing on the Initial Date of Deposit.
Holders of preferred stocks incur more risk than holders of debt
obligations because preferred stockholders, as owners of the entity,
have generally inferior rights to receive payments from the issuer
in comparison with the rights of creditors of or holders of debt
obligations issued by the issuer.
Whether or not the Adjustable Preferred Securities are listed
on a national securities exchange, the principal trading market
for the Adjustable Preferred Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market
for the Adjustable Preferred Securities may depend on whether
dealers will make a market in the Adjustable Preferred Securities.
There can be no assurance that a market will be made for any of
the Adjustable Preferred Securities, that any market for the Adjustable
Preferred Securities will be maintained or of the liquidity of
the Adjustable Preferred Securities in any markets made.
Page 8
In addition, a Trust may be restricted under the Investment Company
Act of 1940 from selling Adjustable Preferred Securities to the
Sponsor. The price at which the Adjustable Preferred Securities
may be sold to meet redemptions, and the value of a Trust, will
be adversely affected if trading markets for the Adjustable Preferred
Securities are limited or absent.
Unit holders will be unable to dispose of any of the Adjustable
Preferred Securities in a Portfolio, as such, and will not be
able to vote the Adjustable Preferred Securities. As the holder
of the Adjustable Preferred Securities, the Trustee will have
the right to vote all of the voting stocks in the Trust and will
vote such stocks in accordance with the instructions of the Sponsor.
The Trusts may be deemed to be concentrated in Adjustable Preferred
Securities issued by companies in the banking industry. In view
of this, an investment in Units of a Trust should be made with
an understanding of the problems and risks inherent in the banking
industry in general. Commercial banks and their holding companies
are especially subject to the adverse effects of economic recession,
volatile interest rates, portfolio concentrations in loans to
particular businesses or debtors, such as energy or real estate
businesses or less developed countries, and competition from new
entrants in their fields of business. Economic conditions in the
real estate markets, which have been weak in the recent past,
can have a significant effect upon banks that have a substantial
percentage of their assets invested in loans secured by real estate,
as has recently been the case for a number of banks with respect
to commercial real estate in the northeastern and southwestern
regions of the United States. During recent years the ratings
of U.S. banks and holding companies have been subject to extensive
downgrades due primarily to deterioration in asset quality and
the attendant impact on earnings and capital adequacy. Commercial
banks and their holding companies are subject to extensive federal
regulation and, when such institutions are state-chartered, to
state regulation as well. Regulatory actions, such as increases
in the minimum capital requirements applicable to commercial banks
and the recent increases in deposit insurance premiums required
to be paid by commercial banks, can negatively impact earnings
and the ability of a company to pay dividends. Neither federal
insurance of deposits nor governmental regulation, however, ensures
the solvency or profitability of commercial banks or their holding
companies, or insures against any risk of investment in the securities
issued by such institutions.
The deposit insurance system is currently under review by Congress
and federal regulators. Currently proposed reforms of that system
could, among other things, restrict the ways in which deposited
moneys can be used by banks or reduce the dollar amount or number
of deposits insured for any depositor. Such reforms could reduce
profitability as the investment choices available to banking institutions
are limited and as consumers look for investment vehicles other
than bank deposits. Legislation broadening bank powers also is
being studied by Congress which, if enacted, could provide new
earnings opportunities for banks but would also expose banks to
well-established competitors, such as securities firms and insurance
companies, as well as companies engaged in other areas of business
if Congress were to eliminate the historic barriers between commerce
and banking. Increased competition may also result from the broadening
of regional and national interstate banking powers. The Sponsor
makes no prediction as to what, if any, manner of bank regulatory
reform might ultimately be adopted or what ultimate effect such
reform might have.
The Trusts may be deemed to be concentrated in Adjustable Preferred
Securities issued by the public utility industry. An investment
in Units of a Trust should be made with an understanding of the
characteristics of the public utility industry and the risks which
such an investment may entail. General problems of the public
utility industry include the difficulty in obtaining an adequate
return on invested capital despite frequent increases in rates
which have been granted by the public service commissions having
jurisdiction, the difficulty in financing large construction programs
during an inflationary period, the restrictions on operations
and increased cost and delays attributable to environmental and
other regulatory considerations, the difficulty to the capital
markets in absorbing utility debt and equity securities, the difficulty
in obtaining fuel for electric generation at reasonable prices,
and the effects of energy conservation. There is no assurance
that such commissions will in the future grant rate increases
or that any such increases will be adequate to cover operating
and other expenses and debt service requirements. All of the public
utilities which
Page 9
are issuers of the Adjustable Preferred Securities in the portfolio
have been experiencing many of these problems in varying degrees.
In addition, federal, state and municipal governmental authorities
may from time to time review existing, and impose additional regulations
governing the licensing, construction and operation of nuclear
power plants, which may adversely affect the ability of the issuers
of certain of the Adjustable Preferred Securities in a Trust's
portfolio to make dividend payments on their Adjustable Preferred
Securities.
Utilities are generally subject to extensive regulation by state
utility commissions which, for example, establish the rates which
may be charged and the appropriate rate of return on an approved
asset base, which must be approved by the state commissions. Certain
utilities have had difficulty from time to time in persuading
regulators, who are subject to political pressures, to grant rate
increases necessary to maintain an adequate return on investment
and voters in many states have the ability to impose limits on
rate adjustments (for example, by initiative or referendum). Any
unexpected limitations could negatively affect the profitability
of utilities whose budgets are planned far in advance. In addition,
gas pipeline and distribution companies have had difficulties
in adjusting to short and surplus energy supplies, enforcing or
being required to comply with long-term contracts and avoiding
litigation from their customers, on the one hand, or suppliers,
on the other.
Certain of the issuers of the Adjustable Preferred Securities
in the Trusts may own or operate nuclear generating facilities.
Governmental authorities may from time to time review existing,
and impose additional, requirements governing the licensing, construction
and operation of nuclear power plants. Nuclear generating projects
in the electric utility industry have experienced substantial
cost increases, construction delays and licensing difficulties.
These have been caused by various factors, including inflation,
high financing costs, required design changes and rework, allegedly
faulty construction, objections by groups and governmental officials,
limits on the ability to finance, reduced forecasts of energy
requirements and economic conditions. This experience indicates
that the risk of significant cost increases, delays and licensing
difficulties remains present until completion and achievement
of commercial operation of any nuclear project. Also, nuclear
generating units in service have experienced unplanned outages
or extensions of scheduled outages due to equipment problems or
new regulatory requirements sometimes followed by a significant
delay in obtaining regulatory approval to return to service. A
major accident at a nuclear plant anywhere, such as the accident
at a plant in Chernobyl could cause the imposition of limits or
prohibitions on the operation, construction or licensing of nuclear
units in the United States.
In view of the pending investigations and the other uncertainties
discussed above, there can be no assurance that any company's
share of the full cost of nuclear units under construction ultimately
will be recovered in rates or of the extent to which a company
could earn an adequate return on its investment in such units.
The likelihood of a significantly adverse event occurring in any
of the areas of concern described above varies, as does the potential
severity of any adverse impact. It should be recognized, however,
that one or more of such adverse events could occur and individually
or collectively could have a material adverse impact on the financial
condition or the results of operations of a company's ability
to make interest and principal payments on its outstanding debt
or to pay dividends.
Other general problems of the gas, water, telephone and electric
utility industry (including state and local joint action power
agencies) include difficulty in obtaining timely and adequate
rate increases, difficulty in financing large construction programs
to provide new or replacement facilities during an inflationary
period, rising costs of rail transportation to transport fossil
fuels, the uncertainty of transmission service costs for both
interstate and intrastate transactions, changes in tax laws which
adversely affect a utility's ability to operate profitably, increased
competition in service costs, recent reductions in estimates of
future demand for electricity and gas in certain areas of the
country, restrictions on operations and increased cost and delays
attributable to environmental considerations, uncertain availability
and increased cost of capital, unavailability of fuel for electric
generation at reasonable prices, including the steady rise in
fuel costs and the costs associated with conversion to alternate
fuel sources such as coal, availability and cost of natural gas
for resale, technical and cost factors and other problems associated
with construction, licensing, regulation
Page 10
and operation of nuclear facilities for electric generation, including
among other considerations the problems associated with the use
of radioactive materials and the disposal of radioactive wastes,
and the effects of energy conservation. Each of the problems referred
to could adversely affect the ability of the issuers of certain
of the Adjustable Preferred Securities in the Trusts to make dividend
payments.
The Underwriter in its general securities business acts as agent
or principal in connection with the purchase and sale of securities,
including the Adjustable Preferred Securities in the Trusts, and
may act as a market maker in certain of the Adjustable Preferred
Securities. The Underwriter also from time to time may issue reports
on and make recommendations relating to equity securities, which
may include the Adjustable Preferred Securities.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before
making a decision to invest in a Trust.
The value of the Adjustable Preferred Securities will fluctuate
over the life of a Trust and may be more or less than the price
at which they were deposited in such Trust. The Adjustable Preferred
Securities may appreciate or depreciate in value (or pay dividends)
depending on the full range of economic and market influences
affecting these securities.
The Trustee will have no power to vary the investments of a Trust,
i.e., the Trustee will have no managerial power to take advantage
of market variations to improve a Unit holder's investment, but
may dispose of Adjustable Preferred Securities only under limited
circumstances. See "How May Adjustable Preferred Securities be
Removed from a Trust?"
To the best of the Sponsor's knowledge, there is no litigation
pending as of the date of this Part Two Prospectus in respect
of any Adjustable Preferred Security which might reasonably be
expected to have a material adverse effect on a Trust. Litigation
may be instituted on a variety of grounds with respect to the
Adjustable Preferred Securities. The Sponsor is unable to predict
whether any such litigation will be instituted, or if instituted,
whether such litigation might have a material adverse effect on
a Trust.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. The Public Offering
Price is based on the aggregate underlying value of the Adjustable
Preferred Securities in a Trust, plus or minus cash, if any, in
the Income and Capital Accounts of such Trust, plus the applicable
sales charge divided by the amount of Units of the Trust outstanding.
The minimum purchase of each Trust is as indicated in Part One
for each Trust. The applicable sales charge is reduced by a discount
as indicated below for volume purchases:
<TABLE>
<CAPTION>
Discount
Dollar Amount per 100
of Transaction Units
______________ ________
<C> <S>
$100,000 to $249,999 0.50%
$250,000 to $499,999 1.00%
$500,000 or more 2.00%
</TABLE>
Any such reduced sales charge shall be the responsibility of the
selling underwriter or dealer. The reduced sales charge structure
will apply on all purchases of Units in the Trust by the same
person on any one day from any one underwriter or dealer. Additionally,
Units purchased in the name of the spouse of a purchaser or in
the name of a child of such purchaser under 21 years of age will
be deemed, for the purposes of calculating the applicable sales
charge, to be additional purchases by the purchaser. The reduced
sales charges will also be applicable to a trustee or other fiduciary
purchasing securities for a single trust estate or single fiduciary
account. The purchaser must inform the Underwriter or dealer of
any such combined purchase prior to the sale in order to obtain
the indicated discount. In addition, with respect to the employees,
officers and directors (including their immediate family members,
defined as spouses, children, grandchildren,
Page 11
parents, grandparents, mothers-in-law, fathers-in-law, sons-in-law
and daughters-in-law, and trustees, custodians or fiduciaries
for the benefit of such persons) of the Sponsor and the Underwriter
and their subsidiaries, the sales charge is reduced by 2.0% of
the Public Offering Price for purchases of Units during the secondary
public offering period.
The Public Offering Price of Units on the date of this Part Two
Prospectus may vary from the amount stated under "Summary of Essential
Information" in Part One for each Trust in accordance with fluctuations
in the prices of the underlying Adjustable Preferred Securities.
The aggregate underlying value of the Adjustable Preferred Securities
will be determined in the following manner: if the Adjustable
Preferred Securities are listed on a national securities exchange
or the NASDAQ National Market System, this evaluation is generally
based on the closing sale prices on that exchange or that system
(unless it is determined that these prices are inappropriate as
a basis for valuation) or, if there is no closing sale price on
that exchange or system, at the closing bid prices. If the Adjustable
Preferred Securities are not so listed or, if so listed and the
principal market therefore is other than on the exchange, the
evaluation shall generally be based on the current bid price on
the over-the-counter market (unless it is determined that these
prices are inappropriate as a basis for evaluation). If current
bid prices are unavailable, the evaluation is generally determined
(a) on the basis of current bid prices for comparable securities,
(b) by appraising the value of the Adjustable Preferred Securities
on the bid side of the market or (c) by any combination of the
above.
Although payment is normally made five business days following
the order for purchase, payment may be made prior thereto. Cash,
if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. Delivery of
Certificates representing Units so ordered will be made five business
days following such order or shortly thereafter. See "Rights of
Unit Holders-How may Units be Redeemed?" for information regarding
the ability to redeem Units ordered for purchase.
How are Units Distributed?
Units repurchased in the secondary market may be offered by this
Part Two Prospectus at the secondary market public offering price
determined in the manner described above.
The Sponsor reserves the right to change the amount of the concession
or agency commission from time to time. Certain commercial banks
may be making Units of the Trusts available to their customers
on an agency basis. A portion of the sales charge paid by these
customers is retained by or remitted to the banks. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust Units; however,
the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act. In Texas
and in certain other states, any banks making Units available
must be registered as broker/dealers under state law.
What are the Sponsor's Profits?
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between
the price at which Units are purchased and the price at which
Units are resold (which price includes a sales charge as indicated
in Part One for each Trust) or redeemed. The secondary market
public offering price of Units may be greater or less than the
cost of such Units to the Sponsor.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the
Trustee. Ownership of Units may be evidenced by registered certificates
executed by the Trustee and the Sponsor. Delivery of certificates
representing Units ordered for purchase is normally made five
business days following such order or shortly thereafter. Certificates
are transferable by presentation and surrender to the Trustee
properly endorsed or accompanied by a written instrument or instruments
of transfer. Certificates to be redeemed must be properly endorsed
or accompanied by a written instrument or instruments of transfer.
A Unit holder must sign exactly as his name appears on the face
of the
Page 12
certificate with the signature guaranteed by a participant in
the Securities Transfer Agents Medallion Program ("STAMP") or
such other signature guaranty program in addition to, or in substitution
for, STAMP, as may be accepted by the Trustee. In certain instances
the Trustee may require additional documents such as, but not
limited to, trust instruments, certificates of death, appointments
as executor or administrator or certificates of corporate authority.
Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form.
The Trustee will maintain an account for each such Unit holder
and will credit each such account with the number of Units purchased
by that Unit holder. Within two business days of the issuance
or transfer of Units held in uncertificated form, the Trustee
will send to the registered owner of Units a written initial transaction
statement containing a description of the Trust; the number of
Units issued or transferred; the name, address and taxpayer identification
number, if any, of the new registered owner; a notation of any
liens and restrictions of the issuer and any adverse claims to
which such Units are or may be subject or a statement that there
are no such liens, restrictions or adverse claims; and the date
the transfer was registered. Uncertificated Units are transferable
through the same procedures applicable to Units evidenced by certificates
(described above), except that no certificate need be presented
to the Trustee and no certificate will be issued upon the transfer
unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder
may be required to pay $2.00 to the Trustee per certificate reissued
or transferred and to pay any governmental charge that may be
imposed in connection with each such transfer or exchange. For
new certificates issued to replace destroyed, stolen or lost certificates,
the Unit holder may be required to furnish indemnity satisfactory
to the Trustee and pay such expenses as the Trustee may incur.
Mutilated certificates must be surrendered to the Trustee for
replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income received with respect
to any of the securities in a Trust on or about the Income Distribution
Dates to Unit holders of record on the preceding Income Record
Date. See "Summary of Essential Information" in Part One for each
Trust. Because dividends are not received by a Trust at a constant
rate throughout the year, and because the dividend rate of each
Adjustable Preferred Security is subject to periodic adjustments,
such distributions to Unit holders may be more or less than the
amount credited to the Income Account as of the Record Date. Notification
to the Trustee of the transfer of Units is the responsibility
of the purchaser, but in the normal course of business such notice
is provided by the selling broker-dealer. The pro rata share of
cash in the Capital Account of a Trust will be computed as of
the fifteenth day of each month. Proceeds received on the sale
of any Securities in a Trust, to the extent not used to meet redemptions
of Units or pay expenses, will, however, be distributed at least
annually on the last day of each month to Unit holders of record
on the fifteenth day of such month if the amount available for
distribution equals at least $1.00 per 100 Units. The Trustee
is not required to pay interest on funds held in the Capital Account
of a Trust (but may itself earn interest thereon and therefore
benefit from the use of such funds). Notwithstanding, distributions
of funds in the Capital Account, if any, will be made on the last
day of each December to Unit holders of record as of December
15 for each Trust. See "What is the Federal Tax Status of Unit
Holders?"
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of any
distribution made by the Trust if the Trustee has not been furnished
the Unit holder's tax identification number in the manner required
by such regulations. Any amount so withheld is transmitted to
the Internal Revenue Service and may be recovered by the Unit
holder only when filing a tax return. Under normal circumstances
the Trustee obtains the Unit holder's tax identification number
from the selling broker. However, a Unit holder should examine
his or her statements from the Trustee to make sure that the Trustee
has been provided a certified tax identification number in order
to avoid this possible "back-up withholding."
Page 13
In the event the Trustee has not been previously provided such
number, one should be provided as soon as possible.
Within a reasonable time after a Trust is terminated, each Unit
holder will, upon surrender of his Units for redemption, receive
(i) the pro rata share of the amounts realized upon the disposition
of the Adjustable Preferred Securities, unless he elects an In-Kind
Distribution as described below and (ii) a pro rata share of any
other assets of such Trust, less expenses of the Trust. Not less
than 60 days prior to the Mandatory Termination Date of a Trust
the Trustee will provide written notice thereof to all Unit holders
and will include with such notice a form to enable Unit holders
to elect a distribution of shares of the Adjustable Preferred
Securities (an "In-Kind Distribution"), if such Unit holder owns
at least the amount specified in "Summary of Essential Information"
appearing in Part One for each Trust, rather than to receive payment
in cash for such Unit holder's pro rata share of the amounts realized
upon the disposition by the Trustee of the Adjustable Preferred
Securities. An In-Kind Distribution will be reduced by customary
transfer and registration charges. To be effective, the election
form, together with surrendered certificates and other documentation
required by the Trustee, must be returned to the Trustee at least
five business days prior to the Mandatory Termination Date of
a Trust. A Unit holder my, of course, at any time after the Adjustable
Preferred Securities are distributed, sell all or a portion of
the shares.
The Trustee will credit to the Income Account of a Trust any dividends
received on the Adjustable Preferred Securities therein. All other
receipts (e.g. return of principal, capital gains, etc.) are credited
to the Capital Account of the Trust.
The Trustee may establish reserves (the "Reserve Account") within
a Trust for state and local taxes, if any, and any governmental
charges payable out of the Trust.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and
the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per 100 Units. Within
a reasonable period of time after the end of each calendar year,
the Trustee shall furnish to each person who at any time during
the calendar year was a Unit holder of a Trust the following information
in reasonable detail: (1) a summary of transactions in such Trust
for such year; (2) any Adjustable Preferred Securities sold during
the year and the Adjustable Preferred Securities held at the end
of such year by the Trust; (3) the redemption price per 100 Units
based upon a computation thereof on the 31st day of December of
such year (or the last business day prior thereto); and (4) amounts
of income and capital distributed during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Adjustable Preferred Securities in the Trust furnished
to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its corporate trust office in the City of New
York of the certificates representing the Units to be redeemed,
or in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed as explained above (or by
providing satisfactory indemnity, as in connection with lost,
stolen or destroyed certificates), and payment of applicable governmental
charges, if any. No redemption fee will be charged. On the seventh
calendar day following such tender, or if the seventh calendar
day is not a business day, on the first business day prior thereto,
the Unit holder will be entitled to receive in cash an amount
for each Unit equal to the Redemption Price per Unit next computed
after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received
by the Trustee, except that as regards Units received after 4:00
p.m. Eastern time, the date of tender is the next day on which
the New York Stock Exchange is open for trading and such Units
will be deemed to have been tendered to the Trustee on such day
for redemption at the redemption price computed on that day. Units
so redeemed shall be cancelled.
Page 14
For certain Trusts, any Unit holder tendering at least the amount
specified in "Summary of Essential Information" appearing in Part
One for each Trust for redemption by request by written notice
submitted at the time of tender from the Trustee in lieu of a
cash redemption a distribution of shares of Adjustable Preferred
Securities in an amount and value of Adjustable Preferred Securities
per Unit equal to the Redemption Price Per Unit as determined
as of the evaluation next following tender. To the extent possible,
in-kind distributions ("In-Kind Distributions") shall be made
by the Trustee through the distribution of each of the Adjustable
Preferred Securities in book-entry form to the account of the
Unit holder's bank or broker-dealer at the Depository Trust Company.
An In-Kind Distribution will be reduced by customary transfer
and registration charges. The tendering Unit holder will receive
his pro rata number of whole shares of each of the Adjustable
Preferred Securities comprising the portfolio and cash from the
Capital Account equal to the fractional shares to which the tendering
Unit holder's In-Kind Distribution to facilitate the distribution
of whole shares, such adjustment to be made on the basis of the
value of Adjustable Preferred Securities on the date of tender.
If funds in the Capital Account are insufficient to cover the
required cash distribution to the tendering Unit holder, the Trustee
may sell Adjustable Preferred Securities in the manner described
above.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the
principal amount of a Unit redemption if the Trustee has not been
furnished the redeeming Unit holder's tax identification number
in the manner required by such regulations. Any amount so withheld
is transmitted to the Internal Revenue Service and may be recovered
by the Unit holder only when filing a tax return. Under normal
circumstances the Trustee obtains the Unit holder's tax identification
number from the selling broker. However, any time a Unit holder
elects to tender Units for redemption, such Unit holder should
make sure that the Trustee has been provided a certified tax identification
number in order to avoid this possible "back-up withholding."
In the event the Trustee has not been previously provided such
number, one must be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of a Trust to the extent that funds are
available for such purpose. All other amounts paid on redemption
shall be withdrawn from the Capital Account of a Trust.
The Trustee is empowered to sell Adjustable Preferred Securities
of a Trust in order to make funds available for redemption. To
the extent that Adjustable Preferred Securities are sold, the
size and diversity of a Trust will be reduced. Such sales may
be required at a time when Adjustable Preferred Securities would
not otherwise be sold and might result in lower prices than might
otherwise be realized.
The Redemption Price per Unit (as well as the secondary market
Public Offering Price) will be determined on the basis of the
aggregate underlying value of the Adjustable Preferred Securities
in a Trust plus or minus cash, if any, in the Income and Capital
Accounts of the Trust. The Redemption Price per Unit is the pro
rata share of each Unit determined by the Trustee by adding: (1)
the cash on hand in the Trust; (2) the aggregate value of the
Adjustable Preferred Securities held in the Trust, as determined
by the Evaluator on the basis of the aggregate underlying value
of the Adjustable Preferred Securities in the Trust next computed;
and (3) dividends receivable on the Adjustable Preferred Securities
trading ex-dividend as of the date of computation; and deducting
therefrom: (1) amounts representing any applicable taxes or governmental
charges payable out of the Trust; (2) any amounts owing to the
Trustee for its advances; (3) an amount representing estimated
accrued expenses of the Trust, including but not limited to fees
and expenses of the Trustee (including legal and auditing fees),
the Evaluator and supervisory fees, if any; (4) cash held for
distribution to Unit holders of record of the Trust as of the
business day prior to the evaluation being made; and (5) other
liabilities incurred by the Trust; and finally dividing the results
of such computation by the number of Units of the Trust outstanding
as of the date thereof.
The aggregate value of the Adjustable Preferred Securities will
be determined in the following manner: if the Adjustable Preferred
Securities are listed on a national securities exchange or the
NASDAQ National Market System, this evaluation is generally based
on the closing sale prices on that exchange or that system (unless
it is determined that these prices are inappropriate as a basis
for valuation) or, if there is no closing sale
Page 15
price on that exchange or system, at the closing bid prices. If
the Adjustable Preferred Securities are not so listed or, if so
listed and the principal market therefore is other than on the
exchange, the evaluation shall generally be based on the current
bid price on the over-the-counter market (unless these prices
are inappropriate as a basis for evaluation). If current bid prices
are unavailable, the evaluation is generally determined (a) on
the basis of current bid prices for comparable securities, (b)
by appraising the value of the Adjustable Preferred Securities
on the bid side of the market or (c) by any combination of the
above.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on the New York Stock Exchange is restricted or any emergency
exists, as a result of which disposal or evaluation of the Securities
is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. Under
certain extreme circumstances, the Sponsor may apply to the Securities
and Exchange Commission for an order permitting a full or partial
suspension of the right of Unit holders to redeem their Units.
The Trustee is not liable to any person in any way for any loss
or damage which may result from any such suspension or postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before 4:00 p.m. Eastern time
on the same business day and by making payment therefor to the
Unit holder not later than the day on which the Units would otherwise
have been redeemed by the Trustee. Units held by the Sponsor may
be tendered to the Trustee for redemption as any other Units.
In the event the Sponsor does not purchase Units, the Trustee
may sell Units tendered for redemption in the over-the-counter
market, if any, as long as the amount to be received by the Unit
holder is equal to the amount he would have received on redemption
of the Units.
The offering price of any Units acquired by the Sponsor will be
in accord with the Public Offering Price described in the then
effective prospectus describing such Units. Any profit or loss
resulting from the resale or redemption of such Units will belong
to the Sponsor.
How May Adjustable Preferred Securities be Removed from a Trust?
The Portfolio of each Trust is not "managed" by the Sponsor or
the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of
an Adjustable Preferred Security in the event that an issuer defaults
in the payment of a dividend that has been declared, that any
action or proceeding has been instituted restraining the payment
of dividends or there exists any legal question or impediment
affecting such Adjustable Preferred Security, that the issuer
of the Adjustable Preferred Security has breached a covenant which
would affect the payments of dividends, the credit standing of
the issuer or otherwise impair the sound investment character
of the Adjustable Preferred Security, that the issuer has defaulted
on the payment on any other of its outstanding obligations, that
the price of the Adjustable Preferred Security has declined to
such an extent or other such credit factors exist so that in the
opinion of the Sponsor, the retention of such Adjustable Preferred
Securities would be detrimental to a Trust. The acquisition by
the Trust of any securities or other property other than the Adjustable
Preferred Securities is prohibited. Pursuant to the Indenture
and with limited exceptions, the Trustee may sell any securities
or other property acquired in exchange for Adjustable Preferred
Securities such as those acquired in connection with a merger
or other transaction. If offered such new or exchanged securities
or property, the Trustee shall reject the offer. However, in the
event such securities or property are nonetheless acquired by
a Trust, they may be accepted for deposit in the Trust and either
sold by the Trustee or held in the Trust pursuant to the direction
of the Sponsor (who may rely on the advice of the Portfolio Supervisor).
Proceeds from the sale of Adjustable Preferred Securities (or
any securities or other property received by a Trust in exchange
for Adjustable Preferred Securities) by the Trustee are credited
to the Capital Account of a Trust for distribution to Unit holders
or to meet redemptions.
Page 16
The Trustee may also sell Adjustable Preferred Securities designated
by the Sponsor, or if not so directed, in its own discretion,
for the purpose of redeeming Units of the Trust tendered for redemption
and the payment of expenses.
The Sponsor, in designating Adjustable Preferred Securities to
be sold by the Trustee, will generally make selections in order
to maintain, to the extent practicable, the proportionate relationship
among the number of shares of individual issues of Adjustable
Preferred Securities. To the extent this is not practicable, the
composition and diversity of the Adjustable Preferred Securities
may be altered. In order to obtain the best price for a Trust,
it may be necessary for the Sponsor to specify minimum amounts
(generally 100 shares) in which blocks of Adjustable Preferred
Securities are to be sold.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds, The First Trust GNMA, Templeton Growth and Treasury
Trust and Templeton Foreign Fund & U.S. Treasury Securities Trust.
First Trust introduced the first insured unit investment trust
in 1974 and to date more than $7 billion in First Trust unit investment
trusts have been deposited. The Sponsor's employees include a
team of professionals with many years of experience in the unit
investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141.
As of December 31, 1993, the total partners' capital of Nike
Securities L.P. was $12,743,032 (audited). (This paragraph relates
only to the Sponsor and not to the Trust or to any series thereof
or to any other Underwriter. The information is included herein
only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will
be made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is United States Trust Company of New York with its
principal place of business at 45 Wall Street, New York, New York,
10005 and its unit investment offices at 770 Broadway, New York,
New York 10003. Unit holders who have questions regarding the
Trust may call the Customer Service Help Line at 1-800-682-7520.
The Trustee is a member of the New York Clearing House Association
and is subject to supervision and examination by the Comptroller
of the Currency, The Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Securities. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any
Page 17
State and having at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Adjustable
Preferred Securities. In the event of the failure of the Sponsor
to act under the Indenture, the Trustee may act thereunder and
shall not be liable for any action taken by it in good faith under
the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or
upon or in respect of a Trust which the Trustee may be required
to pay under any present or future law of the United States of
America or of any other taxing authority having jurisdiction.
In addition, the Indenture contains other customary provisions
limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding amounts prescribed
by the Securities and Exchange Commission, or (b) terminate the
Indenture and liquidate such Trust as provided herein, or (c)
continue to act as Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187. The Evaluator
may resign or may be removed by the Sponsor and the Trustee, in
which event the Sponsor and the Trustee are to use their best
efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment
by the successor Evaluator. If upon resignation of the Evaluator
no successor has accepted appointment within 30 days after notice
of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator
shall be under no liability to the Trustee, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee).
The Indenture provides that each Trust shall terminate upon the
Mandatory Termination Date indicated in Part One for each Trust
under "Summary of Essential Information" or when the value of
the Adjustable Preferred Securities is less than the lower of
$2,000,000 or 20% of the total value of Adjustable Preferred Securities
deposited in a Trust during the primary offering period. The Trusts
also may be liquidated at any time by consent of 100% of the Unit
holders of the Trust. In the event of termination, written notice
thereof will be sent by the Trustee to all Unit holders of a Trust.
Within a reasonable period after termination, the Trustee will
follow the procedures set forth under "How are Income and Capital
Distributed?"
Page 18
Commencing on the Mandatory Termination Date, Adjustable Preferred
Securities will begin to be sold in connection with the termination
of a Trust. The Sponsor will determine the manner, timing and
execution of the sale of the Adjustable Preferred Securities.
Written notice of any termination of a Trust specifying the time
or times at which Unit holders may surrender their certificates
for cancellation shall be given by the Trustee to each Unit holder
at his address appearing on the registration books of the Trust
maintained by the Trustee. At least 60 days prior to the Mandatory
Termination Date of a Trust the Trustee will provide written notice
thereof to all Unit holders and will include with such notice
a form to enable Unit holders to elect a distribution of shares
of Adjustable Preferred Securities (reduced by customary transfer
and registration charges), if such Unit holder owns at least the
amount specified in "Summary of Essential Information" appearing
in Part One for each Trust, rather than to receive payment in
cash for such Unit holder's pro rata share of the amounts realized
upon the disposition by the Trustee of Adjustable Preferred Securities.
To be effective, the election form, together with surrendered
certificates and other documentation required by the Trustee,
must be returned to the Trustee at least five business days prior
to the Mandatory Termination Date of such Trust. Unit holders
not electing a distribution of shares of Adjustable Preferred
Securities will receive a cash distribution from the sale of the
remaining Adjustable Preferred Securities within a reasonable
time after their Trust is terminated. Regardless of the distribution
involved, the Trustee will deduct from the funds of the Trusts
any accrued costs, expenses, advances or indemnities provided
by the Trust Agreement, including estimated compensation of the
Trustee and costs of liquidation and any amounts required as a
reserve to provide for payment of any applicable taxes or other
governmental charges. Any sale of Adjustable Preferred Securities
in the Trusts upon termination may result in a lower amount than
might otherwise be realized if such sale were not required at
such time. The Trustee will then distribute to each Unit holder
his pro rata share of the balance of the Income and Capital Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating
to Federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor. Carter, Ledyard & Milburn, will act as counsel for
the Trustee and as special New York tax counsel for the Trusts.
Experts
The financial statements of the Trust appearing in Part One of
this Prospectus and Registration Statement have been audited by
Ernst & Young, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
DESCRIPTION OF PREFERRED STOCK RATINGS*
*As published by Standard & Poor's Corporation and Moody's Investors
Service, Inc., respectively.
Standard & Poor's Corporation. A Standard & Poor's preferred stock
rating is an assessment of the capacity and willingness of an
issuer to pay preferred stock dividends and any applicable sinking
fund obligations. A preferred stock rating differs from a bond
rating inasmuch as it is assigned to an equity issue, which issue
is intrinsically different from, and subordinated to, a debt issue.
Therefore, to reflect this difference, the preferred stock rating
symbol will normally not be higher than the bond rating symbol
assigned to, or that would be assigned to, the senior debt of
the same issuer.
The preferred stock ratings are based on the following considerations:
I. Likelihood of payment-capacity and willingness of the issuer
to meet the timely payment of preferred stock dividends and any
applicable sinking fund requirements in accordance with the terms
of the obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
Page 19
"AAA" This is the highest rating that may be assigned by Standard
& Poor's to a preferred stock issue and indicates an extremely
strong capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated
AAA.
"A" An issued rated A is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions.
"BBB" An issue rated BBB is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this category
than for issues in the A category.
"BB," "B," "CCC" Preferred stock issues rated BB, B and CCC are
regarded, on balance, as predominantly speculative with respect
to the issuer's capacity to pay preferred stock obligations. BB
indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such issues will likely have some
quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
Moody's Investors Service, Inc. Moody's Rating Policy Review Board
extended its rating services to include quality designations on
preferred stock on October 1, 1973. The decision to rate preferred
stock, which Moody's had done prior to 1935, was prompted by evidence
of investor interest. Moody's believes that its rating of preferred
stock is especially appropriate in view of the ever-increasing
amount of these securities outstanding, and the fact that continuing
inflation and its ramifications have resulted generally in the
dilution of some of the protection afforded them as well as other
fixed-income securities.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
Preferred stock rating symbols and their definitions are as follows:
"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and
the least risk of dividend impairment within the universe of preferred
stocks.
"aa" An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a reasonable
assurance that earnings and asset protection will remain relatively
well-maintained in the foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classification, earnings and asset
protection are, nevertheless, expected to be maintained at adequate
levels.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured.
Earnings and asset protection appear adequate at present but may
be questionable over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings
and asset protection may be very moderate and not well safeguarded
during adverse periods. Uncertainty of position characterizes
preferred stocks in this class.
"b" An issue which is rated "b" generally lacks the characteristics
of a desirable investment. Assurance of dividend payments and
maintenance of other terms of the issue over any long period of
time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears
on dividend payments. This rating designation does not purport
to indicate the future status of payments.
"ca" An issue which is rated "ca" is speculative in a high degree
and is likely to be in arrears on dividends with little likelihood
of eventual payments.
Page 20
"c" This is the lowest rated class of preferred or preference
stock. Issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
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Page 22
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Page 23
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
The First Trust Special Situations Trust-Preferred
Adjustable Rate Series:
What is The First Trust Special Situations Trust? 3
What are the Expenses and Charges? 3
What is the Federal Tax Status of Unit Holders? 4
Why are Investments in the Trusts Suitable for
Retirement Plans? 7
Portfolio:
What are Adjustable Preferred Securities? 7
What are Some Additional Considerations for
Investors? 11
Public Offering:
How is the Public Offering Price Determined? 11
How are Units Distributed? 12
What are the Sponsor's Profits? 12
Rights of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 12
How are Income and Capital Distributed? 13
What Reports will Unit Holders Receive? 14
How May Units be Redeemed? 14
How May Units be Purchased by the Sponsor? 16
How May Adjustable Preferred
Securities be Removed from a Trust? 16
Information as to Sponsor, Trustee And Evaluator:
Who is the Sponsor? 17
Who is the Trustee? 17
Limitations on Liabilities of Sponsor and Trustee 18
Who is the Evaluator? 18
Other Information:
How May the Indenture be Amended or
Terminated? 18
Legal Opinions 19
Experts 19
Description of Preferred Stock Ratings 19
</TABLE>
__________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE TRUST HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST registered trademark
PREFERRED ADJUSTABLE RATE SERIES
The First Trust
Special Situations Trust
Prospectus
Part Two
May 23, 1994
First Trust registered trademark
Trustee:
United States Trust Company
of New York
770 Broadway
New York, New York 10003
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE.
Page 24
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES
36 PREFFERED ADJUSTABLE RATE TRUST, SERIES 2, certifies that it
meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment of its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the
Village of Lisle and State of Illinois on August 1, 1994.
THE FIRST TRUST SPECIAL SITUATIONS TRUST,
SERIES 36
PREFFERED ADJUSTABLE RATE TRUST, SERIES 2
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title Date
Robert D. Van Kampen Sole Director of )
Nike Securities )
Corporation, ) August 1, 1994
the General Partner )
of Nike Securities L.P. )
)
) Carlos E. Nardo
) Attorney-in-Fact**
*The title of the person named herein represents his capacity in
and relationship to Nike Securities L.P., Depositor.
**An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Special Situations Trust, Series 18 (File No. 33-42683) and
the same is hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated June 24, 1994 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Special Situations Trust
dated July 19, 1994.
ERNST & YOUNG
Chicago, Illinois
July 18, 1994
