File No. 33-55398
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 5
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 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
(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 : October 31, 1997
: : 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
August 15, 1997.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
8,414 UNITS
PROSPECTUS
Part One
Dated October 28, 1997
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.
The Trust
The Trust for Taxable Municipal Income, Series 1 (the "Trust") is a fixed
portfolio of taxable interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities. The Bonds are not tax-
exempt and interest on each of the Bonds is includable in gross income for
Federal income tax purposes. At September 16, 1997, each Unit represented a
1/8,414 undivided interest in the principal and net income of the Trust (see
"The Fund" 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 of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.3% of the Public Offering Price (4.493%
of the amount invested). At September 16, 1997, the Public Offering Price per
Unit was $1,025.68 plus net interest accrued to date of settlement (three
business days after such date) of $11.77 and $31.59 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
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>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 7.68% per annum on September 16, 1997, and 7.63% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 6.36% per annum on September 16, 1997, and 6.30%
under the monthly distribution plan. Estimated Current Return is calculated
by dividing the Estimated Net Annual Interest Income per Unit by the Public
Offering Price. Estimated Long-Term Return is calculated using a formula
which (1) takes into consideration and determines and factors in the relative
weightings of the market values, yields (which take into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Bonds in the Trust and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1997
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $8,337,000
Number of Units 8,414
Fractional Undivided Interest in the Trust per Unit 1/8,414
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $8,258,977
Aggregate Value of Bonds per Unit $981.58
Sales Charge 4.493% (4.3% of Public Offering Price) $44.10
Public Offering Price per Unit $1,025.68*
Redemption Price and Sponsor's Repurchase Price per Unit
($44.10 less than the Public Offering Price per Unit) $981.58*
Discretionary Liquidation Amount of the Trust (20% of the
total principal amount of Bonds in the Trust during
the primary offering period) $2,000,000
</TABLE>
Date Trust Established December 15, 1992
Mandatory Termination Date December 31, 2041
Evaluator's Fee: $3,000 annually. 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
of the Sponsor per Unit annually
[FN]
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1997
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $80.36 $80.36
Less: Estimated Annual Expense $2.14 $1.54
Estimated Net Annual Interest Income $78.22 $78.82
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $78.22 $78.82
Divided by 12 and 2, Respectively $6.52 $39.41
Estimated Daily Rate of Net Interest Accrual $.2173 $.2189
Estimated Current Return Based on Public
Offering Price 7.63% 7.68%
Estimated Long-Term Return Based on Public
Offering Price 6.30% 6.36%
</TABLE>
Trustee's Annual Fee: $1.05 and $.55 per $1,000 principal amount of Bonds for
those portions of the Trust under the monthly and semi-annual distribution
plans, respectively.
Computation Dates: Fifteenth day of the month as follows: monthly--each
month; semi-annual--June and December.
Distribution Dates: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Special
Situations Trust, Series 52, The Trust for
Taxable Municipal Income, Series 1
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Special Situations Trust, Series
52, The Trust for Taxable Municipal Income, Series 1 as of June 30, 1997, and
the related statements of operations and changes in net assets for each of the
three years in the period then ended. These financial statements are the
responsibility of the Trust's Sponsor. 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 June 30, 1997, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, 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 52, The Trust for Taxable Municipal Income, Series 1
at June 30, 1997, and the results of its operations and changes in its net
assets for each of the three years in the period then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 19, 1997
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $7,815,392)
(Note 1) $8,252,310
Accrued interest 184,144
Receivable from investment transactions 10,000
__________
8,446,454
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 49,364
Payable to sponsor 12,229
Unit redemptions payable 8,906
Accrued liabilities 397
__________
70,896
__________
Net assets, applicable to 8,472 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $7,815,392
Net unrealized appreciation (Note 2) 436,918
Distributable funds 123,248
__________
$8,375,558
==========
Net asset value per unit $988.62
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
PORTFOLIO - See notes to portfolio.
June 30, 1997
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(g) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
County of Cuyahoga, Ohio, Taxable Economic
Development Fixed Rate Revenue, Series
1992A (Gateway Arena Project) 8.625% 6/01/2022 2013 @ 100 S.F. A(c) $700,000 750,806
City of Detroit (Michigan), Tax Increment
(Development Area No. 1 Projects), Series 1999 @ 102
1989B (General Obligation) (f) 10.00 7/01/2010 1997 @ 100 S.F. NR 262,000 281,592
Lakewood Redevelopment Agency, Lakewood,
California (Los Angeles County, California),
Redevelopment Project No. 1 (Town Center),
Refunding Tax Allocation, Series 1992B 2002 @ 102
(Taxable) (Capital Guaranty Insured) (d) 8.875 9/01/2017 1997 @ 100 S.F. AAA 2,330,000 2,501,441
New Jersey Housing and Mortgage Finance Agency,
Rental Housing, Revenue, 1992 Series E 2002 @ 102
(Taxable) 9.00 5/01/2024 2013 @ 100 S.F. A+ 475,000 499,491
The City of New York, General Obligation,
Fiscal 1992 Series A (f) 10.00 8/15/2011 2001 @ 102 BBB+ 955,000 1,085,367
The City of New York, General Obligation,
Fiscal 1991 Series F, Taxable 10.50 11/15/2014 2001 @ 102 BBB+ 1,500,000 1,741,935
The City of New York, General Obligation,
Fiscal 1993 Series B, Fixed Rate Taxable
Capital Appreciation -(e) 10/01/2014 BBB+ 800,000 208,736
The City of New York, General Obligation,
Series C, Taxable (f) 9.875 8/15/2017 1999 @ 102 BBB+ 460,000 499,404
New York State, Environmental Facilities
Corporation, Taxable State Services 2002 @ 102
Contract Revenue, Series 1992A 9.625 3/15/2014 2007 @ 100 S.F. BBB 330,000 350,473
Perris Public Financing Authority (California),
1992 Taxable Revenue (Tax Allocation), 2002 @ 102
Series D (MBIA Insured) (d) 8.50 8/15/2012 2000 @ 100 S.F. AAA 210,000 223,005
Raleigh County, West Virginia, Fayette County,
West Virginia and Nicholas County, West
Virginia Municipal Refunding, Collateralized
Mortgage Obligations (MR CMO) Series 1990
A (AMBAC Insured) (d) -(e) 9/15/2014 AAA 400,000 110,060
______________________
$8,422,000 8,252,310
======================
</TABLE>
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
NOTES TO PORTFOLIO
June 30, 1997
(a) Shown under this heading are the year in which each issue of Bonds is
initially redeemable and the redemption price in that year or, if
currently redeemable, the redemption price at June 30, 1997. Unless
other-wise indicated, each issue continues to be redeemable at declining
prices thereafter (but not below par value). "S.F." indicates a sinking
fund is established with respect to an issue of bonds. In addition,
certain bonds are sometimes redeemable in whole or in part other than by
operation of the stated redemption or sinking fund provisions under
specified unusual or extraordinary circumstances. Approximately 75% of
the aggregate principal amount of the Bonds in the Trust is subject to
call within five years.
(b) The ratings shown are those effective at June 30, 1997. All ratings are
by Standard & Poor's Corporation unless otherwise indicated ("NR"
indicates no rating).
(c) Rating by Moody's Investors Service, Inc.
(d) Insurance has been obtained by the Bond issuer.
(e) These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on the following dates and at the following percentages of
their original principal amount:
<TABLE>
<CAPTION>
Date %
<S> <C> <C>
The City of New York General Obligation 10/29/92 14.066
Raleigh County, West Virginia 12/15/90 11.385
</TABLE>
(f) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(g) The Trust consists of eleven obligations of issuers located in six
states. Five bond issues aggregating approximately 48%, and two bond
issues aggregating approximately 30%, of the aggregate principal amount
of Bonds in the Trust are obligations of issuers located in New York and
California, respectively. Five of the Bonds in the Trust, representing
approximately 47% of the aggregate principal amount of the Bonds in the
Trust, are general obligations of a governmental entity. The remaining
issues are revenue bonds payable from the income of a specific project
or authority and are divided by purpose of issue as follows: Housing,
2; and Miscellaneous, 4. Each of three Bond issues represents 10% or
more of the aggregate principal amount of the Bonds in the Trust or a
total of approximately 57%. The largest such issue represents
approximately 28%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Interest income $725,042 805,797 813,099
Expenses:
Trustee's fees and related
expenses (15,290) (14,576) (16,217)
Evaluator's fees (3,000) (3,000) (3,000)
Supervisory fees (2,326) (2,441) (2,445)
______________________________________
Investment income - net 704,426 785,780 791,437
Net gain (loss) on investments:
Net realized gain (loss) 769 (2,420) (3,855)
Change in net unrealized
appreciation
or depreciation 27,011 236,358 74,334
______________________________________
27,780 233,938 70,479
______________________________________
Net increase in net assets
resulting from operations $732,206 1,019,718 861,916
======================================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Net increase in net assets
resulting from operations:
Investment income - net $704,426 785,780 791,437
Net realized gain (loss) on
investments 769 (2,420) (3,855)
Change in net unrealized
appreciation or
depreciation on
investments 27,011 236,358 74,334
_________________________________________
732,206 1,019,718 861,916
Distributions to unit holders:
Investment income - net (706,031) (786,047) (792,927)
Principal from investment
transactions (48,165) (36,247) (82,553)
_________________________________________
(754,196) (822,294) (875,480)
Unit redemptions (1,260, 38 and
13 in 1997, 1996 and 1995,
respectively):
Principal portion (1,229,021) (37,055) (12,136)
Net interest accrued (22,546) (758) (307)
_________________________________________
(1,251,567) (37,813) (12,443)
_________________________________________
Total increase (decrease) in
net assets (1,273,557) 159,611 (26,007)
Net assets:
At the beginning of the year 9,649,115 9,489,504 9,515,511
_________________________________________
At the end of the year
(including distributable funds
applicable to Trust units
of $123,248, $190,025 and
$178,212 at June 30, 1997,
1996 and 1995, respectively) $8,375,558 9,649,115 9,489,504
=========================================
Trust units outstanding at the
end of the year 8,472 9,732 9,770
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
Bonds are stated at values as determined by Securities Evaluation Service,
Inc. (the Evaluator), certain shareholders of which are officers of the
Sponsor. The bond values are based on (1) current bid prices for the bonds
obtained from dealers or brokers who customarily deal in bonds comparable to
those held by the Trust, (2) current bid prices for comparable bonds, (3)
appraisal or (4) any combination of the above.
Security cost -
The Trust's cost of its portfolio is based on the offering prices of the bonds
on the dates the bonds were deposited in the Trust. The premium or discount
(including original issue discount) existing at the Initial Date of Deposit is
not being amortized. Realized gain (loss) from bond transactions is reported
on an identified cost basis. Sales and redemptions of bonds 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 which is based on $1.05 and $.55 per
$1,000 principal amount of Bonds for those portions of the Trust under the
monthly and semi-annual distribution plans, respectively. Prior to September
1, 1995, the Trustee was United States Trust Company of New York; effective
September 1, 1995, The Chase Manhattan Bank succeeded United States Trust
Company of New York as Trustee. Additionally, a fee of $3,000 annually is
payable to the Evaluator and the Trust pays all related expenses of the
Trustee, 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 June 30, 1997 follows:
<TABLE>
<S> <C>
Unrealized appreciation $437,145
Unrealized depreciation (227)
________
$436,918
========
</TABLE>
<PAGE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
offering price of the bonds on the date of an investor's purchase, plus a
sales charge of 4.9% of the public offering price which is equivalent to
approximately 5.152% of the net amount invested.
Distributions of net interest income -
Distributions of net interest income to unit holders are made monthly or semi-
annually. Such income distributions per unit, on an accrual basis, were as
follows:
<TABLE>
<CAPTION>
Type of Year ended June 30,
distribution
plan 1997 1996 1995
<S> <C> <C> <C>
Monthly $79.35 80.42 81.01
Semi-annual 80.01 80.98 81.56
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended June 30,
1997 1996 1995
<S> <C> <C> <C>
Interest income $81.26 82.59 83.17
Expenses (2.31) (2.05) (2.22)
________________________________________
Investment income - net 78.95 80.54 80.95
Distributions to unit holders:
Investment income - net (79.64) (80.59) (81.12)
Principal from investment
transactions (5.29) (3.71) (8.44)
Net gain (loss) on investments 3.12 23.95 7.24
________________________________________
Total increase (decrease)
in net assets (2.86) 20.19 (1.37)
Net assets:
Beginning of the year 991.48 971.29 972.66
________________________________________
End of the year $988.62 991.48 971.29
=======================================
</TABLE>
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1
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: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
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 LLP
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.
THE TRUST FOR TAXABLE MUNICIPAL INCOME SERIES
THE FIRST TRUST SPECIAL SITUATIONS TRUST
PROSPECTUS
Part Two NOTE: THIS PART TWO PROSPECTUS MAY
Dated September 30, 1997 ONLY BE USED WITH PART ONE
The First Trust Special Situations Trust (the "Trusts" and each a
"Trust") are unit investment trusts consisting of portfolios of interest-
bearing taxable municipal bonds (the "Bonds"). THE BONDS ARE NOT TAX-
EXEMPT AND INTEREST ON EACH OF THE BONDS IS INCLUDABLE IN GROSS INCOME
FOR FEDERAL INCOME TAX PURPOSES.
The Objectives of each Trust are a high level of current taxable income
and conservation of capital through investment in a portfolio of
interest-bearing taxable municipal bonds. The payment of interest and
the conservation of capital are, of course, dependent upon the
continuing ability of the issuers, obligors and/or insurers, if any, to
meet their respective obligations.
Attention Foreign Investors: Your interest income from a Trust may be
exempt from federal withholding taxes if you are not a United States
citizen or resident and certain conditions are met. See "What is the
Federal Tax Status of Unit Holders?"
For Information on Estimated Current Return (if applicable) and
Estimated Long-term Return, see Part One for each Trust.
Distributions to Unit holders may be reinvested as described herein. See
"How Can Distributions to Unit Holders be Reinvested?"
The Sponsor, although not obligated to do so, intends to maintain a
market for the Units at prices based upon the aggregate bid price of the
Bonds in the portfolio of the Trust. In the absence of such a market, a
Unit holder will nonetheless be able to dispose of the Units through
redemption at prices based upon the bid prices of the underlying Bonds.
See "How May Units be Redeemed?"
The Secondary Market Public Offering Price will be equal to the
aggregate bid price of the Bonds in the portfolio of a Trust divided by
the number of Units outstanding, plus a maximum sales charge as
indicated in Part One for each Trust. For sales charges in the secondary
market, see "Public Offering." The minimum purchase is five Units.
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
THE TRUST FOR TAXABLE MUNICIPAL INCOME 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, 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 interest-bearing taxable municipal bonds (the "Bonds"),
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, The Chase Manhattan Bank as Trustee,
Securities Evaluation Service, Inc. as Evaluator and First Trust
Advisors L.P., as Portfolio Supervisor.
The objectives of each Trust are a high level of current taxable income
and conservation of capital through investment in a portfolio of
interest-bearing taxable municipal bonds. THERE IS, OF COURSE, NO
GUARANTEE THAT A TRUST'S OBJECTIVES WILL BE ACHIEVED. AN INVESTMENT IN A
TRUST SHOULD BE MADE WITH AN UNDERSTANDING OF THE RISKS WHICH AN
INVESTMENT IN FIXED RATE LONG-TERM DEBT OBLIGATIONS MAY ENTAIL,
INCLUDING THE RISK THAT THE VALUE OF THE UNITS WILL DECLINE WITH
INCREASES IN INTEREST RATES.
In selecting the Bonds, the following facts, among others, were
considered: (i) at the Initial Date of Deposit the Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc.
("Standard & Poor's") rating of the Bonds was in no case less than
"BBB," or the Moody's Investors Service, Inc. rating of the Bonds was in
no case less than "Baa," including provisional or conditional ratings,
respectively, or, if not rated, the Bonds had, in the opinion of the
Sponsor, credit characteristics sufficiently similar to the credit
characteristics of interest-bearing taxable obligations that were so
rated as to be acceptable for acquisition by the Trust (see "Description
of Bond Ratings"); (ii) the prices of the Bonds relative to other bonds
of comparable quality and maturity; (iii) the diversification of Bonds
as to location of issuer; and (iv) whether the Bonds were issued after
July 18, 1984. Subsequent to the Initial Date of Deposit, a Bond may
cease to be rated or its rating may be reduced below the minimum
required as of the Initial Date of Deposit. Neither event requires
elimination of such Bond from a portfolio, but may be considered in the
Sponsor's determination as to whether or not to direct the Trustee to
dispose of the Bond. See "Rights of Unit Holders-How May Bonds be
Removed from the Trust?"
Certain Bonds in the Trusts may have been acquired at a market discount
from par value at maturity. The coupon interest rates on the discount
bonds at the time they were purchased and deposited in the Trusts were
lower than the current market interest rates for newly issued bonds of
comparable rating and type. The market discount of previously issued
bonds will increase when interest rates for newly issued comparable
bonds increase and will decrease when such interest rates fall, other
things being equal. A discount bond held to maturity will have a larger
portion of its total return in the form of taxable income and capital
gain and less in the form of interest income than a comparable bond
newly issued at current market rates. See "What is the Federal Tax
Status of Unit Holders?"
Certain Bonds in the Trusts may be original issue discount bonds. Under
current law, the original issue discount, which is the difference
between the stated redemption price at maturity and the issue price of
the Bonds, is deemed to accrue on a daily basis and the accrued portion
is treated as interest income for Federal income tax purposes. On sale
or redemption, any gain realized that is in excess of the earned portion
of original issue discount will be taxable as capital gain, unless the
gain is attributable to market discount in which case the accretion of
market discount is taxable as ordinary income. See "What is the Federal
Tax Status of Unit Holders?" The current value of an original discount
bond reflects the present value of its stated redemption price at
maturity. The market value tends to increase in greater increments as
the Bonds approach maturity.
Certain Bonds in the Trusts may have been acquired at a market premium
from par value at maturity. The coupon interest rates on the premium
bonds at the time they were purchased and deposited in the Trusts were
higher than the current market interest rates for newly issued bonds of
comparable rating and type. The current returns of bonds trading at a
market premium are initially higher than the current returns of
comparable bonds of a similar type issued at currently prevailing
interest rates because premium bonds tend to decrease in market value as
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they approach maturity when the face amount becomes payable. Because
part of the purchase price is thus returned not at maturity but through
current income payments, early redemption of a premium bond at par or
early prepayments of principal will result in a reduction in yield.
Redemption pursuant to call provisions generally will, and redemption
pursuant to sinking fund provisions may, occur at times when the
redeemed Bonds have an offering side valuation which represents a
premium over par or for original issue discount Bonds a premium over the
accreted value. To the extent that the Bonds were deposited in a Trust
at a price higher than the price at which they are redeemed, this will
represent a loss of capital when compared to the original Public
Offering Price of the Units. Because premium bonds generally pay a
higher rate of interest than bonds priced at or below par, the effect of
the redemption of premium bonds would be to reduce Estimated Net Annual
Unit Income by a greater percentage than the par amount of such bonds
bears to the total par amount of Bonds in the Trusts. Although the
actual impact of any such redemptions that may occur will depend upon
the specific Bonds that are redeemed, it can be anticipated that the
Estimated Net Annual Unit Income will be significantly reduced after the
dates on which such Bonds are eligible for redemption. See "Rights of
Unit Holders-How May Bonds be Removed from a Trust?" and "Other
Information-How May the Indenture be Amended or Terminated?" See
"Portfolio" in Part One for each Trust for the earliest scheduled call
date and the initial redemption price for each Bond.
Certain of the original issue discount bonds may be Zero Coupon Bonds
(including bonds known as multiplier bonds, money multiplier bonds,
capital appreciation bonds, capital accumulator bonds, compound interest
bonds and money discount maturity payment bonds). Zero Coupon Bonds do
not provide for the payment of any current interest and generally
provide for payment at maturity at face value unless sooner sold or
redeemed. Zero Coupon Bond features include (1) not paying interest on a
semi-annual basis and (2) providing for the reinvestment of the bond's
semi-annual earnings at the bond's stated yield to maturity. While Zero
Coupon Bonds are frequently marketed on the basis that their fixed rate
of return minimizes reinvestment risk, this benefit can be negated in
large part by weak call protection.
Certain of the Bonds in the Trusts may be general obligations of a
governmental entity that are backed by the taxing power of such entity.
All other Bonds in the Trusts are revenue bonds payable from the income
of a specific project or authority and are not supported by the issuer's
power to levy taxes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax
or other specific revenue source. There are, of course, variations in
the security of the different Bonds in the Trusts, both within a
particular classification and between classifications, depending on
numerous factors.
Certain of the Bonds in the portfolios of the Trusts may be insured as
to the scheduled payment of interest and principal by municipal bond
insurance policies obtained by the Bond issuer, the underwriters or
others prior to the Initial Date of Deposit from certain municipal bond
insurers (the "Preinsured Bonds"). The premium for any Preinsured Bonds
has been paid in advance by the Bond issuer, the underwriters or others
and any such policy or policies are noncancellable and will continue in
force so long as the Bonds so insured are outstanding and the insurer
and/or insurers thereof remain in business. The value of insurance
obtained by the Bond issuer, the underwriters or others is reflected and
included in the market value of the Preinsured Bonds.
Certain of the Bonds in the Trusts may be healthcare revenue bonds.
Healthcare revenue bonds are obligations of issuers whose revenues are
primarily derived from services provided by hospitals or other
healthcare facilities, including nursing homes. A healthcare issuer's
ability to make debt service payments on these obligations is dependent
on various factors, including occupancy levels of the facility, demand,
government regulations, wages of employees, overhead expenses,
competition from other similar providers, malpractice insurance costs
and the degree of governmental competition from other similar providers,
malpractice insurance costs and the degree of governmental financial
assistance, including Medicare and Medicaid and other similar third-
party payer programs.
Certain of the Bonds in the Trusts may be obligations of issuers whose
revenues are primarily derived from mortgage loans on single-family
residences or housing projects for low to moderate income families. The
ability of such issuers to make debt service payments will be affected
by events and conditions affecting financed projects, including, among
Page 3
other things, the achievement and maintenance of sufficient occupancy
levels and adequate rental income, increases in taxes, employment and
income conditions prevailing in local labor markets, utility costs and
other operating expenses, the managerial ability of project managers,
changes in laws and governmental regulations, the appropriation of
subsidies and social and economic trends affecting the localities in
which the projects are located. The occupancy of housing projects may be
adversely affected by high rent levels and income limitations imposed
under Federal and state programs. Like single family mortgage revenue
bonds, multi-family mortgage revenue bonds are subject to redemption and
call features, including extraordinary mandatory redemption features,
upon prepayment, sale or non-origination of mortgage loans as well as
upon the occurrence of other events. Certain issuers of single or multi-
family housing bonds have considered various ways to redeem bonds they
have issued prior to the stated first redemption dates for such bonds.
In one situation the New York City Housing Development Corporation, in
reliance on its interpretation of certain language in the indenture
under which one of its bond issues was created, redeemed all of such
issue at par in spite of the fact that such indenture provided that the
first optional redemption was to include a premium over par and could
not occur prior to 1992. In connection with the housing Bonds held by a
Trust, the Sponsor has not had any direct communications with any of the
issuers thereof, but at the Initial Date of Deposit it was not aware
that any of the respective issuers of such Bonds were actively
considering the redemption of such Bonds prior to their respective
stated initial call dates. However, there can be no assurance that an
issuer of a Bond in a Trust will not attempt to so redeem a Bond in a
Trust.
Certain of the Bonds in the Trusts may be obligations of issuers whose
revenues are primarily derived from the sale of electric energy.
Utilities are generally subject to extensive regulation by state utility
commissions which, among other things, establish the rates which may be
charged and the appropriate rate of return. The problems faced by such
issuers include the difficulty in obtaining approval for timely and
adequate rate increases from the governing public utility commission,
the difficulty in financing large construction programs, the limitations
on operations and increased costs and delays attributable to
environmental considerations, increased competition, recent reductions
in estimates of future demand for electricity in certain areas of the
country, the difficulty of the capital market in absorbing utility debt,
the difficulty in obtaining fuel at reasonable prices and the effect of
energy conservation. All of such issuers have been experiencing certain
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 such Bonds to make payments of principal
and/or interest on such Bonds.
Certain of the Bonds in the Trusts may be obligations which are payable
from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities,
convention centers and arenas. The ability of issuers to make debt
service payments on airport obligations is dependent on the capability
of airlines to meet their obligations under use agreements. Due to
increased competition, deregulation, increased fuel costs and other
factors, many airlines may have difficulty meeting their obligations
under these use agreements. Similarly, payment on Bonds related to other
facilities is dependent on revenues from the projects, such as user fees
from ports, tolls on turnpikes and bridges and rents from buildings.
Therefore, payment may be adversely affected by reduction in revenues
due to such factors as increased cost of maintenance, decreased use of a
facility, lower cost of alternative modes of transportation, scarcity of
fuel and reduction or loss of rents.
Certain of the Bonds in the Trusts may be obligations which are payable
from and secured by revenues derived from the operation of resource
recovery facilities. Resource recovery facilities are designed to
process solid waste, generate steam and convert steam to electricity.
Resource recovery bonds may be subject to extraordinary optional
redemption at par upon the occurrence of certain circumstances,
including but not limited to: destruction or condemnation of a project;
contracts relating to a project becoming void, unenforceable or
impossible to perform; changes in the economic availability of raw
materials, operating supplies or facilities necessary for the operation
of a project or technological or other unavoidable changes adversely
affecting the operation of a project; administrative or judicial actions
which render contracts relating to the projects void, unenforceable or
impossible to perform; or impose unreasonable burdens or excessive
liabilities.
Because certain Bonds may from time to time under certain circumstances
be sold or redeemed or will mature in accordance with their terms and
Page 4
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. Neither the Sponsor nor the Trustee shall be liable in any
way for any default, failure or defect in any Bond. Certain of the Bonds
contained in the Trusts may be subject to being called or redeemed in
whole or in part prior to their stated maturities pursuant to optional
redemption provisions, sinking fund provisions, special or extraordinary
redemption provisions, or otherwise. See "Portfolio" appearing in Part
One for each Trust. A bond subject to optional call is one which is
subject to redemption or refunding prior to maturity at the option of
the issuer. A refunding is a method by which a bond issue is redeemed,
at or before maturity, by the proceeds of a new bond issue. A bond
subject to sinking fund redemption is one which is subject to partial
call from time to time at par or from a fund accumulated for the
scheduled retirement of a portion of an issue prior to maturity. The
exercise of redemption or call provisions will (except to the extent the
proceeds of the called Bonds are used to pay for Unit redemptions)
result in the distribution of principal and may result in a reduction in
the amount of subsequent interest distributions; it may also affect the
Estimated Long-Term Return and the Estimated Current Return on Units of
the Trusts. Redemption pursuant to call provisions is more likely to
occur, and redemption pursuant to sinking fund provisions may occur,
when the Bonds have an offering side valuation which represents a
premium over par or for original issue discount bonds a premium over the
accreted value. Unit holders may recognize capital gain or loss upon any
redemption or call.
To the best knowledge of the Sponsor, there is no litigation pending as
of the date hereof in respect of any Bonds which might reasonably be
expected to have a material adverse effect upon the Trusts. At any time
after the date hereof, litigation may be initiated on a variety of
grounds with respect to Bonds in the Trusts. Such litigation may affect
the validity of such Bonds. In addition, other factors may arise from
time to time which potentially may impair the ability of issuers to meet
obligations undertaken with respect to the Bonds.
Each Unit initially offered represents that fractional undivided
interest in a Trust as is set forth in Part One for each Trust. To the
extent that any Units of a Trust are redeemed by the Trustee, the
fractional undivided interest in the Trust represented by each
unredeemed Unit will increase, although the actual interest in a Trust
represented by such fraction will remain substantially unchanged. Units
will remain outstanding until redeemed upon tender to the Trustee by any
Unit holder, which may include the Sponsor, or until the termination of
the Trust Agreement.
What are Estimated Long-Term Return and Estimated Current Return?
The Estimated Current Return and the Estimated Long-Term Return, under
the monthly and semi-annual distribution plans, are as set forth in Part
One for each Trust. Estimated Current Return is computed by dividing the
Estimated Net Annual Interest Income per Unit by the Public Offering
Price. Any change in either the Estimated Net Annual Interest Income per
Unit or the Public Offering Price will result in a change in the
Estimated Current Return. The Public Offering Price will vary in
accordance with fluctuations in the prices of the underlying Bonds and
the Net Annual Interest Income per Unit will change as Bonds are
redeemed, paid, sold or exchanged in certain refundings or as the
expenses of a Trust change. Therefore, there is no assurance that the
Estimated Current Return indicated in Part One for each Trust will be
realized in the future. Estimated Long-Term Return is calculated using a
formula which (1) takes into consideration and determines and factors in
the relative weightings of the market values, yields (which takes into
account the amortization of premiums and the accretion of discounts) and
estimated retirements of all of the Bonds in a Trust; and (2) takes into
account a compounding factor and the expenses and sales charge
associated with each Unit of the Trust. Since the market values and
estimated retirements of the Bonds and the expenses of a Trust will
change, there is no assurance that the Estimated Long-Term Return
indicated in Part One for each Trust will be realized in the future.
Estimated Current Return and Estimated Long-Term Return are expected to
differ because the calculation of Estimated Long-Term Return reflects
the estimated date and amount of principal returned while Estimated
Current Return calculations include only Net Annual Interest Income and
Public Offering Price. Neither rate reflects the true return to Unit
holders, which is lower, because neither includes the effect of certain
delays in distributions to Unit holders.
Record Dates for the distribution of interest under the semi-annual
distribution plan are the fifteenth day of June and December with the
Page 5
Distribution Dates being the last day of such month. It is anticipated
that an amount equal to approximately one-half of the amount of net
annual interest income per Unit will be distributed on or shortly after
each Distribution Date to Unit holders of record on the preceding Record
Date. See Part One for each Trust.
Record Dates for monthly distributions are the fifteenth day of each
month. The Distribution Dates for distributions of interest under the
monthly distribution plan is the last day of such month. All Unit
holders will receive such distributions, if any, from the Principal
Account as are made as of the Record Dates for monthly distributions.
See Part One for each Trust.
How is Accrued Interest Treated?
Accrued interest is the accumulation of unpaid interest on a bond from
the last day on which interest thereon was paid. Interest on Bonds in a
Trust generally is paid semi-annually to the Trust. However, interest on
the Bonds in a Trust is accounted for daily on an accrual basis. Because
of this, a Trust always has an amount of interest earned but not yet
collected by the Trustee because of non-collected coupons. For this
reason, the Public Offering Price of Units will have added to it the
proportionate share of accrued and undistributed interest to the date of
settlement.
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of
interest actually received by a Trust and distributed to Unit holders.
Therefore, there will always remain an item of accrued interest that is
added to the value of the Units. If a Unit holder sells or redeems all
or a portion of his Units, he will be entitled to receive his
proportionate share of the accrued interest from the purchaser of his
Units. Since the Trustee has the use of the interest held in the
Interest Account for distributions to Unit holders and since such
Account is non-interest-bearing to Unit holders, the Trustee benefits
thereby.
What is the Federal Tax Status of Unit Holders?
For purposes of the following discussion and opinions, it is assumed
that each of the Bonds is debt and that interest on each of the Bonds is
includable in gross income for Federal income tax purposes (i.e., the
Bonds are not tax-exempt).
In the opinion of Chapman and Cutler, Counsel for the Sponsor, under
existing law:
Each Trust is not an association taxable as a corporation for Federal
income tax purposes.
Each Unit holder of a Trust is considered to be the owner of a pro rata
portion of each of the Trust's assets under subpart E, subchapter J of
chapter 1 of the Internal Revenue Code of 1986 (hereinafter the "Code");
and the income of the Trust will be treated as income of the Unit
holders. Each Unit holder will be considered to have received his pro
rata share of interest derived from each Trust asset when such interest
is considered to be received by the Trust. Each Unit holder will also be
required to include in taxable income for Federal income tax purposes,
original issue discount with respect to his interest in any Bonds held
by a Trust at the same time and in the same manner as though the Unit
holder were the direct owner of such interest.
Each Unit holder will have a taxable event when a Trust disposes of a
Bond (whether by sale, exchange, liquidation, redemption or payment at
maturity), or when the Unit holder redeems or sells his Units. A Unit
holder's tax basis in his Units will equal his tax basis in his pro rata
portion of all the assets of the Trust. Such basis is determined (before
the adjustments described below) by apportioning the tax basis for the
Units among each of the Trust assets according to value as of the
valuation date nearest the date of acquisition of the Units. Unit
holders must reduce the tax basis of their Units for their share of
accrued interest received, if any, on Bonds delivered after the date the
Unit holders pay for their Units to the extent that such interest
accrued on such Bonds before the date the Trust acquired ownership of
the Bonds (and the amount of this reduction may exceed the amount of
accrued interest paid to the sellers), and, consequently, such Unit
holders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. It should be noted that certain
legislative proposals have been made which could affect the calculation
of basis for Unit holders holding securities that are identical to the
Bonds. Unit holders should consult their own tax advisors with regard to
the calculation of basis. Gain or loss upon the sale or redemption of
Units is measured by comparing the proceeds of such sale or redemption
Page 6
with the adjusted basis of the Units. If the Trustee disposes of Bonds
(whether by sale, exchange, payment on maturity, redemption or
otherwise), gain or loss is recognized to the Unit holder (subject to
various non-recognition provisions of the Code). The amount of any such
gain or loss is measured by comparing the Unit holder's pro rata share
of the total proceeds from such disposition with his basis for his
fractional interest in the asset disposed of. The basis of each Unit and
of each Bond which was issued with original issue discount (or which has
market discount) must be increased by the amount of accrued original
issue discount (and market discount, if the Unit holder elects to
include market discount in income as it accrues) and the basis of each
Unit and of each Bond which was purchased by a Trust at a premium must
be reduced by the annual amortization of Bond premium which the Unit
holder has properly elected to amortize under Section 171 of the Code.
The tax basis reduction requirements of the Code relating to
amortization of bond premium may, under some circumstances, result in
the Unit holder realizing a taxable gain when his Units are sold or
redeemed for an amount equal to or less than his original cost. Original
issue discount is effectively treated as interest for federal income tax
purposes, and the amount of original issue discount in this case is
generally the difference between the bond's purchase price and its
stated redemption price at maturity. A Unit holder will be required to
include in gross income for each taxable year the sum of his daily
portions of original issue discount attributable to the Bonds held by a
Trust as such original issue discount accrues for such year even though
the income is not distributed to the Unit holders during such year
unless a security's original issue discount is less than a "de minimis"
amount as determined under the Code. To the extent that the amount of
such discount is less than the respective "de minimis" amount, such
discount shall be treated as zero. In general, original issue discount
accrues daily under a constant interest rate method which takes into
account the semi-annual compounding of accrued interest. Unit holders
should consult their advisors regarding the federal income tax
consequences and accretion of original issue discount.
Each Unit holder's pro rata share of each expense paid by a Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by him. It should be noted that as a result of
the Tax Reform Act of 1986, certain miscellaneous itemized deductions,
such as investment expenses, tax return preparation fees and employee
business expenses will be deductible by an individual only to the extent
they exceed 2% of such individual's adjusted gross income (similar
limitations also apply to estates and trusts). Unit holders may be
required to treat some or all of the expenses paid by the Trust as
miscellaneous itemized deductions subject to this limitation.
If a Unit holder's tax basis of his pro rata portion in any Bonds held
by a Trust exceeds the amount payable by the issuer of the Bond with
respect to such pro rata interest upon maturity of the Bond, such excess
would be considered "premium" which may be amortized by the Unit holder
at the Unit holder's election as provided in Section 171 of the Code.
Unit holders should consult their tax advisors regarding whether such
election should be made and the manner of amortizing acquisition premium.
Certain Bonds in a Trust may have been acquired with "original issue
discount." In the case of any Bonds in a Trust acquired with "original
issue discount" that exceeds a "de minimis" amount as specified in the
Code, such discount is includable in taxable income of the Unit holders
on an accrual basis computed daily, without regard to when payments of
interest on such Bonds are received. The Code provides a complex set of
rules regarding the accrual of original issue discount. These rules
provide that original issue discount generally accrues on the basis of a
constant compound interest rate over the term of the Bonds. Unit holders
should consult their tax advisers as to the amount of original issue
discount which accrues.
Special original issue discount rules apply if the purchase price of the
Bond by a Trust exceeds its original issue price plus the amount of
original issue discount which would have previously accrued based upon
its issue price (its "adjusted issue price"). Similarly these special
rules would apply to a Unit holder if the tax basis of his pro rata
portion of a Bond issued with original issue discount exceeds his pro
rata portion of its adjusted issue price. Unit holders should also
consult their tax advisers regarding these special rules.
If a Unit holder's tax basis in his pro rata portion of Bonds is less
than the allocable portion of such Bond's stated redemption price at
maturity (or, if issued with original issue discount, the allocable
portion of its "revised issue price"), such difference will constitute
market discount unless the amount of market discount is "de minimis" as
specified in the Code. Market discount accrues daily computed on a
Page 7
straight line basis, unless the Unit holder elects to calculate accrued
market discount under a constant yield method. Unit holders should
consult their tax advisers regarding whether an election should be made
and as to the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unit holders as ordinary income for Federal tax purposes upon the
receipt of serial principal payments on the Bonds, on the sale, maturity
or disposition of such Bonds by a Trust, and on the sale by a Unit
holder of Units, unless a Unit holder elects to include the accrued
market discount in taxable income as such discount accrues. If a Unit
holder does not elect to annually include accrued market discount in
taxable income as it accrues, deductions for any interest expenses
incurred by the Unit holder which are incurred to purchase or carry his
Units will be reduced by such accrued market discount. In general, the
portion of any interest expense which was not currently deductible would
ultimately be deductible when the accrued market discount is included in
income. Unit holders should consult their tax advisers regarding whether
an election should be made to include market discount in income as it
accrues and as to the amount of interest expense which may not be
currently deductible.
The tax basis of a Unit holder with respect to his interest in a Bond is
increased by the amount of original issue discount (and market discount,
if the Unit holder elects to include market discount, if any, on the
Bonds held by a Trust in income as it accrues) thereon properly included
in the Unit holder's gross income as determined for Federal income tax
purposes and reduced by the amount of any amortized premium which the
Unit holder has properly elected to amortize under Section 171 of the
Code. A Unit holder's tax basis in his Units will equal his tax basis in
his pro rata portion of all of the assets of a Trust.
A Unit holder will recognize taxable capital gain (or loss) when all or
part of his pro rata interest in a Bond is disposed of in a taxable
transaction for an amount greater (or less) than his tax basis therefor,
subject to various nonrecognition provisions of the Code. As previously
discussed, gain realized on the disposition of the interest of a Unit
holder in any Bond deemed to have been acquired with market discount
will be treated as ordinary income to the extent the gain does not
exceed the amount of accrued market discount not previously taken into
income. For taxpayers other than corporations, net capital gains (which
is defined as net long-term capital gain over net short-term capital
loss for the taxable year) are subject to a maximum marginal stated tax
rate of either 28% or 20%, depending upon the holding period of the
capital assets. In particular, net capital gain, excluding net gain from
property held more than one year but not more than 18 months and gain on
certain other assets, is subject to a maximum marginal stated tax rate
of 20% (10% in the case of certain taxpayers in the lowest tax bracket).
Net capital gain that is not taxed at the maximum marginal stated tax
rate of 20% (or 10%) as described in the preceding sentence, is
generally subject to a maximum marginal stated tax rate of 28%. The date
on which a Unit is acquired (i.e., the "trade date") is excluded for
purposes of determining the holding period of the Unit. Generally,
capital gain or loss is long-term if the holding period for the asset is
more than one year, and is short-term if the holding period for the
asset is one year or less. Net short-term capital gain is taxed at the
same rates as ordinary income. 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 tax basis reduction requirements of the Code
relating to amortization of bond premiums may, under some circumstances,
result in the Unit holder's realizing taxable gain when his Units are
sold or redeemed for an amount equal to or less than his original cost.
In addition, please note that capital gains may be recharacterized 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.
If the Unit holder disposes of a Unit, he is deemed thereby to have
disposed of his entire pro rata interest in all Trust assets including
his pro rata portion of all of the Bonds represented by the Unit. This
may result in a portion of the gain, if any, on such sale being taxable
as ordinary income under the market discount rules (assuming no election
was made by the Unit holder to include market discount in income as it
accrues) as previously discussed. The Taxpayer Relief Act of 1997 (the
"1997 Act") includes provisions that treat certain transactions designed
to reduce or eliminate risk of loss and opportunities for gain (e.g.,
short sales, offsetting notional principal contracts, futures or forward
contracts, or similar transactions) as constructive sales for purposes
Page 8
of recognition of gain (but not loss) and for purposes of determining
the holding period. Unit holders should consult their own tax advisors
with regard to any such constructive sales rules.
A Unit holder who is a foreign investor (i.e., an investor other than a
U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust) will not be subject to United States Federal income taxes,
including withholding taxes, on interest income (including any original
issue discount) on, or any gain from the sale or other disposition of,
his pro rata interest in any Bond or the sale of his Units provided that
all of the following conditions are met: (i) the interest income or gain
is not effectively connected with the conduct by the foreign investor of
a trade or business within the United States, (ii) if the interest is
United States source income (which is the case for each Bond held by a
Trust) and the Bond is issued after July 18, 1984, then the foreign
investor does not own, directly or indirectly, 10% or more of the total
combined voting power of all classes of voting stock of the issuer of
the Bond and the foreign investor is not a controlled foreign
corporation related (within the meaning of Section 864(d)(4) of the
Code) to the issuer of the Bond, (iii) with respect to any gain, the
foreign investor (if an individual) is not present in the United States
for 183 days or more during his or her taxable year and (iv) the foreign
investor provides all certification which may be required of his status
(foreign investors may contact the Sponsor to obtain a Form W-8 which
must be filed with the Trustee and refiled every three calendar years
thereafter). Foreign investors should consult their tax advisers with
respect to United States tax consequences of ownership of Units.
It should be noted that the Tax Act includes a provision which
eliminates the exemption from United States taxation, including
withholding taxes, for certain "contingent interest." The provision
applies to interest received after December 31, 1993. No opinion is
expressed herein regarding the potential applicability of this provision
and whether United States taxation or withholding taxes could be imposed
with respect to income derived from the Units as a result thereof. Unit
holders and prospective investors should consult with their tax advisers
regarding the potential effect of this provision on their investment in
Units.
Each Unit holder (other than a foreign investor who has properly
provided the certifications described above) 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 the Units) will be
subject to back-up withholding.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trusts for New York tax matters, the Trusts are not associations taxable
as corporations and the income of the Trusts will be treated as the
income of the Unit holders under the existing income tax laws of the
State and City of New York.
The foregoing discussion relates only to United States Federal and, to
the extent set forth, New York State and City income taxes; Unit holders
may be subject to state and local taxation (including taxation by a
foreign investor's country of residence). Residents of certain States
may be exempt from state and local (where applicable) personal income
taxation with respect to their portion of the interest income of Bonds
of issuers located in their respective State. The Trustee will supply
annually each Unit holder with a statement setting forth the annual
percentage of the interest income of the Trust generated by each State
in which the issuers of the Bonds are located. Unit holders should
consult their tax advisers regarding potential state, local, or foreign
taxation with respect to the Units.
Why are Investments in a Trust 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.
Page 9
What are the Expenses and Charges?
At no cost to the Trusts, the Sponsor has borne all the expenses of
creating and establishing a Trust, 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 a Trust.
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 a Trust.
Such fee is based on the number of Units of the Trust outstanding on
January 1 of each year except for Trusts which were established
subsequent to the last January 1, in which case the fee will be based on
the number of Units of a Trust outstanding as of the respective Dates of
Deposit. 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.
For each valuation of the Bonds in a Trust, 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 a Trust
for which it is reimbursed by the Trust. The Trustee will receive for
its ordinary recurring services to the Trust an annual fee computed at
$1.05 and $.55 per annum per $1,000 principal amount of underlying Bonds
in a Trust for those portions of the Trust representing monthly and semi-
annual distribution plans, respectively. 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 monthly on
or before each Distribution Date from the Interest Account of a Trust to
the extent funds are available and then from the Principal Account of
the Trust. Since the Trustee has the use of the funds being held in the
Principal and Interest Accounts for future distributions, payment of
expenses and redemptions and since such Accounts are non-interest-
bearing to Unit holders, the Trustee benefits thereby. Part of the
Trustee's compensation for its services to a 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 a Trust: all
expenses (including legal and annual auditing expenses) of the Trustee
incurred by or in connection with its responsibilities under the
Indenture, except in the event of negligence, bad faith or willful
misconduct on its part; the expenses and costs of any action undertaken
by the Trustee to protect a Trust and the rights and interests 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 a 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 a
Trust; all taxes and other government charges imposed upon the Bonds or
any part of the Trust (no such taxes or charges are being levied or made
or, to the knowledge of the Sponsor, contemplated); and expenditures
incurred in contacting Unit holders upon termination of a Trust. The
above expenses and the Trustee's annual fee, when paid or owing to the
Trustee, are secured by a lien on a Trust. In addition, the Trustee is
empowered to sell Bonds of a Trust in order to make funds available to
pay all these amounts if funds are not otherwise available in the
Interest and Principal Accounts of the Trust.
Unless the Sponsor determines that such an audit is not required, the
Indenture requires the accounts of the Trusts shall be audited on an
annual basis at the expense of the Trust by independent auditors
selected by the Sponsor. So long as the Sponsor is making a secondary
market for Units, the Sponsor shall bear the cost of such annual audits
to the extent such cost exceeds $.50 per Unit. Unit holders of a Trust
covered by an audit may obtain a copy of the audited financial
statements from the Trustee upon request.
Page 10
PUBLIC OFFERING
How is the Public Offering Price Determined?
Although it is not obligated to do so, the Sponsor intends to maintain a
market for the Units and continuously to offer to purchase Units at
prices, subject to change at any time, based upon the aggregate bid
price of the Bonds in the portfolio of each Trust plus interest accrued
to the date of settlement. All expenses incurred in maintaining a
market, other than the fees of the Evaluator, the other expenses of the
Trust and the costs of the Trustee in transferring and recording the
ownership of Units, will be borne by the Sponsor. If the supply of Units
exceeds demand, or for some other business reason, the Sponsor may
discontinue purchases of Units at such prices. If a Unit holder wishes
to dispose of his Units, he should inquire of the Sponsor as to current
market prices prior to making a tender for redemption to the Trustee.
Prospectuses relating to certain other bond funds indicate an intention,
subject to change, on the part of the respective sponsors of such funds
to repurchase units of those funds on the basis of a price higher than
the bid prices of the securities in the funds. Consequently, depending
upon the prices actually paid, the repurchase price of other sponsors
for units of their funds may be computed on a somewhat more favorable
basis than the repurchase price offered by the Sponsor for Units of a
Trust in secondary market transactions. The purchase price per unit of
such bond funds will depend primarily on the value of the securities in
the portfolio of the fund.
Units are offered at the Public Offering Price. The Public Offering
Price is determined by adding to the Evaluator's determination of the
aggregate bid price of the Bonds in a Trust the appropriate sales charge
determined in accordance with the schedule set forth below, based upon
the number of years remaining to the maturity of each Bond in the
portfolio of a Trust, adjusting the total to reflect the amount of any
cash held in or advanced to the principal account of a Trust and
dividing the result by the number of Units of a Trust then outstanding.
The minimum sales charge on Units will be 3.0% of the Public Offering
Price (equivalent to 3.093% of the net amount invested). For purposes of
computation, Bonds will be deemed to mature on their expressed maturity
dates unless the Bonds have been called for redemption or funds or
securities have been placed in escrow to redeem them on an earlier call
date, in which case such call date will be deemed to be the date upon
which they mature.
The effect of this method of sales charge computation will be that
different sales charge rates will be applied to each of the various
Bonds in a Trust based upon the maturities of such bonds, in accordance
with the following schedule:
<TABLE>
<CAPTION>
Secondary Offering Period Sales Charge
______________________________________
Percentage of Public Percentage of Net
Years to Maturity Offering Price Amount Invested
______________________ ____________________ _________________
<S> <C> <C>
0 Months to 1 Year 1.00% 1.010%
1 but less than 2 1.50 1.523
2 but less than 3 2.00 2.041
3 but less than 4 2.50 2.564
4 but less than 5 3.00 3.093
5 but less than 6 3.50 3.627
6 but less than 7 4.00 4.167
7 but less than 8 4.50 4.712
8 but less than 9 5.00 5.263
9 but less than 10 5.50 5.820
10 or more 5.80 6.157
</TABLE>
There will be no reduction of the sales charges for volume purchases for
secondary market transactions. A dealer will receive from the Sponsor a
dealer concession of 70% of the total sales charges for Units sold by
such dealer and dealers will not be eligible for additional concessions
for Units sold pursuant to the above schedule.
Additionally, with respect to the employees, officers and directors
(including their immediate family members, defined as spouses, children,
grandchildren, 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 person) of the Sponsor and
broker/dealers and their subsidiaries and vendors providing services to
the Sponsor, the sales charge is reduced by 2% of the Public Offering
Price.
Page 11
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" appearing in Part One in accordance with fluctuations in
the prices of the underlying Bonds. The aggregate price of the Bonds in
a Trust is determined by whomever from time to time is acting as
evaluator (the "Evaluator"), on the basis of bid prices or offering
prices as is appropriate, (1) on the basis of current market prices for
the Bonds obtained from dealers or brokers who customarily deal in bonds
comparable to those held by a Trust; (2) if such prices are not
available for any of the Bonds, on the basis of current market prices
for comparable bonds; (3) by determining the value of the Bonds by
appraisal; or (4) by any combination of the above. The value of
insurance obtained by the issuer of Bonds in the Trust is reflected and
included in the market value of such Bonds.
The Evaluator will be requested to make a determination of the aggregate
price of the Bonds in each Trust, on a bid price basis, as of the close
of trading on the New York Stock Exchange on each day on which it is
open, effective for all sales, purchases or redemptions made subsequent
to the last preceding determination.
The secondary market Public Offering Price of the Units will be equal to
the bid price per Unit of the Bonds in the Trust plus (less) any balance
(overdraft) in the principal cash account of such Trust, plus the
applicable sales charge.
Although payment is normally made three business days following the
order for purchase (the "date of settlement"), payment may be made prior
thereto. A person will become owner of Units on the date of settlement
provided payment has been received. 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 three 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.
Resales of Units of the Trusts by dealers and others to the public will
be made at the Public Offering Price described in Part One of this
Prospectus. Certain commercial banks are making Units of the Trust
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?
The Sponsor will receive a maximum gross sales commission equal to that
amount of the Public Offering Price of the Units of a Trust as specified
in Part One, less any reduced sales charge for quantity purchases as
described under "Public Offering-How is the Public Offering Price
Determined?"
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 (based on the bid prices of the Bonds
in the Trust) and the price at which Units are resold (which price is
also based on the bid prices of the Bonds in the Trust and includes a
maximum sales charge of 5.80%) 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 are Certificates 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 is evidenced by registered certificates executed by
Page 12
the Trustee and the Sponsor. Delivery of certificates representing Units
ordered for purchase is normally made three 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 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. Certificates
for Units will bear an appropriate notation on their face indicating
which plan of distribution has been selected in respect thereof. When a
change is made, the existing certificate must be surrendered to the
Trustee and a new certificate issued to reflect the then currently
effective plan of distribution. There is no charge for this service.
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 for reasons other than to change the plan of distribution,
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 Interest and Principal Distributed?
Interest from a Trust will be distributed on or shortly after the last
day of each month on a pro rata basis to Unit holders of record as of
the preceding Record Date who are entitled to distributions at that time
under the plan of distribution chosen. All distributions for a Trust
will be net of applicable expenses for a Trust.
The pro rata share of cash in the Principal Account of a Trust will be
computed as of the fifteenth day of each month, and distributions to the
Unit holders of a Trust as of such Record Date will be made on or
shortly after the last day of such month. Proceeds from the disposition
of any of the Bonds of a Trust received after such Record Date and prior
to the following Distribution Date will be held in the Principal Account
of a Trust and not distributed until the next Distribution Date. The
Trustee is not required to pay interest on funds held in the Principal
or Interest Account of a Trust (but may itself earn interest thereon and
therefore benefit from the use of such funds) nor to make a distribution
from the Principal Account of the Trust unless the amount available for
distribution shall equal at least $1.00 per Unit.
The Trustee will credit to the Interest Account of the Trust all
interest received by a Trust, including that part of the proceeds
(including insurance proceeds if any, paid to the Trust) of any
disposition of Bonds which represents accrued interest. Other receipts
will be credited to the Principal Account of a Trust. The distribution
to the Unit holders of a Trust as of each Record Date will be made on
the following Distribution Date or shortly thereafter and shall consist
of an amount substantially equal to such portion of the holder's pro
rata share of the estimated annual income of the Trust after deducting
estimated expenses as is consistent with the distribution plan chosen.
Because interest payments are not received by a Trust at a constant rate
throughout the year, such interest distribution may be more or less than
the amount credited to the Interest Account of the Trust as of the
Record Date. For the purpose of minimizing fluctuations in the
distributions from the Interest Account of a Trust, the Trustee is
authorized to advance such amounts as may be necessary to provide
interest distributions of approximately equal amounts. The Trustee shall
be reimbursed, without interest, for any such advances from funds in the
Interest Account of a Trust on the ensuing Record Date. Persons who
purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date after
the purchase, under the applicable plan of distribution. The Trustee is
not required to pay interest on funds held in the Principal or Interest
Account of a Trust (but may itself earn interest thereon and therefore
benefit from the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct from the
Interest Account of a Trust and, to the extent funds are not sufficient
Page 13
therein, from the Principal Account of a Trust, amounts necessary to pay
the expenses of the Trust. The Trustee also may withdraw from said
accounts such amounts, if any, as it deems necessary to establish a
reserve for any governmental charges payable out of a Trust. Amounts so
withdrawn shall not be considered a part of a Trust's assets until such
time as the Trustee shall return all or any part of such amounts to the
appropriate account. In addition, the Trustee may withdraw from the
Interest Account and the Principal Account of the Trust such amounts as
may be necessary to cover redemption of Units of the Trust by the Trustee.
Record Dates for monthly distributions will be the fifteenth day of each
month and Record Dates for semi-annual distributions will be the
fifteenth day of June and December. Distributions will be made on the
last day of such month.
The plan of distribution selected by a Unit holder will remain in effect
until changed. Unit holders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of
the prior owner. Each year, approximately six weeks prior to the end of
May, the Trustee will furnish each Unit holder a card to be returned to
the Trustee not more than thirty nor less than ten days before the end
of such month. Unit holders desiring to change the plan of distribution
in which they are participating may so indicate on the card and return
same, together with their certificate, to the Trustee. If the card and
certificate are returned to the Trustee, the change will become
effective as of June 16 of that year. If the card and certificate are
not returned to the Trustee, the Unit holder will be deemed to have
elected to continue with the same plan for the following twelve months.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation in a
Universal Distribution Option which permits a Unit holder to direct the
Trustee to distribute principal and interest payments to any other
investment vehicle of which the Unit holder has an existing account. For
example, at a Unit holder's direction, the Trustee would distribute
automatically on the applicable distribution date interest income or
principal on the participant's Units to, among other investment
vehicles, a Unit holder's checking, bank savings, money market,
insurance, reinvestment or any other account. All such distributions, of
course, are subject to the minimum investment and sales charges, if any,
of the particular investment vehicle to which distributions are
directed. The Trustee will notify the participant of each distribution
pursuant to the Universal Distribution Option. The Trustee will
distribute directly to the Unit holder any distributions which are not
accepted by the specified investment vehicle. A participant may at any
time, by so notifying the Trustee in writing, elect to terminate his
participation in the Universal Distribution Option and receive directly
future distributions on his Units.
What Reports Will Unit Holders Receive?
The Trustee shall furnish Unit holders of a Trust in connection with
each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed
in each case as a dollar amount per Unit. Within a reasonable time after
the end of each calendar year, the Trustee will furnish to each person
who at any time during the calendar year was a Unit holder of a Trust of
record, a statement as to (1) the Interest Account: interest received by
a Trust (including amounts representing interest received upon any
disposition of Bonds of a Trust), the amount of such interest
representing insurance proceeds (if applicable), deductions for payment
of applicable taxes and for fees and expenses of the Trust, redemption
of Units and the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a dollar
amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (2) the Principal Account: the
dates of disposition of any Bonds of a Trust and the net proceeds
received therefrom, deduction for payment of applicable taxes and for
fees and expenses of a Trust, redemptions of Units, and the balance
remaining after such distributions and deductions, expressed both as a
total dollar amount and as a dollar amount representing the pro rata
share of each Unit outstanding on the last business day of such calendar
year; (3) the Bonds held and the number of Units of a Trust outstanding
on the last business day of such calendar year; (4) the Redemption Price
per Unit based upon the last computation thereof made during such
calendar year; and (5) the amounts actually distributed during such
calendar year from the Interest Account and from the Principal Account
Page 14
of a Trust, separately stated, expressed both as total dollar amounts
and as dollar amounts representing the pro rata share of each Unit
outstanding.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Bonds in their Trust furnished to it by the Evaluator.
Each distribution statement will reflect pertinent information in
respect of each plan of distribution so that Unit holders may be
informed regarding the results of the other plan or plans of
distribution.
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, 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 third business day following such tender, 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 (if such day is a
day on which the New York Stock Exchange is open for trading), except
that as regards Units received after the close of trading on the New
York Stock Exchange (generally 4:00 p.m. Eastern time or as of any
earlier closing time on a day on which the New York Stock Exchange is
scheduled in advance to close at such earlier time), the date of tender
is the next day on which such 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.
Accrued interest to the settlement date paid on redemption shall be
withdrawn from the Interest Account of a Trust or, if the balance
therein is insufficient, from the Principal Account of a Trust. All
other amounts paid on redemption shall be withdrawn from the Principal
Account of a Trust.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Bonds in a Trust, as of the close of trading on the New York Stock
Exchange on the date any such determination is made. The Redemption
Price per Unit is the pro rata share of each Unit determined by the
Trustee on the basis of (1) the cash on hand in a Trust or moneys in the
process of being collected, (2) the value of the Bonds in a Trust based
on the bid prices of the Bonds and (3) interest accrued thereon, less
(a) amounts representing taxes or other governmental charges payable out
of the Trust, (b) the accrued expenses of a Trust and (c) cash held for
distribution to Unit holders of record as of a date prior to the
evaluation then being made. The Evaluator may determine the value of the
Bonds in a Trust (1) on the basis of current bid prices of the Bonds
obtained from dealers or brokers who customarily deal in bonds
comparable to those held by a Trust, (2) on the basis of bid prices for
bonds comparable to any Bonds for which bid prices are not available,
(3) by determining the value of the Bonds by appraisal, or (4) by any
combination of the above. Bonds insured under a policy obtained by the
Bond issuer, the underwriters, the Sponsor or others are entitled to the
benefits of such insurance at all times and such benefits are reflected
and included in the market value of such Bonds.
The Trustee is empowered to sell underlying Bonds in a Trust in order to
make funds available for redemption. To the extent that Bonds are sold,
the size and diversity of a Trust will be reduced. Such sales may be
required at a time when Bonds would not otherwise be sold and might
result in lower prices than might otherwise be realized.
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 that
Exchange is restricted or an emergency exists, as a result of which
disposal or evaluation of the Bonds 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.
Page 15
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 12:00 p.m. Eastern time on the
next succeeding 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.
The offering price of any Units acquired by the Sponsor will be in
accord with the Public Offering Price described in the then currently
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 Bonds be Removed from a Trust?
The Trustee is empowered to sell, for the purpose of redeeming Units
tendered by any Unit holder and for the payment of expenses for which
funds may not be available, such of the Bonds in a Trust on a list
furnished by the Sponsor as the Trustee in its sole discretion may deem
necessary. The Sponsor is empowered, but not obligated, to direct the
Trustee to dispose of Bonds in a Trust in the event of advanced
refunding. The Sponsor may from time to time act as agent for a Trust
with respect to selling Bonds out of a Trust. From time to time, the
Trustee may retain and pay compensation to the Sponsor subject to the
restrictions under the Investment Company Act of 1940, as amended.
If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor within thirty days,
the Trustee is required to notify the Sponsor thereof. If the Sponsor
fails to instruct the Trustee to sell or to hold such Bond within thirty
days after notification by the Trustee to the Sponsor of such default,
the Trustee may, in its discretion, sell the defaulted Bond and not be
liable for any depreciation or loss thereby incurred.
The Sponsor shall instruct the Trustee to reject any offer made by an
issuer of any of the Bonds to issue new obligations in exchange and
substitution for any Bonds pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept such an offer
or to take any other action with respect thereto as the Sponsor may deem
proper if the issuer is in default with respect to such Bonds or in the
written opinion of the Sponsor the issuer will probably default in
respect to such Bonds in the foreseeable future. Any obligations so
received in exchange or substitution will be held by the Trustee subject
to the terms and conditions in the Indenture to the same extent as Bonds
originally deposited thereunder. Within five days after the deposit of
obligations in exchange or substitution for underlying Bonds, the
Trustee is required to give notice thereof to each Unit holder of the
affected Trust, identifying the Bonds eliminated and the Bonds
substituted therefor. Except as stated in this paragraph, the
acquisition by the Trust of any securities other than the Bonds
initially deposited is prohibited.
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, Templeton Foreign
Fund & U.S. Treasury Securities Trust and The Advantage Growth and
Treasury Securities Trust. First Trust introduced the first insured unit
investment trust in 1974 and to date more than $9 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 (630) 241-4141. As of
December 31, 1996, the total partners' capital of Nike Securities L.P.
was $9,005,203 (audited). (This paragraph relates only to the Sponsor
and not to the Trusts or to any series thereof or to any other
Underwriters. The information is included herein only for the purpose of
Page 16
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 The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The Trustee
is subject to supervision by the Superintendent of Banks of the State of
New York, 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 portfolio. 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 thirty 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 the Trustee may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the 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 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 Bonds. 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 Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in respect
of the 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 become incapable of acting or become 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 the 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
Page 17
effective upon the acceptance of appointment by the successor Evaluator.
If upon resignation of the Evaluator no successor has accepted
appointment within thirty 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). In the event
of any amendment, the Trustee is obligated to notify promptly all Unit
holders of the substance of such amendment.
The Trust may be liquidated at any time by consent of 100% of the Unit
holders of a Trust or by the Trustee when the value of the Trust, as
shown by any evaluation, is less than 20% of the aggregate principal
amount of Bonds deposited in the Trust during the primary offering
period or by the Trustee in the event that Units of a Trust not yet sold
aggregating more than 60% of the Units of the Trust are tendered for
redemption by the Underwriters, including the Sponsor. If a Trust is
liquidated because of the redemption of unsold Units of the Trust by the
Underwriters, the Sponsor will refund to each purchaser of Units of a
Trust the entire sales charge paid by such purchaser. The Indenture will
terminate upon the redemption, sale or other disposition of the last
Bond held thereunder, but in no event shall it continue beyond the date
indicated in Part One. 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 sell any
Bonds remaining in a Trust and, after paying all expenses and charges
incurred by a Trust, will distribute to each Unit holder of a Trust
(including the Sponsor if it then holds any Units), upon surrender for
cancellation of his Certificate for Units, his pro rata share of the
balances remaining in the Interest and Principal Accounts of a Trust,
all as provided in the Indenture.
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, 2 Wall Street, New York, New York 10005,
will act as counsel for the Trustee and as special counsel for the Trust
for New York tax matters.
Experts
The financial statements of the Trust, appearing in Part One of this
Prospectus and Registration Statement have been audited by Ernst & Young
LLP, 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.
Page 18
DESCRIPTION OF BOND RATINGS*
Standard & Poor's. A brief description of the applicable Standard &
Poor's rating symbols and their meanings follow:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
l. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
ll. Nature of and provisions of the obligation;
lll. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA-Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.**
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his/her
own judgment with respect to such likelihood and risk.
Credit Watch: Credit Watch highlights potential changes in ratings of
bonds and other fixed income securities. It focuses on events and trends
which place companies and government units under special surveillance by
S&P's 180-member analytical staff. These may include mergers, voter
referendums, actions by regulatory authorities, or developments gleaned
from analytical reviews. Unless otherwise noted, a rating decision will
be made within 90 days. Issues appear on Credit Watch where an event,
situation, or deviation from trends occurred and needs to be evaluated
as to its impact on credit ratings. A listing, however, does not mean a
rating change is inevitable. Since S&P continuously monitors all of its
ratings, Credit Watch is not intended to include all issues under
review. Thus, rating changes will occur without issues appearing on
Credit Watch.
____________
* As published by the rating companies.
** Bonds insured by Financial Guaranty Insurance Company, AMBAC
Indemnity Corporation, Municipal Bond Investors Assurance Corporation,
Connie Lee Insurance Company, Financial Security Assurance and Capital
Guaranty Insurance Company are automatically rated "AAA" by Standard &
Poor's.
Page 19
Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follow:
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat large than in Aaa securities. Their market value is
virtually immune to all but money market influences, with the occasional
exception of oversupply in a few specific instances.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future. The market value of A-rated bonds may be
influenced to some degree by economic performance during a sustained
period of depressed business conditions, but, during periods of
normalcy, A-rated bonds frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few
specific instances.
A 1 and Baa 1-Bonds which are rated A 1 and Baa 1 offer the maximum in
security within their quality group, can be bought for possible
upgrading in quality, and additionally, afford the investor an
opportunity to gauge more precisely the relative attractiveness of
offerings in the market place.
Baa-Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well. The market value of Baa-rated bonds is more
sensitive to changes in economic circumstances, and aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations will move in parallel with Aaa, Aa, and A obligations
during periods of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at
the high end of its 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.
Con.(---)-Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis
of condition.
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Page 23
CONTENTS:
The Trust for Taxable Municipal Income Series:
What is The First Trust Special Situations Trust? 2
What are Estimated Long-Term Return and
Estimated Current Return? 5
How is Accrued Interest Treated? 6
What is the Federal Tax Status of Unit Holders? 6
Why are Investments in a Trust Suitable for
Retirement Plans? 9
What are the Expenses and Charges? 10
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 are Certificates Issued and Transferred? 12
How are Interest and Principal Distributed? 13
How Can Distributions to Unit Holders be
Reinvested? 14
What Reports Will Unit Holders Receive? 14
How May Units be Redeemed? 15
How May Units be Purchased by the Sponsor? 16
How May Bonds be Removed from a Trust? 16
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 16
Who is the Trustee? 17
Limitations on Liabilities of Sponsor and
Trustee 17
Who is the Evaluator? 17
Other Information:
How May the Indenture be Amended or
Terminated? 18
Legal Opinions 18
Experts 18
Description of Bond Ratings 19
______________
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 FUND
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)
THE TRUST FOR TAXABLE MUNICIPAL INCOME SERIES
The First Trust
Special Situations Trust
Prospectus
Part Two
September 30, 1997
FIRST TRUST (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
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
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES
52 THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 1, 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 October 31, 1997.
THE FIRST TRUST SPECIAL SITUATIONS TRUST,
SERIES 52
THE TRUST FOR TAXABLE MUNICIPAL INCOME,
SERIES 1
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
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 Director of )
Nike Securities )
Corporation, ) October 31, 1997
the General Partner )
of Nike Securities L.P. )
)
) Robert M. Porcellino
David J. Allen Director of Nike ) Attorney-in-Fact**
Securities Corporation,
the Genral Partner of
Nike Securities L.P.
*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
Combined Series 258 (File No. 33-63483) 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 September 19, 1997
in this Post-Effective Amendment to the Registration Statement
and related Prospectus of The First Trust Special Situations
Trust dated October 28, 1997.
ERNST & YOUNG LLP
Chicago, Illinois
October 27, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Post Effective Amendment to form S-6 and is qualified in its entirety
by reference to such Post Effective Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> TAXABLE MUNI INCOME TRUST SERIES
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 7,815,392
<INVESTMENTS-AT-VALUE> 8,252,310
<RECEIVABLES> 194,144
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,446,454
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 70,896
<TOTAL-LIABILITIES> 70,896
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,815,392
<SHARES-COMMON-STOCK> 8,472
<SHARES-COMMON-PRIOR> 9,732
<ACCUMULATED-NII-CURRENT> 123,248
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 436,918
<NET-ASSETS> 8,375,558
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 725,042
<OTHER-INCOME> 0
<EXPENSES-NET> 20,616
<NET-INVESTMENT-INCOME> 704,426
<REALIZED-GAINS-CURRENT> 769
<APPREC-INCREASE-CURRENT> 27,011
<NET-CHANGE-FROM-OPS> 723,206
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 706,031
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 48,165
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 1,260
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,273,557)
<ACCUMULATED-NII-PRIOR> 190,025
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
