File No. 33-58366
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 1
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 61
GROWTH & MUNICIPAL TRUST, 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 : July 1, 1994
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the issuer has registered an indefinite amount of
securities. A 24f-2 Notice for the offering was last filed on
April 26, 1994.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 61
GROWTH & MUNICIPAL TRUST, SERIES 1
739,800 UNITS
PROSPECTUS
Part One
Dated June 21, 1994
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.
The Trust
The Growth & Municipal Trust, Series 1 (the "Trust") is a Unit investment
trust consisting of a portfolio containing zero coupon bonds issued by the
City of New Orleans, Louisiana and common stocks issued by companies which, at
the Initial Date of Deposit, provided income or were considered to have the
potential for capital appreciation. At May 16, 1994, each Unit represented a
1/739,800 undivided interest in the principal and net income of the Trust (see
"The Trust" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price per 100 Units is equal to the aggregate value of the
Securities in the Portfolio of the Trust, plus or minus cash, if any, in the
Income and Capital Accounts of the Trust divided by the number of Units
outstanding, multiplied by 100, plus a sales charge of 5.5% of the Public
Offering Price (5.820% of the net amount invested) excluding income and
principal cash. At May 16, 1994, the Public Offering Price per 100 Units was
$888.90 (see "Public Offering" in Part Two). The minimum purchase is 100
Units.
Please retain both parts of this Prospectus for future reference.
_____________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_____________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 61
GROWTH & MUNICIPAL TRUST, SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 16, 1994
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: United States Trust Company of New York
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Aggregate Maturity Value of Zero Coupon Bonds
in the Trust $7,550,000
Number of Units 739,800
Fractional Undivided Interest in the Trust per Unit 1/739,800
Public Offering Price:
Aggregate Value of Securities in the Portfolio $6,258,824
Aggregate Value of Securities per 100 Units $846.02
Income and Principal cash (overdraft) in the Portfolio $(47,045)
Income and Principal cash (overdraft) per 100 Units $(6.36)
Sales Charge 5.820% (5.5% of Public Offering Price,
excluding income and principal cash) $49.24
Public Offering Price per 100 Units $888.90
Redemption Price and Sponsor's Repurchase Price per
100 Units ($49.24 less than the Public Offering
Price per 100 Units) $839.66
</TABLE>
Date Trust Established March 10, 1993
Mandatory Termination Date September 1, 2007
Evaluator's Annual Fee: $.30 per 100 Units outstanding. Evaluations for
purposes of sale, purchase or redemption of Units are made as of the close of
trading (4:00 p.m. Eastern time) on the New York Stock Exchange on each day on
which it is open.
Supervisory fee payable to an affiliate Maximum of $.25 per 100
of the Sponsor Units outstanding annually
Trustee's Annual Fee: $.84 per 100 Units outstanding.
Capital Distribution Record Date and Distribution Date: Distributions from
the Capital Account will be made monthly payable on the last day of the month
to Unit holders of record on the fifteenth day of such month if the amount
available for distribution equals at least $1.00 per 100 Units.
Notwithstanding, distributions of funds in the Capital Account, if any, will
be made in December of each year.
Income Distribution Record Date: Fifteenth day of each June and December.
Income Distribution Date: Last day of each June and December.
A Unit holder who owns at least 2,500 Units may request an "In-Kind
Distribution" upon termination of the Trust. See "Rights of Unit Holders -
How are Income and Capital Distributed?" in Part Two.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust
Special Situations Trust, Series 61,
Growth & Municipal Trust, Series 1
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Special Situations Trust, Series
61, Growth & Municipal Trust, Series 1 as of February 28, 1994, and the
related statements of operations and changes in net assets for the period from
the Initial Date of Deposit, March 10, 1993, to February 28, 1994. These
financial statements are the responsibility of the Trust's Trustee. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 February 28, 1994,
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides 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 61, Growth & Municipal Trust, Series 1 at
February 28, 1994, and the results of its operations and changes in its net
assets for the period from the Initial Date of Deposit, March 10, 1993, to
February 28, 1994, in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Chicago, Illinois
May 20, 1994
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 61
GROWTH & MUNICIPAL TRUST, SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Securities, at value (cost, including accretion
on the zero coupon bonds, $7,198,145) (Note 1) $7,167,209
Receivable from investment transaction 60,899
Dividends receivable 2,112
__________
7,230,220
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Unit redemptions payable 40,838
Cash overdraft 8,731
Accrued liabilities 2,408
__________
51,977
__________
Net assets, applicable to 789,000 outstanding
units of fractional undivided interest:
Cost of Trust assets, including accretion on
the zero coupon bonds (Note 1) $7,198,145
Net unrealized depreciation (Note 2) (30,936)
Distributable funds 11,034
__________
$7,178,243
==========
Net asset value per 100 units $909.79
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 61
GROWTH & MUNICIPAL TRUST, SERIES 1
PORTFOLIO - See notes to portfolio.
February 28, 1994
<TABLE>
<CAPTION>
Maturity Market
value Name of Issuer and Title of Security value
<C> <S> <C>
City of New Orleans, Louisiana, General
Obligation Refunding Bonds, Series 1991
(AAA/Aaa Rated) (2) (AMBAC Insured) (3)
$7,900,000 (1) Zero Coupon, Due September 1, 2007 $3,836,160
==========
</TABLE>
<TABLE>
<CAPTION>
Number
of Shares Name of Issuer of Equity Securities
<C> <S> <C>
4,255 AutoZone, Inc. 240,408
2,830 BellSouth Corporation 157,772
5,664 Browning-Ferris Industries, Inc. 161,424
7,845 Bruno's, Inc. 62,760
6,444 Century Telephone Enterprises, Inc. 167,544
3,559 Coca-Cola Company 151,702
4,959 (4) Cracker Barrel Old Country Store, Inc. 130,174
4,591 Dillard Department Stores (Class A) 163,554
4,500 Disney (Walt) & Co. 216,000
3,054 (5) Home Depot, Inc. 127,123
9,091 J. B. Hunt Transport Services, Inc. 220,457
3,907 McDonald's Corporation 236,862
11,151 (4) Morrison Restaurants, Inc. 282,957
9,269 Rally's, Inc. 96,166
6,300 Russell Corporation 177,975
9,288 Safety-Kleen Corporation 145,125
6,660 Sara Lee Corporation 149,017
8,884 Turner Broadcasting System, Inc. (Class B) 202,111
5,544 Tyson Foods, Inc. (Class A) 119,196
4,325 Wal-Mart Stores, Inc. 122,722
__________
Total equity securities 3,331,049
__________
Total investments $7,167,209
==========
</TABLE>
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 61
GROWTH & MUNICIPAL TRUST, SERIES 1
NOTES TO PORTFOLIO
February 28, 1994
(1) The zero coupon bonds have been purchased at a discount from their par
value because there is no stated interest income thereon. Over the life
of the zero coupon bonds the value increases, so that upon maturity the
holders will receive 100% of the principal amount thereof.
(2) Ratings are by Standard & Poor's Corporation and Moody's Investors
Service, Inc., respectively.
(3) Insurance has been obtained by the Bond issuer prior to the Initial Date
of Deposit. No insurance premium is payable by the Trust.
(4) The number of shares reflects the effect of a three for two stock split.
(5) The number of shares reflects the effect of a 33% stock dividend.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 61
GROWTH & MUNICIPAL TRUST, SERIES 1
STATEMENT OF OPERATIONS
Period from the Initial Date of Deposit,
March 10, 1993, to February 28, 1994
<TABLE>
<S> <C>
Interest income $200,940
Dividends 42,703
________
Total investment income 243,643
Expenses:
Trustee's fees and related expenses (7,970)
Evaluator's fees (2,440)
Supervisory fees (2,010)
________
Total expenses (12,420)
________
Investment income - net 231,223
Net gain (loss) on investments:
Net realized gain (loss) (39,966)
Change in unrealized appreciation
or depreciation (30,936)
________
(70,902)
________
Net increase in net assets resulting
from operations $160,321
========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 61
GROWTH & MUNICIPAL TRUST, SERIES 1
STATEMENT OF CHANGES IN NET ASSETS
Period from the Initial Date of Deposit,
March 10, 1993, to February 28, 1994
<TABLE>
<S> <C>
Net increase in net assets resulting
from operations:
Investment income - net $231,223
Net realized gain (loss) on investments (39,966)
Change in unrealized appreciation or
depreciation on investments (30,936)
__________
160,321
Units issued (850,000 in 1994) 7,603,967
Units redeemed (111,000 in 1994) (1,027,223)
Distributions to unit holders:
Investment income - net (19,562)
Principal from investment transactions -
__________
(19,562)
__________
Total increase (decrease) in net assets 6,717,503
Net assets:
At the beginning of the period
(representing 50,000 units outstanding) 460,740
__________
At the end of the period (including
distributable funds applicable to
Trust units of $11,034 at February 28, 1994) $7,178,243
==========
Trust units outstanding at the end of
the period 789,000
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 61
GROWTH & MUNICIPAL TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
The zero coupon bonds are stated at values as determined by Securities
Evaluation Service, Inc. (the Evaluator), certain shareholders of which are
officers of the Sponsor. The values are based on (1) current bid prices for
the securities obtained from dealers or brokers who customarily deal in
securities comparable to those held by the Trust, (2) current bid prices for
comparable securities, (3) appraisal or (4) any combination of the above.
The equity securities are stated at the closing sale prices of listed equity
securities and the bid prices of over-the-counter traded equity securities as
reported by the Evaluator.
Investment income -
Dividends on each equity security are recognized on such equity security's ex-
dividend date. Interest income consists of amortization of original issue
discount and market discount or premium on the zero coupon bonds. Such
amortization is included in the cost of the zero coupon bonds and not in
distributable funds because it is not currently available for distribution to
unit holders.
Security cost -
Cost of the Trust's zero coupon bonds is based on the offering price of the
zero coupon bonds on the dates the zero coupon bonds were deposited in the
Trust, plus amortization of original issue discount and amortization of market
discount or premium. Cost of the equity securities is based on the market
value of such securities on the dates the securities were deposited in the
Trust. The cost of securities sold is determined using the average cost
method. Sales of securities are recorded on the trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
The Trust pays a fee for Trustee services to United States Trust Company of
New York, which is based on $.84 per annum per 100 units outstanding based on
the largest aggregate number of units outstanding during the calendar year.
In addition, the Evaluator will receive an annual fee based on $.30 per 100
units outstanding. The Trust also pays recurring financial reporting costs
and an annual supervisory fee payable to an affiliate of the Sponsor.
<PAGE>
2. Unrealized appreciation and depreciation
An analysis of net unrealized depreciation at February 28, 1994 follows:
<TABLE>
<CAPTION>
Treasury Equity
obligations securities Total
<S> <C> <C> <C>
Unrealized depreciation $ - (306,621) (306,621)
Unrealized appreciation 28,111 247,574 275,685
__________________________________
$28,111 (59,047) (30,936)
==================================
</TABLE>
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 zero coupon bonds and the aggregate underlying value of
the equity securities on the date of an investor's purchase, plus a sales
charge of 5.5% of the public offering price which is equivalent to
approximately 5.820% of the net amount invested.
Distributions to unit holders -
Income distributions to unit holders are made semiannually on June 30 and
December 31 to unit holders of record on June 15 and December 15,
respectively. Principal distributions to unit holders, if any, are made on
the last day of each month to unit holders of record on the fifteenth day of
such month if the amount available for distribution equals at least $1.00 per
100 units. Notwithstanding, principal distributions, if any, will be made in
December of each year.
<PAGE>
Selected data per 100 units of the Trust
outstanding throughout the period -
<TABLE>
<CAPTION>
Period from
the Initial Date
of Deposit,
March 10,
1993, to
February 28,1994
<S> <C>
Investment income - interest and dividends $29.77
Expenses (1.52)
_______
Investment income - net 28.25
Distributions to unit holders:
Investment income - net (2.21)
Principal from investment transactions -
Net gain (loss) on investments (37.73)
_______
Total increase (decrease) in net assets (11.69)
Net assets:
Beginning of the period 921.48
_______
End of the period $909.79
=======
</TABLE>
Investment income - interest and dividends, Expenses and Investment income -
net per 100 units have been calculated based on the weighted average number of
units outstanding during the period (818,300 units). Distributions to unit
holders of Investment income - net per 100 units reflects the Trust's actual
distributions of approximately $.52 per 100 units to 845,000 units on June 30,
1993 and approximately $1.69 per 100 units to 900,000 units on December 31,
1993. The Net gain (loss) on investments per 100 units includes the effects
of changes arising from issuance of 850,000 additional units during the period
at net asset values which differed from the net asset value per 100 units of
the original 50,000 units ($921.48 per 100 units) on March 10, 1993.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 61
GROWTH & MUNICIPAL TRUST, 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: United States Trust Company of New York
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
Growth & Municipal Trust Series
The First Trust (registered trademark) Special Situations Trust
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated June 27, 1994
The Trust. The First Trust Special Situations Trust (the "Trust")
is a unit investment trust consisting of a portfolio containing
zero coupon bonds issued by the City of New Orleans, Louisiana
and common stocks issued by companies which provide income or
are considered to have the potential for capital appreciation.
The objectives of the Trust are to protect Unit holders' capital
and provide for potential capital appreciation or income by investing
a portion of its portfolio in zero coupon bonds issued by the
City of New Orleans, Louisiana (the "Zero Coupon Bonds"), and
the remainder of the Trust's portfolio in common stocks issued
by companies which provide income or are considered to have the
potential for capital appreciation (the "Equity Securities").
Collectively the Zero Coupon Bonds and the Equity Securities are
referred to herein as the "Securities." See "Portfolio" appearing
in Part One. The Trust has a Mandatory Termination Date as set
forth in Part One. The Zero Coupon Bonds evidence the right to
receive fixed payments at future dates from the City of New Orleans,
Louisiana. The market value of the Zero Coupon Bonds and the Units
of the Trust will fluctuate and, prior to maturity, may be worth
more or less than a purchaser's acquisition cost. There is, of
course, no guarantee that the objectives of the Trust will be
achieved.
Each Unit of the Trust represents an undivided fractional interest
in all the Securities deposited in the Trust. The Trust has been
organized so that purchasers of Units should receive, at the termination
of the Trust, an amount per Unit at least equal to $10.00 (which
is equal to the per Unit value upon maturity of the Zero Coupon
Bonds), even if the Trust never paid a dividend and the value
of the Equity Securities were to decrease to zero, which the Sponsor
considers highly unlikely. This feature of the Trust provides
Unit holders who purchase Units at a price of $10.00 or less per
Unit with total principal protection, including any sales charges
paid, although they might forego any earnings on the amount invested.
To the extent that Units are purchased at a price less than $10.00
per Unit, this feature may also provide a potential for capital
appreciation. UNIT HOLDERS DISPOSING OF THEIR UNITS PRIOR TO THE
MATURITY OF THE TRUST MAY RECEIVE MORE OR LESS THAN $10.00 PER
UNIT, DEPENDING ON MARKET CONDITIONS ON THE DATE UNITS ARE SOLD
OR REDEEMED.
The Zero Coupon Bonds deposited in the Trust on the Initial Date
of Deposit will mature on September 1, 2007 (the "Zero Coupon
Bonds Maturity Date"). The Zero Coupon Bonds in the Trust had
an aggregate maturity value equal to or greater than the aggregate
Public Offering Price (which includes the sales charge) of the
Units of the Trust on the Initial Date of Deposit. The Equity
Securities deposited in the Trust's portfolio have no fixed maturity
date and the value of these underlying Equity Securities will
fluctuate with changes in the values of stocks in general and
with changes in the conditions and performance of the specific
Equity Securities owned by the Trust. See "Portfolio."
Insurance guaranteeing the scheduled payment of all principal
and interest on the Zero Coupon Bonds in the Trust was obtained
directly by the Bond issuer prior to the Initial Date of Deposit
from AMBAC Indemnity Corporation. Such insurance is effective
so long as the Zero Coupon Bonds are outstanding. The insurance
relates only to the Zero Coupon Bonds in the Trust and not to
the Units offered hereby. See "How are the Zero Coupon Bonds Insured?"
on page 11. No representation is made as to AMBAC Indemnity Corporation's
ability to meet its commitments.
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
Public Offering Price. The secondary market Public Offering Price
per Unit will be based upon a pro rata share of the bid prices
of the Zero Coupon Bonds and the aggregate underlying value of
the Equity Securities in the Trust (generally determined by the
closing sale prices of listed Equity Securities and the bid prices
of over-the-counter traded Equity Securities) plus or minus a
pro rata share of cash, if any, in the Capital and Income Accounts
of the Trust plus a maximum sales charge of 5.5% (equivalent to
5.820% of the net amount invested). The minimum purchase is 100
Units. The sales charge is reduced on a graduated scale for sales
involving at least 10,000 Units. See "How is the Public Offering
Price Determined?"
Dividend and Capital Gains Distributions. Distributions of dividends
received, and realized capital gains, if any, received by the
Trust will be paid in cash on the Distribution Date to Unit holders
of record on the Record Date as set forth in Part One. Any distribution
of income and/or capital gains will be net of the expenses of
the Trust. Distributions of funds in the Capital Account, if any,
will be made at least annually in December of each year. THE
ZERO COUPON BONDS DO NOT PROVIDE FOR THE PAYMENT OF ANY CURRENT
INTEREST AND PROVIDE FOR PAYMENT OF PRINCIPAL AND INTEREST AT
MATURITY AT FACE VALUE UNLESS SOLD SOONER. UNIT HOLDERS WHO ARE
RESIDENTS OF THE STATE OF LOUISIANA WILL BE EXEMPT FROM LOUISIANA
INCOME TAX WITH RESPECT TO THE AMORTIZATION OF ORIGINAL ISSUE
DISCOUNT ON THE ZERO COUPON BONDS. UNIT HOLDERS OTHER THAN RESIDENTS
OF THE STATE OF LOUISIANA MAY BE SUBJECT TO STATE INCOME TAX WITH
RESPECT TO THE AMORTIZATION OF ORIGINAL ISSUE DISCOUNT ON THE
ZERO COUPON BONDS AS IF A DISTRIBUTION OF INCOME HAD OCCURRED.
With certain exceptions applicable to corporate Unit holders,
tax-exempt original issue discount which accrues with respect
to the Zero Coupon Bonds will retain its status as tax-exempt
original issue discount for Federal income tax purposes. See "What
is the Federal Tax Status of Unit Holders?" Additionally, upon
termination of the Trust, the Trustee will distribute, upon surrender
of Units for redemption, to each Unit holder his pro rata share
of the Trust's assets, less expenses, in the manner set forth
under "Rights of Unit Holders-How are Income and Capital Distributed?"
Secondary Market for Units. While under no obligation to do so,
the Sponsor may maintain a market for Units of the Trust and offer
to repurchase such Units at prices which are based on the aggregate
bid side evaluation of the Zero Coupon Bonds and the aggregate
underlying value of Equity Securities in the Trust (generally
determined by the closing sale prices of listed Equity Securities
and the bid prices of over-the-counter traded Equity Securities)
plus or minus cash, if any, in the Capital and Income Accounts
of the Trust. As of the date of this Prospectus, the Sponsor is
maintaining a secondary market. If a secondary market is not maintained
in the future, a Unit holder may redeem Units through redemption
at prices based upon the aggregate bid price of the Zero Coupon
Bonds plus the aggregate underlying value of the Equity Securities
in the Trust (generally determined by the closing sale prices
of listed Equity Securities and the bid prices of over-the-counter
traded Equity Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust. See "How
May Units be Redeemed?"
Termination. Commencing on the Zero Coupon Bonds Maturity Date,
Equity Securities will begin to be sold in connection with the
termination of the Trust. The Sponsor will determine the manner,
timing and execution of the sale of the Equity Securities. Written
notice of any termination of the Trust specifying the time or
times at which Unit holders may surrender their certificates for
cancellation shall be given by the Trustee to each Unit holder
at his address appearing on the registration books of the Trust
maintained by the Trustee. At least 60 days prior to the Zero
Coupon Bonds Maturity Date the Trustee will provide written notice
thereof to all Unit holders and will include with such notice
a form to enable Unit holders to elect a distribution of shares
of Equity Securities (reduced by customary transfer and registration
charges) if such Unit holder owns at least 2,500 Units of the
Trust, rather than to receive payment in cash for such Unit holder's
pro rata share of the amounts realized upon the disposition by
the Trustee of Equity Securities. All Unit holders will receive
their pro rata portion of the Zero Coupon Bonds in cash by the
termination of the Trust. To be effective, the election form,
together with surrendered certificates and other documentation
required by the Trustee, must be returned to the Trustee at least
five business days prior to the Zero Coupon Bonds Maturity Date.
Unit holders not electing a distribution of shares of Equity Securities
will receive a cash distribution from the sale of the remaining
Securities within a reasonable time after the Trust is terminated.
See "Rights of Unit Holders-How are Income and Capital Distributed?"
Page 2
Growth & Municipal Trust Series
The First Trust Special Situations Trust
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust is one of a series of
investment companies created by the Sponsor under the name of
The First Trust Special Situations Trust, all of which are generally
similar but each of which is separate and is designated by a different
series number (the "Trust"). The Trust was created under the laws
of the State of New York pursuant to a Trust Agreement (the "Indenture"),
dated the Initial Date of Deposit, with Nike Securities L.P.,
as Sponsor, United States Trust Company of New York, as Trustee,
Securities Evaluation Service, Inc., as Evaluator, and First Trust
Advisors L.P., as Portfolio Supervisor.
The objectives of the Trust are to protect Unit holders' capital
and provide for potential capital appreciation or income by investing
a portion of its portfolio in zero coupon bonds issued by the
City of New Orleans, Louisiana (the "Zero Coupon Bonds"), and
the remainder of the Trust's portfolio in common stocks issued
by companies which provide income or are considered to have the
potential for capital appreciation (the "Equity Securities").
Collectively, the Zero Coupon Bonds and the Equity Securities
are referred to herein as the "Securities." See "Portfolio" appearing
in Part One. The Trust has a Mandatory Termination Date as set
forth in Part One. The Zero Coupon Bonds evidence the right to
receive fixed payment at a future date from the City of New Orleans,
Louisiana. The market value of the Zero Coupon Bonds and the Units
of the Trust will fluctuate and, prior to maturity, may be worth
more or less than a purchaser's acquisition cost. The Equity Securities
in the Trust consist of common stocks of companies which provide
income or are considered to have the potential for capital appreciation.
There is, of course, no guarantee that the objectives of the Trust
will be achieved.
Insurance guaranteeing the scheduled payment of all principal
and interest on the Zero Coupon Bonds in the Trust was obtained
directly by the Bond issuer prior to the Date of Deposit from
AMBAC Indemnity Corporation. Such insurance is effective so long
as such Zero Coupon Bonds are outstanding. See "How are the Zero
Coupon Bonds Insured?"
Each Unit of the Trust represents an undivided fractional interest
in all the Securities deposited in the Trust. The Trust has been
organized so that purchasers of Units should receive, at the termination
of the Trust, an amount per Unit at least equal to $10.00 per
Unit (which is equal to the per Unit value at the maturity of
the Zero Coupon Bonds), even if the Equity Securities never paid
a dividend and the value of the Equity Securities in the Trust
were to decrease to zero, which the Sponsor considers highly unlikely.
The receipt of only $10.00 per Unit at the termination of the
Trust (an event which the Sponsor believes is unlikely) represents
a substantial loss on a present value basis. Furthermore, the
$10.00 per Unit in no respect protects investors against diminution
in the purchasing power of their investment due to inflation (although
expectations concerning inflation are a component in determining
prevailing interest rates, which in turn determine present values).
To the extent that Units of the Trust are redeemed, the aggregate
value of the Securities in the Trust will be reduced and the undivided
fractional interest represented by each outstanding Unit of the
Trust will increase. See "How May Units be Redeemed?" The Trust
has a Mandatory Termination Date as set forth in Part One.
What are the Expenses and Charges?
At no cost to the Trust, the Sponsor has borne all the expenses
of creating and establishing the 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 the 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 in Part One, for providing
portfolio supervisory services for the Trust. Such fee is based
on the number of Units outstanding in the Trust on January 1 of
each year except for the year or years in which an initial offering
period occurs in which case the fee for a month is based on the
number of Units outstanding at the end of such month. The fee
may exceed the actual costs of providing such supervisory services
Page 3
for this Trust, but at no time will the total amount received
for portfolio supervisory services rendered to unit investment
trusts of which Nike Securities L.P. is the Sponsor in any calendar
year exceed the aggregate cost to First Trust Advisors L.P. of
supplying such services in such year.
The Evaluator will receive a fee as indicated in Part One. The
Trustee pays certain expenses of the 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 $.84 per annum
per 100 Units in the Trust outstanding based upon the largest
aggregate number of Units of the Trust outstanding at any time
during the year. For a discussion of the services performed by
the Trustee pursuant to its obligations under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee's and Evaluator's fees are payable from the Income
Account of the Trust to the extent funds are available and then
from the Capital Account of the Trust. Since the Trustee has the
use of the funds being held in the Capital and Income Accounts
for payment of expenses and redemptions and since such Accounts
are noninterest-bearing to Unit holders, the Trustee benefits
thereby. Part of the Trustee's compensation for its services to
the Trust is expected to result from the use of these funds. Both
fees may be increased without approval of the Unit holders by
amounts not exceeding proportionate increases under the category
"All Services Less Rent of Shelter" in the Consumer Price Index
published by the United States Department of Labor.
The following additional charges are or may be incurred by the
Trust: all legal and annual auditing expenses of the Trustee incurred
by or in connection with its responsibilities under the Indenture;
the expenses and costs of any action undertaken by the Trustee
to protect the 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 the Trust; indemnification
of the Sponsor for any loss, liability or expense incurred without
gross negligence, bad faith or willful misconduct in acting as
Depositor of the Trust; all taxes and other government charges
imposed upon the Securities or any part of the Trust (no such
taxes or charges are being levied or made or, to the knowledge
of the Sponsor, contemplated). The above expenses and the Trustee's
annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trust. In addition, the Trustee is empowered to
sell Securities in the Trust in order to make funds available
to pay all these amounts if funds are not otherwise available
in the Income and Capital Accounts of the Trust except that the
Trustee shall not sell Zero Coupon Bonds to pay Trust expenses.
Since the Equity Securities are all common stocks and the income
stream produced by dividend payments is unpredictable, the Sponsor
cannot provide any assurance that dividends will be sufficient
to meet any or all expenses of the Trust. As described above,
if dividends are insufficient to cover expenses, it is likely
that Equity Securities will have to be sold to meet Trust expenses.
These sales may result in capital gains or losses to Unit holders.
See "What is the Federal Tax Status of Unit Holders?"
The Indenture requires the Trust to 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 the Units, the Sponsor is required to bear the cost of such
annual audits to the extent such cost exceeds $.50 per 100 Units.
Unit holders of the Trust covered by an audit may obtain a copy
of the audited financial statements upon request.
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the Federal
income tax consequences of the purchase, ownership and disposition
of the Units of the Trust. The summary is limited to investors
who hold the Units as "capital assets" (generally, property held
for investment) within the meaning of Section 1221 of the Internal
Revenue Code of 1986 (the "Code"). Unit holders should consult
their tax advisers in determining the Federal, state, local and
any other tax consequences of the purchase, ownership and disposition
of Units in the Trust. At the time of issuance of the Zero Coupon
Bonds, an opinion relating to the validity thereof and to the
exclusion of interest and original issue discount thereon from
Federal gross income were rendered by bond counsel to the issuing
authority. Neither the Sponsor nor Chapman and Cutler
Page 4
has made any special review for the Trust of the proceedings relating
to the issuance of the Zero Coupon Bonds or of the basis for such
opinion. Gain realized on the sale or redemption of the Zero Coupon
Bonds by the Trustee or of a Unit by a Unit holder is, however,
includable in gross income for Federal income tax purposes as
a capital gain. (It should be noted in this connection that such
gain does not include any amounts received in respect of accrued
tax-exempt interest or accrued tax-exempt original issue discount,
if any.) It should be noted that under provisions of the Revenue
Reconciliation Act of 1993 (the "Tax Act") described below that
subject accretion of market discount on tax-exempt bonds to taxation
as ordinary income, gain realized on the sale or redemption of
Bonds by the Trustee or of Units by a Unit holder that would have
been treated as capital gain under prior law is treated as ordinary
income to the extent it is attributable to accretion of market
discount. Market discount can arise based on the price a Trust
pays for Bonds or the price a Unit holder pays for his Units.
In the opinion of Chapman and Cutler, special counsel for the
Sponsor, under existing law:
1. The Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated
as the owner of a pro rata portion of the assets of the Trust
under the Code; and the income of the Trust will be treated as
income of the Unit holders thereof under the Code. Each Unit holder
will be considered to have received his pro rata share of income
derived from each Trust asset when such income is received by
the Trust. In general and as further discussed below, a Unit holder's
pro rata portion of dividends received with respect to the Equity
Securities held by the Trust will be taxable as ordinary income.
Tax -exempt original issue discount which accrues with respect
to the Zero Coupon Bonds held by the Trust will retain its status
as tax-exempt original issue discount, for Federal income tax
purposes, as such discount accrues, when distributed to a Unit
holder and in connection with the determination of a Unit holder's
basis in its interest in such Zero Coupon Bonds except that the
alternative minimum tax and the environmental tax (the "Superfund
Tax") applicable to corporate Unit holders may, in certain circumstances,
include in the amount on which such tax is calculated 75% of the
tax-exempt original issue discount which accrues with respect
to such Zero Coupon Bonds.
2. Each Unit holder will have a taxable event when the Trust disposes
of a Security (whether by sale, exchange, redemption, or payment
at maturity) or upon the sale or redemption of Units by such Unit
holder. The price a Unit holder pays for his Units, including
sales charges, is allocated among his pro rata portion of each
Security held by the Trust (in proportion to the fair market values
thereof on the date the Unit holder purchases his Units) in order
to determine his initial cost for his pro rata portion of each
Security held by the Trust. Gain or loss upon the sale or redemption
of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of Units. The amount of a Unit
holder's share of any gain or loss recognized upon the disposition
of Equity Securities or the Zero Coupon Bonds 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 Zero Coupon
Bond is increased by the Unit holder's share of the amount of
accrued tax-exempt original issue discount. For Federal income
tax purposes, a Unit holder's pro rata portion of dividends as
defined by Section 316 of the Code paid with respect to an Equity
Security held by the Trust are taxable as ordinary income to the
extent of such corporation's current and accumulated "earnings
and profits". A Unit holder's pro rata portion of dividends paid
on such Equity Security which exceed such current and accumulated
earnings and profits will first reduce a Unit holder's tax basis
in such Equity Security, and to the extent that such dividends
exceed a Unit holder's tax basis in such Equity Security shall
generally be treated as capital gain. In general, any such capital
gain will be short-term unless a Unit holder has held his Units
for more than one year.
3. A Unit holder's portion of gain, if any, upon the sale or redemption
of Units or the disposition of Securities held by the Trust will
generally be considered a capital gain except in the case of a
dealer or a financial institution and, in general, will be long-term
if the Unit holder has held his Units for more than one year.
A Unit holder's portion of loss, if any, upon the sale or redemption
of Units or the disposition of Securities held by the Trust will
generally be considered a capital loss except in the case of a
dealer or a financial institution and, in general, will be long-term
if the Unit holder has held his Units for more than one
Page 5
year. Unit holders should consult their tax advisers regarding
the recognition of such capital gains and losses for Federal income
tax purposes.
4. Insurance proceeds received by the Trust under any insurance
policies which represent maturing interest on defaulted Zero Coupon
Bonds will be excludable from Federal gross income if, and to
the same extent as, such interest would have been so excludable
if paid by the issuer of the defaulted Zero Coupon Bonds.
5. The Code provides that "miscellaneous itemized deductions"
are allowable only to the extent that they exceed two percent
of an individual taxpayer's adjusted gross income. Miscellaneous
itemized deductions subject to this limitation under present law
include a Unit holder's pro rata share of expenses paid by the
Trust, including fees of the Trustee and the Evaluator. Because
the Trust will hold Zero Coupon Bonds, Counsel for the Sponsor
has also advised that under Section 265 of the Code, interest
on indebtedness incurred or continued to purchase or carry Units
of the Trust is not deductible for Federal income tax purposes.
The Internal Revenue Service has taken the position that indebtedness
need not be directly traceable to the purchase or carrying of
Zero Coupon Bonds or Units (however, these rules generally do
not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
Dividends Received Deduction. A corporation that owns Units will
generally be entitled to a 70% dividends received deduction with
respect to such Unit holder's pro rata portion of dividends received
by the Trust (to the extent such dividends are taxable as ordinary
income, as discussed above) in the same manner as if such corporation
directly owned the Equity Securities paying such dividends. However,
a corporation owning Units should be aware that Sections 246 and
246A of the Code impose additional limitations on the eligibility
of dividends for the 70% dividends received deduction. These limitations
include a requirement that stock (and therefore Units) must generally
be held at least 46 days (as determined under Section 246(c) of
the Code). Proposed regulations have been issued which address
special rules that must be considered in determining whether the
46-day holding requirement is met. Moreover, the allowable percentage
of the deduction will be reduced from 70% if a corporate Unit
holder owns certain stock (or Units) the financing of which is
directly attributable to indebtedness incurred by such corporation.
It should be noted that various legislative proposals that would
affect the dividends received deduction have been introduced.
Unit holders should consult with their tax advisors with respect
to the limitations on and possible modifications to the dividends
received deduction.
Computation of Original Issue Discount. Sections 1288 and 1272
of the Code provide a complex set of rules governing the accrual
of original issue discount. These rules provide that original
issue discount accrues either on the basis of a constant compounded
interest rate or ratably over the term of the Zero Coupon Bond,
depending upon the date the Zero Coupon Bond was issued. In addition,
special rules apply if the purchase price of a Zero Coupon Bond
exceeds the original issue price plus the amount of original issue
discount which would have accrued to prior owners. The application
of these rules will also vary depending on the value of the Zero
Coupon Bond on the date a Unit holder acquires his Unit, and the
price the Unit holder pays for his Unit. Because of the complexity
of these rules relating to the accrual of original issue discount,
Unit holders should consult their tax advisers as to how these
rules apply.
The Tax Act subjects tax-exempt bonds to the market discount rules
of the Code effective for bonds purchased after April 30, 1993.
In general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable
to original issue discount not yet accrued). Under the Tax Act,
accretion of market discount is taxable as ordinary income; under
prior law the accretion had been treated as capital gain. Market
discount that accretes while the Trust holds a Bond would be recognized
as ordinary income by the Unit holders when principal payments
are received on the Bond, upon sale or at redemption (including
early redemption) or upon the sale or redemption of the Units,
unless a Unit holder elects to include market discount in taxable
income as it accrues. The market discount rules are complex and
Unit holders should consult their tax advisers regarding these
rules and their application.
Page 6
Recognition of Taxable Gain or Loss Upon Disposition of Securities
by the Trust or Disposition of Units. As discussed above, a Unit
holder may recognize taxable gain (or loss) when a Security is
disposed of by the Trust or if the Unit holder disposes of a Unit.
For taxpayers other than corporations, net capital gains are subject
to a maximum marginal tax rate of 28%. However, it should be noted
that legislative proposals are introduced from time to time that
affect tax rates and could affect relative differences at which
ordinary income and capital gains are taxed.
Special Tax Consequences of In-Kind Distributions Upon Termination
of the Trust. The Tax Act raised the rates on ordinary income
while capital gains remain subject to a 28% maximum stated rate.
Because some or all capital gains are taxed at a comparatively
lower rate under the Tax Act, the Tax Act includes a provision
that recharacterizes capital gains as ordinary income in the case
of certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993.
Unit holders and prospective investors should consult with their
tax advisers regarding the potential effect of this provision
on their investment in Units. As discussed in "Rights of Unit
Holders-How are Income and Capital Distributed?", under certain
circumstances a Unit holder who owns at least 2,500 Units may
request an In-Kind Distribution upon the termination of the Trust.
The Unit holder requesting an In-Kind Distribution will be liable
for expenses related thereto (the "Distribution Expenses") and
the amount of such In-Kind Distribution will be reduced by the
amount of the Distribution Expenses. See "Rights of Unit Holders-How
are Income and Capital Distributed?" Zero Coupon Bonds held by
the Trust will not be distributed to a Unit holder as part of
an In-Kind Distribution. The tax consequences relating to the
sale of Zero Coupon Bonds are discussed above. As previously discussed,
prior to the termination of the Trust, a Unit holder is considered
as owning a pro rata portion of each of the Trust assets for Federal
income tax purposes. The receipt of an In-Kind Distribution upon
the termination of the Trust would be deemed an exchange of such
Unit holder's pro rata portion of each of the shares of stock
and other assets held by the Trust in exchange for an undivided
interest in whole shares of stock plus, possibly, cash.
There are generally three different potential tax consequences
which may occur under an In-Kind Distribution with respect to
each Security owned by the Trust. A "Security" for this purpose
is a particular class of stock issued by a particular corporation
(and does not include the Zero Coupon Bonds). If the Unit holder
receives only whole shares of a Security in exchange for his or
her pro rata portion in each share of such security held by the
Trust, there is no taxable gain or loss recognized upon such deemed
exchange pursuant to Section 1036 of the Code. If the Unit holder
receives whole shares of a particular Security plus cash in lieu
of a fractional share of such Security, and if the fair market
value of the Unit holder's pro rata portion of the shares of such
Security exceeds his tax basis in his pro rata portion of such
Security, taxable gain would be recognized in an amount not to
exceed the amount of such cash received, pursuant to Section 1031(b)
of the Code. No taxable loss would be recognized upon such an
exchange pursuant to Section 1031(c) of the Code, whether or not
cash is received in lieu of a fractional share. Under either of
these circumstances, special rules will be applied under Section
1031(d) of the Code to determine the Unit holder's tax basis in
the shares of such particular Security which he receives as part
of the In-Kind Distribution. Finally, if a Unit holder's pro rata
interest in a Security does not equal a whole share, he may receive
entirely cash in exchange for his pro rata portion of a particular
Security. In such case, taxable gain or loss is measured by comparing
the amount of cash received by the Unit holder with his tax basis
in such Security.
Because the Trust will own many Securities, a Unit holder who
requests an In-Kind Distribution will have to analyze the tax
consequences with respect to each Security owned by the Trust.
In analyzing the tax consequences with respect to each Security,
such Unit holder must allocate the Distribution Expenses among
the Securities (the "Allocable Expenses"). The Allocable Expenses
will reduce the amount realized with respect to each Security
so that the fair market value of the shares of such Security received
(if any) and cash received in lieu thereof (as a result of any
fractional shares) by such Unit holder should equal the amount
realized for purposes of determining the applicable tax consequences
in connection with an In-Kind Distribution. A Unit holder's tax
basis in shares of such Security received will be increased by
the Allocable Expenses relating to such Security. However, a Unit
holder must elect to have his Equity Securities exchanged entirely
In-Kind plus cash for fractional shares or entirely for cash.
The amount of taxable gain (or
Page 7
loss) recognized upon such exchange will generally equal the sum
of the gain (or loss) recognized under the rules described above
by such Unit holder with respect to each Security owned by the
Trust. Unit holders who request an In-Kind Distribution are advised
to consult their tax advisers in this regard.
Collateral Tax Consequences Relating to the Zero Coupon Bonds.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest and original
issue discount. To the extent that Social Security benefits are
includible in gross income, they will be treated as any other
item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest and original issue discount is included
in modified adjusted gross income solely for the purpose of determining
what portion, if any, of Social Security benefits will be included
in gross income, no tax-exempt interest or tax-exempt original
issue discount, including that received from the Trust, will be
subject to tax. A taxpayer whose adjusted gross income already
exceeds the base amount or the adjusted base amount must include
50% or 85%, respectively, of his Social Security benefits in gross
income whether or not he receives any tax-exempt interest or tax-exempt
original issue discount. A taxpayer whose modified adjusted gross
income (after inclusion of tax-exempt interest and original issue
discount) does not exceed the base amount need not include any
Social Security benefits in gross income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing revenue bonds) issued on or after August 8, 1986,
is included as an item of tax preference. THE TRUST DOES NOT INCLUDE
ANY SUCH PRIVATE ACTIVITY BONDS ISSUED ON OR AFTER THAT DATE.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
General. Each Unit holder will be requested to provide the Unit
holder's taxpayer identification number to the Trustee and to
certify that the Unit holder has not been notified that payments
to the Unit holder are subject to back-up withholding. If the
proper taxpayer identification number and appropriate certification
are not provided when requested, distributions by the Trust to
such Unit holder (including amounts received upon the redemption
of Units) will be subject to back-up withholding. Distributions
by the Trust will generally be subject to United States income
taxation and withholding in the case of Units held by non-resident
alien individuals, foreign corporations or other non-United States
persons (accrual of tax-exempt original issue discount on the
Zero Coupon Bonds will not generally be subject to taxation or
withholding provided certain requirements are met). Such persons
should consult their tax advisers.
Unit holders will be notified annually of the amount of tax-exempt
original issue discount and the amount of income dividends includable
in the Unit holder's gross income and allocable portion of Trust
expenses which may be claimed as itemized deductions.
Dividend income, long-term capital gains and accrual of tax-exempt
original issue discount may also be subject to state and local
taxes. Investors should consult their tax advisers for specific
information on the tax consequences of particular types of distributions.
Page 8
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Trust for New York tax matters, under the existing income
tax laws of the State of New York, the Trust is not an association
taxable as a corporation and the income of the Trust will be treated
as the income of the Unit holders thereof.
Louisiana Tax Status. At the time of the closing for the Trust,
Special Counsel to the Fund for Louisiana tax matters, which relied
explicitly on the opinion of Chapman and Cutler regarding Federal
income tax matters, rendered an opinion under then existing Louisiana
income tax law applicable to taxpayers whose income is subject
to Louisiana income taxation substantially to the effect that:
The State of Louisiana imposes a tax upon the net income of resident
individuals, and with certain exceptions, resident corporations,
estates and trusts, and upon the income from Louisiana sources
of nonresident individuals, corporations, estates and trusts.
The mere ownership of Units will not subject a nonresident Unit
holder to the tax jurisdiction of Louisiana. Amounts received
by a nonresident Unit holder (who may for other reasons be subject
to the tax jurisdiction of Louisiana) with respect to Units held
outside of Louisiana will not constitute income from Louisiana
sources, upon which the Louisiana income tax would be imposed.
In the case of resident individuals, the calculation of Louisiana
tax table income begins with Federal adjusted gross income with
certain modifications, including the addition of interest on obligations
of a state or political subdivision thereof other than Louisiana.
However, Louisiana law specifically provides that interest on
obligations (such as the Zero Coupon Bonds) of the State of Louisiana,
its political subdivisions, public corporations created by them
and constituted authorities thereof authorized to issue obligations
on their behalf, title to which obligations are vested with a
resident individual, shall be excluded from tax table income and
are exempt from Louisiana income taxation. In addition, to the
extent that any such interest paid to a Unit holder is derived
from the proceeds of a bond insurance policy issued to the Trustee
of the Fund or under individual policies obtained by the issuer
of the Bonds, the underwriter, the Sponsor or others, such interest
would be exempt from Louisiana income tax.
In the case of corporations, estates, trusts, insurance companies
and foreign corporations, interest received upon obligations of
the State of Louisiana, or any political or municipal subdivision
thereof, is exempt from Louisiana income taxation.
The Trust is not an "association" taxable as a corporation under
Louisiana law with the result that income of the Trust will be
deemed to be income of the Unit holders.
Interest on the Zero Coupon Bonds that is exempt from Louisiana
income tax when received by the Trust will retain its tax-exempt
status when received by the Unit holders.
As a general rule, to the extent that gain (or loss) from the
sale of obligations held by the Trust (whether as a result of
the sale of such obligations by the Trust or as a result of the
sale of a Unit by a Unit holder) is includable in (or deductible
in the calculation of) the Federal adjusted gross income of a
resident individual or the Federal taxable income of a resident
corporation, estate or trust, such gain will be included (or loss
deducted) in the calculation of the Unit holder's Louisiana taxable
income.
The State of Louisiana does not impose an intangibles tax on investments,
and therefore, Unit holders will not be subject to Louisiana intangibles
tax on their Units of the Trust.
PORTFOLIO
What are the Zero Coupon Bonds?
By virtue of the insurance obtained by the Bond issuer prior to
the Initial Date of Deposit, the Zero Coupon Bonds included in
the Trust are original issue discount bonds rated at the Initial
Date of Deposit "AAA" by Standard & Poor's Corporation and "Aaa"
by Moody's Investors Service, Inc. See "Description of Bond Ratings"
for further information. Specifically, the Zero Coupon Bonds are
general obligation bonds designated as City of New Orleans, Louisiana,
General Obligation Refunding Bonds, Series 1991. As general obligation
bonds issued by the City of New Orleans, Louisiana, the Zero Coupon
Bonds are payable from ad valorem taxes levied by the City Council
on all property subject to taxation within the City of New Orleans
and are secured by a pledge of the full faith and credit of the
City of New Orleans. The City Council is required under the Constitution
and laws of Louisiana to impose and collect annually, in excess
of all other taxes,
Page 9
a tax on all property subject to taxation within the City of
New Orleans sufficient to pay the principal and interest and redemption
premiums, if any, on all general obligation bonds in each year.
Special Considerations and Risk Factors. The Zero Coupon Bonds
do not provide for the payment of any current interest and provide
for payment of principal and interest at maturity at face value
unless sooner sold. The Zero Coupon Bonds are not subject to redemption
prior to maturity. The Zero Coupon Bonds may be subject to more
price volatility than conventional bonds. The Zero Coupon Bonds
share the basic features of (1) not paying interest on a semi-annual
basis and (2) providing for the implicit reinvestment of each
bond's semi-annual accretion at such bond's stated yield to maturity.
This implicit reinvestment of accretion at the same rate eliminates
the risk of being unable to reinvest the income on each bond at
a rate as high as the implicit yield, but at the same time also
eliminates the holder's ability to reinvest at higher rates in
the future.
An investment in the Trust should be made with an understanding
of the risks which an investment in Zero Coupon Bonds issued by
the City of New Orleans, Louisiana (the "City") may entail.
The largest city in Louisiana, New Orleans was founded in 1718
and incorporated in 1805. The City's system of government is provided
for in its Home Rule Charter which became effective in 1954 (the
"Charter"). The Louisiana Constitution of 1974 prohibits the State
Legislature from enacting any law affecting the structure, organization
or distribution of the power and function of any local political
subdivision which operates under a home rule charter. The Charter
may be amended only by the vote of a majority of the qualified
voters in the City voting at an election called by the City Council
on its own initiative or upon receipt by it of a petition of not
less than ten thousand registered voters.
A number of important local government functions in New Orleans
are performed by entities which, in varying degrees, operate independently
of City government. These entities include the Sewerage and Water
Board of New Orleans, which is responsible for water, sewer and
drainage service for the City, the Orleans Parish School Board,
which is responsible for elementary and secondary education in
the City, the New Orleans Aviation Board, which operates the New
Orleans International Airport, and the Orleans Levee Board, which
has primary responsibility for levees, seawalls and breakwaters
surrounding the City. These and other similar entities have their
own budgets and revenue sources, and are not included in the City's
budget.
The City has a Mayor-Council plan of government. The Mayor, the
chief executive officer, is elected for a four-year term. The
Mayor appoints the Chief Administrative Officer, who is his principal
assistant and the budget officer for the City. The Chief Administrative
Officer appoints all department heads, subject to the Mayor's
approval, except the City Attorney, who is appointed by the Mayor,
and the Director of the Civil Service Department, who is appointed
by the Civil Service Commission. There are numerous executive
department and affiliated boards and commissions.
The City Council is the legislative body of City government, comprised
of five Council members elected from districts and two elected
at large, all for four-year terms. The voters have recently authorized
an amendment to the Charter to limit the number of terms members
of the City Council may serve, which becomes effective in 1994.
The City Council has authority to levy taxes, subject to State
law, and to adopt the City's annual capital and operating budgets.
Ordinances of the City Council may be vetoed by the Mayor. Vetoes
may be overridden by a two-thirds vote of the City Council.
The Charter requires the annual preparation and adoption of a
balanced operating budget. Not later than August 1 of each year,
the Chief Administrative Officer is required to prepare budget
request forms for the City Council and for each office, department
or board that is receiving or seeks to receive an appropriation
from the City Council payable from any operating fund of the City.
The City Council and the head of each office, department or board
is then required to enter upon such budget request forms its request
for appropriations for the ensuing fiscal year, and the completed
forms are to be delivered to the Chief Administrative Officer
not later than September 15.
The Chief Administrative Officer, after consulting with the City
Council and the heads of office, departments and boards, is required
by the Charter to prepare a preliminary budget for the consideration
of the Mayor. The preliminary budget must include all budget requests,
and the recommendations of the Chief Administrative Officer with
respect to each request, an estimate of the receipts from each
source of revenue and
Page 10
a statement of the total estimated income and total recommended
expenditures for each operating fund.
The Mayor is required to review the preliminary budget and may
hold either formal or informal hearings thereon, at which the
heads of each office, department or board may be given an opportunity
to be heard with respect to their requests. The Chief Administrative
Officer then prepares the operating budget under the direction
of the Mayor. Such budget is required to set forth each item of
the expenditures recommended by the Mayor, his estimates of available
surplus and income from existing revenues for each operating fund
and where the estimated revenues from existing sources are insufficient
to meet the recommended expenditures, the Mayor's recommendations
of new sources of revenues to balance the budget. The operating
budget, together with the proposed revenue and expenditure budget
ordinances to give effect to the budget as presented, are required
to be submitted to the City Council not later than November 1.
The proposed ordinance for the operating budget must provide lump
sum appropriations for each budget unit for (among other things)
improvements of an estimated life of less than ten years and equipment.
After public notice and hearing, the budget is adopted by ordinance
on or before each December 1 for the fiscal year beginning on
the next succeeding January 1. Amendments to the annual operating
budget ordinance may be considered and approved by the City Council
under the same procedures prescribed for its original adoption,
but no amendment may increase the aggregate of authorized expenditures
to an amount greater than the estimate of revenues for the fiscal
year.
Budgeted operating expenditures are funded principally through
the General Fund and through various other funds. The Charter
prohibits the Department of Finance from approving any expenditure
under any portion of an annual operating budget ordinance until
sufficient estimated revenues have been provided to finance the
proposed expenditures. The Charter also provides that revenues
shall be estimated only upon the basis of the cash receipts anticipated
for the fiscal year. The City Council is required, within the
limits of its power and subject to other provisions of the Charter,
to adopt such taxes and other revenue measures necessary (together
with available surplus) to produce a balanced budget. In addition,
no budgeted expenditures may be made unless authorized by the
Mayor and the Chief Administrative Officer through the allotment
system. The Chief Administrative Officer monitors revenues and
expenditures during the year. Transfers within budget are adopted
to increase or curtail budgeted expenditures in light of anticipated
actual operating results and for the purpose of assuring a balanced
budget.
The foregoing information constitutes only a brief summary of
some of the general factors which may impact the Zero Coupon Bonds
and does not purport to be a complete or exhaustive description
of all adverse conditions to which the Zero Coupon Bonds in the
Trust may be subject. Additionally, many factors including national
economic, social and environmental policies and conditions, which
are not within the control of the City of New Orleans, Louisiana,
could affect or could have an adverse impact on the financial
condition of the State of Louisiana and various agencies and political
subdivisions located in the State, including the City of New Orleans.
The Sponsor is unable to predict whether or to what extent such
factors or other factors may affect the State of Louisiana or
the City of New Orleans, the market value or marketability of
the Zero Coupon Bonds or the ability of the City of New Orleans,
Louisiana to pay principal of and interest on the Zero Coupon
Bonds at maturity.
How are the Zero Coupon Bonds Insured?
The Zero Coupon Bonds in the portfolio of the Trust are insured
as to the scheduled payment of principal and interest by a policy
obtained directly by the Bond issuer prior to the Initial Date
of Deposit from AMBAC Indemnity Corporation ("AMBAC Indemnity"
or "AMBAC"), a Wisconsin-domiciled stock insurance company. The
premium for such insurance has been paid in advance by the Bond
issuer and such policy is noncancellable and will continue in
force as long as the Zero Coupon Bonds so insured are outstanding
and AMBAC Indemnity remains in business.
AMBAC Indemnity is a Wisconsin-domiciled stock insurance corporation
regulated by the Office of the Commissioner of Insurance of the
State of Wisconsin and licensed to do business in fifty states,
the District of Columbia and the Commonwealth of Puerto Rico,
with admitted assets of approximately $1,988,000,000 (unaudited)
and statutory capital of approximately $1,148,000,000 (unaudited)
as of March 31, 1994. Statutory
Page 11
capital consists of AMBAC Indemnity's policyholders' surplus and
statutory contingency reserve. AMBAC Indemnity is a wholly owned
subsidiary of AMBAC Inc., a 100% publicly-held company. Moody's
Investors Service, Inc. and Standard & Poor's Corporation have
both assigned a triple-A claims-paying ability rating to AMBAC
Indemnity.
Copies of AMBAC Indemnity's financial statements prepared in accordance
with statutory accounting standards are available from AMBAC Indemnity.
The address of AMBAC Indemnity's administrative offices and its
telephone number are One State Street Plaza, 17th Floor, New York,
New York 10004 and (212) 668-0340.
The information relating to AMBAC Indemnity contained above has
been furnished by AMBAC Indemnity. No representation is made herein
as to the accuracy or adequacy of such information, or as to the
existence of any adverse changes in such information, subsequent
to the date hereof.
Chapman and Cutler, Counsel for the Sponsor, has given an opinion
to the effect that the payment of insurance proceeds representing
maturing interest on defaulted Zero Coupon Bonds paid by AMBAC
Indemnity would be excludable from Federal gross income if, and
to the same extent as, such interest would have been so excludable
if paid by the issuer of the defaulted obligations. See "What
is the Federal Tax Status of Unit Holders?"
What are Equity Securities?
The Trust also consists of different issues of Equity Securities,
issued by companies which at the Initial Date of Deposit were
considered to provide income or have potential for capital appreciation
and are listed on a national securities exchange or the NASDAQ
National Market System or are traded in the over-the-counter market.
The companies which are included in the portfolio are, in the
view of the Sponsor, actively-traded, well-established corporations.
See "Portfolio" appearing in Part One for a list of Securities
as may continue to be held from time to time in the Trust together
with cash held in the Income and Capital Accounts.
Because certain of the Equity Securities from time to time may
be sold under certain circumstances described herein, and because
the proceeds from such events will be distributed to Unit holders
and will not be reinvested, no assurance can be given that the
Trust will retain for any length of time its present size and
composition. Although the Portfolio is not managed, the Sponsor
may instruct the Trustee to sell Equity Securities under certain
limited circumstances. Pursuant to the Indenture and with limited
exceptions, the Trustee may sell any securities or other property
acquired in exchange for Equity Securities such as those acquired
in connection with a merger or other transaction. If offered such
new or exchanged securities or property, the Trustee shall reject
the offer. However, in the event such securities or property are
nonetheless acquired by a Trust, they may be accepted for deposit
in such Trust and either sold by the Trustee or held in the Trust
pursuant to the direction of the Sponsor (who may rely on the
advice of the Portfolio Supervisor). See "How May Securities be
Removed from the Trust?" Equity Securities, however, will not
be sold by the Trust to take advantage of market fluctuations
or changes in anticipated rates of appreciation or depreciation.
An investment in Units should be made with an understanding of
the risks which an investment in common stocks entails, including
the risk that the financial condition of the issuers of the Equity
Securities or the general condition of the common stock market
may worsen and the value of the Equity Securities and therefore
the value of the Units may decline. Common stocks are especially
susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions
of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic
or banking crises. Shareholders of common stocks have rights to
receive payments from the issuers of those common stocks that
are generally subordinate to those of creditors of, or holders
of debt obligations or preferred stocks of, such issuers. Shareholders
of common stocks of the type held by the Trust have a right to
receive dividends only when and if, and in the amounts, declared
by the issuer's board of directors and have a right to participate
in amounts available for distribution by the issuer only after
all other claims on the issuer have been
Page 12
paid or provided for. Common stocks do not represent an obligation
of the issuer and, therefore, do not offer any assurance of income
or provide the same degree of protection of capital as do debt
securities. The issuance of additional debt securities or preferred
stock will create prior claims for payment of principal, interest
and dividends which could adversely affect the ability and inclination
of the issuer to declare or pay dividends on its common stock
or the rights of holders of common stock with respect to assets
of the issuer upon liquidation or bankruptcy. The value of common
stocks is subject to market fluctuations for as long as the common
stocks remain outstanding, and thus the value of the Equity Securities
in the Portfolio may be expected to fluctuate over the life of
the Trust to values higher or lower than those prevailing on the
Initial Date of Deposit.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners
of the entity, have generally inferior rights to receive payments
from the issuer in comparison with the rights of creditors of,
or holders of debt obligations or preferred stocks issued by,
the issuer. Cumulative preferred stock dividends must be paid
before common stock dividends and any cumulative preferred stock
dividend omitted is added to future dividends payable to the holders
of cumulative preferred stock. Preferred stockholders are also
generally entitled to rights on liquidation which are senior to
those of common stockholders.
Whether or not the Equity Securities are listed on a national
securities exchange, the principal trading market for the Equity
Securities may be in the over-the-counter market. As a result,
the existence of a liquid trading market for the Equity Securities
may depend on whether dealers will make a market in the Equity
Securities. There can be no assurance that a market will be made
for any of the Equity Securities, that any market for the Equity
Securities will be maintained or of the liquidity of the Equity
Securities in any markets made. In addition, the Trust may be
restricted under the Investment Company Act of 1940 from selling
Equity Securities to the Sponsor. The price at which the Equity
Securities may be sold to meet redemptions, and the value of the
Trust, will be adversely affected if trading markets for the Equity
Securities are limited or absent.
Unit holders will be unable to dispose of any of the Equity Securities
in the Portfolio, as such, and will not be able to vote the Equity
Securities. As the holder of the Equity Securities, the Trustee
will have the right to vote all of the voting stocks in the Trust
and will vote such stocks in accordance with the instructions
of the Sponsor.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before
making a decision to invest in the Trust.
The value of the Equity Securities, like the value of the Zero
Coupon Bonds, will fluctuate over the life of the Trust and may
be more or less than the price at which they were deposited in
the Trust. The Equity Securities may appreciate or depreciate
in value (or pay dividends) depending on the full range of economic
and market influences affecting these securities. However, the
Sponsor believes that, even if the Equity Securities deposited
in the Trust are worthless, an event which the Sponsor considers
highly unlikely, the Zero Coupon Bonds will provide sufficient
principal to at least equal $10.00 per Unit at the termination
of the Trust (which is equal to the per Unit value at the maturity
of the Zero Coupon Bonds). This feature of the Trust provides
Unit holders with principal protection, although they might forego
any earnings on the amount invested. To the extent that Units
are purchased at a price less than $10.00 per Unit, this feature
may also provide a potential for capital appreciation.
Unless a Unit holder purchases Units of the Trust on the date
of this Part Two Prospectus (or another date when the value of
the Units is $10.00 or less), total distributions, including distributions
made upon termination of the Trust, may be less than the amount
paid for a Unit.
The Trust consists of the Securities listed under "Portfolio"
appearing in Part One. The Trustee will have no power to vary
the investments of the Trust, i.e., the Trustee will have no managerial
power to take advantage of market variations to improve a Unit
holder's investment, but may dispose of Securities only under
limited circumstances. See "How May Securities be Removed from
the Trust?"
Page 13
To the best of the Sponsor's knowledge, there is no litigation
pending as of the date of this Part Two Prospectus in respect
of any Security which might reasonably be expected to have a material
adverse effect on the Trust. At any time after the Initial Date
of Deposit, litigation may be instituted on a variety of grounds
with respect to the Securities. The Sponsor is unable to predict
whether any such litigation will be instituted, or if instituted,
whether such litigation might have a material adverse effect on
the Trust.
The Sponsor may from time to time in its advertising and sales
materials compare the then current estimated returns on the Trust
and returns over specified periods on other similar Trusts sponsored
by Nike Securities L.P. with returns on taxable investments such
as corporate or U.S. Government bonds, bank CDs and money market
accounts or money market funds, each of which has investment characteristics
that may differ from those of the Trust. U.S. Government bonds,
for example, are backed by the full faith and credit of the U.S.
Government and bank CDs and money market accounts are insured
by an agency of the federal government. Money market accounts
and money market funds provide stability of principal, but pay
interest at rates that vary with the condition of the short-term
debt market. The investment characteristics of the Trust are described
more fully elsewhere in this Prospectus.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. The Public Offering
Price is based on the aggregate bid side evaluation of the Zero
Coupon Bonds and the aggregate underlying value of the Equity
Securities in the Trust, plus or minus cash, if any, in the Income
and Capital Accounts of the Trust, plus a maximum sales charge
of 5.5% of the Public Offering Price (equivalent to 5.820% of
the net amount invested) divided by the number of outstanding
Units of the Trust. The minimum purchase of the Trust is 100 Units.
The applicable sales charge is reduced by a discount as indicated
below for volume purchases:
<TABLE>
<CAPTION>
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
_______________ __________ __________
<S> <C> <C>
10,000 but less than 50,000 0.60% 0.6036%
50,000 but less than 100,000 1.30% 1.3171%
100,000 or more 2.10% 2.1450%
</TABLE>
From time to time the Sponsor may implement programs under which
Underwriters and dealers of the Fund may receive nominal awards
from the Sponsor for each of their registered representatives
who have sold a minimum number of UIT Units during a specified
time period. In addition, at various times the Sponsor may implement
other programs under which the sales force of an Underwriter or
dealer may be eligible to win other nominal awards for certain
sales efforts, or under which the Sponsor will reallow to any
such Underwriter or dealer that sponsors sales contests or recognition
programs conforming to criteria established by the Sponsor, or
participates in sales programs sponsored by the Sponsor, an amount
not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor
pay fees to qualifying Underwriters or dealers for certain services
or activities which are primarily intended to result in sales
of Units of the Trusts. Such payments are made by the Sponsor
out of its own assets, and not out of the assets of the Trusts.
These programs will not change the price Unit holders pay for
their Units or the amount that the Trusts will receive from the
Units sold.
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 Securities. The aggregate value
of the Units of the Trust shall be determined (a) on the basis
of the bid prices of the Zero Coupon Bonds and the aggregate underlying
value of the Equity Securities therein plus or minus cash, if
any, in the Income and Capital Accounts of the Trust, (b) if bid
prices are not available for the Zero Coupon Bonds, on the basis
of bid prices for comparable securities, (c) by determining the
value of the Zero Coupon Bonds on the bid side of the market by
appraisal, or (d) by any combination of the above. The aggregate
underlying value of the Equity Securities will be determined in
the following
Page 14
manner: if the Equity Securities are listed on a national securities
exchange or the NASDAQ National Market System, this evaluation
is generally based on the closing sale prices on that exchange
or that system (unless it is determined that these prices are
inappropriate as a basis for valuation) or, if there is no closing
sale price on that exchange or system, at the closing bid prices.
If the Equity Securities are not so listed or, if so listed and
the principal market therefore is other than on the exchange,
the evaluation shall generally be based on the current bid price
on the over-the-counter market (unless it is determined that these
prices are inappropriate as a basis for evaluation). If current
bid prices are unavailable, the evaluation is generally determined
(a) on the basis of current bid prices for comparable securities,
(b) by appraising the value of the Equity Securities on the bid
side of the market or (c) by any combination of the above.
Although payment is normally made five business days following
the order for purchase, payment may be made prior thereto. Cash,
if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. Delivery of
Certificates representing Units so ordered will be made five business
days following such order or shortly thereafter. See "Rights of
Unit Holders-How May Units be Redeemed?" for information regarding
the ability to redeem Units ordered for purchase.
How are Units Distributed?
Units repurchased in the secondary market (see "Will There be
a Secondary Market?") may be offered by this Part Two Prospectus
at the secondary market public offering price determined in the
manner described above.
The Sponsor reserves the right to change the amount of the concession
or agency commission from time to time. Certain commercial banks
may be making Units of the 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?
In maintaining a market for the Units, the Sponsor also realizes
profits or sustains losses in the amount of any difference between
the price at which Units are purchased and the price at which
Units are resold (which price includes a sales charge of 5.5%)
or redeemed. The secondary market public offering price of Units
may be greater or less than the cost of such Units to the Sponsor.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the
Trustee. Ownership of Units may be evidenced by registered certificates
executed by the Trustee and the Sponsor. Delivery of certificates
representing Units ordered for purchase is normally made five
business days following such order or shortly thereafter. Certificates
are transferable by presentation and surrender to the Trustee
properly endorsed or accompanied by a written instrument or instruments
of transfer. Certificates to be redeemed must be properly endorsed
or accompanied by a written instrument or instruments of transfer.
A Unit holder must sign exactly as his name appears on the face
of the 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.
Page 15
Unit holders may elect to hold their Units in uncertificated form.
The Trustee will maintain an account for each such Unit holder
and will credit each such account with the number of Units purchased
by that Unit holder. Within two business days of the issuance
or transfer of Units held in uncertificated form, the Trustee
will send to the registered owner of Units a written initial transaction
statement containing a description of the Trust; the number of
Units issued or transferred; the name, address and taxpayer identification
number, if any, of the new registered owner; a notation of any
liens and restrictions of the issuer and any adverse claims to
which such Units are or may be subject or a statement that there
are no such liens, restrictions or adverse claims; and the date
the transfer was registered. Uncertificated Units are transferable
through the same procedures applicable to Units evidenced by certificates
(described above), except that no certificate need be presented
to the Trustee and no certificate will be issued upon the transfer
unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder
may be required to pay $2.00 to the Trustee per certificate reissued
or transferred and to pay any governmental charge that may be
imposed in connection with each such transfer or exchange. For
new certificates issued to replace destroyed, stolen or lost certificates,
the Unit holder may be required to furnish indemnity satisfactory
to the Trustee and pay such expenses as the Trustee may incur.
Mutilated certificates must be surrendered to the Trustee for
replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income (other than accreted
interest) received with respect to any of the Securities in the
Trust on or about the Income Distribution Dates to Unit holders
of record on the preceding Income Record Date. See "Summary of
Essential Information" in Part One of this Prospectus. Proceeds
received on the sale of any Securities in the Trust, to the extent
not used to meet redemptions of Units or pay expenses, will, however,
be distributed on the last day of each month to Unit holders of
record on the fifteenth day of such month if the amount available
for distribution equals at least $1.00 per 100 Units. The Trustee
is not required to pay interest on funds held in the Capital Account
of a Trust (but may itself earn interest thereon and therefore
benefit from the use of such funds). Notwithstanding, distributions
of funds in the Capital Account, if any, will be made on the last
day of each December to Unit holders of record as of December
15. Income with respect to the original issue discount on the
Treasury Obligations in the Trust will not be distributed currently,
although Unit holders will be subject to Federal income tax as
if a distribution had occurred. See "What is the Federal Tax Status
of Unit Holders?"
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of any
distribution made by the Trust if the Trustee has not been furnished
the Unit holder's tax identification number in the manner required
by such regulations. Any amount so withheld is transmitted to
the Internal Revenue Service and may be recovered by the Unit
holder only when filing a tax return. Under normal circumstances
the Trustee obtains the Unit holder's tax identification number
from the selling broker. However, a Unit holder should examine
his or her statements from the Trustee to make sure that the Trustee
has been provided a certified tax identification number in order
to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should
be provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit
holder will, upon surrender of his Units for redemption, receive:
(i) the pro rata share of the amounts realized upon the disposition
of Equity Securities, unless he elects an In-Kind Distribution
as described below, (ii) a pro rata share of the amounts realized
upon the disposition of the Zero Coupon Bonds and (iii) a pro
rata share of any other assets of the Trust, less expenses of
the Trust, subject to the limitation that Zero Coupon Bonds may
not be sold to pay for Trust expenses. Not less than 60 days prior
to the Zero Coupon Bonds Maturity Date the Trustee will provide
written notice thereof to all Unit holders and will include with
such notice a form to enable Unit holders to elect a distribution
of shares of Equity Securities (an "In-Kind Distribution"), if
such Unit holder owns at least 2,500 Units of the Trust, rather
than to receive payment in cash for such Unit holder's pro rata
share of the amounts realized upon the disposition by the Trustee
of Equity Securities. An In-Kind Distribution will be reduced
by customary transfer and registration charges. To be effective,
the election form, together with surrendered
Page 16
certificates and other documentation required by the Trustee,
must be returned to the Trustee at least five business days prior
to the Zero Coupon Bonds Maturity Date. Not less than 60 days
prior to the termination of the Trust, those Unit holders with
at least 2,500 Units will be offered the option of having the
proceeds from the Equity Securities distributed "In-Kind," or
they will be paid in cash, as indicated above. A Unit holder may,
of course, at any time after the Equity Securities are distributed,
sell all or a portion of the shares.
The Trustee will credit to the Income Account of the Trust any
dividends received on the Equity Securities therein. All other
receipts (e.g. return of principal, capital gains, etc.) are credited
to the Capital Account of the Trust.
The Trustee may establish reserves (the "Reserve Account") within
the Trust for state and local taxes, if any, and any governmental
charges payable out of the Trust.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and
the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per 100 Units. Within
a reasonable period of time after the end of each calendar year,
the Trustee shall furnish to each person who at any time during
the calendar year was a Unit holder of the Trust the following
information in reasonable detail: (1) a summary of transactions
in the Trust for such year; (2) any Securities sold during the
year and the Securities held at the end of such year by the Trust;
(3) the redemption price per 100 Units based upon a computation
thereof on the 31st day of December of such year (or the last
business day prior thereto); and (4) amounts of income and capital
distributed during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its corporate trust office in the City of New
York of the certificates representing the Units to be redeemed,
or in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed as explained above (or by
providing satisfactory indemnity, as in connection with lost,
stolen or destroyed certificates), and payment of applicable governmental
charges, if any. No redemption fee will be charged. On the seventh
calendar day following such tender, or if the seventh calendar
day is not a business day, on the first business day prior thereto,
the Unit holder will be entitled to receive in cash an amount
for each Unit equal to the Redemption Price per Unit next computed
after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received
by the Trustee, except that as regards Units received after 4:00
p.m. Eastern time, the date of tender is the next day on which
the New York Stock Exchange is open for trading and such Units
will be deemed to have been tendered to the Trustee on such day
for redemption at the redemption price computed on that day. Units
so redeemed shall be cancelled.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the
principal amount of a Unit redemption if the Trustee has not been
furnished the redeeming Unit holder's tax identification number
in the manner required by such regulations. Any amount so withheld
is transmitted to the Internal Revenue Service and may be recovered
by the Unit holder only when filing a tax return. Under normal
circumstances the Trustee obtains the Unit holder's tax identification
number from the selling broker. However, any time a Unit holder
elects to tender Units for redemption, such Unit holder should
make sure that the Trustee has been provided a certified tax identification
number in order to avoid this possible "back-up withholding."
In the event the Trustee has not been previously provided such
number, one must be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds
are available for such purpose. All other amounts paid on redemption
shall be withdrawn from the Capital Account of the Trust.
Page 17
The Trustee is empowered to sell Securities of the Trust in order
to make funds available for redemption. To the extent that Securities
are sold, the size and diversity of the Trust will be reduced.
Such sales may be required at a time when Securities would not
otherwise be sold and might result in lower prices than might
otherwise be realized. Equity Securities will be sold to meet
redemptions of Units before Zero Coupon Bonds, although Zero Coupon
Bonds may be sold if the Trust is assured of retaining a sufficient
principal amount of Zero Coupon Bonds to provide funds by the
maturity of the Trust at least equal to $10.00 per Unit.
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 Zero Coupon Bonds and the aggregate underlying
value of the Equity Securities in the Trust plus or minus cash,
if any, in the Income and Capital Accounts of the Trust. The Redemption
Price per Unit is the pro rata share of each Unit determined by
the Trustee by adding: (1) the cash on hand in the Trust; (2)
the aggregate value of the Securities held in the Trust, as determined
by the Evaluator on the basis of bid prices of the Zero Coupon
Bonds and the aggregate underlying value of the Equity Securities
in the Trust next computed; and (3) dividends receivable on Equity
Securities trading ex-dividend as of the date of computation;
and deducting therefrom: (1) amounts representing any applicable
taxes or governmental charges payable out of the Trust; (2) an
amount representing estimated accrued expenses of the Trust, including
but not limited to fees and expenses of the Trustee (including
legal and auditing fees), the Evaluator and supervisory fees,
if any; (3) cash held for distribution to Unit holders of record
of the Trust as of the business day prior to the evaluation being
made; and (4) other liabilities incurred by the Trust; and finally
dividing the results of such computation by the number of Units
of the Trust outstanding as of the date thereof.
The aggregate value of the Equity Securities will be determined
in the following manner: if the Equity Securities are listed on
a national securities exchange or the NASDAQ National Market System,
this evaluation is generally based on the closing sale prices
on that exchange or that system (unless it is determined that
these prices are inappropriate as a basis for valuation) or, if
there is no closing sale price on that exchange or system, at
the closing bid prices. If the Equity Securities are not so listed
or, if so listed and the principal market therefore is other than
on the exchange, the evaluation shall generally be based on the
current bid price on the over-the-counter market (unless these
prices are inappropriate as a basis for evaluation). If current
bid prices are unavailable, the evaluation is generally determined
(a) on the basis of current bid prices for comparable securities,
(b) by appraising the value of the Equity Securities on the bid
side of the market or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on the New York Stock Exchange is restricted or any emergency
exists, as a result of which disposal or evaluation of the Securities
is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. Under
certain extreme circumstances, the Sponsor may apply to the Securities
and Exchange Commission for an order permitting a full or partial
suspension of the right of Unit holders to redeem their Units.
The Trustee is not liable to any person in any way for any loss
or damage which may result from any such suspension or postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before 1:00 p.m. Eastern time
on the same business day and by making payment therefor to the
Unit holder not later than the day on which the Units would otherwise
have been redeemed by the Trustee. Units held by the Sponsor may
be tendered to the Trustee for redemption as any other Units.
In the event the Sponsor does not purchase Units, the Trustee
may sell Units tendered for redemption in the over-the-counter
market, if any, as long as the amount to be received by the Unit
holder is equal to the amount he would have received on redemption
of the Units.
Page 18
The offering price of any Units acquired by the Sponsor will be
in accord with the Public Offering Price described in the then
effective prospectus describing such Units. Any profit or loss
resulting from the resale or redemption of such Units will belong
to the Sponsor.
How May Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or
the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of
an Equity Security in the event that an issuer defaults in the
payment of a dividend that has been declared, that any action
or proceeding has been instituted restraining the payment of dividends
or there exists any legal question or impediment affecting such
Equity Security, that the issuer of the Equity Security has breached
a covenant which would affect the payments of dividends, the credit
standing of the issuer or otherwise impair the sound investment
character of the Equity Security, that the issuer has defaulted
on the payment on any other of its outstanding obligations, that
the price of the Equity Security has declined to such an extent
or other such credit factors exist so that in the opinion of the
Sponsor, the retention of such Equity Securities would be detrimental
to the Trust. Zero Coupon Bonds may be sold by the Trustee only
pursuant to the liquidation of the Trust or to meet redemption
requests. Pursuant to the Indenture and with limited exceptions,
the Trustee may sell any securities or other property acquired
in exchange for Equity Securities such as those acquired in connection
with a merger or other transaction. If offered such new or exchanged
securities or property, the Trustee shall reject the offer. However,
in the event such securities or property are nonetheless acquired
by a Trust, they may be accepted for deposit in the Trust and
either sold by the Trustee or held in the Trust pursuant to the
direction of the Sponsor (who may rely on the advice of the Portfolio
Supervisor). Proceeds from the sale of Securities by the Trustee
(or any securities or other property received by the Trust in
exchange for Equity Securities) are credited to the Capital Account
of the Trust for annual distribution to Unit holders or to meet
redemptions.
The Trustee may also sell Securities designated by the Sponsor,
or if not so directed, in its own discretion, for the purpose
of redeeming Units of the Trust tendered for redemption and the
payment of expenses; provided, however, that in the case of Securities
sold to meet redemption requests, Zero Coupon Bonds may only be
sold if the Trust is assured of retaining a sufficient principal
amount of Zero Coupon Bonds to provide funds at the maturity of
the Trust at least equal to $10.00 per Unit. Zero Coupon Bonds
may not be sold by the Trustee to meet Trust expenses.
The Sponsor, in designating Equity Securities to be sold by the
Trustee, will generally make selections in order to maintain,
to the extent practicable, the proportionate relationship among
the number of shares of individual issues of Equity Securities.
To the extent this is not practicable, the composition and diversity
of the Equity Securities may be altered. In order to obtain the
best price for the Trust, it may be necessary for the Sponsor
to specify minimum amounts (generally 100 shares) in which blocks
of Equity Securities are to be sold.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds, The First Trust GNMA, Templeton Growth and Treasury
Trust, 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 $8 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 (708) 241-4141. As of December
31, 1993, the total partners' capital of Nike Securities
Page 19
L.P. was $12,743,032 (unaudited). (This paragraph relates only
to the Sponsor and not to the Trust or to any series thereof or
to any other Underwriters. The information is included herein
only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will
be made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is United States Trust Company of New York with its
principle place of business at 45 Wall Street, New York, New York
10005 and its unit investment trust offices at 770 Broadway, New
York, New York 10003. Unit holders who have questions regarding
the Trust may call the Customer Service Help Line at 1-800-682-7520.
The Trustee is a member of the New York Clearing House Association
and is subject to supervision and examination by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Securities. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any 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 Securities.
In the event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or
upon or in respect of 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 becomes incapable of acting or becomes bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding amounts prescribed
by the Securities and Exchange Commission, or (b) terminate the
Indenture and liquidate the Trust as provided herein, or (c) continue
to act as Trustee without terminating the Indenture.
Page 20
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187. The Evaluator
may resign or may be removed by the Sponsor and the Trustee, in
which event the Sponsor and the Trustee are to use their best
efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment
by the successor Evaluator. If upon resignation of the Evaluator
no successor has accepted appointment within 30 days after notice
of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator
shall be under no liability to the Trustee, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the
maturity, redemption or other disposition of the last of the Zero
Coupon Bonds held in the Trust, but in no event beyond the Mandatory
Termination Date indicated in Part One under "Summary of Essential
Information." The Trust may be liquidated at any time by consent
of 100% of the Unit holders of the Trust. In the event of termination,
written notice thereof will be sent by the Trustee to all Unit
holders of the Trust. Within a reasonable period after termination,
the Trustee will follow the procedures set forth under "How are
Income and Capital Distributed?"
Commencing on the Zero Coupon Bonds Maturity Date, Equity Securities
will begin to be sold in connection with the termination of the
Trust. The Sponsor will determine the manner, timing and execution
of the sale of the Equity Securities. Written notice of any termination
of the Trust specifying the time or times at which Unit holders
may surrender their certificates for cancellation shall be given
by the Trustee to each Unit holder at his address appearing on
the registration books of the Trust maintained by the Trustee.
At least 60 days prior to the Zero Coupon Bonds' Maturity Date
the Trustee will provide written notice thereof to all Unit holders
and will include with such notice a form to enable Unit holders
to elect a distribution of shares of Equity Securities (reduced
by customary transfer and registration charges), if such Unit
holder owns at least 2,500 Units of the Trust, rather than to
receive payment in cash for such Unit holder's pro rata share
of the amounts realized upon the disposition by the Trustee of
Equity Securities. All Unit holders will receive their pro rata
portion of the Zero Coupon Bonds in cash upon the termination
of the Trust. To be effective, the election form, together with
surrendered certificates and other documentation required by the
Trustee, must be returned to the Trustee at least five business
days prior to the Zero Coupon Bonds' Maturity Date. Unit holders
not electing a distribution of shares of Equity Securities will
receive a cash distribution from the sale of the remaining Securities
within a reasonable time after the Trust is terminated. Regardless
of the distribution involved, the Trustee will deduct from the
funds of the Trust any accrued costs, expenses, advances or indemnities
provided by the Trust Agreement, including estimated compensation
of the Trustee and costs of liquidation and any amounts required
as a reserve to provide for payment of any applicable taxes or
other governmental charges. Any sale of Securities in the Trust
upon termination may result in a lower amount than might otherwise
be realized if such sale were not required at such time. The Trustee
will then distribute to each Unit holder his pro rata share of
the balance of the Income and Capital Accounts.
Page 21
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, acts as counsel for the
Trustee and as special New York tax counsel for the Trust.
Experts
The financial statements of the Trust appearing in Part One of
this Prospectus and Registration Statement have been audited by
Ernst & Young, independent auditors, as set forth in their report
thereon appearing elsewhere therein and in the Registration Statement,
and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
Description of Bond Ratings*
* As published by the rating companies.
Standard & Poor's Corporation. A brief description of the applicable
Standard & Poor's Corporation 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.**
** Bonds insured by AMBAC Indemnity Corporation are automatically
rated "AAA" by Standard & Poor's Corporation.
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.
Page 22
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.
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.***
*** Bonds insured by AMBAC Indemnity Corporation are automatically
rated "Aaa" by Moody's Investors Service, Inc.
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 larger 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.
Page 23
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
Growth & Municipal Trust Series
The First Trust Special Situations Trust
What is The First Trust Special Situations Trust? 3
What are the Expenses and Charges? 3
What is the Federal Tax Status of Unit Holders? 4
Portfolio:
What are the Zero Coupon Bonds? 9
How are the Zero Coupon Bonds Insured? 11
What are Equity Securities? 12
What are Some Additional Considerations for
Investors? 13
Public Offering:
How is the Public Offering Price Determined? 14
How are Units Distributed? 15
What are the Sponsor's Profits? 15
Rights of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 15
How are Income and Capital Distributed? 16
What Reports will Unit Holders Receive? 17
How May Units be Redeemed? 17
How May Units be Purchased by the Sponsor? 18
How May Securities be Removed from the Trust? 18
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 19
Who is the Trustee? 20
Limitations on Liabilities of Sponsor and Trustee 20
Who is the Evaluator? 20
Other Information:
How May the Indenture be Amended or
Terminated? 21
Legal Opinions 21
Experts 21
Description of Bond Ratings 22
</TABLE>
__________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE TRUST HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST
(registered trademark)
GROWTH & MUNICIPAL
TRUST SERIES
The First Trust
Special Situations Trust
Prospectus
Part Two
June 27, 1994
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
United States Trust Company
of New York
770 Broadway
New York, New York 10003
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE.
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
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES
61 GROWTH & MUNICIPAL TRUST, 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 July 1, 1994.
THE FIRST TRUST SPECIAL SITUATIONS TRUST,
SERIES 61
GROWTH & MUNICIPAL TRUST, SERIES 1
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title Date
Robert D. Van Kampen Sole Director of )
Nike Securities )
Corporation, ) July 1, 1994
the General Partner )
of Nike Securities L.P. )
)
) Carlos E. Nardo
) Attorney-in-Fact**
*The title of the person named herein represents his capacity in
and relationship to Nike Securities L.P., Depositor.
**An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Special Situations Trust, Series 18 (File No. 33-42683) and
the same is hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated May 20, 1994 in this
Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Special Situations Trust
dated June 21, 1994.
ERNST & YOUNG
Chicago, Illinois
June 20, 1994
