File No. 33-63766
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 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : September 30, 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
July 21, 1994.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
5,124 UNITS
PROSPECTUS
Part One
Dated September 22, 1994
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.
The Trust
The Trust for Taxable Municipal Income, Series 2 (the "Trust") is a fixed
portfolio of taxable interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities. The Bonds are not tax-
exempt and interest on each of the Bonds is includable in gross income for
Federal income tax purposes. At August 16, 1994, each Unit represented a
1/5,124 undivided interest in the principal and net income of the Trust (see
"The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 5.8% of the Public Offering Price (6.157%
of the amount invested). At August 16, 1994, the Public Offering Price per
Unit was $961.91 plus net interest accrued to date of settlement (five
business days after such date) of $11.58 and $24.65 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
Please retain both parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 8.15% per annum on August 16, 1994, and 8.09% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 8.19% per annum on August 16, 1994 and 8.14%
under the monthly distribution plan. Estimated Current Return is calculated
by dividing the Estimated Net Annual Interest Income per Unit by the Public
Offering Price. Estimated Long-Term Return is calculated using a formula
which (1) takes into consideration and determines and factors in the relative
weightings of the market values, yields (which take into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Bonds in the Trust; (2) takes into account the
expenses and sales charge associated with each Unit of the Trust; and (3)
takes into effect the tax-adjusted yield from potential capital gains at the
Date of Deposit. Since the market values and estimated retirements of the
Bonds and the expenses of the Trust will change, there is no assurance that
the present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF AUGUST 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>
GENERAL INFORMATION
Principal Amount of Bonds in the Trust $5,130,000
Number of Units 5,124
Fractional Undivided Interest in the Trust per Unit 1/5,124
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $4,642,965
Aggregate Value of Bonds per Unit $906.12
Sales Charge 6.157% (5.8% of Public Offering Price) $55.79
Public Offering Price per Unit $961.91*
Redemption Price and Sponsor's Repurchase Price per Unit
($55.79 less than the Public Offering Price per Unit) $906.12*
Discretionary Liquidation Amount of the Trust (20% of the
total principal amount of Bonds in the Trust during
the primary offering period) $1,029,000
</TABLE>
Date Trust Established June 17, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $1,544 annually. Evaluations for purposes of sale, purchase
or redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to an affiliate Maximum of $.25 of the Sponsor
of the Sponsor per unit annually
[FN]
*Plus net interest accrued to date of settlement (five business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF AUGUST 16, 1994
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: United States Trust Company of New York
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $80.03 $80.03
Less: Estimated Annual Expense $2.19 $1.64
Estimated Net Annual Interest Income $77.84 $78.39
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $77.84 $78.39
Divided by 12 and 2, Respectively $6.49 $39.20
Estimated Daily Rate of Net Interest Accrual $.2162 $.2178
Estimated Current Return Based on Public Offering Price 8.09% 8.15%
Estimated Long-Term Return Based on Public Offering Price 8.14% 8.19%
</TABLE>
Trustee's Annual Fee: $1.05 and $.55 per $1,000 principal amount of Bonds for
those portions of the Trust under the monthly and semi-annual distribution
plans, respectively.
Computation Dates: Fifteenth day of the month as follows: monthly--each
month; semi-annual--June and December.
Distribution Dates: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Special
Situations Trust, Series 73, The Trust for
Taxable Municipal Income, Series 2
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Special Situations Trust,
Series 73, The Trust for Taxable Municipal Income, Series 2 as of May 31,
1994, and the related statements of operations and changes in net assets for
the period from the Date of Deposit, June 17, 1993, to May 31, 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 May 31, 1994, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our 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 73, The Trust for Taxable Municipal Income, Series 2
at May 31, 1994, and the results of its operations and changes in its net
assets for the period from the Date of Deposit, June 17, 1993, to May 31,
1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
August 31, 1994
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at value (cost $4,840,725) (Note 1) $4,743,832
Accrued interest 113,987
Cash 14,247
__________
4,872,066
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 48,057
__________
Net assets, applicable to 5,131 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $4,840,725
Net unrealized depreciation (Note 2) (96,893)
Distributable funds 80,177
__________
$4,824,009
==========
Net asset value per unit $940.17
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
PORTFOLIO - See notes to portfolio.
May 31, 1994
<TABLE>
<CAPTION>
Coupon
interest Date of Redemption Principal
Name of issuer and title of bond(f) rate maturity provisions(a) Rating(b) amount Value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
City of Albuquerque, New Mexico, Municipal
Refunding, Collateralized Mortgage Obigations
(MR CMO), Series 1988-A (FGIC Insured) (d) -(e) 8/10/2014 AAA $550,000 $104,588
City of Detroit (Michigan), Tax Increment
(Development Area No. 1 Projects), Series 1989B 1999 @ 102
(General Obligation) 10.00% 7/01/2010 1994 @ 100 S.F. A- 250,000 265,777
Minnesota Housing Finance Agency, Rental Housing 1997 @ 102
1993 Series A (Taxable) 8.70 8/01/2022 2015 @ 100 S.F. A+ 1,000,000 1,011,610
New Jersey Housing and Mortgage Finance Agency, 2002 @ 102
Rental Housing Revenue, 1992 Series E (Taxable) 8.95 11/01/2012 2003 @ 100 S.F. A+ 500,000 516,995
The City of New York (New York), General Obligation,
Fiscal 1989 Series C 9.875 8/15/2014 1999 @ 102 A- 1,250,000 1,353,213
New York State, Environmental Facilities
Corporation, Taxable State Service Contract 2002 @ 102
Revenue, Series 1992 A 9.625 3/15/2021 2015 @ 100 S.F. BBB 735,000 797,593
North Little Rock, Arkansas, Residential Housing
Facilities Board, Collateralized Mortgage Obligation,
Municipal Refunding, Class A-2, Series A -(e) 7/20/2014 Aaa (c) 175,000 31,551
Oklahoma City, Oklahoma Airport Trust,
Federal Bureau Prisons Project 9.40 11/01/2010 2003@ 100 S.F. BBB 170,000 172,820
Taxable Certificates of Participation (1993 2003 @ 102
Financing Project) City of Visalia (California) 8.75 1/01/2023 2004 @ 100 S.F. BBB+ 500,000 489,685
______________________
$5,130,000 4,743,832
======================
</TABLE>
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
NOTES TO PORTFOLIO
May 31, 1994
(a) Shown under this heading are the year in which each issue of Bonds is
initially redeemable and the redemption price in that year or, if
currently redeemable, the redemption price at May 31, 1994. Unless
otherwise indicated, each issue continues to be redeemable at declining
prices thereafter (but not below par value). "S.F." indicates a sinking
fund is established with respect to an issue of bonds. In addition,
certain bonds are sometimes redeemable in whole or in part other than by
operation of the stated redemption or sinking fund provisions under
specified unusual or extraordinary circumstances. Approximately 24% of
the Bonds in the Trust are subject to call within five years.
(b) The ratings shown are those effective at May 31, 1994. All ratings are
by Standard & Poor's Corporation unless otherwise indicated.
(c) Rating by Moody's Investors Service, Inc.
(d) Insurance has been obtained by the Bond issuer.
(e) These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on the following dates and at the following percentages of
their original principal amount:
<TABLE>
<CAPTION>
Date %
<S> <C> <C>
City of Albuquerque, New Mexico,
Municipal Refunding 11/10/88 9.389%
North Little Rock, Arkansas,
Residential Housing 10/20/91 13.076
</TABLE>
(f) The Trust consists of nine obligations of issuers located in eight
states. Two bond issues aggregating approximately 39% of the aggregate
principal amount of Bonds in the Trust are obligations of issuers
located in New York. Two of the Bonds in the Trust, representing
approximately 29% of the aggregate principal amount of the Bonds in the
Trust, are general obligations of a governmental entity. The remaining
issues are revenue bonds payable from the income of a specific project
or authority and are divided by purpose of issue as follows: Housing,
4; Airport, 1; and Miscellaneous, 2. Approximately 43% of the aggregate
principal amount of the Bonds in the Trust consist of residential
mortgage revenue bonds. Each of four Bond issues represents 10% or more
of the aggregate principal amount of the Bonds in the Trust or a total
of approximately 69%. The largest such issue represents approximately
24%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
STATEMENT OF OPERATIONS
Period from the Date of Deposit,
June 17, 1993, to May 31, 1994
<TABLE>
<S> <C>
Interest income $393,604
Expenses:
Trustee's fees and related expenses (6,869)
Evaluator's fees (1,276)
Supervisory fees (1,226)
________
Investment income - net 384,233
Net gain (loss) on investments:
Net realized gain (loss) (552)
Change in unrealized appreciation or depreciation (96,893)
________
(97,445)
________
Net increase in net assets resulting from operations $286,788
========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
STATEMENT OF CHANGES IN NET ASSETS
Period from the Date of Deposit,
June 17, 1993, to May 31, 1994
<TABLE>
<S> <C>
Net increase in net assets resulting from operations:
Investment income - net $384,233
Net realized gain (loss) on investments (552)
Change in unrealized appreciation or
depreciation on investments (96,893)
__________
286,788
Distributions to unit holders:
Investment income - net (306,732)
Principal from investment transactions -
__________
(306,732)
Unit redemptions (14):
Principal portion (13,207)
Net interest accrued (223)
__________
(13,430)
__________
Total increase (decrease) in net assets (33,374)
Net assets:
At the beginning of the period 4,857,383
__________
At the end of the period (including distributable
funds applicable to Trust units of $80,177) $4,824,009
==========
Trust units outstanding at the end of the period 5,131
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
Bonds are stated at values as determined by Securities Evaluation Service,
Inc. (the Evaluator), certain shareholders of which are officers of the
Sponsor. The bond values are based on (1) current bid prices for the bonds
obtained from dealers or brokers who customarily deal in bonds comparable to
those held by the Trust, (2) current bid prices for comparable bonds,
(3) appraisal or (4) any combination of the above.
Security cost -
The Trust's cost of its portfolio is based on the offering prices of the bonds
on the Date of Deposit, June 17, 1993. The premium or discount (including
original issue discount) existing at the Date of Deposit is not being
amortized. Realized gain (loss) from bond transactions is reported on an
identified cost basis. Sales and redemptions of bonds are recorded on the
trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
The Trust pays a fee for Trustee services to United States Trust Company of
New York which is based on $1.05 and $.55 per $1,000 principal amount of Bonds
for those portions of the Trust under the monthly and semi-annual distribution
plans, respectively. Additionally, a fee of $1,544 annually is payable to the
Evaluator and the Trust pays all related expenses of the Trustee, recurring
financial reporting costs and an annual supervisory fee payable to an
affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized depreciation at May 31, 1994 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(104,460)
Unrealized appreciation 7,567
_________
$(96,893)
=========
</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 bonds on the date of an investor's purchase, plus a
sales charge of 5.3% of the public offering price which is equivalent to
approximately 5.597% of the net amount invested.
<PAGE>
Distributions of net interest income -
Distributions of net interest income to unit holders are made monthly or semi-
annually. Such income distributions per unit, on an accrual basis, were as
follows:
<TABLE>
<CAPTION>
Period from the
Type of Date of Deposit,
distribution June 17, 1993,
plan to May 31, 1994
<S> <C>
Monthly $59.57*
Semi-annual 59.92
</TABLE>
[FN]
*Excludes $1.52 per unit distributed to the Sponsor as discussed below.
Accrued interest to the Date of Deposit, totaling $103,566, plus net interest
accruing to the first settlement date of the Trust, June 24, 1993, totaling
$7,816 were distributed to the Sponsor as the unit holder of record. The
initial subsequent distribution, $6.10 per unit, was paid on October 1, 1993
to all unit holders of record on September 15, 1993.
Selected data for a unit of the Trust outstanding throughout
the period -
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
June 17, 1993,
to May 31, 1994
<S> <C>
Interest income $76.56
Expenses (1.82)
_______
Investment income - net (74.74)
Distributions to unit holders:
Investment income - net (59.68)
Principal from investment transactions -
Net gain (loss) on investments (18.99)
_______
Total increase (decrease) in net assets (3.93)
Net assets:
Beginning of the period 944.10
_______
End of the period $940.17
=======
</TABLE>
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
PART ONE
Must be Accompanied by Part Two
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: United States Trust Company of New York
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
The First Trust Special Situations Trust
The Trust for Taxable Municipal Income Series
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated October 28, 1993
The First Trust Special Situations Trust (the "Trusts" and each
a "Trust") are unit investment trusts consisting of portfolios
of interest-bearing taxable municipal bonds (the "Bonds"). THE
BONDS ARE NOT TAX-EXEMPT AND INTEREST ON EACH OF THE BONDS IS
INCLUDABLE IN GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES.
The Objectives of each Trust are a high level of current taxable
income and conservation of capital through investment in a portfolio
of interest-bearing taxable municipal bonds. The payment of interest
and the conservation of capital are, of course, dependent upon
the continuing ability of the issuers, obligors and/or insurers,
if any, to meet their respective obligations.
Attention Foreign Investors: Your interest income from a Trust
may be exempt from federal withholding taxes if you are not a
United States citizen or resident and certain conditions are met.
See "What is the Federal Tax Status of Unit Holders?"
For Information on Estimated Current Return (if applicable) and
Estimated Long-term Return, see Part One for each Trust.
Distributions to Unit holders may be reinvested as described herein.
See "How Can Distributions to Unit Holders be Reinvested?"
The Sponsor, although not obligated to do so, intends to maintain
a market for the Units at prices based upon the aggregate bid
price of the Bonds in the portfolio of the Trust. In the absence
of such a market, a Unit holder will nonetheless be able to dispose
of the Units through redemption at prices based upon the bid prices
of the underlying Bonds. See "How May Units be Redeemed?"
The Secondary Market Public Offering Price will be equal to the
aggregate bid price of the Bonds in the portfolio of a Trust divided
by the number of Units outstanding, plus a maximum sales charge
as indicated in Part One for each Trust. For sales charges in
the secondary market, see "Public Offering." The minimum purchase
is 5 Units.
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE
REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
The First Trust Special Situations Trust
The Trust for Taxable Municipal Income Series
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust is a series of investment
companies created by the Sponsor under the name of The First Trust
Special Situations Trust, each of which is separate and is designated
by a different series number (the "Trust"). Each Series consists
of an underlying separate unit investment trust consisting of
a portfolio containing interest-bearing taxable municipal bonds
(the "Bonds"), created under the laws of the State of New York
pursuant to a Trust Agreement (the "Indenture"), dated the Initial
Date of Deposit, with Nike Securities L.P., as Sponsor, 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 each Trust are a high level of current taxable
income and conservation of capital through investment in a portfolio
of interest-bearing taxable municipal bonds. THERE IS, OF COURSE,
NO GUARANTEE THAT A TRUST'S OBJECTIVES WILL BE ACHIEVED. AN INVESTMENT
IN A TRUST SHOULD BE MADE WITH AN UNDERSTANDING OF THE RISKS WHICH
AN INVESTMENT IN FIXED RATE LONG-TERM DEBT OBLIGATIONS MAY ENTAIL,
INCLUDING THE RISK THAT THE VALUE OF THE UNITS WILL DECLINE WITH
INCREASES IN INTEREST RATES.
In selecting the Bonds, the following facts, among others, were
considered: (i) at the Initial Date of Deposit the Standard &
Poor's Corporation rating of the Bonds was in no case less than
"BBB," or the Moody's Investors Service, Inc. rating of the Bonds
was in no case less than "Baa," including provisional or conditional
ratings, respectively, or, if not rated, the Bonds had, in the
opinion of the Sponsor, credit characteristics sufficiently similar
to the credit characteristics of interest-bearing taxable obligations
that were so rated as to be acceptable for acquisition by the
Trust (see "Description of Bond Ratings"); (ii) the prices of
the Bonds relative to other bonds of comparable quality and maturity;
(iii) the diversification of Bonds as to location of issuer; and
(iv) whether the Bonds were issued after July 18, 1984. Subsequent
to the Initial Date of Deposit, a Bond may cease to be rated or
its rating may be reduced below the minimum required as of the
Initial Date of Deposit. Neither event requires elimination of
such Bond from a portfolio, but may be considered in the Sponsor's
determination as to whether or not to direct the Trustee to dispose
of the Bond. See "Rights of Unit Holders-How May Bonds be Removed
from the Trust?"
Certain Bonds in the Trusts may have been acquired at a market
discount from par value at maturity. The coupon interest rates
on the discount bonds at the time they were purchased and deposited
in the Trusts were lower than the current market interest rates
for newly issued bonds of comparable rating and type. If such
interest rates for newly issued comparable bonds increase, the
market discount of previously issued bonds will become greater,
and if such interest rates for newly issued comparable bonds decline,
the market discount of previously issued bonds will be reduced,
other things being equal. Investors should also note that the
value of bonds purchased at a market discount will increase in
value faster than bonds purchased at a market premium if interest
rates decrease. Conversely, if interest rates increase, the value
of bonds purchased at a market discount will decrease faster than
bonds purchased at a premium. In addition, if interest rates rise,
the prepayment risk of higher yielding, premium bonds and the
prepayment benefit for lower yielding, discount bonds will be
reduced. A discount bond held to maturity will have a larger portion
of its total return in the form of taxable income and capital
gain and less in the form of interest income than a comparable
bond newly issued at current market rates. See "What is the Federal
Tax Status of Unit Holders?" Market discount attributable to interest
changes does not indicate a lack of market confidence in the issue.
Neither the Sponsor nor the Trustee shall be liable in any way
for any default, failure or defect in any of the Bonds.
Certain Bonds in the Trusts may be original issue discount bonds.
Under current law, the original issue discount, which is the difference
between the stated redemption price at maturity and the issue
price of the Bonds
Page 2
is deemed to accrue on a daily basis and the accrued portion
is treated as interest income for Federal income tax purposes.
On sale or redemption, any gain realized that is in excess of
the earned portion of original issue discount will be taxable
as capital gain, unless the gain is attributable to market discount
in which case the accretion of market discount is taxable as ordinary
income. See "What is the Federal Tax Status of Unit Holders?"
The current value of an original discount bond reflects the present
value of its stated redemption price at maturity. The market value
tends to increase in greater increments as the Bonds approach
maturity.
Certain Bonds in the Trusts may have been acquired at a market
premium from par value at maturity. The coupon interest rates
on the premium bonds at the time they were purchased and deposited
in the Trusts were higher than the current market interest rates
for newly issued bonds of comparable rating and type. If such
interest rates for newly issued and otherwise comparable bonds
decrease, the market premium of previously issued bonds will be
increased, and if such interest rates for newly issued comparable
bonds increase, the market premium of previously issued bonds
will be reduced, other things being equal. The current returns
of bonds trading at a market premium are initially higher than
the current returns of comparable bonds of a similar type issued
at currently prevailing interest rates because premium bonds tend
to decrease in market value as they approach maturity when the
face amount becomes payable. Because part of the purchase price
is thus returned not at maturity but through current income payments,
early redemption of a premium bond at par or early prepayments
of principal will result in a reduction in yield. Redemption pursuant
to call provisions generally will, and redemption pursuant to
sinking fund provisions may, occur at times when the redeemed
Bonds have an offering side valuation which represents a premium
over par or for original issue discount Bonds a premium over the
accreted value. To the extent that the Bonds were deposited in
a Trust at a price higher than the price at which they are redeemed,
this will represent a loss of capital when compared to the original
Public Offering Price of the Units. Because premium bonds generally
pay a higher rate of interest than bonds priced at or below par,
the effect of the redemption of premium bonds would be to reduce
Estimated Net Annual Unit Income by a greater percentage than
the par amount of such bonds bears to the total par amount of
Bonds in the Trusts. Although the actual impact of any such redemptions
that may occur will depend upon the specific Bonds that are redeemed,
it can be anticipated that the Estimated Net Annual Unit Income
will be significantly reduced after the dates on which such Bonds
are eligible for redemption. See "Rights of Unit Holders: How
May Bonds be Removed from a Trust?" and "Other Information: How
May the Indenture be Amended or Terminated?" See "Portfolio" in
Part One for each Trust for the earliest scheduled call date and
the initial redemption price for each Bond.
Certain of the original issue discount bonds may be Zero Coupon
Bonds (including bonds known as multiplier bonds, money multiplier
bonds, capital appreciation bonds, capital accumulator bonds,
compound interest bonds and money discount maturity payment bonds).
Zero Coupon Bonds do not provide for the payment of any current
interest and generally provide for payment at maturity at face
value unless sooner sold or redeemed. Zero Coupon Bonds may be
subject to more price volatility than conventional bonds. While
some types of Zero Coupon Bonds, such as multipliers and capital
appreciation bonds, define par as the initial offering price rather
than the maturity value, they share the basic Zero Coupon Bond
features of (1) not paying interest on a semi-annual basis and
(2) providing for the reinvestment of the bond's semi-annual earnings
at the bond's stated yield to maturity. While Zero Coupon Bonds
are frequently marketed on the basis that their fixed rate of
return minimizes reinvestment risk, this benefit can be negated
in large part by weak call protection, i.e., a bond's provision
for redemption at only a modest premium over the accreted value
of the bond.
Certain of the Bonds in the Trusts may be general obligations
of a governmental entity that are backed by the taxing power of
such entity. All other Bonds in the Trusts are revenue bonds payable
from the income of a specific project or authority and are not
supported by the issuer's power to levy taxes. General obligation
bonds are secured by the issuer's pledge of its faith, credit
and taxing power for the payment of principal and
Page 3
interest. Revenue bonds, on the other hand, are payable only from
the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or
other specific revenue source. There are, of course, variations
in the security of the different Bonds in the Trusts, both within
a particular classification and between classifications, depending
on numerous factors.
Certain of the Bonds in the portfolios of the Trusts may be insured
as to the scheduled payment of interest and principal by municipal
bond insurance policies obtained by the Bond issuer, the underwriters
or others prior to the Initial Date of Deposit from certain municipal
bond insurers (the "Preinsured Bonds"). The premium for any Preinsured
Bonds has been paid in advance by the Bond issuer, the underwriters
or others and any such policy or policies are noncancellable and
will continue in force so long as the Bonds so insured are outstanding
and the insurer and/or insurers thereof remain in business. The
value of insurance obtained by the Bond issuer, the underwriters
or others is reflected and included in the market value of the
Preinsured Bonds.
Certain of the Bonds in the Trusts may be health care revenue
bonds. Ratings of bonds issued for health care facilities are
sometimes based on feasibility studies that contain projections
of occupancy levels, revenues and expenses. A facility's gross
receipts and net income available for debt service may be affected
by future events and conditions including among other things,
demand for services, the ability of the facility to provide the
services required, physicians' confidence in the facility, management
capabilities, competition with other hospitals, efforts by insurers
and governmental agencies to limit rates, legislation establishing
state rate-setting agencies, expenses, government regulation,
the cost and possible unavailability of malpractice insurance
and the termination or restriction of governmental financial assistance,
including that associated with Medicare, Medicaid and other similar
third party payor programs. Pursuant to recent Federal legislation,
Medicare reimbursements are currently calculated on a prospective
basis utilizing a single nationwide schedule of rates. Prior to
such legislation Medicare reimbursements were based on the actual
costs incurred by the health facility. The current legislation
may adversely affect reimbursements to hospitals and other facilities
for services provided under the Medicare program.
Certain of the Bonds in the Trusts may be obligations of issuers
whose revenues are primarily derived from mortgage loans to housing
projects for low to moderate income families. The ability of such
issuers to make debt service payments will be affected by events
and conditions affecting financed projects, including, among other
things, the achievement and maintenance of sufficient occupancy
levels and adequate rental income, increases in taxes, employment
and income conditions prevailing in local labor markets, utility
costs and other operating expenses, the managerial ability of
project managers, changes in laws and governmental regulations,
the appropriation of subsidies and social and economic trends
affecting the localities in which the projects are located. The
occupancy of housing projects may be adversely affected by high
rent levels and income limitations imposed under Federal and state
programs. Like single family mortgage revenue bonds, multi-family
mortgage revenue bonds are subject to redemption and call features,
including extraordinary mandatory redemption features, upon prepayment,
sale or non-origination of mortgage loans as well as upon the
occurrence of other events. Certain issuers of single or multi-family
housing bonds have considered various ways to redeem bonds they
have issued prior to the stated first redemption dates for such
bonds. In one situation the New York City Housing Development
Corporation, in reliance on its interpretation of certain language
in the indenture under which one of its bond issues was created,
redeemed all of such issue at par in spite of the fact that such
indenture provided that the first optional redemption was to include
a premium over par and could not occur prior to 1992. In connection
with the housing Bonds held by a Trust, the Sponsor has not had
any direct communications with any of the issuers thereof, but
at the Initial Date of Deposit it was not aware that any of the
respective issuers of such Bonds were actively considering the
redemption of such Bonds prior to their respective stated initial
call dates. However, there can be no assurance that an issuer
of a Bond in a Trust will not attempt to so redeem a Bond in a
Trust.
Page 4
Certain of the Bonds in the Trusts may be obligations of issuers
whose revenues are primarily derived from the sale of electric
energy. Utilities are generally subject to extensive regulation
by state utility commissions which, among other things, establish
the rates which may be charged and the appropriate rate of return
on an approved asset base. The problems faced by such issuers
include the difficulty in obtaining approval for timely and adequate
rate increases from the governing public utility commission, the
difficulty in financing large construction programs, the limitations
on operations and increased costs and delays attributable to environmental
considerations, increased competition, recent reductions in estimates
of future demand for electricity in certain areas of the country,
the difficulty of the capital market in absorbing utility debt,
the difficulty in obtaining fuel at reasonable prices and the
effect of energy conservation. All of such issuers have been experiencing
certain of these problems in varying degrees. In addition, Federal,
state and municipal governmental authorities may from time to
time review existing and impose additional regulations governing
the licensing, construction and operation of nuclear power plants,
which may adversely affect the ability of the issuers of such
Bonds to make payments of principal and/or interest on such Bonds.
Certain of the Bonds in the Trusts may be obligations which are
payable from and secured by revenues derived from the ownership
and operation of facilities such as airports, bridges, turnpikes,
port authorities, convention centers and arenas. The major portion
of an airport's gross operating income is generally derived from
fees received from signatory airlines pursuant to use agreements
which consist of annual payments for leases, occupancy of certain
terminal space and service fees. Airport operating income may
therefore be affected by the ability of the airlines to meet their
obligations under the use agreements. The air transport industry
is experiencing significant variations in earnings and traffic,
due to increased competition, excess capacity, increased costs,
deregulation, traffic constraints and other factors, and several
airlines are experiencing severe financial difficulties. The Sponsor
cannot predict what effect these industry conditions may have
on airport revenues which are dependent for payment on the financial
condition of the airlines and their usage of the particular airport
facility. Similarly, payment on Bonds related to other facilities
is dependent on revenues from the projects, such as user fees
from ports, tolls on turnpikes and bridges and rents from buildings.
Therefore, payment may be adversely affected by reduction in revenues
due to such factors as increased cost of maintenance, decreased
use of a facility, lower cost of alternative modes of transportation,
scarcity of fuel and reduction or loss of rents.
Certain of the Bonds in the Trusts may be obligations which are
payable from and secured by revenues derived from the operation
of resource recovery facilities. Resource recovery facilities
are designed to process solid waste, generate steam and convert
steam to electricity. Resource recovery bonds may be subject to
extraordinary optional redemption at par upon the occurrence of
certain circumstances, including but not limited to: destruction
or condemnation of a project; contracts relating to a project
becoming void, unenforceable or impossible to perform; changes
in the economic availability of raw materials, operating supplies
or facilities necessary for the operation of a project or technological
or other unavoidable changes adversely affecting the operation
of a project; administrative or judicial actions which render
contracts relating to the projects void, unenforceable or impossible
to perform; or impose unreasonable burdens or excessive liabilities.
The Sponsor cannot predict the causes or likelihood of the redemption
of resource recovery bonds in the Trusts prior to the stated maturity
of the Bonds.
Because certain Bonds may from time to time under certain circumstances
be sold or redeemed or will mature in accordance with their terms
and because the proceeds from such events will be distributed
to Unit holders and will not be reinvested, no assurance can be
given that a Trust will retain for any length of time its present
size and composition. Neither the Sponsor nor the Trustee shall
be liable in any way for any default, failure or defect in any
Bond. Certain of the Bonds contained in the Trusts may be subject
to being called or redeemed in whole or in part prior to their
stated maturities pursuant to optional redemption provisions,
sinking fund provisions, special or extraordinary redemption provisions,
or otherwise. See "Portfolio" appearing in Part One for each Trust.
A bond subject to optional call is one which is subject to redemption
or refunding
Page 5
prior to maturity at the option of the issuer. A refunding is
a method by which a bond issue is redeemed, at or before maturity,
by the proceeds of a new bond issue. A bond subject to sinking
fund redemption is one which is subject to partial call from time
to time at par or from a fund accumulated for the scheduled retirement
of a portion of an issue prior to maturity. The exercise of redemption
or call provisions will (except to the extent the proceeds of
the called Bonds are used to pay for Unit redemptions) result
in the distribution of principal and may result in a reduction
in the amount of subsequent interest distributions; it may also
affect the Estimated Long-Term Return and the Estimated Current
Return on Units of the Trusts. Redemption pursuant to call provisions
is more likely to occur, and redemption pursuant to sinking fund
provisions may occur, when the Bonds have an offering side valuation
which represents a premium over par or for original issue discount
bonds a premium over the accreted value. Unit holders may recognize
capital gain or loss upon any redemption or call.
To the best knowledge of the Sponsor, there is no litigation pending
as of the date hereof in respect of any Bonds which might reasonably
be expected to have a material adverse effect upon the Trusts.
At any time after the date hereof, litigation may be initiated
on a variety of grounds with respect to Bonds in the Trusts. Such
litigation may affect the validity of such Bonds. In addition,
other factors may arise from time to time which potentially may
impair the ability of issuers to meet obligations undertaken with
respect to the Bonds.
Each Unit initially offered represents that fractional undivided
interest in a Trust as is set forth in Part One for each Trust.
To the extent that any Units of a Trust are redeemed by the Trustee,
the fractional undivided interest in the Trust represented by
each unredeemed Unit will increase, although the actual interest
in a Trust represented by such fraction will remain substantially
unchanged. Units will remain outstanding until redeemed upon tender
to the Trustee by any Unit holder, which may include the Sponsor,
or until the termination of the Trust Agreement.
What are Estimated Long-Term Return and Estimated Current Return?
The Estimated Current Return (if applicable) and the Estimated
Long-Term Return, under the monthly and semi-annual distribution
plans, are as set forth in Part One for each Trust. Estimated
Current Return is computed by dividing the Estimated Net Annual
Interest Income per Unit by the Public Offering Price. Any change
in either the Estimated Net Annual Interest Income per Unit or
the Public Offering Price will result in a change in the Estimated
Current Return. The Public Offering Price will vary in accordance
with fluctuations in the prices of the underlying Bonds and the
Net Annual Interest Income per Unit will change as Bonds are redeemed,
paid, sold or exchanged in certain refundings or as the expenses
of a Trust change. Therefore, there is no assurance that the Estimated
Current Return (if applicable) indicated in Part One for each
Trust will be realized in the future. Estimated Long-Term Return
is calculated using a formula which (1) takes into consideration
and determines and factors in the relative weightings of the market
values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all
of the Bonds in a Trust; and (2) takes into account the expenses
and sales charge associated with each Unit of the Trust. Since
the market values and estimated retirements of the Bonds and the
expenses of a Trust will change, there is no assurance that the
Estimated Long-Term Return indicated in Part One for each Trust
will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation
of Estimated Long-Term Return reflects the estimated date and
amount of principal returned while Estimated Current Return calculations
include only Net Annual Interest Income and Public Offering Price.
Neither rate reflects the true return to Unit holders, which is
lower, because neither includes the effect of the delay in the
first payment to Unit holders.
Record Dates for the distribution of interest under the semi-annual
distribution plan are the fifteenth day of June and December with
the Distribution Dates being the first day of the month following
each Record Date. It is anticipated that an amount equal to approximately
one-half of the amount of net annual interest
Page 6
income per Unit will be distributed on or shortly after each Distribution
Date to Unit holders of record on the preceding Record Date. See
Part One for each Trust.
Record Dates for monthly distributions are the fifteenth day of
each month. The Distribution Dates for distributions of interest
under the monthly distribution plan is the first day of the month
following that in which the related Record Date occurs. All Unit
holders will receive such distributions, if any, from the Principal
Account as are made as of the Record Dates for monthly distributions.
See Part One for each Trust.
How is Accrued Interest Treated?
Accrued interest is the accumulation of unpaid interest on a bond
from the last day on which interest thereon was paid. Interest
on Bonds in a Trust generally is paid semi-annually to the Trust.
However, interest on the Bonds in a Trust is accounted for daily
on an accrual basis. Because of this, a Trust always has an amount
of interest earned but not yet collected by the Trustee because
of non-collected coupons. For this reason, the Public Offering
Price of Units will have added to it the proportionate share of
accrued and undistributed interest to the date of settlement.
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount
of interest actually received by a Trust and distributed to Unit
holders. Therefore, there will always remain an item of accrued
interest that is added to the value of the Units. If a Unit holder
sells or redeems all or a portion of his Units, he will be entitled
to receive his proportionate share of the accrued interest from
the purchaser of his Units. Since the Trustee has the use of the
interest held in the Interest Account for distributions to Unit
holders and since such Account is non-interest-bearing to Unit
holders, the Trustee benefits thereby.
What is the Federal Tax Status of Unit Holders?
For purposes of the following discussion and opinions, it is assumed
that interest on each of the Bonds is includable in gross income
for Federal income tax purposes (i.e., the Bonds are not tax-exempt).
In the opinion of Chapman and Cutler, Counsel for the Sponsor,
under existing law:
Each Trust is not an association taxable as a corporation for
Federal income tax purposes.
Each Unit holder of a Trust is considered to be the owner of a
pro rata portion of the Trust under subpart E, subchapter J of
chapter 1 of the Internal Revenue Code of 1986 (hereinafter the
"Code"). Each Unit holder will be considered to have received
his pro rata share of interest derived from each Trust asset when
such interest is received by the Trust. Each Unit holder will
also be required to include in taxable income for Federal income
tax purposes, original issue discount with respect to his interest
in any Bonds held by a Trust at the same time and in the same
manner as though the Unit holder were the direct owner of such
interest.
Each Unit holder will have a taxable event when a Trust disposes
of a Bond, or when the Unit holder redeems or sells his Units.
Unit holders must reduce the tax basis of their Units for their
share of accrued interest received, if any, on Bonds delivered
after the date the Unit holders pay for their Units and, consequently,
such Unit holders may have an increase in taxable gain or reduction
in capital loss upon the disposition of such Units. 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 the Units. If the Trustee disposes of Bonds (whether by sale,
exchange, payment on maturity, redemption or otherwise), gain
or loss is recognized to the Unit holder. The amount of any such
gain or loss is measured by comparing the Unit holder's pro rata
share of the total proceeds from such disposition with his basis
for his fractional interest in the asset disposed of. In the case
of a Unit holder who purchases his Units, such basis is determined
by apportioning the tax basis for the Units among each of the
Trust assets ratably according to value as of the date of acquisition
of the Units. The basis of each Unit and of each Bond which was
issued with original issue discount must be increased by the amount
of accrued original issue discount and the basis of each Unit
and of each Bond which was purchased by a Trust at a premium must
be reduced by the annual amortization of Bond premium which the
Unit holder has properly elected to amortize under Section 171
of the Code. The tax cost reduction requirements of the Code relating
to amortization of bond premium may, under some circumstances
Page 7
result in the Unit holder realizing a taxable gain when his Units
are sold or redeemed for an amount equal to or less than his original
cost.
Each Unit holder's pro rata share of each expense paid by a Trust
is deductible by the Unit holder to the same extent as though
the expense had been paid directly by him, subject to the following
limitation. It should be noted that as a result of the Tax Reform
Act of 1986, certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee
business expenses will be deductible by an individual only to
the extent they exceed 2% of such individual's adjusted gross
income. Temporary regulations have been issued which require Unit
holders to treat certain expenses of the Trust as miscellaneous
itemized deductions subject to this limitation.
If a Unit holder's tax basis of his pro rata portion in any Bonds
held by a Trust exceeds the amount payable by the issuer of the
Bonds with respect to such pro rata interest upon maturity of
the Bond, such excess would be considered "acquisition premium"
which may be amortized by the Unit holder at the Unit holder's
election as provided in Section 171 of the Code. Unit holders
should consult their tax advisors regarding whether such election
should be made and the manner of amortizing acquisition premium.
Certain Bonds in a Trust may have been acquired with "original
issue discount." In the case of any Bonds in the Trust acquired
with "original issue discount" that exceeds a "de minimis" amount
as specified in the Code, such discount is includable in taxable
income of the Unit holders on an accrual basis computed daily,
without regard to when payments of interest on such Bonds are
received. The Code provides a complex set of rules regarding the
accrual of original issue discount. These rules provide that original
issue discount generally accrues on the basis of a constant compound
interest rate over the term of the Bonds. Unit holders should
consult their tax advisers as to the amount of original issue
discount which accrues.
Special original issue discount rules apply if the purchase price
of the Bond by a Trust exceeds its original issue price plus the
amount of original issue discount which would have previously
accrued based upon its issue price (its "adjusted issue price").
Unit holders should also consult their tax advisers regarding
these special rules. Similarly these special rules would apply
to a Unit holder if the tax basis of his pro rata portion of a
Bond issued with original issue discount exceeds his pro rata
portion of its adjusted issue price.
If a Unit holder's tax basis in his pro rata portion of Bonds
is less than the allocable portion of such Bond's stated redemption
price at maturity (or, if issued with original issue discount,
the allocable portion of its "revised issue price"), such difference
will constitute market discount unless the amount of market discount
is "de minimis" as specified in the Code. Market discount accrues
daily computed on a straight line basis, unless the Unit holder
elects to calculate accrued market discount under a constant yield
method. Unit holders should consult their tax advisers as to the
amount of market discount which accrues.
Accrued market discount is generally includable in taxable income
to the Unit holders as ordinary income for Federal tax purposes
upon the receipt of serial principal payments on the Bonds, on
the sale, maturity or disposition of such Bonds by a Trust, and
on the sale by a Unit holder of Units, unless a Unit holder elects
to include the accrued market discount in taxable income as such
discount accrues. If a Unit holder does not elect to annually
include accrued market discount in taxable income as it accrues,
deductions for any interest expenses incurred by the Unit holder
which are incurred to purchase or carry his Units will be reduced
by such accrued market discount. In general, the portion of any
interest expense which was not currently deductible would ultimately
be deductible when the accrued market discount is included in
income. Unit holders should consult their tax advisers regarding
whether an election should be made to include market discount
in income as it accrues and as to the amount of interest expense
which may not be currently deductible.
The tax basis of a Unit holder with respect to his interest in
a Bond is increased by the amount of original issue discount (and
market discount, if the Unit holder elects to include market discount,
if any, on the Bonds held by a Trust in income as it accrues)
thereon properly included in the Unit holder's gross income as
determined for Federal income tax purposes and reduced by the
amount of any amortized acquisition premium
Page 8
which the Unit holder has properly elected to amortize under Section
171 of the Code. A Unit holder's tax basis in his Units will equal
his tax basis in his pro rata portion of all of the assets of
a Trust.
A Unit holder will recognize taxable capital gain (or loss) when
all or part of his pro rata interest in a Bond is disposed of
in a taxable transaction for an amount greater (or less) than
his tax basis therefor. Any gain recognized on a sale or exchange
and not constituting a realization of accrued "market discount,"
and any loss will, under current law, generally be capital gain
or loss. As previously discussed, gain realized on the disposition
of the interest of a Unit holder in any Bond deemed to have been
acquired with market discount will be treated as ordinary income
to the extent the gain does not exceed the amount of accrued market
discount not previously taken into income. Any capital gain or
loss arising from the disposition of a Bond by the Trust or the
disposition of Units by a Unit holder will be short-term capital
gain or loss unless the Unit holder has held his Units for more
than one year in which case such capital gain or loss will be
long-term. For taxpayers other than corporations, net capital
gains are presently subject to a maximum stated marginal tax rate
of 28 percent.
The Revenue Reconciliation Act of 1993 (the "Tax Act") was recently
enacted. The Tax Act raises tax rates on ordinary income while
capital gains remain subject to a 28 percent 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.
If the Unit holder disposes of a Unit, he is deemed thereby to
have disposed of his entire pro rata interest in all Trust assets
including his pro rata portion of all of the Bonds represented
by the Unit. This may result in a portion of the gain, if any,
on such sale being taxable as ordinary income under the market
discount rules (assuming no election was made by the Unit holder
to include market discount in income as it accrues) as previously
discussed.
A Unit holder who is a foreign investor (i.e., an investor other
than a U.S. citizen or resident or a U.S. corporation, partnership,
estate or trust) will not be subject to United States Federal
income taxes, including withholding taxes, on interest income
(including any original issue discount) on, or any gain from the
sale or other disposition of, his pro rata interest in any Bond
or the sale of his Units provided that all of the following conditions
are met: (i) the interest income or gain is not effectively connected
with the conduct by the foreign investor of a trade or business
within the United States, (ii) if the interest is United States
source income (which is the case for each Bond held by a Trust),
then the foreign investor does not own, directly or indirectly,
10% or more of the total combined voting power of all classes
of voting stock of the issuer of the Bond and the foreign investor
is not a controlled foreign corporation related (within the meaning
of Section 864(d)(4) of the Code) to the issuer of the Bond, (iii)
with respect to any gain, the foreign investor (if an individual)
is not present in the United States for 183 days or more during
his or her taxable year and (iv) the foreign investor provides
all certification which may be required of his status (foreign
investors may contact the Sponsor to obtain a Form W-8 which must
be filed with the Trustee and refiled every three calendar years
thereafter). Foreign investors should consult their tax advisers
with respect to United States tax consequences of ownership of
Units.
It should be noted that the Tax Act includes a provision which
eliminates the exemption from United States taxation, including
withholding taxes, for certain "contingent interest." The provision
applies to interest received after December 31, 1993. No opinion
is expressed herein regarding the potential applicability of this
provision and whether United States taxation or withholding taxes
could be imposed with respect to income derived from the Units
as a result thereof. Unit holders and prospective investors should
consult with their tax advisers regarding the potential effect
of this provision on their investment in Units.
Page 9
Each Unit holder (other than a foreign investor who has properly
provided the certifications described in the preceding paragraph)
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 will be subject
to back-up withholding.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Trusts for New York tax matters, the Trusts are not associations
taxable as corporations and the income of the Trusts will be treated
as the income of the Unit holders under the existing income tax
laws of the State and City of New York.
The foregoing discussion relates only to United States Federal
and, to the extent set forth, New York State and City income taxes;
Unit holders may be subject to state and local taxation (including
taxation by a foreign investor's country of residence). Residents
of the States of California and New York may be exempt from state
and local (where applicable) personal income taxation with respect
to their portion of the interest income of Bonds of issuers located
in their respective State. The Trustee will supply annually each
Unit holder with a statement setting forth the annual percentage
of the interest income of the Trust generated by each State in
which the issuers of the Bonds are located. Unit holders should
consult their tax advisers regarding potential state, local, or
foreign taxation with respect to the Units.
Why are Investments in a Trust Suitable for Retirement Plans?
Units of a Trust may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans, certain of which are briefly described below.
Generally, the Federal income tax relating to capital gains and
income received in each of the foregoing plans is deferred until
distributions are received. Distributions from such plans are
generally treated as ordinary income but may, in some cases, be
eligible for special 10 year averaging or tax-deferred rollover
treatment. The Code substitutes 5 year averaging for 10 year averaging
for qualifying lump sum plan distributions after December 31,
1986 although certain transition rules apply which retain 10 year
averaging for qualifying recipients who attained age 50 before
January 1, 1986. Moreover, the Code contains provisions which
adversely affect the continued deductibility of annual contributions
to an IRA beginning in 1987. Investors considering participation
in any such plan should review specific tax laws related thereto
and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans
are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
Individual Retirement Account-IRA. The deductible amount an individual
may contribute will be reduced to the extent an individual has
adjusted gross income over $25,000 ($40,000 if married, filing
jointly or $0 if married, living apart and filing separately),
if either an individual or that individual's spouse (if married,
filing jointly) is an active participant in an employer maintained
retirement plan. If an individual has adjusted gross income over
$35,000 ($50,000 if married, filing jointly or $0 if married,
living apart and filing separately), and if an individual or that
individual's spouse is an active participant in an employer maintained
retirement plan, no IRA deduction is permitted. Under the Code,
an individual may make nondeductible contributions to the extent
deductible contributions are not allowed. The combined deductible
and nondeductible limit for an individual under the Code is the
lesser of $2,000 ($2,250 in the case of a spousal IRA) or 100
percent of compensation. Generally, the Federal income tax relating
to capital gains and income received in an IRA is deferred until
distributions are received. Distributions from an IRA (other than
the return of certain excess contributions) are treated as ordinary
income, except that under the Code an individual need not pay
tax on the return of nondeductible contributions. The Code provides
that if amounts are withdrawn from an IRA which includes both
deductible and nondeductible contributions, the amount excludable
from income for the taxable year is the same proportion to the
total amount withdrawn for the taxable year
Page 10
that the individual's aggregate nondeductible IRA contributions
bear to the aggregate balance of all IRAs of the individual.
It should be noted that certain transactions which are prohibited
under the Code will cause all or a portion of the amount in an
IRA to be deemed to be distributed and subject to tax at that
time. A participant's entire interest in an IRA must be, or commence
to be, distributed to the participant not later than April 1 of
the calendar year following the year during which the individual
attains age 70 1/2. Excess contributions are subject to an annual
6% excise tax. Distributions made before attainment of age 59
1/2, except in the case of the participant's death or disability,
separation from service after attaining age 55, qualified domestic
relations orders or distributions applied to certain medical expenses
or where the amount distributed is to be rolled over to another
IRA, or if distributions are in a form of substantially equal
periodic payments over the life or life expectancy of the individual,
or over the joint lives of the individual and the individual's
beneficiary, are generally subject to a surtax in an amount equal
to 10% of the taxable portion of the distribution.
Retirement Plans for the Self-Employed-Keogh Plans. Units of a
Trust may be purchased by retirement plans established pursuant
to the Self-Employed Individuals Tax Retirement Act of 1962 ("Keogh
Plans"). Such plans are available for self-employed individuals,
partnerships or unincorporated companies. Under existing law,
qualified individuals may generally make annual tax-deductible
contributions to a defined contribution Keogh Plan of up to the
lesser of 25% of annual compensation (less the Keogh Plan contribution)
or $30,000 for taxable years beginning after December 31, 1983.
A defined benefit Keogh Plan is limited to providing benefits
each year which do not exceed the lesser of $90,000 (as adjusted
for inflation) or 100% of average compensation for the highest
three consecutive calendar years. The assets of the Keogh Plans
must be held in a qualified trust or other arrangement which meets
the requirements of the Code. Generally, a participant's entire
interest in a Keogh Plan must be, or commence to be, distributed
to the participant not later than April 1 of the calendar year
following the year during which the individual attains age 70
1/2. Excess contributions to a Keogh Plan are subject to an annual
10% excise tax. Distributions made before attainment of age 59
1/2, except in the case of the participant's death or disability,
separation from service after attaining age 55, qualified domestic
relations orders or distributions applied to certain medical expenses
or where the amount distributed is to be rolled over to an IRA
or another qualified plan, or if distributions are in a form of
substantially equal periodic payments over the life or life expectancy
of the individual, or over the joint lives of the individual and
the individual's beneficiary, are generally subject to a surtax
in an amount equal to 10% of the distribution.
Corporate Pension and Profit-Sharing Plans. An employer who has
established a pension or profit-sharing plan for employees may
purchase Units of a Trust for such a plan.
Excess Distributions Tax. In addition to the other taxes due by
reason of a plan distribution, a tax of 15% may apply to certain
aggregate distributions from IRAs, Keogh Plans, and qualified
corporate retirement plans to the extent such aggregate taxable
distributions exceed specified amounts (generally $150,000, as
adjusted or $112,500, as adjusted, if the recipient has made a
"grandfather election") during the tax year. This 15% tax will
not apply to distributions on account of death, qualified domestic
relations orders or amounts rolled over to an eligible plan. In
general, for qualifying lump sum distributions the excess distribution
over $750,000, as adjusted, or $562,000, as adjusted, if the recipient
has made a "grandfather election," will be subject to the 15%
tax.
Excess Accumulations Tax. On the participant's death, a 15% tax
will be imposed on aggregate balances remaining in IRAs, Keogh
Plans and qualified corporate retirement plans to the extent those
balances exceed specified levels. If a spouse is the death beneficiary
of all balances and makes a spousal election, the imposition of
the tax may be postponed until the spouse's death unless such
spouse receives excess distributions during the spouse's life.
In such a case, the spouse will be treated as the participant
and will be liable for the 15% tax on excess distributions, as
described above.
Page 11
What are the Expenses and Charges?
At no cost to the Trusts, the Sponsor has borne all the expenses
of creating and establishing a Trust, including the cost of the
initial preparation, printing and execution of the Indenture and
the certificates for the Units, legal and accounting expenses,
expenses of the Trustee and other out-of-pocket expenses. The
Sponsor will not receive any fees in connection with its activities
relating to a Trust. However, First Trust Advisors L.P., an affiliate
of the Sponsor, will receive an annual supervisory fee, which
is not to exceed the amount set forth under "Summary of Essential
Information" appearing in Part One for each Trust, for providing
portfolio supervisory services for a Trust. Such fee is based
on the number of Units of the Trust outstanding on January 1 of
each year except for Trusts which were established subsequent
to the last January 1, in which case the fee will be based on
the number of Units of a Trust outstanding as of the respective
Dates of Deposit. The fee may exceed the actual costs of providing
such supervisory services for a Trust, but at no time will the
total amount received for portfolio supervisory services rendered
to unit investment trusts of which Nike Securities L.P. is the
Sponsor in any calendar year exceed the aggregate cost to First
Trust Advisors L.P. of supplying such services in such year.
For each valuation of the Bonds in a Trust, the Evaluator will
receive a fee as indicated in the "Summary of Essential Information"
appearing in Part One for each Trust. The Trustee pays certain
expenses of a Trust for which it is reimbursed by the Trust. After
the first year the Trustee will receive for its ordinary recurring
services to the Trust an annual fee computed at $1.05 and $.55
per annum per $1,000 principal amount of underlying Bonds in a
Trust for those portions of the Trust representing monthly and
semi-annual distribution plans, respectively. For a discussion
of the services performed by the Trustee pursuant to its obligations
under the Indenture, reference is made to the material set forth
under "Rights of Unit Holders." The Trustee's and Evaluator's
fees are payable monthly on or before each Distribution Date from
the Interest Account of a Trust to the extent funds are available
and then from the Principal Account of the Trust. Since the Trustee
has the use of the funds being held in the Principal and Interest
Accounts for future distributions, payment of expenses and redemptions
and since such Accounts are non-interest-bearing to Unit holders,
the Trustee benefits thereby. Part of the Trustee's compensation
for its services to a Trust is expected to result from the use
of these funds. Both fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases
under the category "All Services Less Rent of Shelter" in the
Consumer Price Index published by the United States Department
of Labor.
The following additional charges are or may be incurred by a Trust:
all expenses (including legal and annual auditing expenses) of
the Trustee incurred by or in connection with its responsibilities
under the Indenture, except in the event of negligence, bad faith
or willful misconduct on its part; the expenses and costs of any
action undertaken by the Trustee to protect a Trust and the rights
and interests of the Unit holders; fees of the Trustee for any
extraordinary services performed under the Indenture; indemnification
of the Trustee for any loss, liability or expense incurred by
it without negligence, bad faith or willful misconduct on its
part, arising out of or in connection with its acceptance or administration
of a Trust; indemnification of the Sponsor for any loss, liability
or expense incurred without gross negligence, bad faith or willful
misconduct in acting as Depositor of a Trust; all taxes and other
government charges imposed upon the Bonds or any part of the Trust
(no such taxes or charges are being levied or made or, to the
knowledge of the Sponsor, contemplated); and expenditures incurred
in contacting Unit holders upon termination of a Trust. The above
expenses and the Trustee's annual fee, when paid or owing to the
Trustee, are secured by a lien on a Trust. In addition, the Trustee
is empowered to sell Bonds of a Trust in order to make funds available
to pay all these amounts if funds are not otherwise available
in the Interest and Principal Accounts of the Trust.
Unless the Sponsor determines that such an audit is not required,
the Indenture requires the accounts of the Trusts shall be audited
on an annual basis at the expense of the Trust by independent
auditors selected by the Sponsor. So long as the Sponsor is making
a secondary market for Units, the Sponsor shall bear
Page 12
the cost of such annual audits to the extent such cost exceeds
$.50 per Unit. Unit holders of a Trust covered by an audit may
obtain a copy of the audited financial statements from the Trustee
upon request.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Although it is not obligated to do so, the Sponsor intends to
maintain a market for the Units and continuously to offer to purchase
Units at prices, subject to change at any time, based upon the
aggregate bid price of the Bonds in the portfolio of each Trust
plus interest accrued to the date of settlement. All expenses
incurred in maintaining a market, other than the fees of the Evaluator,
the other expenses of the Trust and the costs of the Trustee in
transferring and recording the ownership of Units, will be borne
by the Sponsor. If the supply of Units exceeds demand, or for
some other business reason, the Sponsor may discontinue purchases
of Units at such prices. If a Unit holder wishes to dispose of
his Units, he should inquire of the Sponsor as to current market
prices prior to making a tender for redemption to the Trustee.
Prospectuses relating to certain other bond funds indicate an
intention, subject to change, on the part of the respective sponsors
of such funds to repurchase units of those funds on the basis
of a price higher than the bid prices of the securities in the
funds. Consequently, depending upon the prices actually paid,
the repurchase price of other sponsors for units of their funds
may be computed on a somewhat more favorable basis than the repurchase
price offered by the Sponsor for Units of a Trust in secondary
market transactions. The purchase price per unit of such bond
funds will depend primarily on the value of the securities in
the portfolio of the fund.
Units are offered at the Public Offering Price. The Public Offering
Price is determined by adding to the Evaluator's determination
of the aggregate bid price of the Bonds in a Trust the appropriate
sales charge determined in accordance with the schedule set forth
below, based upon the number of years remaining to the maturity
of each Bond in the portfolio of a Trust, adjusting the total
to reflect the amount of any cash held in or advanced to the principal
account of a Trust and dividing the result by the number of Units
of a Trust then outstanding. The minimum sales charge on Units
will be 3.0% of the Public Offering Price (equivalent to 3.093%
of the net amount invested). For purposes of computation, Bonds
will be deemed to mature on their expressed maturity dates unless
the Bonds have been called for redemption or funds or securities
have been placed in escrow to redeem them on an earlier call date,
in which case such call date will be deemed to be the date upon
which they mature.
The effect of this method of sales charge computation will be
that different sales charge rates will be applied to each of the
various Bonds in a Trust based upon the maturities of such bonds,
in accordance with the following schedule:
Page 13
<TABLE>
<CAPTION>
Secondary Offering Period
Sales Charge
______________________________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_________________ _________ _________
<S> <C> <C>
0 Months to 1 Year 1.00% 1.010%
1 but less than 2 1.50 1.523
2 but less than 3 2.00 2.041
3 but less than 4 2.50 2.564
4 but less than 5 3.00 3.093
5 but less than 6 3.50 3.627
6 but less than 7 4.00 4.167
7 but less than 8 4.50 4.712
8 but less than 9 5.00 5.263
9 but less than 10 5.50 5.820
10 or more 5.80 6.157
</TABLE>
With respect to the employees, officers and directors (including
their immediate families and trustees, custodians or a fiduciary
for the benefit of such person) of Nike Securities L.P. and its
subsidiaries the sales charge is reduced by 2% of the Public Offering
Price for purchases of Units during the initial and secondary
offering periods.
The Public Offering Price of Units on the date of this Part Two
Prospectus may vary from the amount stated under "Summary of Essential
Information" appearing in Part One in accordance with fluctuations
in the prices of the underlying Bonds. The aggregate price of
the Bonds in a Trust is determined by whomever from time to time
is acting as evaluator (the "Evaluator"), on the basis of bid
prices or offering prices as is appropriate, (1) on the basis
of current market prices for the Bonds obtained from dealers or
brokers who customarily deal in bonds comparable to those held
by a Trust; (2) if such prices are not available for any of the
Bonds, on the basis of current market prices for comparable bonds;
(3) by determining the value of the Bonds by appraisal; or (4)
by any combination of the above. The value of insurance obtained
by the issuer of Bonds in the Trust is reflected and included
in the market value of such Bonds.
The Evaluator will be requested to make a determination of the
aggregate price of the Bonds in each Trust, on a bid price basis,
as of the close of trading on the New York Stock Exchange on each
day on which it is open, effective for all sales, purchases or
redemptions made subsequent to the last preceding determination.
The secondary market Public Offering Price of the Units will
be equal to the bid price per Unit of the Bonds in the Trust plus
(less) any balance (overdraft) in the principal cash account of
such Trust, plus the applicable sales charge.
Although payment is normally made five business days following
the order for purchase, payment may be made prior thereto. Cash,
if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. Delivery of
Certificates representing Units so ordered will be made five business
days following such order or shortly thereafter. See "Rights of
Unit Holders-How May Units Be Redeemed?" for information regarding
the ability to redeem Units ordered for purchase.
How are Units Distributed?
Units repurchased in the secondary market may be offered by this
Part Two Prospectus at the secondary market public offering price
determined in the manner described above.
Page 14
The Sponsor reserves the right to change the amount of the concession
or agency commission from time to time.
Resales of Units of the Trusts by dealers and others to the public
will be made at the Public Offering Price described in Part One
of this Prospectus. Certain commercial banks are making Units
of the Trust available to their customers on an agency basis.
A portion of the sales charge paid by these customers is retained
by or remitted to the banks in the amounts indicated in the second
preceding sentence. Under the Glass-Steagall Act, banks are prohibited
from underwriting Trust Units; however, the Glass-Steagall Act
does permit certain agency transactions and the banking regulators
have not indicated that these particular agency transactions are
not permitted under such Act. In Texas and in certain other states,
any banks making Units available must be registered as broker/dealers
under state law.
What are the Sponsor's Profits?
The Underwriter of the Trust, including the Sponsor, will receive
a maximum gross sales commission equal to that amount of the Public
Offering Price of the Units of a Trust as specified in Part One,
less any reduced sales charge for quantity purchases as described
under "Public Offering-How is the Public Offering Price Determined?"
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between
the price at which Units are purchased (based on the bid prices
of the Bonds in the Trust) and the price at which Units are resold
(which price is also based on the bid prices of the Bonds in the
Trust and includes a maximum sales charge of 5.80%) or redeemed.
The secondary market public offering price of Units may be greater
or less than the cost of such Units to the Sponsor.
RIGHTS OF UNIT HOLDERS
How are Certificates Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the
Trustee. Ownership of Units is evidenced by registered certificates
executed by 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 signature guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guaranty program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. In
certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates
of corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
Certificates for Units will bear an appropriate notation on their
face indicating which plan of distribution has been selected in
respect thereof. When a change is made, the existing certificate
must be surrendered to the Trustee and a new certificate issued
to reflect the then currently effective plan of distribution.
There is no charge for this service.
Although no such charge is now made or contemplated, a Unit holder
may be required to pay $2.00 to the Trustee per certificate reissued
or transferred for reasons other than to change the plan of distribution,
and to pay any governmental charge that may be imposed in connection
with each such transfer or exchange. For new certificates issued
to replace destroyed, stolen or lost certificates, the Unit holder
may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
Page 15
How are Interest and Principal Distributed?
Interest from a Trust will be distributed on or shortly after
the first day of each month on a pro rata basis to Unit holders
of record as of the preceding Record Date who are entitled to
distributions at that time under the plan of distribution chosen.
All distributions for a Trust will be net of applicable expenses
for a Trust.
The pro rata share of cash in the Principal Account of a Trust
will be computed as of the fifteenth day of each month, and distributions
to the Unit holders of a Trust as of such Record Date will be
made on or shortly after the first day of the following month.
Proceeds from the disposition of any of the Bonds of a Trust received
after such Record Date and prior to the following Distribution
Date will be held in the Principal Account of a Trust and not
distributed until the next Distribution Date. The Trustee is not
required to pay interest on funds held in the Principal or Interest
Account of a Trust (but may itself earn interest thereon and therefore
benefit from the use of such funds) nor to make a distribution
from the Principal Account of the Trust unless the amount available
for distribution shall equal at least $1.00 per Unit.
The Trustee will credit to the Interest Account of the Trust all
interest received by a Trust, including that part of the proceeds
(including insurance proceeds if any, paid to the Trust) of any
disposition of Bonds which represents accrued interest. Other
receipts will be credited to the Principal Account of a Trust.
The distribution to the Unit holders of a Trust as of each Record
Date will be made on the following Distribution Date or shortly
thereafter and shall consist of an amount substantially equal
to such portion of the holder's pro rata share of the estimated
annual income of the Trust after deducting estimated expenses
as is consistent with the distribution plan chosen. Because interest
payments are not received by a Trust at a constant rate throughout
the year, such interest distribution may be more or less than
the amount credited to the Interest Account of the Trust as of
the Record Date. For the purpose of minimizing fluctuations in
the distributions from the Interest Account of a Trust, the Trustee
is authorized to advance such amounts as may be necessary to provide
interest distributions of approximately equal amounts. The Trustee
shall be reimbursed, without interest, for any such advances from
funds in the Interest Account of a Trust on the ensuing Record
Date. Persons who purchase Units between a Record Date and a Distribution
Date will receive their first distribution on the second Distribution
Date after the purchase, under the applicable plan of distribution.
The Trustee is not required to pay interest on funds held in the
Principal or Interest Account of a Trust (but may itself earn
interest thereon and therefore benefit from the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct
from the Interest Account of a Trust and, to the extent funds
are not sufficient therein, from the Principal Account of a Trust,
amounts necessary to pay the expenses of the Trust. The Trustee
also may withdraw from said accounts such amounts, if any, as
it deems necessary to establish a reserve for any governmental
charges payable out of a Trust. Amounts so withdrawn shall not
be considered a part of a Trust's assets until such time as the
Trustee shall return all or any part of such amounts to the appropriate
account. In addition, the Trustee may withdraw from the Interest
Account and the Principal Account of the Trust such amounts as
may be necessary to cover redemption of Units of the Trust by
the Trustee.
Record Dates for monthly distributions will be the fifteenth day
of each month and Record Dates for semi-annual distributions will
be the fifteenth day of June and December. Distributions will
be made on the first day of the month subsequent to the respective
Record Dates.
The plan of distribution selected by a Unit holder will remain
in effect until changed. Unit holders purchasing Units in the
secondary market will initially receive distributions in accordance
with the election of the prior owner. Each year, approximately
six weeks prior to the end of May, the Trustee will furnish each
Unit holder a card to be returned to the Trustee not more than
thirty nor less than ten days before the end of such month. Unit
holders desiring to change the plan of distribution in which they
are participating may so indicate on the card and return same,
together with their certificate, to the Trustee. If the card and
certificate are returned to the Trustee, the change will become
effective as of June 16 of that year. If the card and certificate
are
Page 16
not returned to the Trustee, the Unit holder will be deemed to
have elected to continue with the same plan for the following
twelve months.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation
in a Universal Distribution Option which permits a Unit holder
to direct the Trustee to distribute principal and interest payments
to any other investment vehicle of which the Unit holder has an
existing account. For example, at a Unit holder's direction, the
Trustee would distribute automatically on the applicable distribution
date interest income, capital gains or principal on the participant's
Units to, among other investment vehicles, a Unit holder's checking,
bank savings, money market, insurance, reinvestment or any other
account. All such distributions, of course, are subject to the
minimum investment and sales charges, if any, of the particular
investment vehicle to which distributions are directed. The Trustee
will notify the participant of each distribution pursuant to the
Universal Distribution Option. The Trustee will distribute directly
to the Unit holder any distributions which are not accepted by
the specified investment vehicle. A participant may at any time,
by so notifying the Trustee in writing, elect to terminate his
participation in the Universal Distribution Option and receive
directly future distributions on his Units.
What Reports Will Unit Holders Receive?
The Trustee shall furnish Unit holders of a Trust in connection
with each distribution a statement of the amount of interest,
if any, and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit.
Within a reasonable time after the end of each calendar year,
the Trustee will furnish to each person who at any time during
the calendar year was a Unit holder of a Trust of record, a statement
as to (1) the Interest Account: interest received by a Trust (including
amounts representing interest received upon any disposition of
Bonds of a Trust), the amount of such interest representing insurance
proceeds (if applicable), deductions for payment of applicable
taxes and for fees and expenses of the Trust, redemption of Units
and the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (2) the Principal Account:
the dates of disposition of any Bonds of a Trust and the net proceeds
received therefrom, deduction for payment of applicable taxes
and for fees and expenses of a Trust, redemptions of Units, and
the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (3) the Bonds held and
the number of Units of a Trust outstanding on the last business
day of such calendar year; (4) the Redemption Price per Unit based
upon the last computation thereof made during such calendar year;
and (5) the amounts actually distributed during such calendar
year from the Interest Account and from the Principal Account
of a Trust, separately stated, expressed both as total dollar
amounts and as dollar amounts representing the pro rata share
of each Unit outstanding.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Bonds in their Trust furnished to it by the Evaluator.
Each distribution statement will reflect pertinent information
in respect of each plan of distribution so that Unit holders may
be informed regarding the results of the other plan or plans of
distribution.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its corporate trust office in the City of New
York of the certificates representing the Units to be redeemed,
duly endorsed or accompanied by proper instruments of transfer
with signature guaranteed as explained above (or by providing
satisfactory indemnity, as in connection with lost, stolen or
destroyed certificates), and payment of applicable governmental
charges, if any. No redemption fee will be charged. On the 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
Page 17
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 the close of trading (4:00 p.m. Eastern time) on the New
York Stock Exchange, the date of tender is the next day on which
such Exchange is open for trading and such Units will be deemed
to have been tendered to the Trustee on such day for redemption
at the redemption price computed on that day. Units so redeemed
shall be cancelled.
Accrued interest to the settlement date paid on redemption shall
be withdrawn from the Interest Account of a Trust or, if the balance
therein is insufficient, from the Principal Account of a Trust.
All other amounts paid on redemption shall be withdrawn from the
Principal Account of a Trust.
The Redemption Price per Unit (as well as the secondary market
Public Offering Price) will be determined on the basis of the
bid price of the Bonds in a Trust, as of the close of trading
on the New York Stock Exchange on the date any such determination
is made. The Redemption Price per Unit is the pro rata share of
each Unit determined by the Trustee on the basis of (1) the cash
on hand in a Trust or moneys in the process of being collected,
(2) the value of the Bonds in a Trust based on the bid prices
of the Bonds and (3) interest accrued thereon, less (a) amounts
representing taxes or other governmental charges payable out of
the Trust, (b) the accrued expenses of a Trust and (c) cash held
for distribution to Unit holders of record as of a date prior
to the evaluation then being made. The Evaluator may determine
the value of the Bonds in a Trust (1) on the basis of current
bid prices of the Bonds obtained from dealers or brokers who customarily
deal in bonds comparable to those held by a Trust, (2) on the
basis of bid prices for bonds comparable to any Bonds for which
bid prices are not available, (3) by determining the value of
the Bonds by appraisal, or (4) by any combination of the above.
Bonds insured under a policy obtained by the Bond issuer, the
underwriters, the Sponsor or others are entitled to the benefits
of such insurance at all times and such benefits are reflected
and included in the market value of such Bonds.
The Trustee is empowered to sell underlying Bonds in a Trust in
order to make funds available for redemption. To the extent that
Bonds are sold, the size and diversity of a Trust will be reduced.
Such sales may be required at a time when Bonds would not otherwise
be sold and might result in lower prices than might otherwise
be realized.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on that Exchange is restricted or an emergency exists, as a result
of which disposal or evaluation of the Bonds is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances,
the Sponsor may apply to the Securities and Exchange Commission
for an order permitting a full or partial suspension of the right
of Unit holders to redeem their Units.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before 12:00 p.m. Eastern
time on the next succeeding business day and by making payment
therefor to the Unit holder not later than the day on which the
Units would otherwise have been redeemed by the Trustee. Units
held by the Sponsor may be tendered to the Trustee for redemption
as any other Units.
The offering price of any Units acquired by the Sponsor will be
in accord with the Public Offering Price described in the then
currently effective prospectus describing such Units. Any profit
or loss resulting from the resale or redemption of such Units
will belong to the Sponsor.
How May Bonds be Removed from a Trust?
The Trustee is empowered to sell, for the purpose of redeeming
Units tendered by any Unit holder and for the payment of expenses
for which funds may not be available, such of the Bonds in a Trust
on a list furnished
Page 18
by the Sponsor as the Trustee in its sole discretion may deem
necessary. The Sponsor is empowered, but not obligated, to direct
the Trustee to dispose of Bonds in a Trust in the event of advanced
refunding. The Sponsor may from time to time act as agent for
a Trust with respect to selling Bonds out of a Trust. From time
to time, the Trustee may retain and pay compensation to the Sponsor
subject to the restrictions under the Investment Company Act of
1940, as amended.
If any default in the payment of principal or interest on any
Bond occurs and no provision for payment is made therefor within
thirty days, the Trustee is required to notify the Sponsor thereof.
If the Sponsor fails to instruct the Trustee to sell or to hold
such Bond within thirty days after notification by the Trustee
to the Sponsor of such default, the Trustee may, in its discretion,
sell the defaulted Bond and not be liable for any depreciation
or loss thereby incurred.
The Sponsor shall instruct the Trustee to reject any offer made
by an issuer of any of the Bonds to issue new obligations in exchange
and substitution for any Bonds pursuant to a refunding or refinancing
plan, except that the Sponsor may instruct the Trustee to accept
such an offer or to take any other action with respect thereto
as the Sponsor may deem proper if the issuer is in default with
respect to such Bonds or in the written opinion of the Sponsor
the issuer will probably default in respect to such Bonds in the
foreseeable future. Any obligations so received in exchange or
substitution will be held by the Trustee subject to the terms
and conditions in the Indenture to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations
in exchange or substitution for underlying Bonds, the Trustee
is required to give notice thereof to each Unit holder of the
affected Trust, identifying the Bonds eliminated and the Bonds
substituted therefor. Except as stated in this paragraph, the
acquisition by the Trust of any securities other than the Bonds
initially deposited is prohibited.
INFORMATION AS TO SPONSOR, TRUSTEE, UNDERWRITER 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 $7 billion in First Trust unit investment
trusts have been deposited. The Sponsor's employees include a
team of professionals with many years of experience in the unit
investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141.
As of August 31, 1993, the total partners' capital of Nike Securities
L.P. was $14,270,063 (unaudited). (This paragraph relates only
to the Sponsor and not to the Trusts or to any series thereof
or to any other Underwriters. The information is included herein
only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will
be made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is United States Trust Company of New York, with its
principal place of business at 45 Wall Street, New York, New York
10005 and its unit investment trust offices at 770 Broadway, New
York, New York 10003. Unit holders who have questions regarding
the Trusts 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 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.
Page 19
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the portfolio. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
thirty days after notification, the retiring trustee may apply
to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such
or when a court of competent jurisdiction appoints a successor
trustee.
Any corporation into which the Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Trustee shall be a party,
shall be the successor Trustee. The Trustee must be a banking
corporation organized under the laws of the United States or any
State and having at all times an aggregate capital, surplus and
undivided profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Bonds. In the
event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in
respect of the Trust which the Trustee may be required to pay
under any present or future law of the United States of America
or of any other taxing authority having jurisdiction. In addition,
the Indenture contains other customary provisions limiting the
liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding amounts prescribed
by the Securities and Exchange Commission, or (b) terminate the
Indenture and liquidate the Trust as provided herein, or (c) continue
to act as Trustee without terminating the Indenture.
Who is the Underwriter?
First Miami Securities, Inc., the Underwriter, is headquartered
in North Miami Beach, Florida, and has offices in North Miami
Beach and Boca Raton, Florida. First Miami Securities, Inc. has
built its reputation on a commitment to client service, reinforced
by expertise in all forms of high-quality, income-producing investments,
with a special emphasis on municipal securities.
A major strength of the firm is its well-versed and experienced
staff. The principals of First Miami Securities, Inc. have over
forty years of experience assisting individual investors. First
Miami Securities, Inc. is a member of the National Association
of Securities Dealers, Inc. and Securities Investor Protection
Corporation.
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
Page 20
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 thirty days after notice of resignation,
the Evaluator may apply to a court of competent jurisdiction for
the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator
shall be under no liability to the Trustee, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee).
In the event of any amendment, the Trustee is obligated to notify
promptly all Unit holders of the substance of such amendment.
The Trust may be liquidated at any time by consent of 100% of
the Unit holders of a Trust or by the Trustee when the value of
the Trust, as shown by any evaluation, is less than 20% of the
aggregate principal amount of Bonds deposited in the Trust during
the primary offering period or by the Trustee in the event that
Units of a Trust not yet sold aggregating more than 60% of the
Units of the Trust are tendered for redemption by the Underwriters,
including the Sponsor. If a Trust is liquidated because of the
redemption of unsold Units of the Trust by the Underwriters, the
Sponsor will refund to each purchaser of Units of a Trust the
entire sales charge paid by such purchaser. The Indenture will
terminate upon the redemption, sale or other disposition of the
last Bond held thereunder, but in no event shall it continue beyond
the date indicated in Part One. In the event of termination, written
notice thereof will be sent by the Trustee to all Unit holders
of a Trust. Within a reasonable period after termination, the
Trustee will sell any Bonds remaining in a Trust and, after paying
all expenses and charges incurred by a Trust, will distribute
to each Unit holder of a Trust (including the Sponsor if it then
holds any Units), upon surrender for cancellation of his Certificate
for Units, his pro rata share of the balances remaining in the
Interest and Principal Accounts of a Trust, all as provided in
the Indenture.
Legal Opinions
The legality of the Units offered hereby and certain matters relating
to Federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor. Carter, Ledyard & Millburn, 2 Wall Street, New York,
New York 10005, will act as counsel for the Trustee and as special
counsel for the Trust for New York tax matters.
Experts
The financial statements of the Trust, appearing in Part One of
this Prospectus and Registration Statement have been audited by
Ernst & Young, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
Page 21
DESCRIPTION OF BOND RATINGS*
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.
AA-Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only
in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for bonds in this category
than for bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating
is provisional. A provisional rating assumes the successful completion
of the project being financed by the bonds being rated and indicates
that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent
to completion of the project, makes no comment on the likelihood
of, or the risk of default upon failure of, such completion. The
investor should exercise his/her own judgment with respect to
such likelihood and risk.
Credit Watch: Credit Watch highlights potential changes in ratings
of bonds and other fixed income securities. It focuses on events
and trends which place companies and government units under special
surveillance by S&P's 180-member analytical staff. These may include
mergers, voter referendums, actions by regulatory authorities,
or developments gleaned from analytical reviews. Unless otherwise
noted, a rating decision will be made within 90 days. Issues appear
on Credit Watch where an event, situation, or deviation from trends
occurred and needs to be evaluated as to its impact on credit
ratings. A listing, however, does not mean a rating change is
inevitable. Since S&P continuously monitors all of its ratings,
Credit
* As published by the rating companies.
Page 22
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.
Aa-Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat large than in Aaa
securities. Their market value is virtually immune to all but
money market influences, with the occasional exception of oversupply
in a few specific instances.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future. The market value of A-rated
bonds may be influenced to some degree by economic performance
during a sustained period of depressed business conditions, but,
during periods of normalcy, A-rated bonds frequently move in parallel
with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
A 1 and Baa 1-Bonds which are rated A 1 and Baa 1 offer the maximum
in security within their quality group, can be bought for possible
upgrading in quality, and additionally, afford the investor an
opportunity to gauge more precisely the relative attractiveness
of offerings in the market place.
Baa-Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well. The market value of Baa-rated bonds is more sensitive
to changes in economic circumstances, and aside from occasional
speculative factors applying to some bonds of this class, Baa
market valuations will move in parallel with Aaa, Aa, and A obligations
during periods of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of
a generic rating classification. The modifier 1 indicates that
the bond ranks at the high end of its category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
Con.(---)-Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments
to which some other limiting condition attaches. Parenthetical
rating denotes probable credit stature upon completion of construction
or elimination of basis of condition.
Page 23
<TABLE>
<CAPTION>
<S> <C>
CONTENTS:
The First Trust Special Situations Trust - The
Trust for Taxable Municipal Income Series:
What is The First Trust Special Situations Trust? 2
What are Estimated Long-Term Return and
Estimated Current Return? 6
How is Accrued Interest Treated? 7
What is the Federal Tax Status of Unit Holders? 7
Why are Investments in a Trust Suitable for
Retirement Plans? 10
What are the Expenses and Charges? 12
Public Offering:
How is the Public Offering Price Determined? 13
How are Units Distributed? 14
What are the Sponsor's Profits? 15
Rights of Unit Holders:
How are Certificates Issued and Transferred? 15
How are Interest and Principal Distributed? 16
How Can Distributions to Unit Holders be
Reinvested? 17
What Reports Will Unit Holders Receive? 17
How May Units be Redeemed? 17
How May Units be Purchased by the Sponsor? 18
How May Bonds be Removed from a Trust? 18
Information as to Sponsor, Trustee, Underwriter and
Evaluator:
Who is the Sponsor? 19
Who is the Trustee? 19
Limitations on Liabilities of Sponsor and Trustee 20
Who is the Underwriter? 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 FUND HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST
The First Trust Special
Situations Trust
The Trust for Taxable
Municipal Income Series
Prospectus
Part Two
October 28, 1993
Sponsor:
First Trust
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
73 THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2, certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment of its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the
Village of Lisle and State of Illinois on September 30, 1994.
THE FIRST TRUST SPECIAL SITUATIONS TRUST,
SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME,
SERIES 2
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title Date
Robert D. Van Kampen Sole Director of )
Nike Securities )
Corporation, ) September 30, 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 August 31, 1994 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Special Situations Trust
dated September 22, 1994.
ERNST & YOUNG LLP
Chicago, Illinois
September 21, 1994
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to Form S-6 and is qualified in its entirety by
reference to such Post Effective Amendment to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> THE TRUST FOR TAXABLE MUNICIPAL INCOME
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1994
<PERIOD-START> JUN-17-1993
<PERIOD-END> MAY-31-1994
<INVESTMENTS-AT-COST> 4840725
<INVESTMENTS-AT-VALUE> 4743832
<RECEIVABLES> 113987
<ASSETS-OTHER> 14247
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4872066
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48,057
<TOTAL-LIABILITIES> 48,057
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4840725
<SHARES-COMMON-STOCK> 5,131
<SHARES-COMMON-PRIOR> 5,145
<ACCUMULATED-NII-CURRENT> 80,177
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (96,893)
<NET-ASSETS> 4,824,009
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 393,604
<OTHER-INCOME> 0
<EXPENSES-NET> 9,371
<NET-INVESTMENT-INCOME> 384,233
<REALIZED-GAINS-CURRENT> (552)
<APPREC-INCREASE-CURRENT> (96,893)
<NET-CHANGE-FROM-OPS> 286,788
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 306,732
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 14
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (33374)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
