File No. 33-63766
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 3
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, 1996
: : 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
June 14, 1996.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
5,090 UNITS
PROSPECTUS
Part One
Dated September 24, 1996
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, 1996, each Unit represented a
1/5,090 undivided interest in the principal and net income of the Trust (see
"The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.8% of the Public Offering Price (5.042%
of the amount invested). At August 16, 1996, the Public Offering Price per
Unit was $994.30 plus net interest accrued to date of settlement (three
business days after such date) of $10.81 and $23.85 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
Please retain both parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 7.86% per annum on August 16, 1996, and 7.80% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 7.25% per annum on August 16, 1996 and 7.19%
under the monthly distribution plan. Estimated Current Return is calculated
by dividing the Estimated Net Annual Interest Income per Unit by the Public
Offering Price. Estimated Long-Term Return is calculated using a formula
which (1) takes into consideration and determines and factors in the relative
weightings of the market values, yields (which take into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Bonds in the Trust and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF AUGUST 16, 1996
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $5,076,000
Number of Units 5,090
Fractional Undivided Interest in the Trust per Unit 1/5,090
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $4,818,016
Aggregate Value of Bonds per Unit $946.57
Sales Charge 5.042% (4.8% of Public Offering Price) $47.73
Public Offering Price per Unit $994.30*
Redemption Price and Sponsor's Repurchase Price per Unit
($47.73 less than the Public Offering Price per Unit) $946.57*
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 (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF AUGUST 16, 1996
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $79.69 $79.69
Less: Estimated Annual Expense $2.13 $1.52
Estimated Net Annual Interest Income $77.56 $78.17
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $77.56 $78.17
Divided by 12 and 2, Respectively $6.46 $39.09
Estimated Daily Rate of Net Interest Accrual $.2155 $.2171
Estimated Current Return Based on Public Offering Price 7.80% 7.86%
Estimated Long-Term Return Based on Public Offering Price 7.19% 7.25%
</TABLE>
[FN]
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, 1996, and
the related statements of operations and changes in net assets for each of the
two years in the period then ended and 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 Sponsor. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of May 31, 1996, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Special
Situations Trust, Series 73, The Trust for Taxable Municipal Income, Series 2
at May 31, 1996, and the results of its operations and changes in its net
assets for each of the two years in the period then ended and 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 30, 1996
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $4,807,498) (Note 1) $4,820,984
Accrued interest 113,379
__________
4,934,363
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 46,179
Cash overdraft 1,719
__________
47,898
__________
Net assets, applicable to 5,109 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $4,807,498
Net unrealized appreciation (Note 2) 13,486
Distributable funds 65,481
__________
$4,886,465
==========
Net asset value per unit $956.44
==========
</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, 1996
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(g) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
City of Albuquerque, New Mexico, Municipal
Refunding, Collateralized Mortgage Obligations
(MR CMO), Series 1988-A (FGIC Insured) (d) -(e) 8/10/2014 AAA $550,000 139,282
City of Detroit (Michigan), Tax Increment
(Development Area No. 1 Projects), Series 1989B 1999 @ 102
(General Obligation) 10.00 % 7/01/2010 1996 @ 100 S.F. A- 239,000 255,178
Minnesota Housing Finance Agency, Rental Housing 1997 @ 102
1993 Series A (Taxable) 8.70 8/01/2022 2015 @ 100 S.F. AA 1,000,000 1,020,620
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+ 480,000 504,456
The City of New York (New York), General Obligation,
Fiscal 1989 Series C (f) 9.875 8/15/2014 1999 @ 102 BBB+ 1,250,000 1,401,538
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 735,000 802,120
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 42,234
Oklahoma City, Oklahoma Airport Trust,
Federal Bureau Prisons Project 9.40 11/01/2010 2003 @ 100 S.F. BBB 170,000 182,546
Taxable Certificates of Participation (1993 2003 @ 102
Financing Project) City of Visalia (California) 8.75 1/01/2023 2004 @ 100 S.F. BBB+ 500,000 473,010
______________________
$5,099,000 4,820,984
======================
</TABLE>
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
NOTES TO PORTFOLIO
May 31, 1996
(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, 1996. 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 49% of
the Bonds in the Trust are subject to call within five years.
(b) The ratings shown are those effective at May 31, 1996. 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) This issue of bonds is secured by, and payable from, escrowed U.S.
Government securities.
(g) The Trust consists of nine obligations of issuers located in eight
states. Two bond issues aggregating approximately 39%, and one bond
issue representing approximately 20%, of the aggregate principal amount
of Bonds in the Trust are obligations of issuers located in New York and
Minnesota, respectively. 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
25%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME, SERIES 2
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended Year ended June 17, 1993,
May 31, 1996 May 31, 1995 to May 31, 1994
<S> <C> <C> <C>
Interest income $407,812 409,778 393,604
Expenses:
Trustee's fees and related
expenses (7,622) (9,330) (6,869)
Evaluator's fees (1,544) (1,544) (1,276)
Supervisory fees (1,281) (1,283) (1,226)
_______________________________________
Investment income - net 397,365 397,621 384,233
Net gain (loss) on investments:
Net realized gain (loss) (433) (1,794) (552)
Change in net unrealized
appreciation or depreciation 177,214 (66,835) (96,893)
_______________________________________
176,781 (68,629) (97,445)
_______________________________________
Net increase in net assets
resulting from operations $574,146 328,992 286,788
=======================================
</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
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended Year ended June 17, 1993,
May 31, 1996 May 31, 1995 to May 31, 1994
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $397,365 397,621 384,233
Net realized gain (loss) on
investments (433) (1,794) (552)
Change in net unrealized
appreciation or depreciation
on investments 177,214 (66,835) (96,893)
_______________________________________
574,146 328,992 286,788
Distributions to unit holders:
Investment income - net (397,150) (400,073) (306,732)
Principal from investment
transactions - (22,443) -
_______________________________________
(397,150) (422,516) (306,732)
Unit redemptions (15, 7 and 14
in 1996, 1995 and 1994,
respectively):
Principal portion (14,094) (6,438) (13,207)
Net interest accrued (386) (98) (223)
_______________________________________
(14,480) (6,536) (13,430)
_______________________________________
Total increase (decrease) in
net assets 162,516 (100,060) (33,374)
Net assets:
At the beginning of the period 4,723,949 4,824,009 4,857,383
_______________________________________
At the end of the period
(including distributable funds
applicable to Trust units of
$65,481, $74,746 and $80,177
at May 31, 1996, 1995 and
1994, respectively) $4,886,465 4,723,949 4,824,009
=======================================
Trust units outstanding at the
end of the period 5,109 5,124 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 which is based on $1.05 and $.55 per
$1,000 principal amount of Bonds for those portions of the Trust under the
monthly and semi-annual distribution plans, respectively. Prior to September
1, 1995, the Trustee was United States Trust Company of New York; effective
September 1, 1995, The Chase Manhattan Bank succeeded United States Trust
Company of New York as Trustee. Additionally, a fee of $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 appreciation at May 31, 1996 follows:
<TABLE>
<S> <C>
Unrealized appreciation $71,073
Unrealized depreciation (57,587)
_______
$13,486
=======
</TABLE>
<PAGE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
offering price of the bonds on the date of an investor's purchase, plus a
sales charge of 5.3% of the public offering price which is equivalent to
approximately 5.597% of the net amount invested.
Distributions of net interest income -
Distributions of net interest income to unit holders are made monthly or semi-
annually. Such income distributions per unit, on an accrual basis, were as
follows:
<TABLE>
<CAPTION>
Period from the
Type of Date of Deposit,
distribution Year ended Year ended June 17, 1993,
plan May 31, 1996 May 31, 1995 to May 31, 1994
<S> <C> <C> <C>
Monthly $77.41 77.83 59.57*
Semi-annual 77.92 78.44 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.
<PAGE>
Selected data for a unit of the Trust outstanding throughout
each period -
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended Year ended June 17, 1993,
May 31, 1996 May 31, 1995 to May 31, 1994
<S> <C> <C> <C>
Interest income $79.59 79.97 76.56
Expenses (2.04) (2.37) (1.82)
_____________________________________
Investment income - net 77.55 77.60 (74.74)
Distributions to unit holders:
Investment income - net (77.55) (78.07) (59.68)
Principal from investment
transactions - (4.38) -
Net gain (loss) on investments 34.51 (13.39) (18.99)
_____________________________________
Total increase (decrease)
in net assets 34.51 (18.24) (3.93)
Net assets:
Beginning of the period 921.93 940.17 944.10
_____________________________________
End of the period $956.44 921.93 940.17
=====================================
</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: The Chase Manhattan Bank
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 TRUST FOR TAXABLE MUNICIPAL INCOME SERIES
The First Trust Special Situations Trust
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated September 27, 1996
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 TRUST FOR TAXABLE MUNICIPAL INCOME SERIES
The First Trust Special Situations Trust
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust is a series of investment
companies created by the Sponsor under the name of The First Trust
Special Situations Trust, each of which is separate and is designated by
a different series number (the "Trust"). Each Series consists of an
underlying separate unit investment trust consisting of a portfolio
containing interest-bearing taxable municipal bonds (the "Bonds"),
created under the laws of the State of New York pursuant to a Trust
Agreement (the "Indenture"), dated the Initial Date of Deposit, with
Nike Securities L.P., as Sponsor, The Chase Manhattan Bank as Trustee,
Securities Evaluation Service, Inc. as Evaluator and First Trust
Advisors L.P., as Portfolio Supervisor.
The objectives of each Trust are a high level of current taxable income
and conservation of capital through investment in a portfolio of
interest-bearing taxable municipal bonds. THERE IS, OF COURSE, NO
GUARANTEE THAT A TRUST'S OBJECTIVES WILL BE ACHIEVED. AN INVESTMENT IN A
TRUST SHOULD BE MADE WITH AN UNDERSTANDING OF THE RISKS WHICH AN
INVESTMENT IN FIXED RATE LONG-TERM DEBT OBLIGATIONS MAY ENTAIL,
INCLUDING THE RISK THAT THE VALUE OF THE UNITS WILL DECLINE WITH
INCREASES IN INTEREST RATES.
In selecting the Bonds, the following facts, among others, were
considered: (i) at the Initial Date of Deposit the Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc.
("Standard & Poor's") rating of the Bonds was in no case less than
"BBB," or the Moody's Investors Service, Inc. rating of the Bonds was in
no case less than "Baa," including provisional or conditional ratings,
respectively, or, if not rated, the Bonds had, in the opinion of the
Sponsor, credit characteristics sufficiently similar to the credit
characteristics of interest-bearing taxable obligations that were so
rated as to be acceptable for acquisition by the Trust (see "Description
of Bond Ratings"); (ii) the prices of the Bonds relative to other bonds
of comparable quality and maturity; (iii) the diversification of Bonds
as to location of issuer; and (iv) whether the Bonds were issued after
July 18, 1984. Subsequent to the Initial Date of Deposit, a Bond may
cease to be rated or its rating may be reduced below the minimum
required as of the Initial Date of Deposit. Neither event requires
elimination of such Bond from a portfolio, but may be considered in the
Sponsor's determination as to whether or not to direct the Trustee to
dispose of the Bond. See "Rights of Unit Holders-How May Bonds be
Removed from the Trust?"
Certain Bonds in the Trusts may have been acquired at a market discount
from par value at maturity. The coupon interest rates on the discount
bonds at the time they were purchased and deposited in the Trusts were
lower than the current market interest rates for newly issued bonds of
comparable rating and type. 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, 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
Page 2
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 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
Page 3
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.
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
Page 4
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 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.
Page 5
Each Unit initially offered represents that fractional undivided
interest in a Trust as is set forth in Part One for each Trust. To the
extent that any Units of a Trust are redeemed by the Trustee, the
fractional undivided interest in the Trust represented by each
unredeemed Unit will increase, although the actual interest in a Trust
represented by such fraction will remain substantially unchanged. Units
will remain outstanding until redeemed upon tender to the Trustee by any
Unit holder, which may include the Sponsor, or until the termination of
the Trust Agreement.
What are Estimated Long-Term Return and Estimated Current Return?
The Estimated Current Return and the Estimated Long-Term Return, under
the monthly and semi-annual distribution plans, are as set forth in Part
One for each Trust. Estimated Current Return is computed by dividing the
Estimated Net Annual Interest Income per Unit by the Public Offering
Price. Any change in either the Estimated Net Annual Interest Income per
Unit or the Public Offering Price will result in a change in the
Estimated Current Return. The Public Offering Price will vary in
accordance with fluctuations in the prices of the underlying Bonds and
the Net Annual Interest Income per Unit will change as Bonds are
redeemed, paid, sold or exchanged in certain refundings or as the
expenses of a Trust change. Therefore, there is no assurance that the
Estimated Current Return indicated in Part One for each Trust will be
realized in the future. Estimated Long-Term Return is calculated using a
formula which (1) takes into consideration and determines and factors in
the relative weightings of the market values, yields (which takes into
account the amortization of premiums and the accretion of discounts) and
estimated retirements of all of the Bonds in a Trust; and (2) takes into
account a compounding factor and the expenses and sales charge
associated with each Unit of the Trust. Since the market values and
estimated retirements of the Bonds and the expenses of a Trust will
change, there is no assurance that the Estimated Long-Term Return
indicated in Part One for each Trust will be realized in the future.
Estimated Current Return and Estimated Long-Term Return are expected to
differ because the calculation of Estimated Long-Term Return reflects
the estimated date and amount of principal returned while Estimated
Current Return calculations include only Net Annual Interest Income and
Public Offering Price. Neither rate reflects the true return to Unit
holders, which is lower, because neither includes the effect of certain
delays in distributions to Unit holders.
Record Dates for the distribution of interest under the semi-annual
distribution plan are the fifteenth day of June and December with the
Distribution Dates being the last day of such month. It is anticipated
that an amount equal to approximately one-half of the amount of net
annual interest income per Unit will be distributed on or shortly after
each Distribution Date to Unit holders of record on the preceding Record
Date. See Part One for each Trust.
Record Dates for monthly distributions are the fifteenth day of each
month. The Distribution Dates for distributions of interest under the
monthly distribution plan is the last day of such month. All Unit
holders will receive such distributions, if any, from the Principal
Account as are made as of the Record Dates for monthly distributions.
See Part One for each Trust.
How is Accrued Interest Treated?
Accrued interest is the accumulation of unpaid interest on a bond from
the last day on which interest thereon was paid. Interest on Bonds in a
Trust generally is paid semi-annually to the Trust. However, interest on
the Bonds in a Trust is accounted for daily on an accrual basis. Because
of this, a Trust always has an amount of interest earned but not yet
collected by the Trustee because of non-collected coupons. For this
reason, the Public Offering Price of Units will have added to it the
proportionate share of accrued and undistributed interest to the date of
settlement.
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of
interest actually received by a Trust and distributed to Unit holders.
Therefore, there will always remain an item of accrued interest that is
added to the value of the Units. If a Unit holder sells or redeems all
or a portion of his Units, he will be entitled to receive his
proportionate share of the accrued interest from the purchaser of his
Units. Since the Trustee has the use of the interest held in the
Interest Account for distributions to Unit holders and since such
Account is non-interest-bearing to Unit holders, the Trustee benefits
thereby.
Page 6
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 each of the Trust's assets under subpart E, subchapter J of
chapter 1 of the Internal Revenue Code of 1986 (hereinafter the "Code");
and the income of the Trust will be treated as income of the Unit
holders. Each Unit holder will be considered to have received his pro
rata share of interest derived from each Trust asset when such interest
is considered to be received by the Trust. Each Unit holder will also be
required to include in taxable income for Federal income tax purposes,
original issue discount with respect to his interest in any Bonds held
by a Trust at the same time and in the same manner as though the Unit
holder were the direct owner of such interest.
Each Unit holder will have a taxable event when a Trust disposes of a
Bond (whether by sale, exchange, liquidation, redemption or payment at
maturity), or when the Unit holder redeems or sells his Units. A Unit
holder's tax basis in his Units will equal his tax basis in his pro rata
portion of all the assets of the Trust. Such basis is determined (before
the adjustments described below) by apportioning the tax basis for the
Units among each of the Trust assets according to value as of the
valuation date nearest the date of acquisition of the Units. Unit
holders must reduce the tax basis of their Units for their share of
accrued interest received, if any, on Bonds delivered after the date the
Unit holders pay for their Units to the extent that such interest
accrued on such Bonds during the period from the Unit holder's
settlement date to the date such Bonds are delivered to the Trust 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 (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unit holder's pro rata share of the total proceeds from
such disposition with his basis for his fractional interest in the asset
disposed of. The basis of each Unit and of each Bond which was issued
with original issue discount (or which has market discount) must be
increased by the amount of accrued original issue discount (and market
discount, if the Unit holder elects to include market discount in income
as it accrues) and the basis of each Unit and of each Bond which was
purchased by a Trust at a premium must be reduced by the annual
amortization of Bond premium which the Unit holder has properly elected
to amortize under Section 171 of the Code. The tax basis reduction
requirements of the Code relating to amortization of bond premium may,
under some circumstances, result in the Unit holder realizing a taxable
gain when his Units are sold or redeemed for an amount equal to or less
than his original cost. Original issue discount is effectively treated
as interest for federal income tax purposes, and the amount of original
issue discount in this case is generally the difference between the
bond's purchase price and its stated redemption price at maturity. A
Unit holder will be required to include in gross income for each taxable
year the sum of his daily portions of original issue discount
attributable to the Bonds held by a Trust as such original issue
discount accrues for such year even though the income is not distributed
to the Unit holders during such year unless a security's original issue
discount is less than a "de minimis" amount as determined under the
Code. To the extent that the amount of such discount is less than the
respective "de minimis" amount, such discount shall be treated as zero.
In general, original issue discount accrues daily under a constant
interest rate method which takes into account the semi-annual
compounding of accrued interest. Unit holders should consult their
advisors regarding the federal income tax consequences and accretion of
original issue discount.
Each Unit holder's pro rata share of each expense paid by a Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by him. It should be noted that as a result of
the Tax Reform Act of 1986, certain miscellaneous itemized deductions,
such as investment expenses, tax return preparation fees and employee
business expenses will be deductible by an individual only to the extent
Page 7
they exceed 2% of such individual's adjusted gross income. Unit holders
may be required to treat some or all of the expenses paid by the Trust
as miscellaneous itemized deductions subject to this limitation.
If a Unit holder's tax basis of his pro rata portion in any Bonds held
by a Trust exceeds the amount payable by the issuer of the Bond with
respect to such pro rata interest upon maturity of the Bond, such excess
would be considered "premium" which may be amortized by the Unit holder
at the Unit holder's election as provided in Section 171 of the Code.
Unit holders should consult their tax advisors regarding whether such
election should be made and the manner of amortizing acquisition premium.
Certain Bonds in a Trust may have been acquired with "original issue
discount." In the case of any Bonds in a Trust acquired with "original
issue discount" that exceeds a "de minimis" amount as specified in the
Code, such discount is includable in taxable income of the Unit holders
on an accrual basis computed daily, without regard to when payments of
interest on such Bonds are received. The Code provides a complex set of
rules regarding the accrual of original issue discount. These rules
provide that original issue discount generally accrues on the basis of a
constant compound interest rate over the term of the Bonds. Unit holders
should consult their tax advisers as to the amount of original issue
discount which accrues.
Special original issue discount rules apply if the purchase price of the
Bond by a Trust exceeds its original issue price plus the amount of
original issue discount which would have previously accrued based upon
its issue price (its "adjusted issue price"). Similarly these special
rules would apply to a Unit holder if the tax basis of his pro rata
portion of a Bond issued with original issue discount exceeds his pro
rata portion of its adjusted issue price. Unit holders should also
consult their tax advisers regarding these special rules.
If a Unit holder's tax basis in his pro rata portion of Bonds is less
than the allocable portion of such Bond's stated redemption price at
maturity (or, if issued with original issue discount, the allocable
portion of its "revised issue price"), such difference will constitute
market discount unless the amount of market discount is "de minimis" as
specified in the Code. Market discount accrues daily computed on a
straight line basis, unless the Unit holder elects to calculate accrued
market discount under a constant yield method. Unit holders should
consult their tax advisers regarding whether an election should be made
and as to the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unit holders as ordinary income for Federal tax purposes upon the
receipt of serial principal payments on the Bonds, on the sale, maturity
or disposition of such Bonds by a Trust, and on the sale by a Unit
holder of Units, unless a Unit holder elects to include the accrued
market discount in taxable income as such discount accrues. If a Unit
holder does not elect to annually include accrued market discount in
taxable income as it accrues, deductions for any interest expenses
incurred by the Unit holder which are incurred to purchase or carry his
Units will be reduced by such accrued market discount. In general, the
portion of any interest expense which was not currently deductible would
ultimately be deductible when the accrued market discount is included in
income. Unit holders should consult their tax advisers regarding whether
an election should be made to include market discount in income as it
accrues and as to the amount of interest expense which may not be
currently deductible.
The tax basis of a Unit holder with respect to his interest in a Bond is
increased by the amount of original issue discount (and market discount,
if the Unit holder elects to include market discount, if any, on the
Bonds held by a Trust in income as it accrues) thereon properly included
in the Unit holder's gross income as determined for Federal income tax
purposes and reduced by the amount of any amortized premium which the
Unit holder has properly elected to amortize under Section 171 of the
Code. A Unit holder's tax basis in his Units will equal his tax basis in
his pro rata portion of all of the assets of a Trust.
A Unit holder will recognize taxable capital gain (or loss) when all or
part of his pro rata interest in a Bond is disposed of in a taxable
transaction for an amount greater (or less) than his tax basis therefor.
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
Page 8
gain or loss will generally be long-term. For taxpayers other than
corporations, net capital gains are presently subject to a maximum
stated marginal tax rate of 28%. However, it should be noted that
legislative proposals are introduced from time to time that affect tax
rates and could affect relative differences at which ordinary income and
capital gains are taxed. The tax basis reduction requirements of the
Code relating to amortization of bond premiums may, under some
circumstances, result in the Unit holder's realizing taxable gain when
his Units are sold or redeemed for an amount equal to or less than his
original cost.
The Revenue Reconciliation Act of 1993 (the "Tax Act") raised tax rates
on ordinary income while capital gains remain subject to a 28 percent
maximum stated rate for taxpayers other than corporations. 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) and the Bond is issued after July 18, 1984, then the foreign
investor does not own, directly or indirectly, 10% or more of the total
combined voting power of all classes of voting stock of the issuer of
the Bond and the foreign investor is not a controlled foreign
corporation related (within the meaning of Section 864(d)(4) of the
Code) to the issuer of the Bond, (iii) with respect to any gain, the
foreign investor (if an individual) is not present in the United States
for 183 days or more during his or her taxable year and (iv) the foreign
investor provides all certification which may be required of his status
(foreign investors may contact the Sponsor to obtain a Form W-8 which
must be filed with the Trustee and refiled every three calendar years
thereafter). Foreign investors should consult their tax advisers with
respect to United States tax consequences of ownership of Units.
It should be noted that the Tax Act includes a provision which
eliminates the exemption from United States taxation, including
withholding taxes, for certain "contingent interest." The provision
applies to interest received after December 31, 1993. No opinion is
expressed herein regarding the potential applicability of this provision
and whether United States taxation or withholding taxes could be imposed
with respect to income derived from the Units as a result thereof. Unit
holders and prospective investors should consult with their tax advisers
regarding the potential effect of this provision on their investment in
Units.
Each Unit holder (other than a foreign investor who has properly
provided the certifications described above) will be requested to
provide the Unit holder's taxpayer identification number to the trustee
and to certify that the Unit holder has not been notified that payments
to the Unit holder are subject to back-up withholding. If the proper
taxpayer identification number and appropriate certification are not
provided when requested, distributions by a Trust to such Unit holder
(including amounts received upon the redemption of the Units) will be
subject to back-up withholding.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trusts for New York tax matters, the Trusts are not associations taxable
as corporations and the income of the Trusts will be treated as the
income of the Unit holders under the existing income tax laws of the
State and City of New York.
The foregoing discussion relates only to United States Federal and, to
the extent set forth, New York State and City income taxes; Unit holders
may be subject to state and local taxation (including taxation by a
foreign investor's country of residence). Residents of certain States
Page 9
may be exempt from state and local (where applicable) personal income
taxation with respect to their portion of the interest income of Bonds
of issuers located in their respective State. The Trustee will supply
annually each Unit holder with a statement setting forth the annual
percentage of the interest income of the Trust generated by each State
in which the issuers of the Bonds are located. Unit holders should
consult their tax advisers regarding potential state, local, or foreign
taxation with respect to the Units.
Why are Investments in a Trust Suitable for Retirement Plans?
Units of a Trust may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans. Generally, the Federal income tax relating to capital
gains and income received in each of the foregoing plans is deferred
until distributions are received. Distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible
for special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisers
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
What are the Expenses and Charges?
At no cost to the Trusts, the Sponsor has borne all the expenses of
creating and establishing a Trust, including the cost of the initial
preparation, printing and execution of the Indenture and the
certificates for the Units, legal and accounting expenses, expenses of
the Trustee and other out-of-pocket expenses. The Sponsor will not
receive any fees in connection with its activities relating to a Trust.
However, First Trust Advisors L.P., an affiliate of the Sponsor, will
receive an annual supervisory fee, which is not to exceed the amount set
forth under "Summary of Essential Information" appearing in Part One for
each Trust, for providing portfolio supervisory services for a Trust.
Such fee is based on the number of Units of the Trust outstanding on
January 1 of each year except for Trusts which were established
subsequent to the last January 1, in which case the fee will be based on
the number of Units of a Trust outstanding as of the respective Dates of
Deposit. The fee may exceed the actual costs of providing such
supervisory services for a Trust, but at no time will the total amount
received for portfolio supervisory services rendered to unit investment
trusts of which Nike Securities L.P. is the Sponsor in any calendar year
exceed the aggregate cost to First Trust Advisors L.P. of supplying such
services in such year.
For each valuation of the Bonds in a Trust, the Evaluator will receive a
fee as indicated in the "Summary of Essential Information" appearing in
Part One for each Trust. The Trustee pays certain expenses of a Trust
for which it is reimbursed by the Trust. The Trustee will receive for
its ordinary recurring services to the Trust an annual fee computed at
$1.05 and $.55 per annum per $1,000 principal amount of underlying Bonds
in a Trust for those portions of the Trust representing monthly and semi-
annual distribution plans, respectively. For a discussion of the
services performed by the Trustee pursuant to its obligations under the
Indenture, reference is made to the material set forth under "Rights of
Unit Holders." The Trustee's and Evaluator's fees are payable monthly on
or before each Distribution Date from the Interest Account of a Trust to
the extent funds are available and then from the Principal Account of
the Trust. Since the Trustee has the use of the funds being held in the
Principal and Interest Accounts for future distributions, payment of
expenses and redemptions and since such Accounts are non-interest-
bearing to Unit holders, the Trustee benefits thereby. Part of the
Trustee's compensation for its services to a Trust is expected to result
from the use of these funds. Both fees may be increased without approval
of the Unit holders by amounts not exceeding proportionate increases
under the category "All Services Less Rent of Shelter" in the Consumer
Price Index published by the United States Department of Labor.
The following additional charges are or may be incurred by a Trust: all
expenses (including legal and annual auditing expenses) of the Trustee
incurred by or in connection with its responsibilities under the
Indenture, except in the event of negligence, bad faith or willful
misconduct on its part; the expenses and costs of any action undertaken
by the Trustee to protect a Trust and the rights and interests of the
Unit holders; fees of the Trustee for any extraordinary services
performed under the Indenture; indemnification of the Trustee for any
loss, liability or expense incurred by it without negligence, bad faith
or willful misconduct on its part, arising out of or in connection with
its acceptance or administration of a Trust; indemnification of the
Page 10
Sponsor for any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct in acting as Depositor of a
Trust; all taxes and other government charges imposed upon the Bonds or
any part of the Trust (no such taxes or charges are being levied or made
or, to the knowledge of the Sponsor, contemplated); and expenditures
incurred in contacting Unit holders upon termination of a Trust. The
above expenses and the Trustee's annual fee, when paid or owing to the
Trustee, are secured by a lien on a Trust. In addition, the Trustee is
empowered to sell Bonds of a Trust in order to make funds available to
pay all these amounts if funds are not otherwise available in the
Interest and Principal Accounts of the Trust.
Unless the Sponsor determines that such an audit is not required, the
Indenture requires the accounts of the Trusts shall be audited on an
annual basis at the expense of the Trust by independent auditors
selected by the Sponsor. So long as the Sponsor is making a secondary
market for Units, the Sponsor shall bear the cost of such annual audits
to the extent such cost exceeds $.50 per Unit. Unit holders of a Trust
covered by an audit may obtain a copy of the audited financial
statements from the Trustee upon request.
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 11
<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>
There will be no reduction of the sales charges for volume purchases for
secondary market transactions. A dealer will receive from the Sponsor a
dealer concession of 70% of the total sales charges for Units sold by
such dealer and dealers will not be eligible for additional concessions
for Units sold pursuant to the above schedule.
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.
The Public Offering Price of Units on the date of this Part Two
Prospectus may vary from the amount stated under "Summary of Essential
Information" appearing in Part One in accordance with fluctuations in
the prices of the underlying Bonds. The aggregate price of the Bonds in
a Trust is determined by whomever from time to time is acting as
evaluator (the "Evaluator"), on the basis of bid prices or offering
prices as is appropriate, (1) on the basis of current market prices for
the Bonds obtained from dealers or brokers who customarily deal in bonds
comparable to those held by a Trust; (2) if such prices are not
available for any of the Bonds, on the basis of current market prices
for comparable bonds; (3) by determining the value of the Bonds by
appraisal; or (4) by any combination of the above. The value of
insurance obtained by the issuer of Bonds in the Trust is reflected and
included in the market value of such Bonds.
The Evaluator will be requested to make a determination of the aggregate
price of the Bonds in each Trust, on a bid price basis, as of the close
of trading on the New York Stock Exchange on each day on which it is
open, effective for all sales, purchases or redemptions made subsequent
to the last preceding determination.
The secondary market Public Offering Price of the Units will be equal to
the bid price per Unit of the Bonds in the Trust plus (less) any balance
(overdraft) in the principal cash account of such Trust, plus the
applicable sales charge.
Although payment is normally made three business days following the
order for purchase (the "date of settlement"), payment may be made prior
thereto. A person will become owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available to the
Sponsor prior to the date of settlement for the purchase of Units may be
used in the Sponsor's business and may be deemed to be a benefit to the
Sponsor, subject to the limitations of the Securities Exchange Act of
1934. Delivery of Certificates representing Units so ordered will be
made three business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units Be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are Units Distributed?
Units repurchased in the secondary market may be offered by this Part
Two Prospectus at the secondary market public offering price determined
in the manner described above.
The Sponsor reserves the right to change the amount of the concession or
agency commission from time to time.
Page 12
Resales of Units of the Trusts by dealers and others to the public will
be made at the Public Offering Price described in Part One of this
Prospectus. Certain commercial banks are making Units of the Trust
available to their customers on an agency basis. A portion of the sales
charge paid by these customers is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting
Trust Units; however, the Glass-Steagall Act does permit certain agency
transactions and the banking regulators have not indicated that these
particular agency transactions are not permitted under such Act. In
Texas and in certain other states, any banks making Units available must
be registered as broker/dealers under state law.
What are the Sponsor's Profits?
The 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 three business days following such
order or shortly thereafter. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer.
Certificates to be redeemed must be properly endorsed or accompanied by
a written instrument or instruments of transfer. A Unit holder must sign
exactly as his name appears on the face of the certificate with the
signature guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guaranty program in
addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. In certain instances the Trustee may require additional
documents such as, but not limited to, trust instruments, certificates
of death, appointments as executor or administrator or certificates of
corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification. Certificates
for Units will bear an appropriate notation on their face indicating
which plan of distribution has been selected in respect thereof. When a
change is made, the existing certificate must be surrendered to the
Trustee and a new certificate issued to reflect the then currently
effective plan of distribution. There is no charge for this service.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred for reasons other than to change the plan of distribution,
and to pay any governmental charge that may be imposed in connection
with each such transfer or exchange. For new certificates issued to
replace destroyed, stolen or lost certificates, the Unit holder may be
required to furnish indemnity satisfactory to the Trustee and pay such
expenses as the Trustee may incur. Mutilated certificates must be
surrendered to the Trustee for replacement.
How are Interest and Principal Distributed?
Interest from a Trust will be distributed on or shortly after the last
day of each month on a pro rata basis to Unit holders of record as of
the preceding Record Date who are entitled to distributions at that time
under the plan of distribution chosen. All distributions for a Trust
will be net of applicable expenses for a Trust.
Page 13
The pro rata share of cash in the Principal Account of a Trust will be
computed as of the fifteenth day of each month, and distributions to the
Unit holders of a Trust as of such Record Date will be made on or
shortly after the last day of such month. Proceeds from the disposition
of any of the Bonds of a Trust received after such Record Date and prior
to the following Distribution Date will be held in the Principal Account
of a Trust and not distributed until the next Distribution Date. The
Trustee is not required to pay interest on funds held in the Principal
or Interest Account of a Trust (but may itself earn interest thereon and
therefore benefit from the use of such funds) nor to make a distribution
from the Principal Account of the Trust unless the amount available for
distribution shall equal at least $1.00 per Unit.
The Trustee will credit to the Interest Account of the Trust all
interest received by a Trust, including that part of the proceeds
(including insurance proceeds if any, paid to the Trust) of any
disposition of Bonds which represents accrued interest. Other receipts
will be credited to the Principal Account of a Trust. The distribution
to the Unit holders of a Trust as of each Record Date will be made on
the following Distribution Date or shortly thereafter and shall consist
of an amount substantially equal to such portion of the holder's pro
rata share of the estimated annual income of the Trust after deducting
estimated expenses as is consistent with the distribution plan chosen.
Because interest payments are not received by a Trust at a constant rate
throughout the year, such interest distribution may be more or less than
the amount credited to the Interest Account of the Trust as of the
Record Date. For the purpose of minimizing fluctuations in the
distributions from the Interest Account of a Trust, the Trustee is
authorized to advance such amounts as may be necessary to provide
interest distributions of approximately equal amounts. The Trustee shall
be reimbursed, without interest, for any such advances from funds in the
Interest Account of a Trust on the ensuing Record Date. Persons who
purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date after
the purchase, under the applicable plan of distribution. The Trustee is
not required to pay interest on funds held in the Principal or Interest
Account of a Trust (but may itself earn interest thereon and therefore
benefit from the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct from the
Interest Account of a Trust and, to the extent funds are not sufficient
therein, from the Principal Account of a Trust, amounts necessary to pay
the expenses of the Trust. The Trustee also may withdraw from said
accounts such amounts, if any, as it deems necessary to establish a
reserve for any governmental charges payable out of a Trust. Amounts so
withdrawn shall not be considered a part of a Trust's assets until such
time as the Trustee shall return all or any part of such amounts to the
appropriate account. In addition, the Trustee may withdraw from the
Interest Account and the Principal Account of the Trust such amounts as
may be necessary to cover redemption of Units of the Trust by the Trustee.
Record Dates for monthly distributions will be the fifteenth day of each
month and Record Dates for semi-annual distributions will be the
fifteenth day of June and December. Distributions will be made on the
last day of such month.
The plan of distribution selected by a Unit holder will remain in effect
until changed. Unit holders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of
the prior owner. Each year, approximately six weeks prior to the end of
May, the Trustee will furnish each Unit holder a card to be returned to
the Trustee not more than thirty nor less than ten days before the end
of such month. Unit holders desiring to change the plan of distribution
in which they are participating may so indicate on the card and return
same, together with their certificate, to the Trustee. If the card and
certificate are returned to the Trustee, the change will become
effective as of June 16 of that year. If the card and certificate are
not returned to the Trustee, the Unit holder will be deemed to have
elected to continue with the same plan for the following twelve months.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation in a
Universal Distribution Option which permits a Unit holder to direct the
Trustee to distribute principal and interest payments to any other
investment vehicle of which the Unit holder has an existing account. For
example, at a Unit holder's direction, the Trustee would distribute
automatically on the applicable distribution date interest income or
principal on the participant's Units to, among other investment
vehicles, a Unit holder's checking, bank savings, money market,
insurance, reinvestment or any other account. All such distributions, of
Page 14
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 third business day following such tender, the Unit
holder will be entitled to receive in cash an amount for each Unit equal
to the Redemption Price per Unit next computed after receipt by the
Trustee of such tender of Units. The "date of tender" is deemed to be
the date on which Units are received by the Trustee, 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
Page 15
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 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
Page 16
to the terms and conditions in the Indenture to the same extent as Bonds
originally deposited thereunder. Within five days after the deposit of
obligations in exchange or substitution for underlying Bonds, the
Trustee is required to give notice thereof to each Unit holder of the
affected Trust, identifying the Bonds eliminated and the Bonds
substituted therefor. Except as stated in this paragraph, the
acquisition by the Trust of any securities other than the Bonds
initially deposited is prohibited.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, The First Trust Special Situations Trust, The First Trust
Insured Corporate Trust, The First Trust of Insured Municipal Bonds, The
First Trust GNMA, Templeton Growth and Treasury Trust, Templeton Foreign
Fund & U.S. Treasury Securities Trust and The Advantage Growth and
Treasury Securities Trust. First Trust introduced the first insured unit
investment trust in 1974 and to date more than $9 billion in First Trust
unit investment trusts have been deposited. The Sponsor's employees
include a team of professionals with many years of experience in the
unit investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (630) 241-4141. As of
December 31, 1995, the total partners' capital of Nike Securities L.P.
was $9,033,760 (audited). (This paragraph relates only to the Sponsor
and not to the Trusts or to any series thereof or to any other
Underwriters. The information is included herein only for the purpose of
informing investors as to the financial responsibility of the Sponsor
and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 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 subject to
supervision by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the portfolio. For information relating
to the responsibilities of the Trustee under the Indenture, reference is
made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within thirty days after notification, the retiring trustee
may apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which the Trustee may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Page 17
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Bonds. In the event of the failure of the Sponsor
to act under the Indenture, the Trustee may act thereunder and shall not
be liable for any action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in respect
of the Trust which the Trustee may be required to pay under any present
or future law of the United States of America or of any other taxing
authority having jurisdiction. In addition, the Indenture contains other
customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East Roosevelt
Road, Suite 200, Wheaton, Illinois 60187. The Evaluator may resign or
may be removed by the Sponsor and the Trustee, in which event the
Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become
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.
Page 18
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
LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
DESCRIPTION OF BOND RATINGS*
Standard & Poor's. A brief description of the applicable Standard &
Poor's rating symbols and their meanings follow:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
l. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
ll. Nature of and provisions of the obligation;
lll. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA-Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.**
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
____________________
* As published by the rating companies.
** Bonds insured by Financial Guaranty Insurance Company, AMBAC
Indemnity Corporation, Municipal Bond Investors Assurance Corporation,
Connie Lee Insurance Company, Financial Security Assurance and Capital
Guaranty Insurance Company are automatically rated "AAA" by Standard &
Poor's.
Page 19
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his/her
own judgment with respect to such likelihood and risk.
Credit Watch: Credit Watch highlights potential changes in ratings of
bonds and other fixed income securities. It focuses on events and trends
which place companies and government units under special surveillance by
S&P's 180-member analytical staff. These may include mergers, voter
referendums, actions by regulatory authorities, or developments gleaned
from analytical reviews. Unless otherwise noted, a rating decision will
be made within 90 days. Issues appear on Credit Watch where an event,
situation, or deviation from trends occurred and needs to be evaluated
as to its impact on credit ratings. A listing, however, does not mean a
rating change is inevitable. Since S&P continuously monitors all of its
ratings, Credit Watch is not intended to include all issues under
review. Thus, rating changes will occur without issues appearing on
Credit Watch.
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.
Page 20
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 21
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Page 22
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Page 23
CONTENTS:
The Trust for Taxable Municipal Income Series:
What is The First Trust Special Situations Trust? 2
What are Estimated Long-Term Return and
Estimated Current Return? 6
How is Accrued Interest Treated? 6
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? 10
Public Offering:
How is the Public Offering Price Determined? 11
How are Units Distributed? 12
What are the Sponsor's Profits? 13
Rights of Unit Holders:
How are Certificates Issued and Transferred? 13
How are Interest and Principal Distributed? 13
How Can Distributions to Unit Holders be
Reinvested? 14
What Reports Will Unit Holders Receive? 15
How May Units be Redeemed? 15
How May Units be Purchased by the Sponsor? 16
How May Bonds be Removed from a Trust? 16
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 17
Who is the Trustee? 17
Limitations on Liabilities of Sponsor and Trustee 18
Who is the Evaluator? 18
Other Information:
How May the Indenture be Amended or Terminated? 18
Legal Opinions 19
Experts 19
Description of Bond Ratings 19
______________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE FUND
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (REGISTERED TRADEMARK)
THE TRUST FOR TAXABLE MUNICIPAL INCOME SERIES
The First Trust
Special Situations Trust
Prospectus
Part Two
September 27, 1996
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
770 Broadway
New York, New York 10003
1-800-682-7520
THIS PART TWP MUST BE
ACCOMPANIED BY PART ONE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 24
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES
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, 1996.
THE FIRST TRUST SPECIAL SITUATIONS TRUST,
SERIES 73
THE TRUST FOR TAXABLE MUNICIPAL INCOME,
SERIES 2
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title Date
Robert D. Van Kampen Sole Director of )
Nike Securities )
Corporation, ) September 30, 1996
the General Partner )
of Nike Securities L.P. )
)
) Robert M. Porcellino
) 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
Combined Series 258 (File No. 33-63483) and the same is
hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated August 30, 1996 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Special Situations Trust
dated September 24, 1996.
ERNST & YOUNG LLP
Chicago, Illinois
September 23, 1996
<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> TAXABLE MUNICIPAL INCOME TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<INVESTMENTS-AT-COST> 4,807,498
<INVESTMENTS-AT-VALUE> 4,820,984
<RECEIVABLES> 113,379
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,934,363
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,898
<TOTAL-LIABILITIES> 47,898
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,807,498
<SHARES-COMMON-STOCK> 5,109
<SHARES-COMMON-PRIOR> 5,124
<ACCUMULATED-NII-CURRENT> 65,748
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,486
<NET-ASSETS> 4,886,465
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 407,812
<OTHER-INCOME> 0
<EXPENSES-NET> 10,447
<NET-INVESTMENT-INCOME> 397,365
<REALIZED-GAINS-CURRENT> (433)
<APPREC-INCREASE-CURRENT> 177,214
<NET-CHANGE-FROM-OPS> 574,146
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 397,150
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 15
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 162,516
<ACCUMULATED-NII-PRIOR> 74,746
<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>
