Registration No. 33-51787
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to Form S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
The First Trust Special Situations Trust, Series 88
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
E. Title and Amount of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as
amended
F. Proposed Maximum Aggregate Offering Price to the Public of
the Securities Being Registered: Indefinite
G. Amount of Filing Fee (as required by Rule 24f-2): $500.00*
H. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
|XXX|Check box if it is proposed that this filing will become
effective on January 20, 1994 at 2:00 p.m. pursuant to Rule
487.
________________________________
*Previously paid
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 88
Cross-Reference Sheet
(Form N-8B-2 Items required by Instructions as
to the Prospectus in Form S-6)
Form N-8B-2 Item Number Form S-6 Heading in Prospectus
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust Prospectus front cover
(b) Title of securities issued Summary of Essential
Information
2. Name and address of each depositor Information as to
Sponsor, Trustee and
Evaluator
3. Name and address of trustee Information as to
Sponsor, Trustee and
Evaluator
4. Name and address of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
5. State of organization of trust The First Trust
Special Situations
Trust
6. Execution and termination of Other Information
trust agreement
7. Changes of name *
8. Fiscal year *
9. Litigation *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer Public Offering
securities
(b) Cumulative or distributive The First Trust
securities Special Situations
Trust
(c) Redemption Rights of Unitholders
(d) Conversion, transfer, etc. Rights of Unitholders
(e) Periodic payment plan *
(f) Voting rights Rights of Unitholders
(g) Notice of certificateholders Other Information
(h) Consents required Rights of Unitholders;
Other Information
(i) Other provisions The First Trust
Special Situations
Trust
11. Types of securities comprising The First Trust
units Special
Situations Trust
Schedule of
Investments
12. Certain information regarding
periodic payment certificates *
13. (a) Load, fees, expenses, etc. Summary of Essential
Information; Public
Offering; The First
Trust Special
Situations Trust
(b) Certain information regarding
periodic payment certificates *
(c) Certain percentages Summary of Essential
Information; The
First Trust Special
Situations Trust;
Public Offering
(d) Certain other fees, etc.
payable by holders Rights of Units
Holders
(e) Certain profits receivable
by depositor, principal,
underwriters, trustee or The First Trust
affiliated persons Special
Situations Trust
(f) Ratio of annual charges *
to income
14. Issuance of trust's securities Rights of Unit Holders
15. Receipt and handling of payments
from purchasers *
16. Acquisition and disposition of
underlying securities The First Trust
Special Situations
Trust; Rights of Unit
Holders;
17. Withdrawal or redemption The First Trust
Special Situations
Trust; Public
Offering; Rights of
Unit Holders
18. (a) Receipt, custody and Rights of Unit Holders
disposition of income
(b) Reinvestment of distributions Rights of Unit Holders
(c) Reserves or special funds Information as to
Sponsor, Trustee and
Evaluator
(d) Schedule of distributions *
19. Records, accounts and reports Rights of Unit Holders
20. Certain miscellaneous provisions
of trust agreement
(a) Amendment Other Information
(b) Termination Other Information
(c) and (d) Trustee, removal Information as
and successor to Sponsor, Trustee
and Evaluator
(e) and (f) Depositor, removal Information as
and successor to Sponsor, Trustee
and Evaluator
21. Loans to security holders *
22. Limitations on liability The First Trust
Special Situations
Trust;
Information as to
Sponsor, Trustee
and Evaluator
23. Bonding arrangements Contents of
Registration
Statement
24. Other material provisions *
of trust agreement
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor Information as to
Sponsor, Trustee and
Evaluator
26. Fees received by depositor *
27. Business of depositor Information as to
Sponsor, Trustee and
Evaluator
28. Certain information as to
officials and affiliated *
persons of depositor
29. Voting securities of depositor *
30. Persons controlling depositor *
31. Payment by depositor for certain
services rendered to trust *
32. Payment by depositor for certain
other services rendered to trust *
33. Remuneration of employees of
depositor for certain services
rendered to trust *
34. Remuneration of other persons
for certain services rendered *
to trust
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of trust's Public Offering
securities by states
36. Suspension of sales of trust's
securities *
37. Revocation of authority to *
distribute
38. (a) Method of distribution Public Offering
(b) Underwriting agreements Public Offering
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as
underwriters to Sponsor, Trustee
and Evaluator
(b) N.A.S.D. membership of
principal underwriters Information as to
Sponsor, Trustee and
Evaluator
40. Certain fees received by See Items 13(a) and
principal underwriters 13(e)
41. (a) Business of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) Branch offices of
principal underwriters *
(c) Salesmen of principal *
underwriters
42. Ownership of trust's securities
by certain persons *
43. Certain brokerage commissions
received by principal *
underwriters
44. (a) Method of valuation Summary of Essential
Information; The
First Trust Special
Situations Trust,
Public Offering
(b) Schedule as to offering *
price
(c) Variation in offering Public Offering
price to certain persons
45. Suspension of redemption rights *
46. (a) Redemption valuation Rights of Unit Holders
(b) Schedule as to redemption *
price
47. Maintenance of position in Public Offering;
underlying securities Rights
of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of Information as
trustee to Sponsor, Trustee
and Evaluator
49. Fees and expenses of trustee The First Trust
Special Situations
Trust
50. Trustee's lien The First Trust
Special Situations
Trust
VI. INFORMATION CONCERNING THE INSURANCE OF HOLDERS OF
SECURITIES
51. Insurance of holders of
trust's ecurities *
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust The First Trust
agreement with respect to Special
selection or elimination of Situations Trust;
underlying securities Rights of Unit Holders
(b) Transactions involving
elimination of underlying *
securities
(c) Policy regarding substitution The First Trust
or elimination of underlying Special
securities Situations Trust;
Rights of Unit Holders
(d) Fundamental policy not
otherwise covered *
53. Tax status of Trust The First Trust
Special Situations
Trust
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during *
last ten years
55.
56.
57. Certain information regarding
period payment certificates *
58.
59. Financial statements Report of Independent
(Instruction 1(c) to Statement of Net
Assets
Form S-6 Auditors
* Inapplicable, answer negative or not required.
The Ohio Company
International Blue Chip Trust, Series 1
The Trust. The First Trust Special Situations Trust, Series 88
(the "Trust") is a unit investment trust consisting of a portfolio
containing common stocks issued by international blue chip companies,
the majority of which are in American Depositary Receipt ("ADR")
form. The Underwriter and Sponsor have created the Trust to capitalize
on the size of the global economy, the familiarity of the selected
companies and their products, and the continuing technological
advancements that provide easier access to information about foreign
markets. The Trust consists of common stocks issued by companies
which are selected on the basis of the following requirements:
- - Among the 500 largest public foreign companies in the world
- - Market capitalization in excess of $1 billion
- - Annual sales in excess of $3 billion
- - Currently paying dividend income
The objectives of the Trust are to provide for potential capital
appreciation and dividend income growth by investing the Trust's
portfolio in common stocks issued by international blue chip companies
(the "Equity Securities"). See "Schedule of Investments." The
Trust has a Mandatory Termination Date as set forth under "Summary
of Essential Information." There is, of course, no guarantee that
the objectives of the Trust will be achieved. Each Unit of the
Trust represents an undivided fractional interest in all the Equity
Securities deposited in the Trust.
The Equity Securities deposited in the Trust's portfolio have
no fixed maturity date and the value of these underlying Equity
Securities will fluctuate with changes in the values of stocks
in general. See "Portfolio."
The Sponsor may, from time to time during a period of up to approximately
180 days after the Initial Date of Deposit, deposit additional
Equity Securities in the Trust. Such deposits of additional Equity
Securities will, therefore, be done in such a manner that the
original proportionate relationship amongst the individual issues
of the Equity Securities shall be maintained. See "What is the
First Trust Special Situations Trust?" and "How May Equity Securities
be Removed from the Trust?"
Public Offering Price. The Public Offering Price per Unit of the
Trust during the initial offering period is equal to the aggregate
underlying value of the Equity Securities in the Trust (generally
determined by the closing sale prices of listed Equity Securities
and the ask prices of over-the-counter traded Equity Securities)
plus or minus a pro rata share of cash, if any, in the Capital
and Income Accounts of the Trust, plus a maximum sales charge
of 5.5% (equivalent to 5.82% of the net amount invested). A pro
rata share of accumulated dividends, if any, in the Income Account
is included in the Public Offering Price. The secondary market
Public Offering Price per Unit will be based upon the aggregate
underlying value of the Equity Securities in the Trust (generally
determined by the closing sale prices of listed Equity Securities
and the bid prices of over-the-counter traded Equity Securities)
plus or minus a pro rata share of cash, if any, in the Capital
and Income Accounts of the Trust plus a maximum sales charge of
5.5% (equivalent to 5.82% of the net amount invested). The minimum
purchase is $1,000. The sales charge is reduced on a graduated
scale for sales involving at least 10,000 Units. See "How is the
Public Offering Price Determined?"
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.
The date of this Prospectus is January 20, 1994
Page 1
Dividend and Capital Gains Distributions. Distributions of dividends
received, and realized capital gains, if any, received by the
Trust will, net of expenses of the Trust, be paid semi-annually
in cash on the Distribution Date to Unit holders of record on
the Record Date as set forth in the "Summary of Essential Information."
Distributions of funds in the Capital Account, if any, will be
made at least annually in December of each year. Any distribution
of income and/or capital gains will be net of the expenses of
the Trust. See "What is the Federal Tax Status of Unit Holders?"
Additionally, upon termination of the Trust, the Trustee will
distribute, upon surrender of Units for redemption, to each Unit
holder his pro rata share of the Trust's assets, less expenses,
in the manner set forth under "Rights of Unit Holders-How are
Income and Capital Distributed?"
Secondary Market for Units. After the initial offering period,
while under no obligation to do so, the Sponsor may maintain a
market for Units of the Trust and offer to repurchase such Units
at prices which are based on the aggregate underlying value of
Equity Securities in the Trust (generally determined by the closing
sale prices of listed Equity Securities and the bid prices of
over-the-counter traded Equity Securities) plus or minus cash,
if any, in the Capital and Income Accounts of the Trust. If a
secondary market is maintained during the initial offering period,
the prices at which Units will be repurchased will also be based
upon the aggregate underlying value of the Equity Securities in
the Trust (generally determined by the closing sale prices of
listed Equity Securities and the ask prices of over-the-counter
traded Equity Securities) plus or minus cash, if any, in the Capital
and Income Accounts of the Trust. If a secondary market is not
maintained, a Unit holder may redeem Units through redemption
at prices based upon the aggregate underlying value of the Equity
Securities in the Trust (generally determined by the closing sale
prices of listed Equity Securities and the bid prices of over-the-counter
traded Equity Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust. A Unit
holder tendering 2,300 Units or more for redemption may request
a distribution of shares of Equity Securities (reduced by customary
transfer and registration charges) in lieu of payment in cash.
See "How May Units be Redeemed?"
Termination. Commencing on the Mandatory Termination Date, Equity
Securities will begin to be sold in connection with the termination
of the Trust. The Sponsor will determine the manner, timing and
execution of the sale of the Equity Securities. Written notice
of any termination of the Trust specifying the time or times at
which Unit holders may surrender their certificates for cancellation
shall be given by the Trustee to each Unit holder at his address
appearing on the registration books of the Trust maintained by
the Trustee. At least 60 days prior to the Mandatory Termination
Date of the Trust, the Trustee will provide written notice thereof
to all Unit holders and will include with such notice a form to
enable Unit holders to elect a distribution of shares of Equity
Securities (reduced by customary transfer and registration charges)
if such Unit holder owns at least 2,300 Units of the Trust, rather
than to receive payment in cash for such Unit holder's pro rata
share of the amounts realized upon the disposition by the Trustee
of Equity Securities. To be effective, the election form, together
with surrendered certificates and other documentation required
by the Trustee, must be returned to the Trustee at least five
business days prior to the Mandatory Termination Date of the Trust.
Unit holders not electing a distribution of shares of Equity Securities
will receive a cash distribution within a reasonable time after
the Trust is terminated. See "Rights of Unit Holders-How are Income
and Capital Distributed?"
Page 2
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Equity Securities-January 20, 1994
Underwriter: The Ohio Company
Sponsor: Nike Securities L.P.
Trustee: United States Trust Company of New York
Evaluator: Muller Data Corporation
<TABLE>
<CAPTION>
General Information
<S> <C>
Initial Number of Units 50,000
Fractional Undivided Interest in the Trust per Unit 1/50,000
Public Offering Price:
Aggregate Offering Price Evaluation of Equity
Securities in Portfolio (1) $ 472,461
Aggregate Offering Price Evaluation of Equity
Securities per Unit $ 9.44922
Sales Charge of 5.5% of the Public Offering Price per Unit
(5.82% of the net amount invested) $ .54995
Public Offering Price per Unit (2) $ 9.99917
Sponsor's Initial Repurchase Price per Unit $ 9.44922
Redemption Price per Unit (based on aggregate underlying
value of Equity Securities) (3) $ 9.44922
</TABLE>
CUSIP Number 33734W 400
First Settlement Date January 27, 1994
Mandatory Termination Date June 30, 1999
Discretionary Liquidation Amount The Trust may be terminated
if the value therefor is less than
the lower of $2,000,000 or 20% of
the total value of Equity Securities
deposited in the Trust during the
primary offering period.
Trustee's Annual Fee $.01 per Unit outstanding.
Evaluator's Annual Fee $.20 per business day per issue of
Equity Securities in the portfolio.
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 Maximum of $.0025 per Unit outstanding
annually payable to an affiliate of
the Sponsor.
Income Distribution Record Date Fifteenth day of each June
and December commencing June 15, 1994.
Income Distribution Date (4) Last day of each June and December
commencing June 30, 1994.
[FN]
(1) Each Equity Security listed on a national securities exchange
or the NASDAQ National Market System is valued at the last closing
sale price, or if no such price exists or if the Equity Security
is not so listed, at the closing ask price thereof.
(2) On the Initial Date of Deposit there will be no accumulated
dividends in the Income Account. Anyone ordering Units after such
date will pay a pro rata share of any accumulated dividends in
such Income Account. The Public Offering Price as shown reflects
the value of the Equity Securities at the opening of business
on the Initial Date of Deposit and establishes the original proportionate
relationship amongst the individual securities. No sales to investors
will be executed at this price. Additional Equity Securities will
be deposited during the day of the Initial Date of Deposit which
will be valued as of 4:00 p.m. Eastern time and sold to investors
at a Public Offering Price per Unit based on this valuation.
(3) See "How May Units be Redeemed?"
(4) Distributions from the Capital Account will be made monthly
payable on the last day of the month to Unit holders of record
on the fifteenth day of such month if the amount available for
distribution equals at least $0.01 per Unit. Notwithstanding,
distributions of funds in the Capital Account, if any, will be
made in December of each year.
Page 3
International Blue Chip Trust, Series 1
The First Trust Special Situations Trust, Series 88
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust, Series 88 is one of
a series of investment companies created by the Sponsor under
the name of The First Trust Special Situations Trust, all of which
are generally similar but each of which is separate and is designated
by a different series number (the "Trust"). This Series consists
of an underlying separate unit investment trust designated as
International Blue Chip Trust, Series 1. The Trust was created
under the laws of the State of New York pursuant to a Trust Agreement
(the "Indenture"), dated the Initial Date of Deposit, with Nike
Securities L.P., as Sponsor, United States Trust Company of New
York, as Trustee, Muller Data Corporation, as Evaluator, and First
Trust Advisors L.P., as Portfolio Supervisor.
On the Initial Date of Deposit, the Sponsor deposited with the
Trustee confirmations of contracts for the purchase of common
stocks issued by international blue chip companies, the majority
of which are in American Depositary Receipt ("ADR") form, together
with an irrevocable letter or letters of credit of a financial
institution in an amount at least equal to the purchase price
of such securities. In exchange for the deposit of securities
or contracts to purchase securities in the Trust, the Trustee
delivered to the Sponsor documents evidencing the entire ownership
of the Trust.
The Underwriter and Sponsor have created the Trust to capitalize
on the size of the global economy, the familiarity of the selected
companies and their products, and the continuing technological
advancements that provide easier access to information about foreign
markets. Statistically, the United States represents 30% of the
world's total economic activity, which is estimated at $20 trillion.
By combining the economic activity of the United States, Japan,
France, Germany, Italy and the United Kingdom, 70% of this total
world economic activity is accounted for. In addition, international
foreign trade is estimated at over $7 trillion annually, and by
1992 foreign stocks had risen to 57% of the total global stock
market from 42% in 1975. The statistical information set forth
above was obtained from sources deemed reliable, but the Underwriter
and the Sponsor take no responsibility for its accuracy.
The objectives of this Trust are to provide for potential capital
appreciation and dividend income growth through an investment
in equity securities issued by international blue chip companies
(the "Equity Securities") which are selected on the basis of the
following requirements:
- - Among the 500 largest public foreign companies in the world
- - Market capitalization in excess of $1 billion
- - Annual sales in excess of $3 billion
- - Currently paying dividend income
There is, of course, no guarantee that the objectives of the Trust
will be achieved.
With the deposit of the Equity Securities on the Initial Date
of Deposit, the Sponsor established a percentage relationship
between the amounts of Equity Securities in the Trust's portfolio.
From time to time following the Initial Date of Deposit, the Sponsor,
pursuant to the Indenture, may deposit additional Equity Securities
in the Trust and Units may be continuously offered for sale to
the public by means of this Prospectus, resulting in a potential
increase in the outstanding number of Units of the Trust. Any
additional Equity Securities deposited in the Trust will maintain,
as nearly as is practicable, the original proportionate relationship
of the Equity Securities in the Trust's portfolio. Any deposit
by the Sponsor of additional Equity Securities will duplicate,
as nearly as is practicable, the original proportionate relationship
and not the actual proportionate relationship on the subsequent
date of deposit, since the actual proportionate relationship may
be different than the original proportionate relationship. Any
such difference may be due to the sale, redemption or liquidation
of any of the Equity Securities deposited in the Trust on the
Initial, or any subsequent, Date of Deposit. See "How May Equity
Securities be Removed from the Trust?" The original percentage
relationship of each Equity Security to the Trust is set forth
herein under "Schedule of Investments." Since the prices of the
underlying Equity Securities will fluctuate daily, the ratio,
on a market value basis, will also change daily. The portion of
Equity Securities represented by each Unit will not change as
a result of the deposit of additional Equity Securities in the
Trust.
Page 4
On the Initial Date of Deposit, each Unit of the Trust represented
the undivided fractional interest in the Equity Securities deposited
in the Trust set forth under "Summary of Essential Information."
To the extent that Units of the Trust are redeemed, the aggregate
value of the Equity Securities in the Trust will be reduced and
the undivided fractional interest represented by each outstanding
Unit of the Trust will increase. However, if additional Units
are issued by the Trust in connection with the deposit of additional
Equity Securities by the Sponsor, the aggregate value of the Equity
Securities in the Trust will be increased by amounts allocable
to additional Units, and the fractional undivided interest represented
by each Unit of the Trust will be decreased proportionately. See
"How May Units be Redeemed?" The Trust has a Mandatory Termination
Date as set forth herein under "Summary of Essential Information."
What are the Expenses and Charges?
At no cost to the Trust, the Sponsor has borne all the expenses
of creating and establishing the Trust, including the cost of
the initial preparation, printing and execution of the Indenture
and the certificates for the Units, legal and accounting expenses,
expenses of the Trustee and other out-of-pocket expenses. The
Sponsor will not receive any fees in connection with its activities
relating to the Trust. However, First Trust Advisors L.P., an
affiliate of the Sponsor, will receive an annual supervisory fee,
which is not to exceed the amount set forth under "Summary of
Essential Information," for providing portfolio supervisory services
for the Trust. Such fee is based on the number of Units outstanding
in the Trust on January 1 of each year except for the year or
years in which an initial offering period occurs in which case
the fee for a month is based on the number of Units outstanding
at the end of such month. The fee may exceed the actual costs
of providing such supervisory services for this Trust, but at
no time will the total amount received for portfolio supervisory
services rendered to unit investment trusts of which Nike Securities
L.P. is the Sponsor in any calendar year exceed the aggregate
cost to First Trust Advisors L.P. of supplying such services in
such year. See "Underwriting."
Subsequent to the initial offering period, the Evaluator will
receive a fee as indicated in the "Summary of Essential Information."
The Trustee pays certain expenses of the Trust for which it is
reimbursed by the Trust. The Trustee will receive for its ordinary
recurring services to the Trust an annual fee computed at $.01
per annum per Unit in the Trust outstanding based upon the largest
aggregate number of Units of the Trust outstanding at any time
during the year. For a discussion of the services performed by
the Trustee pursuant to its obligations under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee's and Evaluator's fees are payable from the Income
Account of the Trust to the extent funds are available and then
from the Capital Account of the Trust. Since the Trustee has the
use of the funds being held in the Capital and Income Accounts
for payment of expenses and redemptions and since such Accounts
are noninterest-bearing to Unit holders, the Trustee benefits
thereby. Part of the Trustee's compensation for its services to
the Trust is expected to result from the use of these funds. Both
fees may be increased without approval of the Unit holders by
amounts not exceeding proportionate increases under the category
"All Services Less Rent of Shelter" in the Consumer Price Index
published by the United States Department of Labor.
The following additional charges are or may be incurred by the
Trust: all legal and annual auditing expenses of the Trustee incurred
by or in connection with its responsibilities under the Indenture;
the expenses and costs of any action undertaken by the Trustee
to protect the Trust and the rights and interests of the Unit
holders; fees of the Trustee for any extraordinary services performed
under the Indenture; indemnification of the Trustee for any loss,
liability or expense incurred by it without negligence, bad faith
or willful misconduct on its part, arising out of or in connection
with its acceptance or administration of the Trust; indemnification
of the Sponsor for any loss, liability or expense incurred without
gross negligence, bad faith or willful misconduct in acting as
Depositor of the Trust; all taxes and other government charges
imposed upon the Securities or any part of the Trust (no such
taxes or charges are being levied or made or, to the knowledge
of the Sponsor, contemplated). The above expenses and the Trustee's
annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trust. In addition, the Trustee is empowered to
sell Equity Securities in the Trust in order to make funds available
to pay all these amounts if funds are not otherwise
Page 5
available in the Income and Capital Accounts of the Trust. Since
the Equity Securities are all common stocks and the income stream
produced by dividend payments is unpredictable, the Sponsor cannot
provide any assurance that dividends will be sufficient to meet
any or all expenses of the Trust. As described above, if dividends
are insufficient to cover expenses, it is likely that Equity Securities
will have to be sold to meet Trust expenses. These sales may result
in capital gains or losses to Unit holders. See "What is the Federal
Tax Status of Unit Holders?"
The Indenture requires the Trust to be audited on an annual basis
at the expense of the Trust by independent auditors selected by
the Sponsor. So long as the Sponsor is making a secondary market
for the Units, the Sponsor is required to bear the cost of such
annual audits to the extent such cost exceeds $.005 per Unit.
Unit holders of the Trust covered by an audit may obtain a copy
of the audited financial statements upon request.
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the Federal
income tax consequences of the purchase, ownership and disposition
of the Units. The summary is limited to investors who hold the
Units as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code
of 1986 (the "Code"). Unit holders should consult their tax advisers
in determining the Federal, state, local and any other tax consequences
of the purchase, ownership and disposition of Units in the Trust.
In the opinion of Chapman and Cutler, special counsel for the
Sponsor, under existing law:
1. The Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated
as the owner of a pro rata portion of the assets of the Trust
under the Code; and the income of the Trust will be treated as
income of the Unit holders thereof under the Code. Each Unit holder
will be considered to have received his pro rata share of the
income derived from each Equity Security when such income is received
by the Trust.
2. Each Unit holder will have a taxable event when the Trust
disposes of an Equity Security (whether by sale, exchange, redemption,
or otherwise) or upon the sale or redemption of Units by such
Unit holder. The price a Unit holder pays for his Units, including
sales charges, is allocated among his pro rata portion of each
Equity Security held by the Trust (in proportion to the fair market
values thereof on the date the Unit holder purchases his Units)
in order to determine his initial cost for his pro rata portion
of each Equity Security held by the Trust. For Federal income
tax purposes, a Unit holder's pro rata portion of dividends as
defined by Section 316 of the Code paid with respect to an Equity
Security held by the Trust are taxable as ordinary income to the
extent of such corporation's current and accumulated "earnings
and profits." A Unit holder's pro rata portion of dividends paid
on such Equity Security which exceed such current and accumulated
earnings and profits will first reduce a Unit holder's tax basis
in such Equity Security, and to the extent that such dividends
exceed a Unit holder's tax basis in such Equity Security shall
generally be treated as capital gain. In general, any such capital
gain will be short-term unless a Unit holder has held his Units
for more than one year.
3. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Equity Securities held
by the Trust will generally be considered a capital gain except
in the case of a dealer or a financial institution and will be
long-term if the Unit holder has held his Units for more than
one year. A Unit holder's portion of loss, if any, upon the sale
or redemption of Units or the disposition of Equity Securities
held by the Trust will generally be considered a capital loss
except in the case of a dealer or a financial institution and,
in general, will be long-term if the Unit holder has held his
Units for more than one year. Unit holders should consult their
tax advisers regarding the recognition of such capital gains and
losses for Federal income tax purposes.
4. The Code provides that "miscellaneous itemized deductions"
are allowable only to the extent that they exceed two percent
of an individual taxpayer's adjusted gross income. Miscellaneous
itemized deductions subject to this limitation under present law
include a Unit holder's pro rata share of expenses paid by the
Trust, including fees of the Trustee and the Evaluator.
Page 6
Dividends Received Deduction. To the extent dividends received
by the Trust are attributable to foreign corporations, a corporation
that owns Units will not be entitled to the dividends received
deduction with respect to its pro rata portion of such dividends,
since the dividends received deduction is generally available
only with respect to dividends paid by domestic corporations.
Recognition of Taxable Gain or Loss Upon Disposition of Securities
by the Trust or Disposition of Units. As discussed above, a Unit
holder may recognize taxable gain (or loss) when an Equity Security
is disposed of by the Trust or if the Unit holder disposes of
a Unit. For taxpayers other than corporations, net capital gains
are subject to a maximum stated marginal tax rate of 28%. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Tax Act") raises
tax rates on ordinary income while capital gains remain subject
to a 28% maximum stated rate. Because some or all capital gains
are taxed at a comparatively lower rate under the Tax Act, the
Tax Act includes a provision that would recharacterize capital
gains as ordinary income in the case of certain financial transactions
that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Unit holders and prospective
investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
Special Tax Consequences of In-Kind Distributions Upon Redemption
of Units or Termination of the Trust. As discussed in "Rights
of Unit Holders-How are Income and Capital Distributed?", under
certain circumstances a Unit holder who owns at least 2,300 Units
may request an In-Kind Distribution upon the redemption of Units
or the termination of the Trust. The Unit holder requesting an
In-Kind Distribution will be liable for expenses related thereto
(the "Distribution Expenses") and the amount of such In-Kind Distribution
will be reduced by the amount of the Distribution Expenses. See
"Rights of Unit Holders-How are Income and Capital Distributed?"
As previously discussed, prior to the redemption of Units or the
termination of the Trust, a Unit holder is considered as owning
a pro rata portion of each of the Trust assets for Federal income
tax purposes. The receipt of an In-Kind Distribution upon the
redemption of Units or the termination of the Trust would be deemed
an exchange of such Unit holder's pro rata portion of each of
the shares of stock and other assets held by the Trust in exchange
for an undivided interest in whole shares of stock plus, possibly,
cash.
There are generally three different potential tax consequences
which may occur under an In-Kind Distribution with respect to
each Equity Security owned by the Trust. An "Equity Security"
for this purpose is a particular class of stock issued by a particular
corporation. If the Unit holder receives only whole shares of
an Equity Security in exchange for his or her pro rata portion
in each share of such security held by the Trust, there is no
taxable gain or loss recognized upon such deemed exchange pursuant
to Section 1036 of the Code. If the Unit holder receives whole
shares of a particular Equity Security plus cash in lieu of a
fractional share of such Equity Security, and if the fair market
value of the Unit holder's pro rata portion of the shares of such
Equity Security exceeds his tax basis in his pro rata portion
of such Equity Security, taxable gain would be recognized in an
amount not to exceed the amount of such cash received, pursuant
to Section 1031(b) of the Code. No taxable loss would be recognized
upon such an exchange pursuant to Section 1031(c) of the Code,
whether or not cash is received in lieu of a fractional share.
Under either of these circumstances, special rules will be applied
under Section 1031(d) of the Code to determine the Unit holder's
tax basis in the shares of such particular Equity Security which
he receives as part of the In-Kind Distribution. Finally, if a
Unit holder's pro rata interest in an Equity Security does not
equal a whole share, he may receive entirely cash in exchange
for his pro rata portion of a particular Equity Security. In such
case, taxable gain or loss is measured by comparing the amount
of cash received by the Unit holder with his tax basis in such
Equity Security.
Because the Trust will own many Equity Securities, a Unit holder
who requests an In-Kind Distribution will have to analyze the
tax consequences with respect to each Equity Security owned by
the Trust. In analyzing the tax consequences with respect to each
Equity Security, such Unit holder must allocate the Distribution
Expenses among the Equity Securities (the "Allocable Expenses").
The Allocable Expenses will reduce the amount realized with respect
to each Equity Security so that the fair market value of the shares
of such
Page 7
Equity Security received (if any) and cash received in lieu thereof
(as a result of any fractional shares) by such Unit holder should
equal the amount realized for purposes of determining the applicable
tax consequences in connection with an In-Kind Distribution. A
Unit holder's tax basis in shares of such Equity Security received
will be increased by the Allocable Expenses relating to such Equity
Security. The amount of taxable gain (or loss) recognized upon
such exchange will generally equal the sum of the gain (or loss)
recognized under the rules described above by such Unit holder
with respect to each Equity Security owned by the Trust. Unit
holders who request an In-Kind Distribution are advised to consult
their tax advisers in this regard.
General. Each Unit holder will be requested to provide the Unit
holder's taxpayer identification number to the Trustee and to
certify that the Unit holder has not been notified that payments
to the Unit holder are subject to back-up withholding. If the
proper taxpayer identification number and appropriate certification
are not provided when requested, distributions by the Trust to
such Unit holder (including amounts received upon the redemption
of Units) will be subject to back-up withholding. To the extent
they are not treated as U.S. source income, distributions by the
Trust will generally not be subject to United States income taxation
and withholding in the case of Units held by non-resident alien
individuals, foreign corporations or other non-United States persons.
However, distributions by the Trust that are treated as U.S. source
income would generally be subject to such taxation and withholding.
Investors should consult their tax advisers.
It should be noted that payments to the Trust of dividends on
Equity Securities that are attributable to foreign corporations
may be subject to foreign withholding taxes and Unit holders should
consult their tax advisers regarding the potential tax consequences
relating to the payment of any such withholding taxes by the Trust.
Any dividends withheld as a result thereof will nevertheless be
treated as income to the Unit holders. Because, under the grantor
trust rules, an investor is deemed to have paid directly his share
of foreign taxes that have been paid or accrued, if any, an investor
may be entitled to a foreign tax credit or deduction for United
States tax purposes with respect to such taxes. Investors should
consult their tax advisers with respect to foreign withholding
taxes and foreign tax credits.
Unit holders will be notified annually of the amounts of income
dividends includable in the Unit holder's gross income and amounts
of Trust expenses which may be claimed as itemized deductions.
Dividend income and long-term capital gains may also be subject
to state and local taxes. Investors should consult their tax advisers
for specific information on the tax consequences of particular
types of distributions.
Unit holders desiring to purchase Units for tax-deferred plans
and IRAs should consult their broker for details on establishing
such accounts. Units may also be purchased by persons who already
have self-directed plans established. See "Why are Investments
in the Trust Suitable for Retirement Plans?"
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Trust for New York tax matters, under the existing income
tax laws of the State of New York, the Trust is not an association
taxable as a corporation and the income of the Trust will be treated
as the income of the Unit holders thereof.
Why are Investments in the Trust Suitable for Retirement Plans?
Units of the Trust may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans, certain of which are briefly described below.
Generally, the Federal income tax relating to capital gains and
income received in each of the foregoing plans is deferred until
distributions are received. Distributions from such plans are
generally treated as ordinary income but may, in some cases, be
eligible for special 10 year averaging or tax-deferred rollover
treatment. The Code substitutes 5 year averaging for 10 year averaging
for qualifying lump sum plan distributions after December 31,
1986 although certain transition rules apply which retain 10 year
averaging for qualifying recipients who attained age 50 before
January 1, 1986. Moreover, the Code contains provisions which
adversely affect the continued deductibility of annual contributions
to an IRA beginning in 1987. Investors considering participation
in any such plan should review specific tax laws related thereto
and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans
are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
Page 8
Individual Retirement Account-IRA. The deductible amount an individual
may contribute will be reduced to the extent an individual has
adjusted gross income over $25,000 ($40,000 if married, filing
jointly or $0 if married, living apart and filing separately),
if either an individual or that individual's spouse (if married,
filing jointly) is an active participant in an employer maintained
retirement plan. If an individual has adjusted gross income over
$35,000 ($50,000 if married, filing jointly or $0 if married,
living apart and filing separately), and if an individual or that
individual's spouse is an active participant in an employer maintained
retirement plan, no IRA deduction is permitted. Under the Code,
an individual may make nondeductible contributions to the extent
deductible contributions are not allowed. The combined deductible
and nondeductible limit for an individual under the Code is the
lesser of $2,000 ($2,250 in the case of a spousal IRA) or 100
percent of compensation. Generally, the Federal income tax relating
to capital gains and income received in an IRA is deferred until
distributions are received. Distributions from an IRA (other than
the return of certain excess contributions) are treated as ordinary
income, except that under the Code an individual need not pay
tax on the return of nondeductible contributions. The Code provides
that if amounts are withdrawn from an IRA which includes both
deductible and nondeductible contributions, the amount excludable
from income for the taxable year is the same proportion to the
total amount withdrawn for the taxable year that the individual's
aggregate nondeductible IRA contributions bear to the aggregate
balance of all IRAs of the individual.
It should be noted that certain transactions which are prohibited
under the Code will cause all or a portion of the amount in an
IRA to be deemed to be distributed and subject to tax at that
time. A participant's entire interest in an IRA must be, or commence
to be, distributed to the participant not later than April 1 of
the calendar year following the year during which the individual
attains age 70 1/2. Excess contributions are subject to an annual
6% excise tax. Distributions made before attainment of age 59
1/2, except in the case of the participant's death or disability,
separation from service after attaining age 55, qualified domestic
relations orders or distributions applied to certain medical expenses
or where the amount distributed is to be rolled over to another
IRA, or if distributions are in a form of substantially equal
periodic payments over the life or life expectancy of the individual,
or over the joint lives of the individual and the individual's
beneficiary, are generally subject to a surtax in an amount equal
to 10% of the taxable portion of the distribution.
Retirement Plans for the Self-Employed-Keogh Plans. Units of the
Trust may be purchased by retirement plans established pursuant
to the Self-Employed Individuals Tax Retirement Act of 1962 ("Keogh
Plans"). Such plans are available for self-employed individuals,
partnerships or unincorporated companies. Under existing law,
qualified individuals may generally make annual tax-deductible
contributions to a defined contribution Keogh Plan of up to the
lesser of 25% of annual compensation (less the Keogh Plan contribution)
or $30,000 for taxable years beginning after December 31, 1983.
A defined benefit Keogh Plan is limited to providing benefits
each year which do not exceed the lesser of $90,000 (as adjusted
for inflation) or 100% of average compensation for the highest
three consecutive calendar years. The assets of the Keogh Plans
must be held in a qualified trust or other arrangement which meets
the requirements of the Code. Generally, a participant's entire
interest in a Keogh Plan must be, or commence to be, distributed
to the participant not later than April 1 of the calendar year
following the year during which the individual attains age 70
1/2. Excess contributions to a Keogh Plan are subject to an annual
10% excise tax. Distributions made before attainment of age 59
1/2, except in the case of the participant's death or disability,
separation from service after attaining age 55, qualified domestic
relations orders or distributions applied to certain medical expenses
or where the amount distributed is to be rolled over to an IRA
or another qualified plan, or if distributions are in a form of
substantially equal periodic payments over the life or life expectancy
of the individual, or over the joint lives of the individual and
the individual's beneficiary, are generally subject to a surtax
in an amount equal to 10% of the distribution.
Corporate Pension and Profit-Sharing Plans. An employer who has
established a pension or profit-sharing plan for employees may
purchase Units of the Trust for such a plan.
Excess Distributions Tax. In addition to the other taxes due by
reason of a plan distribution, a tax of 15% may apply to certain
aggregate distributions from IRAs, Keogh Plans, and qualified
corporate retirement plans to the extent such aggregate taxable
distributions exceed specified amounts (generally $150,000, as
adjusted
Page 9
or $112,500, as adjusted, if the recipient has made a "grandfather
election") during the tax year. This 15% tax will not apply to
distributions on account of death, qualified domestic relations
orders or amounts rolled over to an eligible plan. In general,
for qualifying lump sum distributions the excess distribution
over $750,000, as adjusted, or $562,000, as adjusted, if the recipient
has made a "grandfather election," will be subject to the 15%
tax.
Excess Accumulations Tax. On the participant's death, a 15% tax
will be imposed on aggregate balances remaining in IRAs, Keogh
Plans and qualified corporate retirement plans to the extent those
balances exceed specified levels. If a spouse is the death beneficiary
of all balances and makes a spousal election, the imposition of
the tax may be postponed until the spouse's death unless such
spouse receives excess distributions during the spouse's life.
In such a case, the spouse will be treated as the participant
and will be liable for the 15% tax on excess distributions, as
described above.
PORTFOLIO
What are Equity Securities?
The Trust consists of different issues of Equity Securities issued
by international blue chip companies listed on a national securities
exchange or the NASDAQ National Market System or traded in the
over-the-counter market. Each of the companies whose Equity Securities
are included in the portfolio are recognized as well-established
blue chip corporations because of their market dominance, substantial
financial resources, and because the products and services they
produce are used worldwide. See "What are the Equity Securities
Selected for International Blue Chip Trust, Series 1?" for a general
description of the companies.
The Trust consists of such of the Equity Securities listed under
"Schedule of Investments" as may continue to be held from time
to time in the Trust and any additional Equity Securities acquired
and held by the Trust pursuant to the provisions of the Trust
Agreement together with cash held in the Income and Capital Accounts.
Neither the Sponsor nor the Trustee shall be liable in any way
for any failure in any of the Equity Securities. However, should
any contract for the purchase of any of the Equity Securities
initially deposited hereunder fail, the Sponsor will, unless substantially
all of the moneys held in the Trust to cover such purchase are
reinvested in substitute Equity Securities in accordance with
the Trust Agreement, refund the cash and sales charge attributable
to such failed contract to all Unit holders on the next distribution
date.
Because certain of the Equity Securities from time to time may
be sold under certain circumstances described herein, and because
the proceeds from such events will be distributed to Unit holders
and will not be reinvested, no assurance can be given that the
Trust will retain for any length of time its present size and
composition. Although the Portfolio is not managed, the Sponsor
may instruct the Trustee to sell Equity Securities under certain
limited circumstances. Pursuant to the Indenture and with limited
exceptions, the Trustee may sell any securities or other property
acquired in exchange for Equity Securities such as those acquired
in connection with a merger or other transaction. If offered such
new or exchanged securities or property, the Trustee shall reject
the offer. However, in the event such securities or property are
nonetheless acquired by the Trust, they may be accepted for deposit
in the Trust and either sold by the Trustee or held in the Trust
pursuant to the direction of the Sponsor (who may rely on the
advice of the Portfolio Supervisor) . See "How May Equity Securities
be Removed from the Trust?" Equity Securities, however, will not
be sold by the Trust to take advantage of market fluctuations
or changes in anticipated rates of appreciation or depreciation.
Since the Equity Securities in the Trust consist of securities
of foreign issuers, an investment in the Trust involves some investment
risks that are different in some respects from an investment in
a trust that invests entirely in securities of domestic issuers.
Those investment risks include future political and governmental
restrictions which might adversely affect the payment or receipt
of payment of dividends on the relevant Equity Securities, currency
exchange rate fluctuations, exchange control policies, and the
limited liquidity and small market capitalization of such foreign
countries' securities markets. In addition, for the foreign issuers
that are not subject to the reporting requirements of the Securities
Exchange Act of 1934, there may be less publicly available information
than is available from a domestic issuer. Also, foreign issuers
are not necessarily
Page 10
subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable
to domestic issuers. However, due to the nature of the issuers
of Equity Securities included in the Trust, the Sponsor believes
that adequate information will be available to allow the Portfolio
Supervisor to provide portfolio surveillance.
The securities of certain of the foreign issuers in the Trust
are in ADR form. ADRs evidence American Depositary Receipts which
represent common stock deposited with a custodian in a depositary.
American Depositary Shares, and receipts therefor (ADRs), are
issued by an American bank or trust company to evidence ownership
of underlying securities issued by a foreign corporation. These
instruments may not necessarily be denominated in the same currency
as the securities into which they may be converted. For purposes
of the discussion herein, the term ADR generally includes American
Depositary Shares.
ADRs may be sponsored or unsponsored. In an unsponsored facility,
the depositary initiates and arranges the facility at the request
of market makers and acts as agent for the ADR holder, while the
company itself is not involved in the transaction. In a sponsored
facility, the issuing company initiates the facility and agrees
to pay certain administrative and shareholder-related expenses.
Sponsored facilities use a single depositary and entail a contractual
relationship between the issuer, the shareholder and the depositary;
unsponsored facilities involve several depositaries with no contractual
relationship to the company. The depositary bank that issues an
ADR generally charges a fee, based on the price of the ADR, upon
issuance and cancellation of the ADR. This fee would be in addition
to the brokerage commissions paid upon the acquisition or surrender
of the security. In addition, the depositary bank incurs expenses
in connection with the conversion of dividends or other cash distributions
paid in local currency into U.S. dollars and such expenses are
deducted from the amount of the dividend or distribution paid
to holders, resulting in a lower payout per underlying shares
represented by the ADR than would be the case if the underlying
share were held directly. Certain tax considerations, including
tax rate differentials and withholding requirements, arising from
applications of the tax laws of one nation to nationals of another
and from certain practices in the ADR market may also exist with
respect to certain ADRs. In varying degrees, any or all of these
factors may affect the value of the ADR compared with the value
of the underlying shares in the local market. In addition, the
rights of holders of ADRs may be different than those of holders
of the underlying shares, and the market for ADRs may be less
liquid than that for the underlying shares. ADRs are registered
securities pursuant to the Securities Act of 1933 and may be subject
to the reporting requirements of the Securities Exchange Act of
1934.
For those Equity Securities that are ADRs, currency fluctuations
will affect the U.S. dollar equivalent of the local currency price
of the underlying domestic share and, as a result, are likely
to affect the value of the ADRs and consequently the value of
the Equity Securities. The foreign issuers of securities that
are ADRs may pay dividends in foreign currencies which must be
converted into dollars. Most foreign currencies have fluctuated
widely in value against the United States dollar for many reasons,
including supply and demand of the respective currency, the soundness
of the world economy and the strength of the respective economy
as compared to the economies of the United States and other countries.
Therefore, for any securities of issuers (whether or not they
are in ADR form) whose earnings are stated in foreign currencies,
or which pay dividends in foreign currencies or which are traded
in foreign currencies, there is a risk that their United States
dollar value will vary with fluctuations in the United States
dollar foreign exchange rates for the relevant currencies.
On the basis of the best information available to the Sponsor
at the present time, none of the Equity Securities are subject
to exchange control restrictions under existing law which would
materially interfere with payment to the Trust of dividends due
on, or proceeds from the sale of, the Equity Securities. However,
there can be no assurance that exchange control regulations might
not be adopted in the future which might adversely affect payment
to the Trust. In addition, the adoption of exchange control regulations
and other legal restrictions could have an adverse impact on the
marketability of international securities in the Trust and on
the ability of the Trust to satisfy its obligation to redeem Units
tendered to the Trustee for redemption.
Whether or not the Equity Securities are listed on a national
securities exchange, the principal trading market for the Equity
Securities may be in the over-the-counter market. As a result,
the existence of a liquid trading market for the Equity Securities
may depend on whether dealers will make a market in the Equity
Page 11
Securities. There can be no assurance that a market will be made
for any of the Equity Securities, that any market for the Equity
Securities will be maintained or of the liquidity of the Equity
Securities in any markets made. In addition, the Trust may be
restricted under the Investment Company Act of 1940 from selling
Equity Securities to the Sponsor. The price at which the Equity
Securities may be sold to meet redemptions, and the value of the
Trust, will be adversely affected if trading markets for the Equity
Securities are limited or absent.
An investment in Units should be made with an understanding of
the risks which an investment in common stocks entails, including
the risk that the financial condition of the issuers of the Equity
Securities or the general condition of the common stock market
may worsen and the value of the Equity Securities and therefore
the value of the Units may decline. Common stocks are especially
susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions
of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic
or banking crises. Shareholders of common stocks have rights to
receive payments from the issuers of those common stocks that
are generally subordinate to those of creditors of, or holders
of debt obligations or preferred stocks of, such issuers. Shareholders
of common stocks of the type held by the Trust have a right to
receive dividends only when and if, and in the amounts, declared
by the issuer's board of directors and have a right to participate
in amounts available for distribution by the issuer only after
all other claims on the issuer have been paid or provided for.
Common stocks do not represent an obligation of the issuer and,
therefore, do not offer any assurance of income or provide the
same degree of protection of capital as do debt securities. The
issuance of additional debt securities or preferred stock will
create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the
rights of holders of common stock with respect to assets of the
issuer upon liquidation or bankruptcy. The value of common stocks
is subject to market fluctuations for as long as the common stocks
remain outstanding, and thus the value of the Equity Securities
in the Portfolio may be expected to fluctuate over the life of
the Trust to values higher or lower than those prevailing on the
Initial Date of Deposit.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners
of the entity, have generally inferior rights to receive payments
from the issuer in comparison with the rights of creditors of,
or holders of debt obligations or preferred stocks issued by,
the issuer. Cumulative preferred stock dividends must be paid
before common stock dividends and any cumulative preferred stock
dividend omitted is added to future dividends payable to the holders
of cumulative preferred stock. Preferred stockholders are also
generally entitled to rights on liquidation which are senior to
those of common stockholders.
Unit holders will be unable to dispose of any of the Equity Securities
in the Portfolio, as such, and will not be able to vote the Equity
Securities. As the holder of the Equity Securities, the Trustee
will have the right to vote all of the voting stocks in the Trust
and will vote such stocks in accordance with the instructions
of the Sponsor.
The Underwriter has acquired or will acquire the Equity Securities
for the Sponsor and thereby benefits from transaction fees. The
Underwriter in its general securities business acts as agent or
principal in connection with the purchase and sale of equity securities,
including the Equity Securities in the Trust, and may act as a
market maker in certain of the Equity Securities. The Underwriter
also from time to time may issue reports on and make recommendations
relating to equity securities, which may include the Equity Securities.
What are the Equity Securities Selected for International Blue
Chip Trust, Series 1?
The Underwriter and Sponsor have created the Trust to capitalize
on the size of the global economy, the familiarity of the selected
companies and their products, and the continuing technological
advancements that provide easier access to information about foreign
markets. The Trust consists of common stocks of international
Page 12
blue chip companies, the majority of which are in American Depositary
Receipt ("ADR") form, which are selected on the basis of the following
requirements:
- - Among the 500 largest public foreign companies in the world
- - Market capitalization in excess of $1 billion
- - Annual sales in excess of $3 billion
- - Currently paying dividend income
Issuers of Equity Securities selected for inclusion in the portfolio
are as follows:
Akzo N.V. (ADR), headquartered in Arnhem, The Netherlands, is
a diversified multinational company which produces basic, specialty
and functional chemicals for a variety of industries worldwide.
The company's fiber and polymers group manufactures fibers for
industrial and textile uses. Akzo N.V. also makes paints, stains,
synthetic resins, ethical and nonprescription drugs and hospital-related
supplies.
Asea AB (ADR), headquartered in Stockholm, Sweden, owns a 50%
interest in Asea Brown Boveri, Ltd., a global holding company
for electrical utilities, companies involved in public transportation,
process automation, oil and gas and other businesses.
Banco Santander (ADR) based in Madrid, Spain, is a bank holding
company. Through its wholly-owned subsidiary, Banco Santander,
S.A., the Bank provides commercial banking activities through
branches and other member banks. The Bank serves small- to medium-sized
companies in Spain, Europe and elsewhere. Banco Santander also
provides leasing, factoring, mortgage financing and credit life
insurance underwriting.
BASF A.G. (ADR), headquartered in Ludwigshafen am Rhein, Germany,
is one of the world's largest chemical companies. The company
manufactures a variety of different products, concentrating on
chemicals, consumer products, polymer materials, coatings and
color products and fiber and textile goods.
Benetton Group SPA (ADR), headquartered in Ponzano Veneto, Italy,
designs, manufactures and markets casual apparel for men, women
and children. The company's products are sold through stores worldwide,
a portion of which are in the United States. Benetton licenses
its trademark for products made and sold by other companies. These
items include watches, sunglasses and other fashion accessories.
British Airways PLC (ADR) headquartered in Hounslow, Middlesex,
United Kingdom, operates one of Europe's most efficient and profitable
airlines. The company operates an extensive international and
domestic route network and also conducts charters and inclusive
tours.
British Steel PLC (ADR), through its subsidiaries, manufactures
constructional steel, rails, welded tubes and semifinished products,
as well as coated and uncoated steel products. The company, headquartered
in London, England, also has holdings in companies which manufacture
wire rods, bars and rods for concrete reinforcing, light sections
and engineering steels. The company markets its products to end
users worldwide.
Broken Hill Proprietary Company, Ltd. (ADR), together with its
subsidiaries, is an international resources company, headquartered
in Melbourne, Australia. The company is the largest Australian
company which focuses on steel production, minerals exploration
and production and petroleum exploration. The company's mineral
products include thermal and cooking coals, iron ore, copper,
manganese, gold, mineral sands, nickel and zinc.
Burmah Castrol PLC (ADR), headquartered in Swindon, United Kingdom,
produces lubricants and other products under the Castrol brand
name. The company also produces specialty chemicals which include
adhesives, sealants, coatings and printing inks. The company also
manufactures metallurgical and construction chemicals through
the acquisition of Foresco PLC. Oil and gas interests are concentrated
in Pakistan.
Ciba-Geigy (ADR), with headquarters in Basel, Switzerland, produces
pharmaceuticals and chemicals. The company also manufactures agricultural
products, pesticides and genetically-altered plants. Ciba-Geigy
has operations throughout the world.
Coles Myer Limited (ADR) headquartered in Tooronga, Australia,
is the largest retailer in Australia and New Zealand. The stores
consist of department, discount, food and specialty retail operations.
The stores operate under the names of "Coles New World" supermarkets,
"K Mart" discount stores, "Myer" stores, "Grace Brothers," "Georgie
Pie" family restaurants, and "World for Kids" toy and leisure
superstores.
Page 13
Dresdner Bank (ADR), with headquarters in Frankfurt, Germany,
provides commercial loans to governments and other banks, as well
as to industrial companies. The Bank also provides mortgage banking
services, investment management services, counseling and other
financial services. Dresdner operates through worldwide branches.
Hanson PLC (ADR), based in London, England, is a United Kingdom
holding company whose subsidiaries manufacture consumer and industrial
goods and building products, including textiles, clothing, cookware,
appliances, toys, tobacco products, coal, forest products, office
furniture, aircraft components, tools, doors, plywood and cement.
The subsidiaries are located in the United Kingdom and the United
States.
Hudson's Bay Company, headquartered in Toronto, Canada, is one
of the larger operators of department stores in Canada. The company
operates retail department store chains under the names "Zellers,"
"The Bay," "Fields," "Towers" and "Simpsons."
Jardine Matheson Holdings, Ltd. (ADR), based in Hamilton, Bermuda,
is a holding company with operations in trading and distribution,
restaurants, motor vehicles, engineering and construction, aviation
and shipping services. The company's operations also include security,
financial services, property, insurance brokering and merchant
banking. Jardine Matheson Holdings Ltd.'s subsidiaries include
Jardine Fleming, Dairy Farm, Jardine Pacific and Hong Kong Land.
Minorco S.A. (ADR), headquartered in Grand Duchy of Luxembourg,
is a natural resources group with interests in mining and the
processing of metals and industrial materials. The strategy of
the company is to build a portfolio of operating assets in gold
and base metals, industrial minerals and other industrial interests.
National Westminster Bank (ADR), headquartered in London, England,
provides a wide range of banking services throughout the world.
Services include corporate finance, currency trading, insurance
brokering and retail banking services. The company also operates
offices in New York and New Jersey.
NEC Corporation (ADR), based out of Tokyo, Japan, is the world
leader in manufacturing communications and computer equipment.
The company's communications equipment includes switching systems,
fiber-optic transmission systems, radio equipment, and television
and radio broadcast equipment. The company manufactures semiconductor
manufacturing equipment and computers ranging from minicomputers
to supercomputers.
Nestle S.A. (ADR), with headquarters located in Vevey, Switzerland,
is a holding company. The company's subsidiaries produce and sell
drinks, cereals, powdered milk, culinary products, frozen food,
ice cream, ready-to-eat dishes, refrigerated products, food service
products, pet food, pharmaceuticals, and cosmetics. Nestle has
production facilities throughout the world.
Norsk-Hydro A.S. (ADR), headquartered in Oslo, Norway, is one
of the largest industrial corporations in Norway. The company
has interests in agriculture, oil and gas, light metals and petrochemicals.
Its products include fertilizers, bulk explosives, semi-fabricated
products, vinyl chloride monomer, chlorine and PVC.
Petrofina S.A. (ADR), with headquarters located in Brussels, Belgium,
explores for and produces oil onshore and offshore in the United
States, Africa, Asia and Europe. The company also distributes
and processes crude oil and natural gas throughout France, Great
Britain, Italy, The Netherlands, and Norway. The company operates
metal refineries in Belgium, Germany and Great Britain.
Repsol S.A. (ADR), based in Madrid, Spain, is an integrated oil
company that explores for, develops and produces oil and gas.
The company is also involved in the transportation of petroleum
products, refining, production of petrochemicals and liquified
petroleum gas.
Royal Dutch Petroleum Company, headquartered in The Hague, The
Netherlands, owns a majority interest in the Royal Dutch/Shell
Group of companies which are involved in all phases of the petroleum
industry from exploration to final processing and delivery. The
company also mines and trades coal and metal interests and is
involved in the petrochemicals industry.
Siemens A.G. (ADR), headquartered in Munich, Germany, is Germany's
third largest electronics manufacturer. The company's principal
areas of business include computers, telecommunications, lighting,
appliances and electric machinery.
Page 14
SmithKline Beecham PLC (ADR), headquartered in Brentford, United
Kingdom, researches, develops, manufactures and markets a broad
line of pharmaceutical products for human and animal use. The
company also makes over-the-counter medicines and health-orientated
consumer products. These products include "Contact," "Massengill,"
"Tums" and "Aquafresh."
Societe Nationale Elf Aquitaine (ADR), based in Paris, France,
is an oil and gas company that explores for, develops, produces,
refines and sells petroleum products, selling its products in
France and Europe. The company also produces specialty chemicals,
health care products and perfumes.
Sony Corporation (ADR), headquartered in Tokyo, Japan, manufactures
consumer electronic equipment and has one of the most recognized
brand names in the world. The company's products include color
television sets and videotape recorders.
Total S.A. (ADR), headquartered in Puteaux, France, explores for,
produces, trades, refines and markets oil and gas around the world.
The company also has interests in other segments including the
chemical and uranium mining industries. The company's products
include gasoline, jet fuel, heating fuel, lubricants, paints,
adhesives, ink and resins.
Toyota Motor Corporation (ADR), whose headquarters are located
in Aichi Prefecture, Japan, manufactures, designs and sells a
full line of cars and trucks. The company has also expanded into
financial services, industrial vehicles and prefabricated housing.
Unilever PLC (ADR), based in Rotterdam, The Netherlands, manufactures
branded and packaged consumer goods including margarine, frozen
foods, ice cream and personal products. The company also has interests
in specialty chemicals, agribusiness, packaging and medical product
operations. The company's brand names include "Lipton Tea," "Dove,"
"Vaseline" and "Q-Tips." Unilever N.V. is one of the world's largest
packaged consumer good companies and operates internationally.
Vitro S.A. (ADR), headquartered in Monterrey, Mexico, manufactures
a variety of products including glass containers, glassware, flatglass
and fiberglass. The company, through majority-owned ventures or
its affiliates, also manufactures major household appliances,
chemicals and state-of-the-art glass forming machines. The company
sells its products internationally.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before
making a decision to invest in the Trust.
The value of the Equity Securities will fluctuate over the life
of the Trust and may be more or less than the price at which they
were deposited in the Trust. The Equity Securities may appreciate
or depreciate in value (or pay dividends) depending on the full
range of economic and market influences affecting these securities.
The Sponsor and the Trustee shall not be liable in any way for
any default, failure or defect in any Security. In the event of
a notice that any Equity Security will not be delivered ("Failed
Contract Obligations") to the Trust, the Sponsor is authorized
under the Indenture to direct the Trustee to acquire other Equity
Securities ("Replacement Securities"). Any Replacement Security
will be identical to those which were the subject of the failed
contract. The Replacement Securities must be purchased within
20 days after delivery of the notice of a failed contract and
the purchase price may not exceed the amount of funds reserved
for the purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraphs is not utilized to acquire Replacement Securities in
the event of a failed contract, the Sponsor will refund the sales
charge attributable to such Failed Contract Obligations to all
Unit holders of the Trust and the Trustee will distribute the
principal attributable to such Failed Contract Obligations not
more than 120 days after the date on which the Trustee received
a notice from the Sponsor that a Replacement Security would not
be deposited in the Trust. In addition, Unit holders should be
aware that, at the time of receipt of such principal, they may
not be able to reinvest such proceeds in other securities at a
yield equal to or in excess of the yield which such proceeds would
have earned for Unit holders of the Trust.
The Indenture also authorizes the Sponsor to increase the size
of the Trust and the number of Units thereof by the deposit of
additional Equity Securities in the Trust and the issuance of
a corresponding number of additional Units.
Page 15
The Trust consists of the Equity Securities listed under "Schedule
of Investments" (or contracts to purchase such Securities) as
may continue to be held from time to time in the Trust and any
additional Equity Securities acquired and held by the Trust pursuant
to the provisions of the Indenture (including provisions with
respect to deposits into the Trust of Equity Securities in connection
with the issuance of additional Units).
Once all of the Equity Securities in the Trust are acquired, the
Trustee will have no power to vary the investments of the Trust,
i.e., the Trustee will have no managerial power to take advantage
of market variations to improve a Unit holder's investment, but
may dispose of Equity Securities only under limited circumstances.
See "How May Equity Securities be Removed from the Trust?"
To the best of the Sponsor's knowledge, there is no litigation
pending as of the Initial Date of Deposit in respect of any Equity
Security which might reasonably be expected to have a material
adverse effect on the Trust. At any time after the Initial Date
of Deposit, litigation may be instituted on a variety of grounds
with respect to the Equity Securities. The Sponsor is unable to
predict whether any such litigation will be instituted, or if
instituted, whether such litigation might have a material adverse
effect on the Trust.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, the Public Offering Price is based on the aggregate
underlying value of the Equity Securities in the Trust, plus or
minus cash, if any, in the Income and Capital Accounts of the
Trust, plus a sales charge of 5.5% (equivalent to 5.82% of the
net amount invested), divided by the amount of Units of the Trust
outstanding.
During the initial offering period, the Sponsor's Repurchase Price
is based on the aggregate underlying value of the Equity Securities
in the Trust, plus or minus cash, if any, in the Income and Capital
Accounts of the Trust divided by the number of Units of the Trust
outstanding. For secondary market sales after the completion of
the initial offering period, the Public Offering Price is also
based on the aggregate underlying value of the Equity Securities
in the Trust, plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, plus a maximum sales charge of 5.5% of
the Public Offering Price (equivalent to 5.82% of the net amount
invested) divided by the number of outstanding Units of the Trust.
The minimum purchase of the Trust is $1,000. The applicable sales
charge for both primary and secondary market sales is reduced
by a discount as indicated below for volume purchases:
<TABLE>
<CAPTION>
Number of Units Discount
_______________ ________
<S> <C>
10,000 to 24,999 1.0%
25,000 to 49,999 1.5%
50,000 or more 2.0%
</TABLE>
For secondary market transactions, a dealer will receive from
the Sponsor a dealer concession of 65% of the total sales charges
for Units sold.
Any such reduced sales charge shall be the responsibility of the
selling Underwriter or dealer. The reduced sales charge structure
will apply on all purchases of Units in the Trust by the same
person on any one day from any one underwriter or dealer. Additionally,
Units purchased in the name of the spouse of a purchaser or in
the name of a child of such purchaser under 21 years of age will
be deemed, for the purposes of calculating the applicable sales
charge, to be additional purchases by the purchaser. The reduced
sales charges will also be applicable to a trustee or other fiduciary
purchasing securities for a single trust estate or single fiduciary
account. The purchaser must inform the Underwriter or dealer of
any such combined purchase prior to the sale in order to obtain
the indicated discount. In addition, with respect to the employees,
officers and directors (including their immediate family members,
defined as spouses, children, grandchildren, parents, grandparents,
mothers-in-law, fathers-in-law, sons-in-law and daughters-in-law,
and trustees, custodians or fiduciaries for the benefit of such
persons) of the Sponsor and the Underwriter and their subsidiaries,
the sales charge is reduced by 4.1% of the Public Offering Price
for purchases of Units during the primary and secondary public
offering periods.
Page 16
Had the Units of the Trust been available for sale on the business
day prior to the Initial Date of Deposit, the Public Offering
Price would have been as indicated in "Summary of Essential Information."
The Public Offering Price of Units on the date of the prospectus
or during the initial offering period may vary from the amount
stated under "Summary of Essential Information" in accordance
with fluctuations in the prices of the underlying Equity Securities.
During the initial offering period, the aggregate value of the
Units of the Trust shall be determined on the basis of the aggregate
underlying value of the Equity Securities therein plus or minus
cash, if any, in the Income and Capital Accounts of the Trust.
The aggregate underlying value of the Equity Securities will be
determined in the following manner: if the Equity Securities are
listed on a national securities exchange or the NASDAQ National
Market System, this evaluation is generally based on the closing
sale prices on that exchange or that system (unless it is determined
that these prices are inappropriate as a basis for valuation)
or, if there is no closing sale price on that exchange or system,
at the closing ask prices. If the Equity Securities are not so
listed or, if so listed and the principal market therefor is other
than on the exchange, the evaluation shall generally be based
on the current ask prices on the over-the-counter market (unless
it is determined that these prices are inappropriate as a basis
for evaluation). If current ask prices are unavailable, the evaluation
is generally determined (a) on the basis of current ask prices
for comparable securities, (b) by appraising the value of the
Equity Securities on the ask side of the market or (c) by any
combination of the above.
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the aggregate underlying
value of the Equity Securities therein, plus or minus cash, if
any, in the Income and Capital Accounts of the Trust plus the
applicable sales charge.
Although payment is normally made five business days following
the order for purchase, payment may be made prior thereto. Cash,
if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. Delivery of
Certificates representing Units so ordered will be made five business
days following such order or shortly thereafter. See "Rights of
Unit Holders-How may Units be Redeemed?" for information regarding
the ability to redeem Units ordered for purchase.
How are Units Distributed?
During the initial offering period (i) for Units issued on the
Initial Date of Deposit and (ii) for additional Units issued after
such date as additional Equity Securities are deposited by the
Sponsor, Units will be distributed to the public at the then current
Public Offering Price. The initial offering period may be up to
approximately 180 days. During such period, the Sponsor may deposit
additional Equity Securities in the Trust and create additional
Units. Units reacquired by the Sponsor during the initial offering
period (at prices based upon the aggregate underlying value of
the Equity Securities in the Trust plus or minus a pro rata share
of cash, if any in the Income and Capital Accounts of the Trust)
may be resold at the then current Public Offering Price. Upon
the termination of the initial offering period, unsold Units created
or reacquired during the initial offering period will be sold
or resold at the then current Public Offering Price.
Upon completion of the initial offering, Units repurchased in
the secondary market (see "Will There be a Secondary Market?")
may be offered by this prospectus at the secondary market public
offering price determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Trust
for sale in a number of states. Sales initially will be made to
dealers and others at prices which represent a concession or agency
commission of 3.6% of the Public Offering Price, and, for secondary
market sales, 3.6% of the Public Offering Price (or 65% of the
then current maximum sales charge). However, resales of Units
of the Trust by such dealers and others to the public will be
made at the Public Offering Price described in the prospectus.
The Sponsor reserves the right to change the amount of the concession
or agency commission from time to time. Certain commercial banks
may be making Units of the Trust available to their customers
on an agency basis. A portion of the sales charge paid by these
customers is retained by or remitted to the banks in the amounts
indicated in the fourth preceding sentence. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust Units; however,
the Glass-Steagall Act does permit certain agency transactions
and the banking regulators
Page 17
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 will receive a gross sales commission
equal to 5.5% of the Public Offering Price of the Units (equivalent
to 5.82% of the net amount invested), less any reduced sales charge
for quantity purchases as described under "Public Offering-How
is the Public Offering Price Determined?" See "Underwriting" for
information regarding the receipt of the excess gross sales commissions
by the Sponsor from the other Underwriter and additional concessions
available to Underwriters, dealers and others. In addition, the
Sponsor and the Underwriter may be considered to have realized
a profit or to have sustained a loss, as the case may be, in the
amount of any difference between the cost of the Equity Securities
to the Trust (which is based on the Evaluator's determination
of the aggregate offering price of the underlying Equity Securities
of such Trust on the Initial Date of Deposit as well as subsequent
deposits) and the cost of such Equity Securities to the Sponsor.
See "Underwriting" and Note (2) of "Schedule of Investments."
During the initial offering period, the Underwriter also may realize
profits or sustain losses as a result of fluctuations after the
Date of Deposit in the Public Offering Price received by the Underwriter
upon the sale of Units.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between
the price at which Units are purchased and the price at which
Units are resold (which price includes a sales charge of 5.5%)
or redeemed. The secondary market public offering price of Units
may be greater or less than the cost of such Units to the Sponsor.
Will There be a Secondary Market?
After the initial offering period, although it is not obligated
to do so, the Sponsor intends to, and the Underwriter may, maintain
a market for the Units and continuously offer to purchase Units
at prices, subject to change at any time, based upon the aggregate
underlying value of the Equity Securities in the Trust plus or
minus cash, if any, in the Income and Capital Accounts of the
Trust. All expenses incurred in maintaining a secondary market,
other than the fees of the Evaluator 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.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the
Trustee. Ownership of Units may be evidenced by registered certificates
executed by the Trustee and the Sponsor. Delivery of certificates
representing Units ordered for purchase is normally made five
business days following such order or shortly thereafter. Certificates
are transferable by presentation and surrender to the Trustee
properly endorsed or accompanied by a written instrument or instruments
of transfer. Certificates to be redeemed must be properly endorsed
or accompanied by a written instrument or instruments of transfer.
A Unit holder must sign exactly as his name appears on the face
of the certificate with signature guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guaranty program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. In
certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates
of corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form.
The Trustee will maintain an account for each such Unit holder
and will credit each such account with the number of Units purchased
by that Unit holder.
Page 18
Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing
a description of the Trust; the number of Units issued or transferred;
the name, address and taxpayer identification number, if any,
of the new registered owner; a notation of any liens and restrictions
of the issuer and any adverse claims to which such Units are or
may be subject or a statement that there are no such liens, restrictions
or adverse claims; and the date the transfer was registered. Uncertificated
Units are transferable through the same procedures applicable
to Units evidenced by certificates (described above), except that
no certificate need be presented to the Trustee and no certificate
will be issued upon the transfer unless requested by the Unit
holder. A Unit holder may at any time request the Trustee to issue
certificates for Units.
Although no such charge is now made or contemplated, a Unit holder
may be required to pay $2.00 to the Trustee per certificate reissued
or transferred and to pay any governmental charge that may be
imposed in connection with each such transfer or exchange. For
new certificates issued to replace destroyed, stolen or lost certificates,
the Unit holder may be required to furnish indemnity satisfactory
to the Trustee and pay such expenses as the Trustee may incur.
Mutilated certificates must be surrendered to the Trustee for
replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income received with respect
to any of the securities in the Trust on or about the Income Distribution
Dates to Unit holders of record on the preceding Income Record
Date. See "Summary of Essential Information." Because dividends
are not received by the Trust at a constant rate throughout the
year, such distributions to Unit holders may be more or less than
the amount credited to the Income Account as of the Record Date.
Notification to the Trustee of the transfer of Units is the responsibility
of the purchaser, but in the normal course of business such notice
is provided by the selling broker-dealer. The pro rata share of
cash in the Capital Account of the Trust will be computed as of
the fifteenth day of each month. Proceeds received on the sale
of any Equity Securities in the Trust, to the extent not used
to meet redemptions of Units or pay expenses, will, however, be
distributed on the last day of each month to Unit holders of record
on the fifteenth day of such month if the amount available for
distribution equals at least $0.01 per Unit. The Trustee is not
required to pay interest on funds held in the Capital Account
of a Trust (but may itself earn interest thereon and therefore
benefit from the use of such funds). Notwithstanding, distributions
of funds in the Capital Account, if any, will be made on the last
day of each December to Unit holders of record as of December
15. See "What is the Federal Tax Status of Unit Holders?"
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of any
distribution made by the Trust if the Trustee has not been furnished
the Unit holder's tax identification number in the manner required
by such regulations. Any amount so withheld is transmitted to
the Internal Revenue Service and may be recovered by the Unit
holder only when filing a tax return. Under normal circumstances
the Trustee obtains the Unit holder's tax identification number
from the selling broker. However, a Unit holder should examine
his or her statements from the Trustee to make sure that the Trustee
has been provided a certified tax identification number in order
to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should
be provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit
holder will, upon surrender of his Units for redemption, receive:
(i) the pro rata share of the amounts realized upon the disposition
of Equity Securities, unless he elects an In-Kind Distribution
as described below and (ii) a pro rata share of any other assets
of the Trust, less expenses of the Trust. Not less than 60 days
prior to the Mandatory Termination Date of the Trust, the Trustee
will provide written notice thereof to all Unit holders and will
include with such notice a form to enable Unit holders to elect
a distribution of shares of Equity Securities (an "In-Kind Distribution"),
if such Unit holder owns at least 2,300 Units of the Trust, rather
than to receive payment in cash for such Unit holder's pro rata
share of the amounts realized upon the disposition by the Trustee
of Equity Securities. An In-Kind Distribution will be reduced
by customary transfer and registration charges. To be effective,
the election form, together with surrendered certificates and
other documentation required by the Trustee, must be returned
to the Trustee at least five business days prior to the Mandatory
Termination Date of the Trust.
Page 19
A Unit holder may, of course, at any time after the Equity Securities
are distributed, sell all or a portion of the shares.
The Trustee will credit to the Income Account of the Trust any
dividends received on the Equity Securities therein. All other
receipts (e.g. return of principal, capital gains, etc.) are credited
to the Capital Account of the Trust.
The Trustee may establish reserves (the "Reserve Account") within
the Trust for state and local taxes, if any, and any governmental
charges payable out of the Trust.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and
the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per Unit. Within a reasonable
period of time after the end of each calendar year, the Trustee
shall furnish to each person who at any time during the calendar
year was a Unit holder of the Trust the following information
in reasonable detail: (1) a summary of transactions in the Trust
for such year; (2) any Equity Securities sold during the year
and the Equity Securities held at the end of such year by the
Trust; (3) the redemption price per Unit based upon a computation
thereof on the 31st day of December of such year (or the last
business day prior thereto); and (4) amounts of income and capital
distributed during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its corporate trust office in the City of New
York of the certificates representing the Units to be redeemed,
or in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed as explained above (or by
providing satisfactory indemnity, as in connection with lost,
stolen or destroyed certificates), and payment of applicable governmental
charges, if any. No redemption fee will be charged. On the seventh
calendar day following such tender, or if the seventh calendar
day is not a business day, on the first business day prior thereto,
the Unit holder will be entitled to receive in cash an amount
for each Unit equal to the Redemption Price per Unit next computed
after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received
by the Trustee, except that as regards Units received after 4:00
p.m. Eastern time, the date of tender is the next day on which
the New York Stock Exchange is open for trading and such Units
will be deemed to have been tendered to the Trustee on such day
for redemption at the redemption price computed on that day. Units
so redeemed shall be cancelled.
Any Unit holder tendering 2,300 Units or more for redemption may
request by written notice submitted at the time of tender from
the Trustee in lieu of a cash redemption a distribution of shares
of Equity Securities in an amount and value of Equity Securities
per Unit equal to the Redemption Price Per Unit as determined
as of the evaluation next following tender. To the extent possible,
In-Kind distributions ("In-Kind Distributions") shall be made
by the Trustee through the distribution of each of the Equity
Securities in book-entry form to the account of the Unit holder's
bank or broker-dealer at the Depository Trust Company. An In-Kind
Distribution will be reduced by customary transfer and registration
charges. The tendering Unit holder will receive his pro rata number
of whole shares of each of the Equity Securities comprising the
portfolio and cash from the Capital Account equal to the fractional
shares to which the tendering Unit holder is entitled. The Trustee
may adjust the number of shares of any issue of Equity Securities
included in a Unit holder's In-Kind Distribution to facilitate
the distribution of whole shares, such adjustment to be made on
the basis of the value of Equity Securities on the date of tender.
If funds in the Capital Account are insufficient to cover the
required cash distribution to the tendering Unit holder, the Trustee
may sell Equity Securities in the manner described above.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the
principal amount of a Unit redemption if the Trustee has not been
furnished the redeeming Unit holder's tax identification number
in the manner required by such regulations. Any amount so
Page 20
withheld is transmitted to the Internal Revenue Service and may
be recovered by the Unit holder only when filing a tax return.
Under normal circumstances the Trustee obtains the Unit holder's
tax identification number from the selling broker. However, any
time a Unit holder elects to tender Units for redemption, such
Unit holder should make sure that the Trustee has been provided
a certified tax identification number in order to avoid this possible
"back-up withholding." In the event the Trustee has not been previously
provided such number, one must be provided at the time redemption
is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds
are available for such purpose. All other amounts paid on redemption
shall be withdrawn from the Capital Account of the Trust.
The Trustee is empowered to sell Equity Securities of the Trust
in order to make funds available for redemption. To the extent
that Equity Securities are sold, the size and diversity of the
Trust will be reduced. Such sales may be required at a time when
Equity Securities would not otherwise be sold and might result
in lower prices than might otherwise be realized.
The Redemption Price per Unit and the Public Offering Price per
Unit (which includes the sales charge) during the initial offering
period (as well as the secondary market Public Offering Price)
will be determined on the basis of the aggregate underlying value
of the Equity Securities in the Trust plus or minus cash, if any,
in the Income and Capital Accounts of the Trust. The Redemption
Price per Unit is the pro rata share of each Unit determined by
the Trustee by adding: (1) the cash on hand in the Trust other
than cash deposited in the Trust to purchase Equity Securities
not applied to the purchase of such Equity Securities;(2) the
aggregate value of the Equity Securities held in the Trust, as
determined by the Evaluator on the basis of the aggregate underlying
value of the Equity Securities in the Trust next computed; and
(3) dividends receivable on the Equity Securities trading ex-dividend
as of the date of computation; and deducting therefrom: (1) amounts
representing any applicable taxes or governmental charges payable
out of the Trust; (2) any amounts owing to the Trustee for its
advances; (3) an amount representing estimated accrued expenses
of the Trust, including but not limited to fees and expenses of
the Trustee (including legal and auditing fees), the Evaluator
and supervisory fees, if any; (4) cash held for distribution to
Unit holders of record of the Trust as of the business day prior
to the evaluation being made; and (5) other liabilities incurred
by the Trust; and finally dividing the results of such computation
by the number of Units of the Trust outstanding as of the date
thereof.
The aggregate value of the Equity Securities will be determined
in the following manner: if the Equity Securities are listed on
a national securities exchange or the NASDAQ National Market System,
this evaluation is generally based on the closing sale prices
on that exchange or that system (unless it is determined that
these prices are inappropriate as a basis for valuation) or, if
there is no closing sale price on that exchange or system, at
the closing bid prices. If the Equity Securities are not so listed
or, if so listed and the principal market therefor is other than
on the exchange, the evaluation shall generally be based on the
current bid prices on the over-the-counter market (unless these
prices are inappropriate as a basis for evaluation). If current
bid prices are unavailable, the evaluation is generally determined
(a) on the basis of current bid prices for comparable securities,
(b) by appraising the value of the Equity Securities on the bid
side of the market or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on the New York Stock Exchange is restricted or any emergency
exists, as a result of which disposal or evaluation of the Securities
is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. Under
certain extreme circumstances, the Sponsor may apply to the Securities
and Exchange Commission for an order permitting a full or partial
suspension of the right of Unit holders to redeem their Units.
The Trustee is not liable to any person in any way for any loss
or damage which may result from any such suspension or postponement.
Page 21
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before 1:00 p.m. Eastern time
on the same business day and by making payment therefor to the
Unit holder not later than the day on which the Units would otherwise
have been redeemed by the Trustee. Units held by the Sponsor may
be tendered to the Trustee for redemption as any other Units.
In the event the Sponsor does not purchase Units, the Trustee
may sell Units tendered for redemption in the over-the-counter
market, if any, as long as the amount to be received by the Unit
holder is equal to the amount he would have received on redemption
of the Units.
The offering price of any Units acquired by the Sponsor will be
in accord with the Public Offering Price described in the then
effective prospectus describing such Units. Any profit or loss
resulting from the resale or redemption of such Units will belong
to the Sponsor.
How May Equity Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or
the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of
an Equity Security in the event that an issuer defaults in the
payment of a dividend that has been declared, that any action
or proceeding has been instituted restraining the payment of dividends
or there exists any legal question or impediment affecting such
Equity Security, that the issuer of the Equity Security has breached
a covenant which would affect the payments of dividends, the credit
standing of the issuer or otherwise impair the sound investment
character of the Equity Security, that the issuer has defaulted
on the payment on any other of its outstanding obligations, that
the price of the Equity Security has declined to such an extent
or other such credit factors exist so that in the opinion of the
Sponsor, the retention of such Equity Securities would be detrimental
to the Trust. Except as stated under "Portfolio - What are Some
Additional Considerations for Investors?" for Failed Obligations,
the acquisition by the Trust of any securities or other property
other than the Equity Securities is prohibited. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Equity Securities
such as those acquired in connection with a merger or other transaction.
If offered such new or exchanged securities or property, the Trustee
shall reject the offer. However, in the event such securities
or property are nonetheless acquired by the Trust, they may be
accepted for deposit in the Trust and either sold by the Trustee
or held in the Trust pursuant to the direction of the Sponsor
(who may rely on the advice of the Portfolio Supervisor). Proceeds
from the sale of Equity Securities (or any securities or other
property received by the Trust in exchange for Equity Securities)
by the Trustee are credited to the Capital Account of the Trust
for distribution to Unit holders or to meet redemptions.
The Trustee may also sell Equity Securities designated by the
Sponsor, or if not so directed, in its own discretion, for the
purpose of redeeming Units of the Trust tendered for redemption
and the payment of expenses.
The Sponsor, in designating Equity Securities to be sold by the
Trustee, will generally make selections in order to maintain,
to the extent practicable, the proportionate relationship among
the number of shares of individual issues of Equity Securities.
To the extent this is not practicable, the composition and diversity
of the Equity Securities may be altered. In order to obtain the
best price for the Trust, it may be necessary for the Sponsor
to specify minimum amounts (generally 100 shares) in which blocks
of Equity Securities are to be sold.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds, The First Trust GNMA
Page 22
Templeton Growth and Treasury Trust and Templeton Foreign Fund
& U.S. Treasury Securities Trust. First Trust introduced the first
insured unit investment trust in 1974 and to date more than $7.5
billion in First Trust unit investment trusts have been deposited.
The Sponsor's employees include a team of professionals with many
years of experience in the unit investment trust industry. The
Sponsor is a member of the National Association of Securities
Dealers, Inc. and Securities Investor Protection Corporation and
has its principal offices at 1001 Warrenville Road, Lisle, Illinois
60532; telephone number (708) 241-4141. As of August 31, 1993,
the total partners' capital of Nike Securities L.P. was $14,270,063
(unaudited). (This paragraph relates only to the Sponsor and not
to the Trust or to any series thereof or to any other Underwriter.
The information is included herein only for the purpose of informing
investors as to the financial responsibility of the Sponsor and
its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon
request.)
Who is the Trustee?
The Trustee is United States Trust Company of New York with its
principal place of business at 45 Wall Street, New York, New York
10005 and its unit investment trust offices at 770 Broadway, New
York, New York 10003. Unit holders who have questions regarding
the Trust may call the Customer Service Help Line at 1-800-682-7520.
The Trustee is a member of the New York Clearing House Association
and is subject to supervision and examination by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Equity Securities. For information relating
to the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Equity Securities.
In the event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or
upon or in respect of the Trust which the Trustee may be required
to pay under any present or future law of the United States of
America or of any other taxing authority having jurisdiction.
In addition, the Indenture contains other customary provisions
limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor
Page 23
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 Muller Data Corporation, 395 Hudson Street, New
York, New York 10014. The Evaluator may resign or may be removed
by the Sponsor and the Trustee, in which event the Sponsor and
the Trustee are to use their best efforts to appoint a satisfactory
successor. Such resignation or removal shall become effective
upon the acceptance of appointment by the successor Evaluator.
If upon resignation of the Evaluator no successor has accepted
appointment within 30 days after notice of resignation, the Evaluator
may apply to a court of competent jurisdiction for the appointment
of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator
shall be under no liability to the Trustee, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the
Mandatory Termination Date indicated herein under "Summary of
Essential Information." The Trust may be liquidated at any time
by consent of 100% of the Unit holders of the Trust or by the
Trustee when the value of the Equity Securities owned by the Trust
as shown by any evaluation, is less than the lower of $2,000,000
or 20% of the total value of Equity Securities deposited in such
Trust during the primary offering period, or in the event that
Units of the Trust not yet sold aggregating more than 60% of the
Units of the Trust are tendered for redemption by the Underwriter,
including the Sponsor. If the Trust is liquidated because of the
redemption of unsold Units of the Trust by the Underwriter, the
Sponsor will refund to each purchaser of Units of the Trust the
entire sales charge and the transaction fees paid by such purchaser.
In the event of termination, written notice thereof will be sent
by the Trustee to all Unit holders of the Trust. Within a reasonable
period after termination, the Trustee will follow the procedures
set forth under "How are Income and Capital Distributed?"
Commencing on the Mandatory Termination Date, Equity Securities
will begin to be sold in connection with the termination of the
Trust. The Sponsor will determine the manner, timing and execution
of the sale of the Equity Securities. Written notice of any termination
of the Trust specifying the time or times at which Unit holders
may surrender their certificates for cancellation shall be given
by the Trustee to each Unit holder at his address appearing on
the registration books of the Trust maintained by the Trustee.
At least 60 days prior to the Maturity Date of the Trust the Trustee
will provide written notice thereof to all Unit holders and will
include with such notice a form to enable Unit holders to elect
a distribution of shares of Equity Securities (reduced by customary
transfer and registration charges), if such Unit holder owns at
least 2,300 Units of the Trust, rather than to receive payment
in cash for such Unit holder's pro rata share of the amounts realized
upon the disposition by the Trustee of Equity Securities. To be
effective, the election form, together with surrendered certificates
and other documentation required by the Trustee, must be returned
to the Trustee at least five business days prior to the Mandatory
Termination Date of the Trust. Unit holders not electing a distribution
of shares of Equity Securities will receive a cash distribution
from the sale of the remaining Equity Securities within a reasonable
time after the Trust is terminated. Regardless of the distribution
involved, the Trustee will deduct from the funds of the Trust
any accrued costs, expenses, advances
Page 24
or indemnities provided by the Trust Agreement, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to provide for payment of any applicable
taxes or other governmental charges. Any sale of Equity Securities
in the Trust upon termination may result in a lower amount than
might otherwise be realized if such sale were not required at
such time. The Trustee will then distribute to each Unit holder
his pro rata share of the balance of the Income and Capital Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating
to Federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor. Carter, Ledyard & Milburn, will act as counsel for
the Trustee and as special New York tax counsel for the Trust.
Experts
The statement of net assets, including the schedule of investments,
of the Trust at the opening of business on the Initial Date of
Deposit appearing in this Prospectus and Registration Statement
has been audited by Ernst & Young, independent auditors, as set
forth in their report thereon appearing elsewhere herein and in
the Registration Statement, and is included in reliance upon such
report given upon the authority of such firm as experts in accounting
and auditing.
UNDERWRITING
The Underwriter named below has purchased Units in the following
amount:
<TABLE>
<CAPTION>
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Underwriter
The Ohio Company* 155 East Broad Street, Columbus, OH 43215 50,000
=========
</TABLE>
[FN]
* The Underwriter has indicated its intention to purchase additional
Units from the Sponsor during the initial six month offering period
and will receive Underwriting Concessions based on total Units
underwritten as of the next business day after the Date of Deposit.
On the Initial Date of Deposit, the Underwriter of the Trust became
the owner of the Units of the Trust and entitled to the benefits
thereof, as well as the risks inherent therein.
The Underwriter Agreement provides that a public offering of the
Units of the Trust will be made at the Public Offering Price described
in the prospectus. Units may also be sold to or through dealers
and others during the initial offering period and in the secondary
market at prices representing a concession or agency commission
as described in "Public Offering-How are Units Distributed?"
The Underwriter has agreed to underwrite additional Units of the
Trust as they become available. The Sponsor will receive from
the Underwriter the difference between the gross sales concession
and 4.1% of the Public Offering Price of the Units, which is retained
by the Underwriter.
Underwriters, dealers and others who, in a single month, purchase
from the Sponsor Units of any Series of The First Trust GNMA,
The First Trust of Insured Municipal Bonds, The First Trust Combined
Series, The First Trust Special Situations Trust, Templeton Growth
and Treasury Trust, Templeton Foreign Fund & U.S. Treasury Securities
Trust, The Advantage Growth and Treasury Securities Trust or any
other unit investment trust of which Nike Securities L.P. is the
Sponsor (the "UIT Units"), which sale of UIT Units are in the
following aggregate dollar amounts, will receive additional concessions
from the Sponsor as indicated in the following table:
Page 25
<TABLE>
<CAPTION>
Aggregate Dollar Amount Additional Concession
of Units Sold (per $1,000 sold)
_______________________ _____________________
<S> <C>
$ 1,000,000 - $2,499,999 $ .50
$ 2,500,000 - $4,999,999 $1.00
$ 5,000,000 - $7,499,999 $1.50
$ 7,500,000 - $9,999,999 $2.00
$10,000,000 - or more $2.50
</TABLE>
From time to time the Sponsor may implement programs under which
Underwriters and dealers of the Trust may receive nominal awards
from the Sponsor for each of their registered representatives
who have sold a minimum number of UIT Units during a specified
time period. In addition, at various times the Sponsor may implement
other programs under which the sales force of an Underwriter or
dealer may be eligible to win other nominal awards for certain
sales efforts, or under which the Sponsor will reallow to any
such Underwriter or dealer that sponsors sales contests or recognition
programs conforming to criteria established by the Sponsor, or
participates in sales programs sponsored by the Sponsor, an amount
not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor
pay fees to qualifying Underwriters or dealers for certain services
or activities which are primarily intended to result in sales
of Units of the Trust. Such payments are made by the Sponsor out
of its own assets, and not out of the assets of the Trust. These
programs will not change the price Unit holders pay for their
Units or the amount that the Trust will receive from the Units
sold.
The Sponsor may from time to time in its advertising and sales
materials compare the then current estimated returns on the Trust
and returns over specified periods on other similar Trusts sponsored
by Nike Securities L.P. with returns on other taxable investments
such as corporate or U.S. Government bonds, bank CDs and money
market accounts or money market funds, each of which has investment
characteristics that may differ from those of the Trust. U.S.
Government bonds, for example, are backed by the full faith and
credit of the U.S. Government and bank CDs and money market accounts
are insured by an agency of the federal government. Money market
accounts and money market funds provide stability of principal,
but pay interest at rates that vary with the condition of the
short-term debt market. The investment characteristics of the
Trust are described more fully elsewhere in this Prospectus.
Page 26
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 88
We have audited the accompanying statement of net assets, including
the schedule of investments, of International Blue Chip Trust,
Series 1, comprising The First Trust Special Situations Trust,
Series 88 as of the opening of business on January 20, 1994. This
statement of net assets is the responsibility of the Trust's Sponsor.
Our responsibility is to express an opinion on this statement
of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the statement
of net assets is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of net assets. Our procedures included
confirmation of the letter of credit held by the Trustee and deposited
in the Trust on January 20, 1994. An audit also includes assessing
the accounting principles used and significant estimates made
by the Sponsor, as well as evaluating the overall presentation
of the statement of net assets. We believe that our audit of the
statement of net assets provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above
presents fairly, in all material respects, the financial position
of International Blue Chip Trust, Series 1, comprising The First
Trust Special Situations Trust, Series 88 at the opening of business
on January 20, 1994 in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Chicago, Illinois
January 20, 1994
Page 27
Statement of Net Assets
International Blue Chip Trust, Series 1
The First Trust Special Situations Trust, Series 88
At the Opening of Business on the Initial Date of Deposit
January 20, 1994
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Equity Securities represented by purchase
contracts (1) (2) $ 472,461
==============
Units outstanding
50,000
==============
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (3) $ 499,959
Less sales charge (3) (27,498)
______________
Net Assets $ 472,461
==============
</TABLE>
[FN]
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Equity Securities listed under "Schedule
of Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $600,000 issued
by Bankers Trust Company has been deposited with the Trustee covering
the monies necessary for the purchase of the Equity Securities
pursuant to contracts for the purchase of such Equity Securities.
(3) The aggregate cost to investors includes a sales charge
computed at the rate of 5.5% of the Public Offering Price (equivalent
to 5.82% of the net amount invested), assuming no reduction of
sales charge for quantity purchases.
Page 28
Schedule of Investments
International Blue Chip Trust, Series 1
The First Trust Special Situations Trust, Series 88
At the Opening of Business on the Initial Date of Deposit
January 20, 1994
<TABLE>
<CAPTION>
Market
Percentage of Value Cost of Equity
Number Aggregate per Securities
of Shares Name of Issuer of Equity Securities (1) Offering Price Share to Trust (2)
_________ __________________________________________ _____________ ________ ______________
<C> <S> <C> <C> <C>
284 Akzo N.V. 3.23% $ 53.750 $ 15,265
207 Asea AB 3.22% 73.500 15,215
311 Banco Santander 3.23% 49.125 15,278
450 BASF A.G. 3.24% 34.000 15,300
473 Benetton Group SPA 3.23% 32.250 15,254
207 British Airways PLC 3.23% 73.750 15,266
819 British Steel PLC 3.23% 18.625 15,254
285 Broken Hill Proprietary Company, Ltd. 3.24% 53.625 15,283
613 Burmah Castrol PLC 3.23% 24.875 15,248
474 Ciba-Geigy 3.22% 32.125 15,227
512 Coles Myer Limited 3.22% 29.750 15,232
632 Dresdner Bank 3.21% 24.000 15,168
725 Hanson PLC 3.20% 20.875 15,134
589 Hudson's Bay Company* 3.23% 25.934 15,275
1,517 Jardine Matheson Holdings, Ltd. 3.23% 10.050 15,246
675 Minorco S.A. 3.22% 22.500 15,188
282 National Westminster Bank 3.23% 54.125 15,263
343 NEC Corporation 3.23% 44.500 15,264
332 Nestle S.A. 3.22% 45.875 15,231
452 Norsk-Hydro A.S. 3.24% 33.875 15,312
508 Petrofina S.A. 3.23% 30.000 15,240
465 Repsol S.A. 3.22% 32.750 15,229
141 Royal Dutch Petroleum Company** 3.23% 108.125 15,246
184 Siemens A.G. 3.22% 82.750 15,226
473 SmithKline Beecham PLC 3.24% 32.375 15,313
431 Societe Nationale Elf Aquitaine 3.23% 35.375 15,247
284 Sony Corporation 3.22% 53.500 15,194
565 Total S.A. 3.23% 27.000 15,255
452 Toyota Motor Corporation 3.24% 33.875 15,311
213 Unilever PLC 3.22% 71.500 15,229
666 Vitro S.A. 3.19% 22.625 15,068
________ _____________
Total Investments 100% $ 472,461
======== =============
</TABLE>
[FN]
(1) All Equity Securities are represented by regular way contracts
to purchase such Equity Securities for the performance of which
an irrevocable letter of credit has been deposited with the Trustee.
The contracts to purchase Equity Securities were entered into
by the Sponsor on January 19, 1994. All of the Equity Securities
are in American Depositary Receipt ("ADR") form except for those
denoted with an * or **.
(2) The cost of the Equity Securities to the Trust represents
the aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of the
listed Equity Securities and the ask prices of the over-the-counter
traded Equity Securities). The valuation of the Equity Securities
has been determined by the Evaluator.
Page 29
The aggregate underlying value of the Equity Securities on the
Initial Date of Deposit was $472,461. Cost and loss to Sponsor
relating to the Equity Securities sold to the Trust were $473,734
and $1,273, respectively.
* Indicates the common stock of a Canadian company that trades
directly on a Canadian national securities exchange.
** Indicates the common stock of a company headquartered in The
Netherlands that trades directly on a United States national securities
exchange.
Page 30
This page is intentionally left blank.
Page 31
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
Summary of Essential Information 3
International Blue Chip Trust, Series 1
The First Trust Special Situations Trust, Series 88:
What is The First Trust Special Situations Trust? 4
What are the Expenses and Charges? 5
What is the Federal Tax Status of Unit Holders? 6
Why are Investments in the Trust
Suitable for Retirement Plans? 8
Portfolio:
What are Equity Securities? 10
What are the Equity Securities Selected for
International Blue Chip Trust, Series 1? 12
What are Some Additional
Considerations for Investors? 15
Public Offering:
How is the Public Offering Price Determined? 16
How are Units Distributed? 17
What are the Sponsor's Profits? 18
Will There be a Secondary Market? 18
Rights of Unit Holders:
How is Evidence of Ownership
Issued and Transferred? 18
How are Income and Capital Distributed? 19
What Reports will Unit Holders Receive? 20
How May Units be Redeemed? 20
How May Units be Purchased by the Sponsor? 22
How May Equity Securities be
Removed from the Trust? 22
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 22
Who is the Trustee? 23
Limitations on Liabilities of Sponsor and Trustee 23
Who is the Evaluator? 24
Other Information:
How May the Indenture be
Amended or Terminated? 24
Legal Opinions 25
Experts 25
Underwriting 25
Report of Independent Auditors 27
Statement of Net Assets 28
Notes to Statement of Net Assets 28
Schedule of Investments 29
___________
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE TRUST HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
The Ohio Company
INTERNATIONAL BLUE CHIP TRUST
Series 1
The Ohio Company
155 East Broad Street
Columbus, OH 43215
1-800-255-1825
Trustee:
United States Trust
Company of New York
770 Broadway
New York, New York 10003
1-800-682-7520
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
January 20, 1994
Page 32
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being
National Union Fire Insurance Company of Pittsburgh.
B. This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
The Registrant, The First Trust Special Situations Trust,
Series 88, hereby identifies The First Trust Special Situations
Trust, Series 4 Great Lakes Growth and Treasury Trust, Series 1
and The First Trust Special Situations Trust, Series 18 Wisconsin
Growth and Treasury Securities Trust, Series 1, for purposes of
the representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from
those deposited in such previous series;
(2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide
essential financial information for, the series with respect to
the securities of which this Registration Statement is being
filed, this Registration Statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities
Act of 1933.
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Special Situations Trust, Series
88, has duly caused this Amendment to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the Village of Lisle and State of Illinois on
January 20, 1994.
THE FIRST TRUST SPECIAL SITUATIONS
TRUST, SERIES 88
By NIKE SECURITIES L.P.
Depositor
By Carlos E. Nardo
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
Robert D. Van Kampen Sole Director )
of Nike Securities )
Corporation, the ) January 20, 1994
General Partner of )
Nike Securities L.P. )
)
)
) Carlos E. Nardo
) Attorney-in-Fact**
)
)
* The title of the person named herein represents his
capacity in and relationship to Nike Securities L.P.,
Depositor.
** An executed copy of the related power of attorney was
filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of The
First Trust Special Situations Trust, Series 18 (File No.
33-42683) and the same is hereby incorporated herein by
this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated January 20, 1994 in
Amendment No. 1 to the Registration Statement (Form S-6) (File
No. 33-51787) and related Prospectus of The First Trust Special
Situations Trust, Series 88.
ERNST & YOUNG
Chicago, Illinois
January 20, 1994
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF MULLER DATA CORPORATION
The consent of Muller Data Corporation to the use of its
name in the Prospectus included in the Registration Statement
will be filed as Exhibit 4.1 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and First Trust
Advisors L.P. as Portfolio Supervisor (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
43693] filed on behalf of The First Trust Special
Situations Trust, Series 22).
1.1.1 Form of Trust Agreement for Series 88 among Nike
Securities L.P., as Depositor, United States Trust
Company of New York, as Trustee, Muller Data
Corporation, as Evaluator, and First Trust Advisors
L.P., as Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities
L.P., Depositor (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-
6 [File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42755] filed on
behalf of The First Trust Special Situations Trust,
Series 19).
2.1 Copy of Certificate of Ownership (included in Exhibit
1.1 filed herewith on page 2 and incorporated herein by
reference).
S-5
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion of counsel as to New York income tax status of
securities being registered.
3.4 Opinion of counsel as to advancement of funds by
Trustee.
4.1 Consent of Muller Data Corporation.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on
page S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
S-6
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 88
TRUST AGREEMENT
Dated: January 20, 1994
This Trust Agreement among Nike Securities L.P., as
Depositor, United States Trust Company of New York, as Trustee,
Muller Data Corporation, as Evaluator, and First Trust Advisors
L.P., as Portfolio Supervisor, sets forth certain provisions in
full and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and certain
subsequent Series, Effective November 20, 1991" (herein called
the "Standard Terms and Conditions of Trust"), and such
provisions as are incorporated by reference constitute a single
instrument. All references herein to Articles and Sections are
to Articles and Sections of the Standard Terms and Conditions of
Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and the Portfolio Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II and Part III hereof,
all the provisions contained in the Standard Terms and Conditions
of Trust are herein incorporated by reference in their entirety
and shall be deemed to be a part of this instrument as fully and
to the same extent as though said provisions had been set forth
in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit is 50,000 Units.
(2) The initial fractional undivided interest in and
ownership of the Trust represented by each Unit thereof shall be
1/50,000.
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio is as follows on the Initial Date
of Deposit:
3.23% Akzo N.V., 3.22% Asea AB,
3.23% Banco Santander, 3.24% BASF A.G.,
3.23 % Benetton Group SPA, 3.23% British Airways
PLC, 3.23% British Steel PLC, 3.24% Broken
Hill Proprietary Company, Ltd., 3.23% Burmah
Castrol PLC, 3.22 % Ciba-Geigy, 3.22% Coles
Myer Limited, 3.21 % Dresdner Bank,
3.20% Hanson PLC, 3.23% Hudson's Bay Company,
3.23% Jardine Matheson Holdings, Ltd.,
3.22% Minorco, S.A., 3.23% National
Westminster Bank, 3.23% NEC Corporation,
3.22% Nestle S.A., 3.24% Norsk-Hydro A.S.,
3.23% Petrofina S.A., 3.22 % Repsol S.A.,
3.23% Royal Dutch Petroleum Company, 3.22%
Siemens A. G., 3.24 % SmithKline Beecham PLC,
3.23% Societe Nationale Elf Aquitaine,
3.22% Sony Corporation,
3.23% Total S.A., 3.24 % Toyota Motor Corporation,
3.22% Unilever N.V., 3.19% Vitro S.A.
D. The Record Dates shall be as set forth in the
Prospectus under "Summary of Essential Information."
E. The Distribution Dates shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
June 30, 1999.
G. The Evaluator's compensation as referred to in Section
4.03 of the Standard Terms and Conditions of Trust shall be a fee
of $0.20 per issue of Equity Securities in the Portfolio per evaluation
and, not withstanding the payment schedule setforth in Section 3.05 of the
Standard Terms and Conditions of Trust, the Evaluator shall receive such fee
then owned to it on a monthly basis.
H. The Trustee's Compensation Rate pursuant to Section
6.04 of the Standard Terms and Conditions of Trust shall be an
annual fee of $.01 per Unit, calculated on the largest number of
Units outstanding during each period in respect of which a
payment is made pursuant to Section 3.05. However, in no event,
except as may be otherwise be provided in the Standard Terms and
Conditions of Trust, shall the Trustee receive compensation in
any one year from any Trust of less than $2,000 for such annual
compensation.
I. The Initial Date of Deposit for the Trust is January
20, 1994.
K. The minimum amount of Equity Securities to be sold by
the Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
PART III
A. The term "Capital Account" as set forth in the
Prospectus shall be deemed to refer to the "Principal Account."
B. Paragraph (g) of Section 6.01 of the Standard Terms and
Conditions of Trust is hereby amended by inserting the following
after the first word thereof:
"(i) the value of any Trust as shown by an evaluation
by the Trustee pursuant to Section 5.01 hereof shall be less
than the lower of $2,000,000 or 20% of the total principal
amount of Securities deposited in such Trust, or (ii)"
C. Paragraph (c) of Subsection II of Section 3.05 of the
Standard Terms and Conditions of Trust is hereby amended to read
as follows:
"On each Distribution Date the Trustee shall
distribute to each Unit holder of record at the close of
business on the Record Date immediately preceding such
Distribution Date an amount per Unit equal to such Unit
holder's pro rata share of the balance of the Principal
Account (except for monies on deposit therein required to
purchase Contract Obligations) computed as of the close of
business on such Record Date after deduction of any amounts
provided in Subsection I, provided, however, that with
respect to distributions other than the distribution
occurring in the month of December of each year, the Trustee
shall not be required to make a distribution from the
Principal Account unless the amount available for
distribution shall equal $1.00 per 1000 Units in the case of
Units initially offered at approximately $1.00 per Unit, or,
$1.00 per 100 Units in the case of Units initially offered
at approximately $10.00 per Unit."
D. For purposes of this Trust, all references in the
Standard Terms and Conditions of Trust including provisions
thereof amended hereby to "$1.00 per Unit" shall be amended to
read "$10.00 per Unit" and all references to "per 1,000 Units"
shall be amended to read "per 100 Units."
E. Section 5.02 of the Standard Terms and Conditions of
Trust is amended by adding the following new paragraph after the
second paragraph of such section:
"In lieu of a cash redemption, Unit holders tendering
2,300 Units or more for redemption may request from the
Trustee by written notice submitted at the time of tender an
in kind distribution of shares of Securities, to the extent
of whole shares. To the extent possible, in kind
distributions of Securities shall be made by the Trustee
through the distribution of each of the Securities in book-
entry form to the account of the Unit holder's bank or
broker-dealer at the Depository Trust Company. An in kind
distribution will be reduced by all expenses in connection
with customary transfer and registration charges. The
tendering Unit holder will receive his pro rata number of
whole shares of each of the Securities comprising the
portfolio and cash from the Principal Account equal to the
fractional shares to which the tendering Unit holder is
entitled. The Trustee may, but shall not be required to,
adjust the number of shares of any issue of Securities
included in a Unit holder's in kind distribution to
facilitate the distribution of whole shares, such adjustment
to be made on the basis of the value of Securities on the
date of tender. If funds in the Principal Account are
insufficient to cover the required cash distribution to the
tendering Unit holder, the Trustee may sell Securities in
the manner described in this Section 5.02."
F. Section 8.02 of the Standard Terms and Conditions of
Trust shall be amended to delete the reference to "100,000 Units"
and substitute "2,300 Units" in the third sentence of the second
paragraph thereof.
G. The first paragraph of Section 3.05.II(a) of the
Standard Terms and Conditions of Trust is hereby amended to read
in its entirety as follows:
"II. (a) On each Distribution Date, the Trustee shall
distribute to each Unit holder of record at the close of
business on the Record Date immediately preceding such
Distribution Date an amount per Unit equal to such Unit
holder's Income Distribution (as defined below), plus such
Unit holder's pro rata share of the balance of the Principal
Account (except for monies on deposit therein required to
purchase Contract Obligations) computed as of the close of
business on such Record Date after deduction of any amounts
provided in Subsection I, provided, however, that with
respect to distributions other than the distribution
occurring in the month of December of each year, the Trustee
shall not be required to make a distribution from the
Principal Account unless the amount available for
distribution shall equal $1.00 per 100 Units."
H. Section 3.05.II(b) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as follows:
"(b) For purposes of this Section 3.05, the Unit
holder's Income Distribution shall be equal to such Unit
holder's pro rata share of the cash balance in the Income
Account computed as of the close of business on the Record
Date immediately preceding such Income Distribution after
deduction of (i) the fees and expenses then deductible
pursuant to Section 3.05.I. and (ii) the Trustee's estimate
of other expenses properly chargeable to the Income Account
pursuant to the Indenture which have accrued, as of such
Record Date, or are otherwise properly attributable to the
period to which such Income Distribution relates."
IN WITNESS WHEREOF, Nike Securities L.P., United States
Trust Company of New York, Muller Data Corporation and First
Trust Advisors L.P. have each caused this Trust Agreement to be
executed and the respective corporate seal to be hereto affixed
and attested (if applicable) by authorized officers; all as of
the day, month and year first above written.
NIKE SECURITIES L.P.,
Depositor
By Carlos E. Nardo
Senior Vice President
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By Thomas Porrazzo
Vice President
(SEAL)
Attest:
Rosalia A. Raviele
Assistant Secretary
MULLER DATA CORPORATION,
Evaluator
By Michael Danziger
Chairman
(SEAL)
Attest:
Laura Costello
Chief Financial Officer
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Carlos E. Nardo
Senior Vice President
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, John P. Byron, a Notary Public in and for the said County
and State aforesaid, do hereby certify that Carlos E. Nardo,
personally known to me to be the same person whose name is
subscribed to the foregoing instrument, and personally known to
me to be a Senior Vice President of Nike Securities L.P., a
limited partnership, appeared before me this day in person and
acknowledged that he signed and delivered the said instrument as
his free and voluntary act as such Senior Vice President and as
the free and voluntary act of said Nike Securities L.P., for the
uses and purposes therein set forth.
GIVEN UNDER my hand and notarial seal on January 20, 1994.
John P. Byron
Notary Public
(SEAL)
My commission expires: March 14, 1997
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
On January 20, 1994 before me personally came Thomas
Porrazzo, to me known, who being by me duly sworn said that he
resides at 3584 Manhasset Street, Seaford, New York 11783, that
he is Vice President of United States Trust Company of New York,
one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to the said instrument is such corporate
seal; that it was so affixed by authority of the Board of
Directors of the said corporation; and that he signed his name
thereto by like authority.
Dorothy S. Bochino
Notary Public
(SEAL)
My commission expires: May 8, 1995
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, John P. Byron, a Notary Public in and for the said County
and State aforesaid, do hereby certify that Carlos E. Nardo,
personally known to me to be the same person whose name is
subscribed to the foregoing instrument, and personally known to
me to be a Senior Vice President of First Trust Advisors L.P., a
limited partnership, appeared before me this day in person and
acknowledged that he signed and delivered the said instrument as
his free and voluntary act as such Senior Vice President and as
the free and voluntary act of said First Trust Advisors L.P. for
the uses and purposes therein set forth.
Given under my hand and notarial seal on January 20, 1994.
John P. Byron
Notary Public
(SEAL)
My commission expires: March 14, 1997
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
I, Mary Tumasini, a Notary Public in and for the
said County and State aforesaid, do hereby certify that Michael Danziger
and Laura Costello, personally known to me to be the same persons whose
names are subscribed to the foregoing instrument, and personally
known to me to be a Chairman and Chief Financial Officer, respectively,
of Muller Data Corporation, a corporation, appeared before me this day
in person and acknowledged that they signed, sealed with the corporate seal
of said Muller Data Corporation and delivered the said instrument as
their free and voluntary act as such Chairman and Chief Financial Officer,
respectively, and as the free and voluntary act of said Muller Data
Corporation for the uses and purposes therein set forth.
Given under my hand and notarial seal on January 20, 1994.
______________________________
Notary Public
(SEAL)
My commission expires: February 24, 1994
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
The First Trust Special Situations Trust, Series 88
(Note: Incorporated herein and made a part hereof for the
Trust is the "Schedule of Investments" for the Trust as set forth
in the Prospectus.)
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
January 20, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Special Situations Trust, Series 88
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of The First Trust Special Situations
Trust, Series 88 in connection with the preparation, execution
and delivery of a Trust Agreement dated January 20, 1994 among
Nike Securities L.P., as Depositor, United States Trust Company
of New York, as Trustee, Muller Data Corporation, as Evaluator,
and First Trust Advisors L.P., as Portfolio Supervisor, pursuant
to which the Depositor has delivered to and deposited the
Securities listed in Schedule A to the Trust Agreement with the
Trustee and pursuant to which the Trustee has issued to or on the
order of the Depositor a certificate or certificates representing
units of fractional undivided interest in and ownership of the
Fund created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. the certificates evidencing the Units in the Fund when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 33-51787)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF:jlg
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60661
January 20, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
United States Trust Company of New York
770 Broadway
New York, New York 10003
Re: The First Trust Special Situations Trust, Series 88
Gentlemen:
We have acted as counsel for Nike Securities L.P., Depositor
of The First Trust Special Situations Trust, Series 88 (the
"Fund"), in connection with the issuance of units of fractional
undivided interests in the Trust of said Fund (the "Trust"),
under a Trust Agreement, dated January 20, 1994 (the
"Indenture"), between Nike Securities L.P., as Depositor, United
States Trust Company of New York, as Trustee, Muller Data
Corporation, as Evaluator and First Trust Advisors L.P., as
Portfolio Supervisor.
In this connection, we have examined the Registration
Statement, the form of Prospectus proposed to be filed with the
Securities and Exchange Commission, the Indenture and such other
instruments and documents we have deemed pertinent. The opinions
expressed herein assume that the Trust will be administered, and
investments by the Trust from proceeds of subsequent deposits, if
any, will be made, in accordance with the terms of the Indenture.
The Trust holds Equity Securities as such term is defined in the
Prospectus.
Based upon the foregoing and upon an investigation of such
matters of law as we consider to be applicable, we are of the
opinion that, under existing federal income tax law:
I. The Trust is not an association taxable as a
corporation for Federal income tax purposes; each Unit holder
will be treated as the owner of a pro rata portion of the assets
of the Trust under the Internal Revenue Code of 1986 (the
"Code"); the income of the Trust will be treated as income of the
Unit holders thereof under the Code; and an item of Trust income
will have the same character in the hands of a Unit holder as it
would have in the hands of the Trustee. Each Unit holder will be
considered to have received his pro rata share of income derived
from each trust asset when such income is received by the Trust.
II. Each Unit holder will have a taxable event when the
Trust disposes of an Equity Security (whether by sale, exchange,
redemption, or otherwise) or upon the sale or redemption of Units
by such Unit holder. The price a Unit holder pays for his Units,
including sales charges, is allocated among his pro rata portion
of each Equity Security held by the Trust (in proportion to the
fair market values thereof on the date the Unit holder purchases
his Units) in order to determine his initial cost for his pro
rata portion of each Equity Security held by the Trust. For
Federal income tax purposes, a Unit holder's pro rata portion of
dividends as defined by Section 316 of the Code paid by a
corporation are taxable as ordinary income to the extent of such
corporation's current and accumulated "earnings and profits". A
Unit holder's pro rata portion of dividends which exceed such
current and accumulated earnings and profits will first reduce a
Unit holder's tax basis in such Equity Security (and accordingly
his basis in his Units), and to the extent that such dividends
exceed a Unit holder's tax basis in such Equity Security shall be
treated as gain from the sale or exchange of property.
III. A Unit holder's portion of gain, if any, upon the sale
or redemption of Units or the disposition of Securities held by
the Trust will generally be considered a capital gain except in
the case of a dealer or a financial institution and will be
generally long-term if the Unit holder has held his Units for
more than one year. A Unit holder's portion of loss, if any,
upon the sale or redemption of Units or the disposition of
Securities held by the Trust will generally be considered a
capital loss except in the case of a dealer or a financial
institution and will be generally long-term if the Unit holder
has held his Units for more than one year. Unit holders should
consult their tax advisers regarding the recognition of such
capital gains and losses for Federal income tax purposes.
IV. The Code provides that "miscellaneous itemized
deductions" are allowable only to the extent that they exceed two
percent of an individual taxpayer's adjusted gross income.
Miscellaneous itemized deductions subject to this limitation
under present law include a Unit holder's pro rata share of
expenses paid by the Trust, including fees of the Trustee and the
Evaluator.
For taxable years beginning after December 31, 1986 and
before January 1, 1996, certain corporations may be subject to
the environmental tax (the "Superfund Tax") imposed by Section
59A of the Code. Income received from, and gains recognized from
the disposition of, a Equity Security by the Trust will be
included in the computation of the Superfund Tax by such
corporations holding Units in the Trust.
The scope of this opinion is expressly limited to the
matters set forth herein, and, except as expressly set forth
above, we express no opinion with respect to any other taxes,
including state or local taxes or collateral tax consequences
with respect to the purchase, ownership and disposition of Units.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 33-51787)
relating to the Units referred to above and to the use of our
name and to the reference to our firm in said Registration
Statement and in the related Prospectus.
Very truly yours,
CHAPMAN AND CUTLER
EFF/jlg
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 20, 1994
The First Trust Special Situations
Trust, Series 88
International Blue Chip Trust, Series 1
c/o United States Trust Company
of New York, as Trustee
770 Broadway - 6th Floor
New York, New York 10003
Re: The First Trust Special Situations Trust, Series 88
International Blue Chip Trust, Series 1
Dear Sirs:
We are acting as special counsel with respect to New York
tax matters for The First Trust Special Situations Trust, Series
88 International Blue Chip Trust, Series 1 (the "Trust"), which
will be established under a Standard Terms and Conditions of
Trust dated November 20, 1991, and a related Trust Agreement
dated as of today (collectively, the "Indenture"), among Nike
Securities L.P., as Depositor (the "Depositor"); Muller Data
Corporation, as Evaluator; First Trust Advisors L.P., as
Portfolio Supervisor and United States Trust Company of New York,
as Trustee (the "Trustee"). Pursuant to the terms of the
Indenture, units of fractional undivided interest in the Trust
(the "Units") will be issued in the aggregate number set forth in
the Indenture.
We have examined and are familiar with originals or
certified copies, or copies otherwise identified to our
satisfaction, of such documents as we have deemed necessary or
appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each dated today
and addressed to the Trustee, of Chapman and Cutler, counsel for
the Depositor, with respect to the matters of law set forth
therein.
Based upon the foregoing, we are of the opinion that:
1. The Trust will not constitute an association taxable as
a corporation under New York law, and accordingly will not be
subject to the New York State franchise tax or the New York City
general corporation tax.
2. Under the income tax laws of the State and City of New
York, the income of the Trust will be considered the income of
the holders of the Units.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 33-51787) filed with the
Securities and Exchange Commission with respect to the
registration of the sale of the Units and to the references to
our name under the captions "What is the Federal Tax Status of
Unit Holders?" and "Legal Opinions" in such Registration
Statement and the preliminary prospectus included therein. In
giving this consent, we do not agree that we come within the
category of persons whose consent is required by the Securities
Act or the Rules.
Very truly yours,
CARTER, LEDYARD & MILBURN
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 20, 1994
United States Trust Company
of New York, as Trustee of
The First Trust Special Situations
Trust, Series 88
International Blue Chip Trust, Series 1
770 Broadway - 6th Floor
New York, New York 10003
Attention: Mr. C. William Steelman
Executive Vice President
Re: The First Trust Special Situations Trust, Series 88
International Blue Chip Trust, Series 1
Dear Sirs:
We are acting as counsel for United States Trust Company of
New York (the "Trust Company") in connection with the execution
and delivery of Standard Terms and Conditions of Trust dated
November 20, 1991, and a related Trust Agreement, dated today's
date (collectively, the "Indenture"), among Nike Securities L.P.,
as Depositor (the "Depositor"); Muller Data Corporation, as
Evaluator; First Trust Advisors L.P., as Portfolio Supervisor;
and the Trust Company, as Trustee (the "Trustee"), establishing
The First Trust Special Situations Trust, Series 88 International
Blue Chip Trust, Series 1 (the "Trust"), and the execution by the
Trust Company, as Trustee under the Indenture, of a certificate
or certificates evidencing ownership of units (such certificate
or certificates and such aggregate units being herein called
"Certificates" and "Units"), each of which represents an
undivided interest in the Trust, consisting of common stocks
(including confirmations of contracts for the purchase of certain
obligations not delivered and cash, cash equivalents or an
irrevocable letter of credit or a combination thereof, in the
amount required for such purchase upon the receipt of such
obligations), such obligations being defined in the Indenture as
Securities and listed in the Schedule to the Indenture.
We have examined the Indenture, the Closing Memorandum dated
today's date, a specimen Certificate, and such other documents as
we have deemed necessary in order to render this opinion. Based
on the foregoing, we are of the opinion that:
1. The Trust Company is a duly organized and existing
corporation having the powers of a trust company under the laws
of the State of New York.
2. The Indenture has been duly executed and delivered by
the Trust Company and, assuming due execution and delivery by the
other parties thereto, constitutes the valid and legally binding
obligation of the Trust Company.
3. The Certificates are in proper form for execution and
delivery by the Trust Company, as Trustee.
4. The Trust Company, as Trustee, has duly executed and
delivered to or upon the order of the Depositor a Certificate or
Certificates evidencing ownership of the Units, registered in the
name of the Depositor. Upon receipt of confirmation of the
effectiveness of the registration statement for the sale of the
Units filed with the Securities and Exchange Commission under the
Securities Act of 1933, the Trustee may deliver such other
Certificates, in such names and denominations as the Depositor
may request, to or upon the order of the Depositor as provided in
the Closing Memorandum.
5. The Trust Company, as Trustee, may lawfully under the
New York Banking Law advance to the Trust Fund amounts as may be
necessary to provide monthly interest distributions of
approximately equal amounts, and be reimbursed, without interest,
for any such advances from funds in the interest account on the
ensuing record date, as provided in the Indenture.
In rendering the foregoing opinion, we have not considered,
among other things, whether the Securities have been duly
authorized and delivered.
Very truly yours,
CARTER, LEDYARD & MILBURN
Muller Data Corporation
395 Hudson Street
New York, New York 10014
January 20, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Special Situations Trust, Series 88
International Blue Chip Trust, Series 1
Gentlemen:
We have examined Registration Statement File No. 33-51787 for the
above captioned trust. We hereby acknowledge that Muller Data
Corporation is currently acting as the evaluator for the trust.
We hereby consent to the use in the Registration Statement of the
reference to Muller Data Corporation as evaluator.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Sincerely,
Neil Edelstein
Executive Vice President
