SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 118
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
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 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 the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 118
Cross-Reference Sheet
(Form N-8B-2 Items required by Instructions as
to the Prospectus in Form S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER 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 Information as to
depositor Sponsor, Trustee and
Evaluator
3. Name and address of Information as to
trustee Sponsor, Trustee and
Evaluator
4. Name and address of Underwriting
principal underwriters
5. State of organization The First Trust Special
of trust Situations Trust
6. Execution and termination The First Trust Special
of trust agreement Situations Trust; Other
Information
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 Rights of Unit Holders
securities
(b) Cumulative or distributive
securities The First Trust Special
Situations Trust
(c) Redemption Rights of Unit Holders
(d) Conversion, transfer, etc. Rights of Unit Holders
(e) Periodic payment plan
certificates *
(f) Voting rights Rights of Unit Holders;
Other Information
(g) Notice of certificate- Rights of Unit Holders;
holders Other Information
(h) Consents required Rights of Unit Holders;
Other Information
(i) Other provisions The First Trust Special
Situations Trust
11. Types of securities comprising The First Trust Special
units Situations Trust
12. Certain information
regarding periodic payment
plan 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
plan certificates *
(c) Certain percentages Summary of Essential
Information; The First
Trust Special Situations
Trust; Public Offering
(d) Difference in price offered Public Offering
for any class of transactions
to any class or group of
individuals
(e) Certain other load fees, Rights of Unit Holders
expenses, etc. payable by
holders
(f) Certain profits receivable The First Trust Special
by depositor, principal Situations Trust
underwriters, trustee or
affiliated persons
(g) Ratio of annual charges to
income *
14. Issuance of trust's Rights of Unit Holders
securities
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
disposition of income Rights of Unit Holders
(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 and
successor Information as to
Sponsor, Trustee and
Evaluator
(e) and (f) Depositor, removal Information as to
and successor 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 other *
persons 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
securities by states Public Offering
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;
Underwriting
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) N.A.S.D. membership of Information as to
principal underwriters Sponsor, Trustee and
Evaluator
40. Certain fee received by See Items 13(a) and 13(e)
principal underwriters
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 Public Offering; Rights
in underlying securities of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation Information as to
of trustee 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 OR
SECURITIES
51. Insurance of holders of *
trust's securities
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust The First Trust Special
agreement with respect Situations Trust; Rights
to selection or elimination of Unit Holders
of underlying securities
(b) Transactions involving
elimination of underlying
securities *
(c) Policy regarding The First Trust Special
substitution or elimination Situations Trust; Rights
of underlying securities 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. Certain information regarding
periodic payment plan
certificates
56. Certain information regarding
periodic payment plan
certificates
57. Certain information regarding *
periodic payment plan
certificates
58. Certain information regarding
periodic payment plan
certificates
59. Financial statements Report of Independent
(Instruction 1(b) to Auditors; Statement of
Form S-6) Net Assets
__________________________
* Inapplicable, answer negative or not required.
SUBJECT TO COMPLETION DATED APRIL 17, 1995
San Diego Growth & Treasury Securities Trust, Series 1
The Trust. The First Trust (registered trademark) Special Situations
Trust, Series 118 (the "Trust") is a unit investment trust consisting
of a portfolio containing zero coupon U.S. Treasury bonds and
common stocks issued by companies which are headquartered or based
in the San Diego, California, area.
The objectives of the Trust are to protect Unit holders' capital
and provide potential for capital appreciation or income by investing
a portion of its portfolio in zero coupon U.S. Treasury bonds
("Treasury Obligations"), and the remainder of the Trust's portfolio
in common stocks ("Equity Securities"). Collectively, the Treasury
Obligations and the Equity Securities are referred to herein as
the "Securities." See "Schedule of Investments." The Trust has
a mandatory termination date (the "Mandatory Termination Date"
or "Trust Ending Date") as set forth under "Summary of Essential
Information." The Treasury Obligations evidence the right to receive
a fixed payment at a future date from the U.S. Government and
are backed by the full faith and credit of the U.S. Government.
The guarantee of the U.S. Government does not apply to the market
value of the Treasury Obligations or the Units of the Trust, whose
net asset value will fluctuate and, prior to maturity, may be
worth more or less than a purchaser's acquisition cost. There
is, of course, no guarantee that the objectives of the Trust will
be achieved.
Each Unit of the Trust represents an undivided fractional interest
in all the Securities deposited in the Trust. The Trust has been
organized so that purchasers of Units should receive, at the termination
of the Trust, an amount per Unit at least equal to $10.00 (which
is equal to the per Unit value upon maturity of the Treasury Obligations),
even if the Trust never paid a dividend and the value of the Equity
Securities were to decrease to zero, which the Sponsor considers
highly unlikely. This feature of the Trust provides Unit holders
who purchase Units at a price of $10.00 or less per Unit with
total principal protection, including any sales charges paid,
although they might forego any earnings on the amount invested.
To the extent that Units are purchased at a price less than $10.00
per Unit, this feature may also provide a potential for capital
appreciation. As a result of the volatile nature of the market
for zero coupon U.S. Treasury bonds, Units sold or redeemed prior
to maturity will fluctuate in price and the underlying Treasury
Obligations may be valued at a price greater or less than their
value as of the Initial Date of Deposit. UNIT HOLDERS DISPOSING
OF THEIR UNITS PRIOR TO THE MATURITY OF THE TRUSTS MAY RECEIVE
MORE OR LESS THAN $10.00 PER UNIT, DEPENDING ON MARKET CONDITIONS
ON THE DATE UNITS ARE SOLD OR REDEEMED.
The Treasury Obligations deposited in the Trust on the Initial
Date of Deposit will mature on , 2006
(the "Treasury Obligations Maturity Date"). The Treasury
Obligations in the Trust have a maturity value equal to or greater
than the aggregate Public Offering Price (which includes the sales
charge) of the Units of the Trust on the Initial Date of Deposit.
The Equity Securities deposited in the Trust's portfolio have no
fixed maturity date and the value of these underlying Equity
Securities will fluctuate with changes in the values of stocks
in general and with changes in the conditions and performance
of the specific Equity Securities owned by the Trust. See "Portfolio."
The Sponsor may, from time to time during a period of up to approximately
360 days after the Initial Date of Deposit, deposit additional
Securities in the Trust, provided it maintains the original percentage
relationship between the Treasury Obligations and Equity Securities
in the Trust's portfolio. Such deposits of additional Securities
will, therefore, be done in such a manner that the maturity value
of each Unit should
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.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE
TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY STATE.
Torrey Pines Securities, Inc.
The date of this Prospectus is , 1995
Page 1
always be an amount at least equal to $10.00, and that the original
proportionate relationship amongst the individual issues of the
Equity Securities shall be maintained. Any such difference may
be due to the sale, redemption or liquidation of any Securities
deposited in the Trust on the Initial, or any subsequent, Date
of Deposit. See "What is The First Trust Special Situations Trust?"
and "How May 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 a pro rata
share of the offering prices of the Treasury Obligations and the
aggregate underlying value of the Equity Securities in the Trust
(generally determined by the closing sale prices of listed Equity
Securities and the 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 4.9% (equivalent to 5.152% of the net amount invested).
The secondary market Public Offering Price per Unit will be based
upon a pro rata share of the bid prices of the Treasury Obligations
and the aggregate underlying value of the Equity Securities in
the Trust (generally determined by the closing sale prices of
listed Equity Securities and the bid prices of over-the-counter
traded Equity Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust plus a
maximum sales charge of 4.9% (equivalent to 5.152% of the net
amount invested), subject to reduction beginning
, 1996. The minimum purchase is $1,000. The sales charge
is reduced on a graduated scale for sales involving at least 5,000
Units. See "How is the Public Offering Price Determined?"
Dividend and Capital Distributions. Distributions of dividends
and capital, if any, received by the Trust will be paid in cash
on the Distribution Date to Unit holders of record on the Record
Date as set forth in 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 will be net of the expenses of the Trust.
INCOME WITH RESPECT TO THE ACCRUAL OF ORIGINAL ISSUE DISCOUNT ON
THE TREASURY OBLIGATIONS WILL NOT BE DISTRIBUTED CURRENTLY,
ALTHOUGH UNIT HOLDERS WILL BE SUBJECT TO INCOME TAX AT ORDINARY
INCOME RATES AS IF A DISTRIBUTION HAD OCCURRED. 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 bid side evaluation
of the Treasury Obligations and the aggregate underlying value
of Equity Securities in the Trust (generally determined by the
closing sale prices of listed Equity Securities and the bid prices
of over-the-counter traded Equity Securities) plus or minus cash,
if any, in the Capital and Income Accounts of the Trust. If a
secondary market is maintained during the initial offering period,
the prices at which Units will be repurchased will be based upon
the aggregate offering side evaluation of the Treasury Obligations
and the aggregate underlying value of the Equity Securities in
the Trust (generally determined by the closing sale prices of
listed Equity Securities and the 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 bid price of the Treasury Obligations
plus the aggregate underlying value of the Equity Securities in
the Trust (generally determined by the closing sale prices of
listed Equity Securities and the bid prices of over-the-counter
traded Equity Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust. See "How
May Units be Redeemed?"
Termination. Commencing on the Treasury Obligations Maturity Date,
Equity Securities will begin to be sold in connection with the
termination of the Trust. The Sponsor will determine the manner,
timing and execution of the sale of the Equity Securities. Written
notice of any termination of the Trust specifying the time or
times at which Unit holders may surrender their certificates for
cancellation shall be given by the Trustee to each Unit holder
at his address appearing on the registration books of the Trust
maintained by the Trustee. At least 60 days prior to the Treasury
Obligations Maturity Date the Trustee will provide written notice
Page 2
thereof to all Unit holders and will include with such notice
a form to enable Unit holders to elect a distribution of shares
of Equity Securities (reduced by customary transfer and registration
charges) if such Unit holder owns at least 2,500 Units of the
Trust, rather than to receive payment in cash for such Unit holder's
pro rata share of the amounts realized upon the disposition by
the Trustee of Equity Securities. All Unit holders will receive
their pro rata portion of the Treasury Obligations in cash upon
the termination of the Trust. To be effective, the election form,
together with surrendered certificates and other documentation
required by the Trustee, must be returned to the Trustee at least
five business days prior to the Treasury Obligations Maturity
Date. Unit holders not electing a distribution of shares of Equity
Securities will receive a cash distribution from the sale of the
remaining Securities within a reasonable time after the Trust
is terminated. See "Rights of Unit Holders-How are Income and
Capital Distributed?"
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among
other factors, the possible deterioration of either the Securities
which make up the Trust or the general condition of the stock
market, volatile interest rates or an economic recession. The
Trust is not actively managed and Equity Securities will not be
sold by the Trust to take advantage of market fluctuations or
changes in anticipated rates of appreciation. See "What are Equity
Securities?-Risk Factors."
Page 3
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Securities- , 1995
Underwriter: Torrey Pines Securities, Inc.
Sponsor: Nike Securities L.P.
Trustee: United States Trust Company of New York
Evaluator: FT Evaluators L.P.
<TABLE>
<CAPTION>
General Information
<S> <C>
Aggregate Maturity Value of Treasury Obligations Initially Deposited $
Initial Number of Units
Fractional Undivided Interest in the Trust per Unit 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities in Portfolio (1) $
Aggregate Offering Price Evaluation of Securities per Unit $
Sales Charge of 4.9% of the Public Offering Price per Unit,
(5.152% of the net amount invested) $
Public Offering Price per Unit (2) $
Sponsor's Initial Repurchase Price per Unit $
Redemption Price per Unit (based on bid price evaluation of
underlying Treasury Obligations and aggregate underlying value
of Equity Securities) $ less than Public Offering Price per Unit;
$ less than Sponsor's Initial Repurchase Price per Unit (3) $
</TABLE>
CUSIP Number
First Settlement Date
Treasury Obligations Maturity Date , 2006
Mandatory Termination Date , 2006
Trustee's Annual Fee $0.0090 per Unit outstanding.
Evaluator's Annual Fee $0.0030 per Unit outstanding.
Evaluations for purposes of sale,
purchase or redemption of Units are
made as of the close of trading
(4:00 p.m. eastern standard time) on
the New York Stock Exchange on each
day on which it is open.
Supervisory Fee (4) Maximum of $0.0035 per Unit out-
standing annually payable to an
affiliate of the Sponsor.
Income Distribution Record Date Fifteenth day of each December,
commencing December 15, 1995.
Income Distribution Date (5) Last day of each December,
commencing December 31, 1995.
[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. The Treasury
Obligations are valued at their aggregate offering side evaluation.
(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 standard time and sold
to investors at a Public Offering Price per Unit based on this
valuation.
(3) See "How May Units be Redeemed?"
(4) The Sponsor will also be reimbursed for bookkeeping and other
administrative expenses currently at a maximum annual rate of
$0.0010 per Unit.
(5) Distributions from the Capital Account, if any, will be made
monthly 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 4
San Diego Growth & Treasury Securities Trust
Series 1
The First Trust Special Situations Trust, Series 118
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust, Series 118 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:
San Diego Growth & Treasury Securities 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, First Trust Advisors L.P.,
as Portfolio Supervisor and FT Evaluators L.P. as Evaluator.
On the Initial Date of Deposit, the Sponsor deposited with the
Trustee confirmations of contracts for the purchase of zero coupon
U.S. Treasury bonds and common stocks, 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 objectives of the Trust are to protect Unit holders' capital
and provide potential for capital appreciation or income through
an investment in zero coupon U.S. Treasury bonds, such securities
being referred to herein as the "Treasury Obligations," and in
equity securities issued by companies headquartered or based in
the San Diego, California, area ("Equity Securities"). The Treasury
Obligations evidence the right to receive a fixed payment at a
future date from the U.S. Government and are backed by the full
faith and credit of the U.S. Government. The guarantee of the
U.S. Government does not apply to the market value of the Treasury
Obligations or the Units of the Trust, whose net asset value will
fluctuate and, prior to maturity, may be more or less than a purchaser's
acquisition cost. Collectively, the Treasury Obligations and Equity
Securities in the Trust are referred to herein as the "Securities."
There is, of course, no guarantee that the objectives of the Trust
will be achieved.
With the deposit of the Securities on the Initial Date of Deposit,
the Sponsor established a percentage relationship between the
principal amounts of Treasury Obligations and 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 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 Securities deposited in the Trust will
maintain, as nearly as is practicable, the original proportionate
relationship of the Treasury Obligations and Equity Securities
in the Trust's portfolio. Such deposits of additional Securities
will, therefore, be done in such a manner that the maturity value
of the Treasury Obligations represented by each Unit should always
be an amount at least equal to $10.00, and that the original proportionate
relationship amongst the individual issues of the Equity Securities
shall be maintained. Any deposit by the Sponsor of additional
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 Securities deposited in the Trust
on the Initial, or any subsequent, Date of Deposit. See "How May
Securities be Removed from the Trust?" On a cost basis to the
Trust, the original percentage relationship on the Initial Date
of Deposit was approximately % Treasury Obligations and
approximately % Equity Securities. 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 Treasury Obligations and Equity Securities will fluctuate
daily, the ratio, on a market value basis, will also change daily.
The maturity value of the Treasury Obligations and the portion of
Page 5
Equity Securities represented by each Unit will not change as
a result of the deposit of additional Securities in the Trust.
On the Initial Date of Deposit, each Unit of the Trust represented
the undivided fractional interest in the Securities deposited
in the Trust set forth under "Summary of Essential Information."
The Trust has been organized so that purchasers of Units should
receive, at the termination of the Trust, an amount per Unit at
least equal to $10.00 per Unit (which is equal to the per Unit
value upon maturity of the Treasury Obligations), even if the
Equity Securities never paid a dividend and the value of the Equity
Securities in the Trust were to decrease to zero, which the Sponsor
considers highly unlikely. Furthermore, the Sponsor will take
such steps in connection with the deposit of additional Securities
in the Trust as are necessary to maintain a maturity value of
the Units of the Trust at least equal to $10.00 per Unit. The
receipt of only $10.00 per Unit upon the termination of the Trust
(an event which the Sponsor believes is unlikely) represents a
substantial loss on a present value basis. At current interest
rates, the present value of receiving $10.00 per Unit as of the
termination of the Trust would be approximately $ per
Unit (the present value is indicated by the amount per Unit which
is invested in Treasury Obligations). Furthermore, the $10.00
per Unit in no respect protects investors against diminution in
the purchasing power of their investment due to inflation (although
expectations concerning inflation are a component in determining
prevailing interest rates, which in turn determine present values).
If inflation were to occur at the rate of 5% per annum during
the period ending at the termination of the Trust, the present
dollar value of $10.00 per Unit at the termination of the Trust
would be approximately $ per Unit. To the extent that
Units of the Trust are redeemed, the aggregate value of the Securities
in the Trust will be reduced and the undivided fractional interest
represented by each outstanding Unit of the Trust will increase.
However, if additional Units are issued by the Trust in connection
with the deposit of additional Securities by the Sponsor, the
aggregate value of the 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. With
the exception of bookkeeping and other administrative services
provided to the Trust, for which the Sponsor will be reimbursed
in amounts as set forth under "Summary of Essential Information,"
the Sponsor will not receive any fees in connection with its activities
relating to the Trust. Such bookkeeping and administrative charges
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 fees payable to
the Sponsor for such services may exceed the actual costs of providing
such services for this Trust, but at no time will the total amount
received for such services rendered to unit investment trusts
of which Nike Securities L.P. is the Sponsor in any calendar year
exceed the aggregate cost to the Sponsor of supplying such services
in such year. 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.
Subsequent to the initial offering period, the Evaluator, an affiliate
of the Sponsor, will receive a fee as indicated in the "Summary
of Essential Information." The fee may exceed the actual costs
of providing such evaluation
Page 6
services for this Trust, but at no time will the total amount
received for evaluation services rendered to unit investment trusts
of which Nike Securities L.P. is the Sponsor in any calendar year
exceed the aggregate cost to FT Evaluators L.P. of supplying such
services in such year. 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 $0.0090 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 Securities in the Trust in order to make funds available
to pay all these amounts if funds are not otherwise available
in the Income and Capital Accounts of the Trust except that the
Trustee shall not sell Treasury Obligations to pay Trust expenses.
Since the Equity Securities are all common stocks and the income
stream produced by dividend payments is unpredictable, the Sponsor
cannot provide any assurance that dividends will be sufficient
to meet any or all expenses of the Trust. As described above,
if dividends are insufficient to cover expenses, it is likely
that Equity Securities will have to be sold to meet Trust expenses.
These sales may result in capital gains or losses to Unit holders.
See "What is the Federal Tax Status of Unit Holders?"
The Indenture requires the Trust to be audited on an annual basis
at the expense of the Trust by independent auditors selected by
the Sponsor. So long as the Sponsor is making a secondary market
for the Units, the Sponsor is required to bear the cost of such
annual audits to the extent such cost exceeds $0.0050 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:
Page 7
1. The Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated
as the owner of a pro rata portion of the assets of the Trust
under the Code; and the income of the Trust will be treated as
income of the Unit holders thereof under the Code. Each Unit holder
will be considered to have received his pro rata share of income
derived from each Trust asset when such income is received by
the Trust.
2. Each Unit holder will have a taxable event when the Trust
disposes of a Security (whether by sale, exchange, redemption,
or payment at maturity) or upon the sale or redemption of Units
by such Unit holder. The price a Unit holder pays for his Units,
including sales charges, is allocated among his pro rata portion
of each Security held by the Trust (in proportion to the fair
market values thereof on the date the Unit holder purchases his
Units) in order to determine his initial cost for his pro rata
portion of each Security held by the Trust. The Treasury Obligations
held by the Trust are treated as stripped bonds and may be treated
as bonds issued at an original issue discount as of the date a
Unit holder purchases his Units. Because the Treasury Obligations
represent interests in "stripped" U.S. Treasury bonds, a Unit
holder's initial cost for his pro rata portion of each Treasury
Obligation held by the Trust shall be treated as its "purchase
price" by the Unit holder. Original issue discount is effectively
treated as interest for Federal income tax purposes and the amount
of original issue discount in this case is generally the difference
between the bond's purchase price and its stated redemption price
at maturity. A Unit holder will be required to include in gross
income for each taxable year the sum of his daily portions of
original issue discount attributable to the Treasury Obligations
held by the Trust as such original issue discount accrues and
will in general be subject to Federal income tax with respect
to the total amount of such original issue discount that accrues
for such year even though the income is not distributed to the
Unit holders during such year to the extent it is not less than
a "de minimis" amount as determined under a Treasury Regulation
issued on December 28, 1992 relating to stripped bonds. To the
extent the amount of such discount is less than the respective
"de minimis" amount, such discount shall be treated as zero. In
general, original issue discount accrues daily under a constant
interest rate method which takes into account the semi-annual
compounding of accrued interest. In the case of the Treasury Obligations,
this method will generally result in an increasing amount of income
to the Unit holders each year. Unit holders should consult their
tax advisers regarding the Federal income tax consequences and
accretion of original issue discount under the stripped bond rules.
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 with respect to an Equity Security held by the Trust
are taxable as ordinary income to the extent of such corporation's
current and accumulated "earnings and profits." A Unit holder's
pro rata portion of dividends paid on such Equity Security which
exceed such current and accumulated earnings and profits will
first reduce a Unit holder's tax basis in such Equity Security,
and to the extent that such dividends exceed a Unit holder's tax
basis in such Equity Security shall generally be treated as capital
gain. In general, any such capital gain will be short-term unless
a Unit holder has held his Units for more than one year.
3. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Securities held by the
Trust will generally be considered a capital gain except in the
case of a dealer or a financial institution and, in general, will
be long-term if the Unit holder has held his Units for more than
one year (the date on which the Units are acquired (i.e., the
trade date) is excluded for purposes of determining whether the
Units have been held 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 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
Page 8
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.
Dividends Received Deduction. A corporation that owns Units will
generally be entitled to a 70% dividends received deduction with
respect to such Unit holder's pro rata portion of dividends received
by the Trust (to the extent such dividends are taxable as ordinary
income, as discussed above) in the same manner as if such corporation
directly owned the Equity Securities paying such dividends (other
than corporate shareholders, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics
and other than for purposes of special taxes such as the accumulated
earnings tax and the personal holding corporation tax). However,
a corporation owning Units should be aware that Sections 246 and
246A of the Code impose additional limitations on the eligibility
of dividends for the 70% dividends received deduction. These limitations
include a requirement that stock (and therefore Units) must generally
be held at least 46 days (as determined under Section 246(c) of
the Code). Proposed regulations have been issued which address
special rules that must be considered in determining whether the
46 day holding requirement is met. Moreover, the allowable percentage
of the deduction will be reduced from 70% if a corporate Unit
holder owns certain stock (or Units) the financing of which is
directly attributable to indebtedness incurred by such corporation.
It should be noted that various legislative proposals that would
affect the dividends received deduction have been introduced.
Unit holders should consult with their tax advisers with respect
to the limitations on and possible modifications to the dividends
received deduction.
Recognition of Taxable Gain or Loss Upon Disposition of Securities
by the Trust or Disposition of Units. As discussed above, a Unit
holder may recognize taxable gain (or loss) when a Security is
disposed of by the Trust or if the Unit holder disposes of a Unit.
For taxpayers other than corporations, net capital gains are subject
to a maximum marginal tax rate of 28%. However, it should be noted
that legislative proposals are introduced from time to time that
affect tax rates and could affect relative differences at which
ordinary income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Tax Act") raised
tax rates on ordinary income while capital gains remain subject
to a 28% maximum stated rate for taxpayers other than corporations.
Because some or all capital gains are taxed at a comparatively
lower rate under the Tax Act, the Tax Act includes a provision
that recharacterizes capital gains as ordinary income in the case
of certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993.
Unit holders and prospective investors should consult with their
tax advisers regarding the potential effect of this provision
on their investment in Units.
Special Tax Consequences of In-Kind Distributions Upon 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 2,500 Units may request an In-Kind
Distribution upon the termination of the Trust. The Unit holder
requesting an In-Kind Distribution will be liable for expenses
related thereto (the "Distribution Expenses") and the amount of
such In-Kind Distribution will be reduced by the amount of the
Distribution Expenses. See "Rights of Unit Holders-How are Income
and Capital Distributed?" Treasury Obligations held by the Trust
will not be distributed to a Unit holder as part of an In-Kind
Distribution. The tax consequences relating to the sale of Treasury
Obligations are discussed above. As previously discussed, prior
to the termination of the Trust, a Unit holder is considered as
owning a pro rata portion of each of the Trust assets for Federal
income tax purposes. The receipt of an In-Kind Distribution upon
the termination of the Trust would be deemed an exchange of such
Unit holder's pro rata portion of each of the shares of stock
and other assets held by the Trust in exchange for an undivided
interest in whole shares of stock plus, possibly, cash.
There are generally three different potential tax consequences
which may occur under an In-Kind Distribution with respect to
each Security owned by the Trust. A "Security" for this purpose
is a particular class of stock issued by a particular corporation
(and does not include the Treasury Obligations). If the Unit holder
receives only whole shares of a Security in exchange for his or
her pro rata portion in each share of such Security held by the
Trust, there is no taxable gain or loss recognized upon such deemed
exchange pursuant
Page 9
to Section 1036 of the Code. If the Unit holder receives whole
shares of a particular Security plus cash in lieu of a fractional
share of such Security, and if the fair market value of the Unit
holder's pro rata portion of the shares of such Security exceeds
his tax basis in his pro rata portion of such Security, taxable
gain would be recognized in an amount not to exceed the amount
of such cash received, pursuant to Section 1031(b) of the Code.
No taxable loss would be recognized upon such an exchange pursuant
to Section 1031(c) of the Code, whether or not cash is received
in lieu of a fractional share. Under either of these circumstances,
special rules will be applied under Section 1031(d) of the Code
to determine the Unit holder's tax basis in the shares of such
particular Security which he receives as part of the In-Kind Distribution.
Finally, if a Unit holder's pro rata interest in a Security does
not equal a whole share, he may receive entirely cash in exchange
for his pro rata portion of a particular Security. In such case,
taxable gain or loss is measured by comparing the amount of cash
received by the Unit holder with his tax basis in such Security.
Because the Trust will own many Securities, a Unit holder who
requests an In-Kind Distribution will have to analyze the tax
consequences with respect to each Security owned by the Trust.
In analyzing the tax consequences with respect to each Security,
such Unit holder must allocate the Distribution Expenses among
the Securities (the "Allocable Expenses"). The Allocable Expenses
will reduce the amount realized with respect to each Security
so that the fair market value of the shares of such Security received
(if any) and cash received in lieu thereof (as a result of any
fractional shares) by such Unit holder should equal the amount
realized for purposes of determining the applicable tax consequences
in connection with an In-Kind Distribution. A Unit holder's tax
basis in shares of such Security received will be increased by
the Allocable Expenses relating to such Security. 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 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. Distributions
by the Trust will generally be subject to United States income
taxation and withholding in the case of Units held by non-resident
alien individuals, foreign corporations or other non-United States
persons (accrual of original issue discount on the Treasury Obligations
may not be subject to taxation or withholding provided certain
requirements are met). Such persons should consult their tax advisers.
Unit holders will be notified annually of the amounts of original
issue discount and income dividends includable in the Unit holder's
gross income and amounts of Trust expenses which may be claimed
as itemized deductions.
Dividend income, long-term capital gains and accrual of original
issue discount may also be subject to state and local taxes. Investors
should consult their tax advisers for specific information on
the tax consequences of particular types of distributions.
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. 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
Page 10
averaging or tax-deferred rollover treatment. Investors considering
participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers
with respect to the establishment and maintenance of any such
plan. Such plans are offered by brokerage firms and other financial
institutions. Fees and charges with respect to such plans may
vary.
PORTFOLIO
What are Treasury Obligations?
The Treasury Obligations deposited in the Trust consist of U.S.
Treasury bonds which have been stripped of their unmatured interest
coupons. The Treasury Obligations evidence the right to receive
a fixed payment at a future date from the U.S. Government, and
are backed by the full faith and credit of the U.S. Government.
Treasury Obligations are purchased at a deep discount because
the buyer obtains only the right to a fixed payment at a fixed
date in the future and does not receive any periodic interest
payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the Treasury Obligations)
is that a fixed yield is earned not only on the original investment,
but also, in effect, on all earnings during the life of the discount
obligation. This implicit reinvestment of earnings at the same
rate eliminates the risk of being unable to reinvest the income
on such obligations at a rate as high as the implicit yield on
the discount obligation, but at the same time eliminates the holder's
ability to reinvest at higher rates in the future. For this reason,
the Treasury Obligations are subject to substantially greater
price fluctuations during periods of changing interest rates than
are securities of comparable quality which make regular interest
payments. The effect of being able to acquire the Treasury Obligations
at a lower price is to permit more of the Trust's portfolio to
be invested in Equity Securities.
What are Equity Securities?
The Trust also consists of different issues of Equity Securities,
all of which are listed on a national securities exchange, the
NASDAQ National Market System or are traded in the over-the-counter
market. The Equity Securities consist of common stocks issued
by companies headquartered or based in the San Diego, California
area. The stocks chosen for the portfolio were selected for their
growth potential and diversification within the San Diego, California,
area. See "What are the Equity Securities Selected for San Diego
Growth & Treasury Securities Trust, Series 1?" for a general description
of the companies.
Risk Factors. An investment in Units of the Trust should be made
with an understanding of the risks such an investment may entail.
Although actions have been taken to provide a diversified portfolio
of Equity Securities, some inherent risks exist due to the concentration
of the Equity Securities within the San Diego, California, area
although a number of companies have significant business activities
outside this region. Unpredictable factors include governmental,
political, economic and fiscal policies of the State of California
and the San Diego, California, area which may have an adverse
effect on the performance of the issuers which have significant
business activities within this region. In addition, regional
influences may affect the performance of issuers, particularly
if an economic downturn or contraction occurs in the West Coast
region of the United States or in the San Diego, California, area.
The Trust consists of such of the Securities listed under "Schedule
of Investments" as may continue to be held from time to time in
the Trust and any additional 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 Securities. However, should any contract for the
purchase of any of the 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
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
Page 11
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 Securities be Removed from the Trust?" Equity Securities,
however, will not be sold by the Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation or
depreciation.
An investment in Units should be made with an understanding of
the risks which an investment in common stocks entails, including
the risk that the financial condition of the issuers of the Equity
Securities or the general condition of the common stock market
may worsen and the value of the Equity Securities and therefore
the value of the Units may decline. Common stocks are especially
susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions
of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic
or banking crises. Shareholders of common stocks have rights to
receive payments from the issuers of those common stocks that
are generally subordinate to those of creditors of, or holders
of debt obligations or preferred stocks of, such issuers. Shareholders
of common stocks of the type held by the Trust have a right to
receive dividends only when and if, and in the amounts, declared
by the issuer's board of directors and have a right to participate
in amounts available for distribution by the issuer only after
all other claims on the issuer have been paid or provided for.
Common stocks do not represent an obligation of the issuer and,
therefore, do not offer any assurance of income or provide the
same degree of protection of capital as do debt securities. The
issuance of additional debt securities or preferred stock will
create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the
rights of holders of common stock with respect to assets of the
issuer upon liquidation or bankruptcy. The value of common stocks
is subject to market fluctuations for as long as the common stocks
remain outstanding, and thus the value of the Equity Securities
in the Portfolio may be expected to fluctuate over the life of
the Trust to values higher or lower than those prevailing on the
Initial Date of Deposit.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners
of the entity, have generally inferior rights to receive payments
from the issuer in comparison with the rights of creditors of,
or holders of debt obligations or preferred stocks issued by,
the issuer. Cumulative preferred stock dividends must be paid
before common stock dividends and any cumulative preferred stock
dividend omitted is added to future dividends payable to the holders
of cumulative preferred stock. Preferred stockholders are also
generally entitled to rights on liquidation which are senior to
those of common stockholders.
Whether or not the Equity Securities are listed on a national
securities exchange, the principal trading market for the Equity
Securities may be in the over-the-counter market. As a result,
the existence of a liquid trading market for the Equity Securities
may depend on whether dealers will make a market in the Equity
Securities. There can be no assurance that a market will be made
for any of the Equity Securities, that any market for the Equity
Securities will be maintained or of the liquidity of the Equity
Securities in any markets made. In addition, the Trust may be
restricted under the Investment Company Act of 1940 from selling
Equity Securities to the Sponsor. The price at which the Equity
Securities may be sold to meet redemptions, and the value of the
Trust, will be adversely affected if trading markets for the Equity
Securities are limited or absent.
Unit holders will be unable to dispose of any of the Equity Securities
in the Portfolio, as such, and will not be able to vote the Equity
Securities. As the holder of the Equity Securities, the Trustee
will have the right
Page 12
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 may benefit. 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.
The Underwriter has performed investment banking services for
certain of the issuers of the Equity Securities.
What are the Equity Securities Selected for San Diego Growth &
Treasury Securities Trust, Series 1?
Applied Digital Access, Inc., headquartered in San Diego, California,
is a provider of network test and performance monitoring systems
for high-speed telecommunication circuits. The company's "T3AS"
system allows telephone companies to test individual circuits
because it is permanently installed and remote accessed to DS3
circuits at network locations.
Ashworth, Inc. is a designer, manufacturing contractor and marketer
of golf apparel sold under the "Ashworth" and "Ashworth/Harry
Logan" labels. The company's products include men's and women's
shorts, pants, cotton shirts, pullovers, vests, sweaters and jackets
which are sold in golf pro shops, country clubs and resorts. Ashworth,
Inc. is headquartered in Carlsbad, California, and markets its
products in the United States, Canada and Japan.
Callaway Golf Company, headquartered in Carlsbad, California,
is a designer, developer, manufacturer and marketer of innovative
golf clubs for both the skilled and average golf player. Callaway
Golf Company also offers golf-related equipment and supplies manufactured
by other companies bearing the Callaway trademark, including golf
balls, golf bags, head covers, travel bags and other accessories.
Chart House Enterprises, headquartered in Solana Beach, California,
operates restaurants which offer a variety of food and alcoholic
beverages. The company operates various restaurants including
"Chart House," "Peohe's," "Paradise Bakeries" and "Cork N Cleavers."
Chart House Enterprises also franchises "Paradise Bakeries."
Cobra Golf, Inc., headquartered in Carlsbad, California, is a
designer, manufacturer and marketer of golf clubs for the premium-priced
game improvement segment of the market. Cobra Golf, Inc.'s clubs
are marketed under the "King Cobra," "Senior King Cobra," "Lady
Cobra Oversize," "Tour King Cobra" and "Baffler" trade names.
Cohu, Inc., headquartered in San Diego, California, is a manufacturer
of semiconductor testing apparatus, television cameras and equipment,
metal detectors and microwave products. The semiconductors are
used to determine the performance and reliability of transistors
and circuits, the television cameras are used for security surveillance
and general broadcast and the metal detectors are used by the
construction industry and public utilities.
DH Technology, Inc., headquartered in San Diego, California, is
a designer, manufacturer and distributor of transaction printers
and mechanisms, impact printheads, bar code printers and related
services and supplies. DH Technology, Inc.'s products are used
in a variety of applications including bank transactions, point-of-sale
receipts, airline ticketing, data processing reports, gaming tickets
and other processes.
Dura Pharmaceuticals, Inc. is a specialty pharmaceutical company
headquartered in San Diego, California. The company markets prescription
pharmaceuticals for the treatment of asthma, allergic rhinitis,
the common cold and related respiratory ailments. In addition,
Dura Pharmaceuticals, Inc. has exclusive rights to the "Dryhaler,"
which is a new drug delivery system for chronic obstructive pulmonary
diseases.
Encad, Inc. develops, manufactures and markets large-format color
inkjet printer/plotters which are used in industries utilizing
computer-aided design; architectural, engineering and construction
design; geographic information systems and graphic arts. The company
is headquartered in San Diego, California, and sells "ENCAD,"
second generation "NOVAJET II" and "NOVAJET III" and "CADJET."
Page 13
Glacier Water Services, Inc. is a provider of low-price, high-quality
drinking water which is dispensed to customers through coin-operated,
self-service vending machines that are designed, developed and
assembled by the company. The company is headquartered in Carlsbad,
California, and distributes its product through machines placed
in supermarkets and other retail locations. These machines are
located in Arizona, California, Florida, Nevada, New Mexico and
Texas.
GTI Corporation, headquartered in San Diego, California, is a
manufacturer and distributor of electronic components, circuit
boards and electronic component processing equipment. The company
produces metal and glass products which are used in the manufacturing
of semiconductor devices and glass diodes and also distributes
electronic components, wire and cable. GTI Corporation sells its
products to a variety of markets, including computer, automotive,
electronics, appliance and telecommunications markets.
HomeTown Buffet, headquartered in San Diego, California, operates
and franchises restaurants that feature traditional American "home
cooking" buffet style food. Low prices, unlimited servings and
a variety of dishes and specials are offered. HomeTown Buffet
operates restaurants throughout the United States.
Jenny Craig, Inc. and its subsidiaries offer a comprehensive weight
loss program through their chain of company-owned and franchised
"Jenny Craig Weight Loss Centres." The company, headquartered
in Del Mar, California, owns and franchises centers located throughout
the United States and in Canada, Mexico, Australia and New Zealand.
Mail Boxes Etc., headquartered in San Diego, California, is a
franchiser of centers specializing in postal, business and communication
services. Products and services include mailbox rentals, parcel
shipping and receiving, business support products and services,
cablegrams, stamps, envelopes and faxes. Mail Boxes Etc. operates
centers throughout the United States, Puerto Rico and in various
international countries.
PSICOR, Inc., headquartered in San Diego, California, is in the
primary business of supplying perfusionists (the person who sets
up, primes and operates the heart-lung machine used in various
surgical and other medical situations), clinical technicians,
equipment and disposable supplies to hospitals performing open-heart
surgical procedures.
Petco Animal Supplies, Inc., headquartered in San Diego, California,
operates a chain of retail pet food and supply stores and superstores.
The company's approach is to combine warehouse store prices with
the service and convenience of a neighborhood pet supply store.
Proxima Corporation, headquartered in San Diego, California, is
a designer, manufacturer and marketer of LCD-based desktop projection
products. The company manufacturers LCD projectors and LCD projection
panels which are used for applications such as business meetings
and computer-based presentations. Proxima Corporation also manufactures
the "Cyclops" interactive pointer system which operates as a mouse,
moving a pointer across the screen.
Pyxis Corporation, headquartered in San Diego, California, is
a developer and manufacturer of systems that automate the distribution,
management and control of medications and supplies in hospitals.
Pyxis Corporation currently markets its systems in hospitals nationwide.
Qualcomm, Inc., headquartered in San Diego, California, is involved
in digital wireless communications technologies. The company uses
its proprietary application of Code Division Multiple Access technology
for a digital cellular telephone communications system which it
has developed. Qualcomm, Inc. has also developed a system which
offers satellite-based two-way messaging and position reporting
services to North America's trucking industry.
San Diego Gas & Electric Company, headquartered in San Diego,
California, supplies electricity, natural gas and steam heat to
southern California. The company is also involved in the development
of commercial and industrial properties, the marketing of petroleum
products and the manufacture of air pollution control equipment.
Sunrise Medical, Inc., headquartered in Carlsbad, California,
is a designer and manufacturer of products used in various healthcare
settings. The company's products include walk-aids, ambulatory
and bath safety aids, electrically-powered wheelchairs, patient
lifters and power lift chairs. Sunrise Medical, Inc.'s products
Page 14
are sold to home healthcare dealers, hospitals and nursing homes
in the United States and internationally.
Tylan General, Inc., headquartered in San Diego, California, is
a supplier of process management instrumentation to semiconductor
capital equipment suppliers and advanced integrated circuit manufacturers.
Products include mass flow controllers that provide precise control
of process gases and capacitance diaphragm gauges, conductance
control valves and automatic pressure controllers which measure
and control sub-atmospheric pressure.
WD-40 Company, headquartered in San Diego, California, manufactures
and markets the petroleum-based product "WD-40" which is a multi-purpose
lubricant, rust preventative, penetrant and moisture displacer.
"WD-40" is sold in aerosol cans through chain, hardware and sporting
good stores, automotive parts outlets and industrial distributors
and suppliers.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before
making a decision to invest in the Trust.
The value of the Equity Securities, like the value of the Treasury
Obligations, will fluctuate over the life of the Trust and may
be more or less than the price at which they were deposited in
the Trust. The Equity Securities may appreciate or depreciate
in value (or pay dividends) depending on the full range of economic
and market influences affecting these securities. However, the
Sponsor believes that, upon termination of the Trust, even if
the Equity Securities deposited in the Trust are worthless, an
event which the Sponsor considers highly unlikely, the Treasury
Obligations will provide sufficient principal to at least equal
$10.00 per Unit (which is equal to the per Unit value upon maturity
of the Treasury Obligations). This feature of the Trust provides
Unit holders with principal protection, although they might forego
any earnings on the amount invested. To the extent that Units
are purchased at a price less than $10.00 per Unit, this feature
may also provide a potential for capital appreciation.
Unless a Unit holder purchases Units of the Trust on the Initial
Date of Deposit (or another date when the value of the Units is
$10.00 or less), total distributions, including distributions
made upon termination of the Trust, may be less than the amount
paid for a Unit.
The 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 Treasury Obligation or Equity Securities will
not be delivered ("Failed Contract Obligations") to the Trust,
the Sponsor is authorized under the Indenture to direct the Trustee
to acquire other Treasury Obligations or Equity Securities ("Replacement
Securities"). Any Replacement Security deposited in the Trust
will, in the case of Treasury Obligations, have the same maturity
value and, as closely as can be reasonably acquired by the Sponsor,
the same maturity date or, in the case of Equity Securities, 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 Securities in the Trust and the issuance of a corresponding
number of additional Units.
The Trust consists of the 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
Securities acquired
Page 15
and held by the Trust pursuant to the provisions of the Indenture
(including provisions with respect to deposits into the Trust
of Securities in connection with the issuance of additional Units).
Once all of the 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 Securities only under limited circumstances. See "How
May 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 Security
which might reasonably be expected to have a material adverse
effect on the Trust. At any time after the Initial Date of Deposit,
litigation may be instituted on a variety of grounds with respect
to the Securities. The Sponsor is unable to predict whether any
such litigation will be instituted, or if instituted, whether
such litigation might have a material adverse effect on the Trust.
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
of the offering side evaluation of the Treasury Obligations in
the Trust and the aggregate underlying value of the Equity Securities
in the Trust, plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, plus a sales charge of 4.9% (equivalent
to 5.152% of the net amount invested) divided by the number of
Units of the Trust outstanding.
During the initial offering period, the Sponsor's Repurchase Price
is based on the aggregate of the offering side evaluation of the
Treasury Obligations and the aggregate underlying value of the
Equity Securities in the Trust, plus or minus cash, if any, in
the Income and Capital Accounts of the Trust 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 based on the aggregate bid side evaluation of
the Treasury Obligations and the aggregate underlying value of
the Equity Securities in the Trust, plus or minus cash, if any,
in the Income and Capital Accounts of the Trust, plus a maximum
sales charge of 4.9% of the Public Offering Price (equivalent
to 5.152% of the net amount invested), subject to reduction beginning
, 1996, divided by the number of outstanding
Units of the Trust.
The minimum purchase of the Trust is $1,000. The applicable sales
charge for primary market sales is reduced by a discount as indicated
below for volume purchases as a percentage of the Public Offering
Price (except for sales made pursuant to a "wrap fee account"
or similar arrangements as set forth below):
<TABLE>
<CAPTION>
Sales Underwriter
Number of Units Discount Charge Concession
_______________ ________ ______ ___________
<S> <C> <C> <C>
5,000 but less than 10,000 0.25% 4.65% 3.35%
10,000 but less than 25,000 0.50% 4.40% 3.20%
25,000 but less than 50,000 1.00% 3.90% 2.80%
50,000 or more 2.00% 2.90% 2.00%
</TABLE>
Any such reduced sales charge shall be the responsibility of the
selling Underwriter, broker/dealer, bank or other. 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,
broker/dealer, bank or other. 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, broker/dealer, bank or other 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, Underwriter, broker/dealers, banks or
others and their affiliates,
Page 16
the sales charge is reduced by 2.0% of the Public Offering Price
for purchases of Units during the primary and secondary public
offering periods.
Units may be purchased in the primary or secondary market at the
Public Offering Price less the concession the Sponsor typically
allows to dealers and other selling agents for purchases (see
"Public Offering-How are Units Distributed?") by investors who
purchase Units through registered investment advisers, certified
financial planners or registered broker-dealers who in each case
either charge periodic fees for financial planning, investment
advisory or asset management services, or provide such services
in connection with the establishment of an investment account
for which a comprehensive "wrap fee" charge is imposed.
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 Securities.
During the initial offering period, the aggregate value of the
Units of the Trust shall be determined (a) on the basis of the
offering prices of the Treasury Obligations and the aggregate
underlying value of the Equity Securities therein plus or minus
cash, if any, in the Income and Capital Accounts of the Trust,
(b) if offering prices are not available for the Treasury Obligations,
on the basis of offering prices for comparable securities, (c)
by determining the value of the Treasury Obligations on the offer
side of the market by appraisal, or (d) by any combination of
the above. The aggregate underlying value of the Equity Securities
will be determined in the following 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 price 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 bid price per
Unit of the Treasury Obligations and the aggregate underlying
value of the Equity Securities therein, plus or minus cash, if
any, in the Income and Capital Accounts of the Trust plus the
applicable sales charge. The offering price of the Treasury Obligations
in the Trust may be expected to be greater than the bid price
of the Treasury Obligations by less than 2%.
Although payment is normally made five business days following
the order for purchase, payment may be made prior thereto. A person
will become owner of the Units on the date of settlement provided
payment has been received. Cash, if any, made available to the
Sponsor prior to the date of settlement for the purchase of Units
may be used in the Sponsor's business and may be deemed to be
a benefit to the Sponsor, subject to the limitations of the Securities
Exchange Act of 1934. Delivery of Certificates representing Units
so ordered will be made 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 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
360 days. During such period, the Sponsor may deposit additional
Securities in the Trust and create additional Units. Units reacquired
by the Sponsor during the initial offering period (at prices based
upon the aggregate offering price of the Treasury Obligations
and the aggregate underlying value of the Equity Securities
Page 17
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
broker/dealers, banks and others at prices which represent a concession
or agency commission of 2.8% of the Public Offering Price, and,
for secondary market sales, 2.8% of the Public Offering Price
(or 65% of the then current maximum sales charge after
, 1996). Effective on each commencing
, 1996, the sales charge will be reduced by 1/2 of
1% to a minimum of 3.0%. However, resales of Units of the Trust
by such broker/dealers, banks 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 second preceding sentence. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust Units; however,
the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act. In Texas
and in certain other states, any banks making Units available
must be registered as broker/dealers under state law.
What are the Sponsor's and Underwriter's Profits?
The Underwriter of the Trust will receive a gross sales commission
equal to 4.9% of the Public Offering Price of the Units (equivalent
to 5.152% of the net amount invested) less an amount paid to the
Sponsor (see "Underwriting"), less any reduced sales charge for
quantity purchases as described under "Public Offering-How is
the Public Offering Price Determined?" In addition, the Sponsor
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 Securities to the Trust (which is based on the
Evaluator's determination of the aggregate offering price of the
underlying Securities of the Trust on the Initial Date of Deposit
as well as on subsequent deposits) and the cost of such Securities
to the Sponsor. See "Underwriting" and Note (2) of "Schedule of
Investments." During the initial offering period, the broker/dealers,
banks and others also may realize profits or sustain losses as
a result of fluctuations after the Date of Deposit in the Public
Offering Price received by such dealers and others upon the sale
of Units.
In maintaining a market for the Units, the Sponsor and Underwriter
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 4.9% subject to reduction beginning , 1996) or
redeemed. The secondary market public offering price of Units may
be greater or less than the cost of such Units to the Sponsor or
the Underwriter.
Will There be a Secondary Market?
After the initial offering period, although not obligated to do
so, the Sponsor and Underwriter intend to maintain a market for
the Units and continuously offer to purchase Units at prices,
subject to change at any time, based upon the aggregate bid price
of the Treasury Obligations in the Portfolio of the Trust and
the aggregate underlying value of the Equity Securities in the
Trust plus or minus cash, if any, in the Income and Capital Accounts
of the Trust. 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.
Page 18
IF A UNIT HOLDER WISHES TO DISPOSE OF HIS UNITS, HE SHOULD INQUIRE
OF THE UNDERWRITER OR 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 the signature guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guaranty program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. In
certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates
of corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form.
The Trustee will maintain an account for each such Unit holder
and will credit each such account with the number of Units purchased
by that Unit holder. Within two business days of the issuance
or transfer of Units held in uncertificated form, the Trustee
will send to the registered owner of Units a written initial transaction
statement containing a description of the Trust; the number of
Units issued or transferred; the name, address and taxpayer identification
number, if any, of the new registered owner; a notation of any
liens and restrictions of the issuer and any adverse claims to
which such Units are or may be subject or a statement that there
are no such liens, restrictions or adverse claims; and the date
the transfer was registered. Uncertificated Units are transferable
through the same procedures applicable to Units evidenced by certificates
(described above), except that no certificate need be presented
to the Trustee and no certificate will be issued upon the transfer
unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder
may be required to pay $2.00 to the Trustee per certificate reissued
or transferred and to pay any governmental charge that may be
imposed in connection with each such transfer or exchange. For
new certificates issued to replace destroyed, stolen or lost certificates,
the Unit holder may be required to furnish indemnity satisfactory
to the Trustee and pay such expenses as the Trustee may incur.
Mutilated certificates must be surrendered to the Trustee for
replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income (other than accreted
interest on the Treasury Obligations) 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." The pro rata share
of cash in the Capital Account of each Trust will be computed
as of the first day of each month. Proceeds received on the sale
of any Securities in the Trust, to the extent not used to meet
redemptions of Units or pay expenses, will, however, be distributed
on the last day of each month to Unit holders of record on the
fifteenth day of each 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. Income with
respect to the original issue discount on the Treasury Obligations
in the Trust will
Page 19
not be distributed currently, although Unit holders will be subject
to Federal income tax as if a distribution had occurred. See "What
is the Federal Tax Status of Unit Holders?"
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of any
distribution made by the Trust if the Trustee has not been furnished
the Unit holder's tax identification number in the manner required
by such regulations. Any amount so withheld is transmitted to
the Internal Revenue Service and may be recovered by the Unit
holder only when filing a tax return. Under normal circumstances
the Trustee obtains the Unit holder's tax identification number
from the selling broker. However, a Unit holder should examine
his or her statements from the Trustee to make sure that the Trustee
has been provided a certified tax identification number in order
to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should
be provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit
holder will, upon surrender of his Units for redemption, receive:
(i) the pro rata share of the amounts realized upon the disposition
of Equity Securities, unless he elects an In-Kind Distribution
as described below; (ii) a pro rata share of the amounts realized
upon the disposition of the Treasury Obligations; and (iii) a
pro rata share of any other assets of the Trust, less expenses
of the Trust, subject to the limitation that Treasury Obligations
may not be sold to pay for Trust expenses. Not less than 60 days
prior to the Treasury Obligations Maturity Date the Trustee will
provide written notice thereof to all Unit holders and will include
with such notice a form to enable Unit holders to elect a distribution
of shares of Equity Securities (an "In-Kind Distribution"), if
such Unit holder owns at least 2,500 Units of the Trust, rather
than to receive payment in cash for such Unit holder's pro rata
share of the amounts realized upon the disposition by the Trustee
of Equity Securities. An In-Kind Distribution will be reduced
by customary transfer and registration charges. To be effective,
the election form, together with surrendered certificates and
other documentation required by the Trustee, must be returned
to the Trustee at least five business days prior to the Treasury
Obligations Maturity Date. Not less than 60 days prior to the
termination of the Trust, those Unit holders with at least 2,500
Units will be offered the option of having the proceeds from the
Equity Securities distributed "in-kind," or they will be paid
in cash, as indicated above. A Unit holder may, of course, at
any time after the Equity Securities are distributed, sell all
or a portion of the shares.
The Trustee will credit to the Income Account of the Trust any
dividends received on the Equity Securities therein. All other
receipts (e.g. return of capital, 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 Securities sold during the year and the
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 the signature guaranteed as explained above (or
by providing satisfactory indemnity, as in connection
Page 20
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 standard time, the date of tender
is the next day on which the New York Stock Exchange is open for
trading and such Units will be deemed to have been tendered to
the Trustee on such day for redemption at the redemption price
computed on that day. Units so redeemed shall be cancelled.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the
principal amount of a Unit redemption if the Trustee has not been
furnished the redeeming Unit holder's tax identification number
in the manner required by such regulations. Any amount so withheld
is transmitted to the Internal Revenue Service and may be recovered
by the Unit holder only when filing a tax return. Under normal
circumstances, the Trustee obtains the Unit holder's tax identification
number from the selling broker. However, any time a Unit holder
elects to tender Units for redemption, such Unit holder should
make sure that the Trustee has been provided a certified tax identification
number in order to avoid this possible "back-up withholding."
In the event the Trustee has not been previously provided such
number, one must be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds
are available for such purpose. All other amounts paid on redemption
shall be withdrawn from the Capital Account of the Trust.
The Trustee is empowered to sell Securities of the Trust in order
to make funds available for redemption. To the extent that Securities
are sold, the size and diversity of the Trust will be reduced.
Such sales may be required at a time when Securities would not
otherwise be sold and might result in lower prices than might
otherwise be realized. Equity Securities will be sold to meet
redemptions of Units before Treasury Obligations, although Treasury
Obligations may be sold if the Trust is assured of retaining a
sufficient principal amount of Treasury Obligations to provide
funds upon maturity of the Trust at least equal to $10.00 per
Unit.
The Redemption Price per Unit (as well as the secondary market
Public Offering Price) will be determined on the basis of the
bid price of the Treasury Obligations and the aggregate underlying
value of the Equity Securities in the Trust plus or minus cash,
if any, in the Income and Capital Accounts of the Trust, while
the Public Offering Price per Unit during the initial offering
period will be determined on the basis of the offering price of
such Treasury Obligations, as of the close of trading on the New
York Stock Exchange on the date any such determination is made
and the aggregate underlying value of the Equity Securities in
the Trust, plus or minus cash, if any, in the Income and Capital
Accounts of the Trust. On the Initial Date of Deposit the Public
Offering Price per Unit (which is based on the offering prices
of the Treasury Obligations and the aggregate underlying value
of the Equity Securities in the Trust and includes the sales charge)
exceeded the Unit value at which Units could have been redeemed
(based upon the current bid prices of the Treasury Obligations
and the aggregate underlying value of the Equity Securities in
the Trust) by the amount shown under "Summary of Essential Information."
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 Securities
not applied to the purchase of such Securities; (2) the aggregate
value of the Securities (including "when issued" contracts, if
any) held in the Trust, as determined by the Evaluator on the
basis of bid prices of the Treasury Obligations and the aggregate
underlying value of the Equity Securities in the Trust next computed;
and (3) dividends receivable on Equity Securities trading ex-dividend
as of the date of computation; and deducting therefrom: (1) amounts
representing any applicable taxes or governmental charges payable
out of the Trust; (2) an amount representing estimated accrued
expenses of the Trust, including but not limited to fees and expenses
of the Trustee (including legal and auditing fees), the Evaluator
and supervisory fees, if any; (3) cash held for distribution to
Unit holders of
Page 21
record of the Trust as of the business day prior to the evaluation
being made; and (4) other liabilities incurred by the Trust; and
finally dividing the results of such computation by the number
of Units of the Trust outstanding as of the date thereof.
The aggregate value of the Equity Securities will be determined
in the following manner: if the Equity Securities are listed on
a national securities exchange or the NASDAQ National Market System,
this evaluation is generally based on the closing sale prices
on that exchange or that system (unless it is determined that
these prices are inappropriate as a basis for valuation) or, if
there is no closing sale price on that exchange or system, at
the closing bid prices. If the Equity Securities are not so listed
or, if so listed and the principal market therefor is other than
on the exchange, the evaluation shall generally be based on the
current bid price on the over-the-counter market (unless these
prices are inappropriate as a basis for evaluation). If current
bid prices are unavailable, the evaluation is generally determined
(a) on the basis of current bid prices for comparable securities,
(b) by appraising the value of the Equity Securities on the bid
side of the market or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on the New York Stock Exchange is restricted or any emergency
exists, as a result of which disposal or evaluation of the Securities
is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. Under
certain extreme circumstances, the Sponsor may apply to the Securities
and Exchange Commission for an order permitting a full or partial
suspension of the right of Unit holders to redeem their Units.
The Trustee is not liable to any person in any way for any loss
or damage which may result from any such suspension or postponement.
How May Units be Purchased by the Sponsor or Underwriter?
The Trustee shall notify the Sponsor or Underwriter 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 standard 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 or Underwriter may be tendered
to the Trustee for redemption as any other Units. In the event
the Sponsor or Underwriter 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 or Underwriter
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 or Underwriter.
How May Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or
the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of
an Equity Security in the event that an issuer defaults in the
payment of a dividend that has been declared, that any action
or proceeding has been instituted restraining the payment of dividends
or there exists any legal question or impediment affecting such
Equity Security, that the issuer of the Equity Security has breached
a covenant which would affect the payments of dividends, the credit
standing of the issuer or otherwise impair the sound investment
character of the Equity Security, that the issuer has defaulted
on the payment on any other of its outstanding obligations, that
the price of the Equity Security has declined to such an extent
or other such credit factors exist so that in the opinion of the
Sponsor, the retention of such Equity Securities would be detrimental
to the Trust. Treasury Obligations may be sold by the Trustee
only pursuant to the liquidation of the Trust or to meet redemption
requests. Except as stated under "Portfolio-What are Some Additional
Considerations for Investors?" For Failed
Page 22
Contract Obligations, the acquisition by the Trust of any securities
other than the 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 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 Securities designated by the Sponsor,
or if not so directed, in its own discretion, for the purpose
of redeeming Units of the Trust tendered for redemption and the
payment of expenses; provided however, that in the case of Securities
sold to meet redemption requests, Treasury Obligations may only
be sold if the Trust is assured of retaining a sufficient principal
amount of Treasury Obligations to provide funds upon maturity
of the Trust at least equal to $10.00 per Unit. Treasury Obligations
may not be sold by the Trustee to meet Trust expenses.
The Sponsor, in designating Equity Securities to be sold by the
Trustee, will generally make selections in order to maintain,
to the extent practicable, the proportionate relationship among
the number of shares of individual issues of Equity Securities.
To the extent this is not practicable, the composition and diversity
of the Equity Securities may be altered. In order to obtain the
best price for the Trust, it may be necessary for the Sponsor
to specify minimum amounts (generally 100 shares) in which blocks
of Equity Securities are to be sold.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds and The First Trust GNMA. First Trust introduced
the first insured unit investment trust in 1974 and to date more
than $9 billion in First Trust unit investment trusts have been
deposited. The Sponsor's employees include a team of professionals
with many years of experience in the unit investment trust industry.
The Sponsor is a member of the National Association of Securities
Dealers, Inc. and Securities Investor Protection Corporation and
has its principal offices at 1001 Warrenville Road, Lisle, Illinois
60532; telephone number (708) 241-4141. As of December 31, 1994,
the total partners' capital of Nike Securities L.P. was $10,863,058
(audited). (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
principle place of business at 45 Wall Street, New York, New York
10005 and its unit investment trust offices at 770 Broadway, New
York, New York 10003. Unit holders who have questions regarding
the Trust may call the Customer Service Help Line at 1-800-682-7520.
The Trustee is a member of the New York Clearing House Association
and is subject to supervision and examination by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Securities. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
Page 23
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities.
In the event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or
upon or in respect of the Trust which the Trustee may be required
to pay under any present or future law of the United States of
America or of any other taxing authority having jurisdiction.
In addition, the Indenture contains other customary provisions
limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding amounts prescribed
by the Securities and Exchange Commission, or (b) terminate the
Indenture and liquidate the Trust as provided herein, or (c) continue
to act as Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is FT Evaluators L.P., an Illinois limited partnership
formed in 1994 and an affiliate of the Sponsor. The Evaluator's
address is 1001 Warrenville Road, Lisle, Illinois 60532. 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.
Page 24
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the
maturity, redemption or other disposition of the last of the Treasury
Obligations held in the Trust, but in no event beyond 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 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 Sponsor. If the Trust is liquidated because of the redemption
of unsold Units of the Trust, the Sponsor will refund to each
purchaser of Units of the Trust the entire sales charge 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 Treasury Obligations Maturity Date, Equity Securities
will begin to be sold in connection with the termination of the
Trust. The Sponsor will determine the manner, timing and execution
of the sale of the Equity Securities. Written notice of any termination
of the Trust specifying the time or times at which Unit holders
may surrender their certificates for cancellation shall be given
by the Trustee to each Unit holder at his address appearing on
the registration books of the Trust maintained by the Trustee.
At least 60 days prior to the Treasury Obligations Maturity Date
the Trustee will provide written notice thereof to all Unit holders
and will include with such notice a form to enable Unit holders
to elect a distribution of shares of Equity Securities (reduced
by customary transfer and registration charges), if such Unit
holder owns at least 2,500 Units of the Trust, rather than to
receive payment in cash for such Unit holder's pro rata share
of the amounts realized upon the disposition by the Trustee of
Equity Securities. All Unit holders will receive their pro rata
portion of the Treasury Obligations in cash upon the termination
of the Trust. To be effective, the election form, together with
surrendered certificates and other documentation required by the
Trustee, must be returned to the Trustee at least five business
days prior to the Treasury Obligations Maturity Date. Unit holders
not electing a distribution of shares of Equity Securities will
receive a cash distribution from the sale of the remaining Securities
within a reasonable time after the Trust is terminated. Regardless
of the distribution involved, the Trustee will deduct from the
funds of the Trust any accrued costs, expenses, advances or indemnities
provided by the Trust Agreement, including estimated compensation
of the Trustee and costs of liquidation and any amounts required
as a reserve to provide for payment of any applicable taxes or
other governmental charges. Any sale of Securities in the Trust
upon termination may result in a lower amount than might otherwise
be realized if such sale were not required at such time. The Trustee
will then distribute to each Unit holder his pro rata share of
the balance of the Income and Capital Accounts.
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 LLP, 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.
Page 25
UNDERWRITING
The Underwriter named below has purchased Units in the following
amount:
<TABLE>
<CAPTION>
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Underwriter
Torrey Pines Securities, Inc. 140 Marine View Drive, Suite 110,
Solana Beach, California 92075
=========
</TABLE>
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 concessions
and 3.5% of the Public Offering Price of the Units, which is retained
by the Underwriter.
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.
Trust performance may be compared to performance on a total return
basis with the Dow Jones Industrial Average, the S&P 500 Composite
Price Stock Index, or performance data from Lipper Analytical
Services, Inc. and Morningstar Publications, Inc. or from publications
such as Money, The New York Times, U.S. News and World Report,
Business Week, Forbes or Fortune. As with other performance data,
performance comparisons should not be considered representative
of the Trust's relative performance for any future period.
Page 26
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 118
We have audited the accompanying statement of net assets, including
the schedule of investments, of The First Trust Special Situations
Trust, Series 118, comprised of San Diego Growth & Treasury Securities
Trust, Series 1, as of the opening of business on , 1995.
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 , 1995. 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 The First Trust Special Situations Trust, Series 118, comprised
of San Diego Growth & Treasury Securities Trust, Series 1, at
the opening of business on , 1995 in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
, 1995
Page 27
Statement of Net Assets
San Diego Growth & Treasury Securities Trust, Series 1
The First Trust Special Situations Trust, Series 118
At the Opening of Business on the Initial Date of Deposit
, 1995
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Securities represented by purchase
contracts (1) (2) $
==========
Units outstanding
==========
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (3) $
Less sales charge (3)
__________
Net Assets $
==========
</TABLE>
[FN]
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" is based on offering side evaluations of the Treasury
Obligations and the aggregate underlying value of the Equity Securities.
(2) An irrevocable letter of credit totaling $
issued by Bankers Trust Company has been deposited with the Trustee
covering the monies necessary for the purchase of the Securities
pursuant to contracts for the purchase of such Securities.
(3) The aggregate cost to investors includes a sales charge computed
at the rate of 4.9% of the Public Offering Price (equivalent to
5.152% of the net amount invested), assuming no reduction of sales
charge for quantity purchases.
Page 28
Schedule of Investments
San Diego Growth & Treasury Securities Trust, Series 1
The First Trust Special Situations Trust, Series 118
At the Opening of Business on the Initial Date of Deposit
, 1995
<TABLE>
<CAPTION>
Market
Approximate Value per
Percentage of Share of Cost of
Maturity Aggregate Equity Securities
Value Name of Issuer and Title of Security (1) Offering Price (3) Securities to Trust (2)
________ ________________________________________ __________________ __________ ____________
<C> <S> <C> <C> <C>
$ Zero coupon U.S. Treasury bonds % $
maturing , 2006
Number Ticker Symbol and
of Shares Name of Issuer of Equity Securities
_________ ___________________________________
ADAX Applied Digital Access, Inc. 1-4%
ASHW Ashworth, Inc. 1-4%
ELY Callaway Golf Company 1-4%
CHT Chart House Enterprises 1-4%
CBRA Cobra Golf, Inc. 1-4%
COHU Cohu, Inc. 1-4%
DHTK DH Technology, Inc. 1-4%
DURA Dura Pharmaceuticals, Inc. 1-4%
ENCD Encad, Inc. 1-4%
HOO Glacier Water Services, Inc. 1-4%
GGTI GTI Corporation 1-4%
HTBB HomeTown Buffet 1-4%
JC Jenny Craig, Inc. 1-4%
MAIL Mail Boxes Etc. 1-4%
PCOR PSICOR, Inc. 1-4%
PETC Petco Animal Supplies, Inc. 1-4%
PRXM Proxima Corporation 1-4%
PYXS Pyxis Corporation 1-4%
QCOM Qualcomm, Inc. 1-4%
SDO San Diego Gas & Electric Company 1-4%
SMD Sunrise Medical, Inc. 1-4%
TYGN Tylan General, Inc. 1-4%
WDFC WD-40 Company 1-4%
________ ____________
Total Equity Securities %
________ ____________
Total Investment 100% $
======== ============
</TABLE>
[FN]
________________
(1) The Treasury Obligations are being purchased at a discount
from their par value because there is no stated interest income
thereon (such securities are often referred to as zero coupon
U.S. Treasury bonds). Over the life of the Treasury Obligations
the value increases, so that upon maturity the holders will receive
100% of the principal amount thereof.
All securities are represented by regular way contracts to purchase
such securities for the performance of which an irrevocable letter
of credit has been deposited with the Trustee. The contracts to
purchase securities were entered into by the Sponsor on
, 1995.
(2) The cost of the securities to the Trust represents the offering
side evaluation as determined by the Evaluator, an affiliate of
the Sponsor, with respect to the Treasury Obligations and the
aggregate underlying value with respect to the Equity Securities
Page 29
acquired (generally determined by the closing sale prices of listed
Equity Securities and the ask prices of over-the-counter traded
Equity Securities on the business day preceding the Initial Date
of Deposit). The offering side evaluation of the Treasury Obligations
is greater than the bid side evaluation of such Treasury Obligations
which is the basis on which the Redemption Price per Unit will
be determined after the initial offering period. The aggregate
value, based on the bid side evaluation of the Treasury Obligations
and the aggregate underlying value of the Equity Securities on
the Initial Date of Deposit, was $ . Cost and profit to
the Sponsor relating to the purchase of the Treasury Obligations
sold to the Trust were $ and $ , respectively. Cost
and loss to Sponsor relating to the purchase of the Equity Securities
sold to the Trust were $ and $ , respectively.
(3) The portfolio may contain additional Equity Securities each
of which will not exceed approximately 4% of the Aggregate Offering
Price for Equity Securities. Although it is not the Sponsor's
intention, certain of the Equity Securities listed above may not
be included in the final portfolio. Also, the percentages of the
Aggregate Offering Price for the Equity Securities are approximate
amounts and may vary in the final portfolio.
Page 30
This page is intentionally left blank.
Page 31
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
Summary of Essential Information 4
San Diego Growth & Treasury Securities Trust,
Series 1
The First Trust Special Situations Trust, Series 118:
What is The First Trust Special Situations Trust? 5
What are the Expenses and Charges? 6
What is the Federal Tax Status of Unit Holders? 7
Why are Investments in the Trust Suitable for
Retirement Plans? 10
Portfolio:
What are Treasury Obligations? 11
What are Equity Securities? 11
Risk Factors 11
What are the Equity Securities Selected for
San Diego Growth & Treasury Securities Trust,
Series 1? 13
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 and Underwriter's Profits? 18
Will There be a Secondary Market? 18
Rights of Unit Holders:
How is Evidence of Ownership Issued
and Transferred? 19
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
or Underwriter? 22
How May Securities be Removed from the Trust? 22
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 23
Who is the Trustee? 23
Limitations on Liabilities of Sponsor and Trustee 24
Who is the Evaluator? 24
Other Information:
How May the Indenture be Amended or
Terminated? 24
Legal Opinions 25
Experts 25
Underwriting 26
Report of Independent Auditors 27
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.
Torrey Pines
Securities, Inc.
San Diego Growth & Treasury Securities Trust
Series 1
140 Marine View Drive
Suite 110
Solana Beach, California 92075
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
, 1995
MEMORANDUM
Re: The First Trust Special Situations Trust, Series 118
As indicated in our cover letter transmitting the
Registration Statement on Form S-6 and other related material
under the Securities Act of 1933 to the Commission, the only
difference of consequence (except as described below) between The
First Trust Special Situations Trust, Series 115, which is the
current fund, and The First Trust Special Situations Trust,
Series 118, the filing of which this memorandum accompanies, is
the change in the series number. The list of bonds comprising
the Fund, the evaluation, record and distribution dates and other
changes pertaining specifically to the new series, such as size
and number of Units in the Fund and the statement of condition of
the new Fund, will be filed by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of Templeton Growth and Treasury Trust, Series 1
and subsequent series (File No. 811-05903) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 115 Prospectus relate to the series number and size and
the date and various items of information which will be derived
from and apply specifically to the bonds deposited in the Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Broker's Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
ITEM 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
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Special Situations Trust, Series
118 has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
Village of Lisle and State of Illinois on April 17, 1995.
THE FIRST TRUST SPECIAL SITUATIONS
TRUST, SERIES 118
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this 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 April 17, 1995
Corporation, the
General Partner of
Nike Securities L.P. Carlos E. Nardo
Attorney-in-Fact**
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with 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 by this reference.
S-2
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 ERNST & YOUNG LLP
The consent of Ernst & Young to the use of its name and to
the reference to such firm in the Prospectus included in this
Registration Statement will be filed by amendment.
CONSENT OF FT EVALUATORS L.P.
The consent of FT Evaluators L.P. to the use of its name in
the Prospectus included in the Registration Statement is filed as
Exhibit 4.1 to the Registration Statement
S-3
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 18 and
subsequent Series effective October 15, 1991 among Nike
Securities L.P., as Depositor, United States Trust
Company of New York as Trustee, Securities Evaluation
Service, Inc., as Evaluator, and Nike Financial Advisory
Services L.P. as Portfolio Supervisor (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).
1.1.1* Form of Trust Agreement for Series 118 among Nike
Securities L.P., as Depositor, United States Trust
Company of New York, as Trustee, FT Evaluators L.P., 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 Corporaiton, 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).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
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.
S-4
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 FT Evaluators L.P.
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).
___________________________________
* To be filed by amendment.
S-5
