Registration No. 33-63491
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to Form S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
The First Trust Special Situations Trust, Series 127
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
E. Title and Amount of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as
amended
F. Proposed Maximum Aggregate Offering Price to the Public of
the Securities Being Registered: Indefinite
G. Amount of Filing Fee (as required by Rule 24f-2): $500.00*
H. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
|XXX|Check box if it is proposed that this filing will become
effective on November 13, 1995 at 2:00 p.m. pursuant to Rule
487.
________________________________
*Previously paid
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 127
Cross-Reference Sheet
(Form N-8B-2 Items required by Instructions as
to the Prospectus in Form S-6)
Form N-8B-2 Item Number Form S-6 Heading in Prospectus
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust Prospectus front cover
(b) Title of securities issued Summary of Essential
Information
2. Name and address of each depositor Information as to
Sponsor, Trustee and
Evaluator
3. Name and address of trustee Information as to
Sponsor, Trustee and
Evaluator
4. Name and address of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
5. State of organization of trust The First Trust
Special Situations
Trust
6. Execution and termination of Other Information
trust agreement
7. Changes of name *
8. Fiscal year *
9. Litigation *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer Public Offering
securities
(b) Cumulative or distributive The First Trust
securities Special Situations
Trust
(c) Redemption Rights of Unitholders
(d) Conversion, transfer, etc. Rights of Unitholders
(e) Periodic payment plan *
(f) Voting rights Rights of Unitholders
(g) Notice of certificateholders Other Information
(h) Consents required Rights of Unitholders;
Other Information
(i) Other provisions The First Trust
Special Situations
Trust
11. Types of securities comprising The First Trust
units Special
Situations Trust
Schedule of
Investments
12. Certain information regarding
periodic payment certificates *
13. (a) Load, fees, expenses, etc. Summary of Essential
Information; Public
Offering; The First
Trust Special
Situations Trust
(b) Certain information regarding
periodic payment certificates *
(c) Certain percentages Summary of Essential
Information; The
First Trust Special
Situations Trust;
Public Offering
(d) Certain other fees, etc.
payable by holders Rights of Units
Holders
(e) Certain profits receivable
by depositor, principal,
underwriters, trustee or The First Trust
affiliated persons Special
Situations Trust
(f) Ratio of annual charges *
to income
14. Issuance of trust's securities Rights of Unit Holders
15. Receipt and handling of payments
from purchasers *
16. Acquisition and disposition of
underlying securities The First Trust
Special Situations
Trust; Rights of Unit
Holders;
17. Withdrawal or redemption The First Trust
Special Situations
Trust; Public
Offering; Rights of
Unit Holders
18. (a) Receipt, custody and Rights of Unit Holders
disposition of income
(b) Reinvestment of distributions Rights of Unit Holders
(c) Reserves or special funds Information as to
Sponsor, Trustee and
Evaluator
(d) Schedule of distributions *
19. Records, accounts and reports Rights of Unit Holders
20. Certain miscellaneous provisions
of trust agreement
(a) Amendment Other Information
(b) Termination Other Information
(c) and (d) Trustee, removal Information as
and successor to Sponsor, Trustee
and Evaluator
(e) and (f) Depositor, removal Information as
and successor to Sponsor, Trustee
and Evaluator
21. Loans to security holders *
22. Limitations on liability The First Trust
Special Situations
Trust;
Information as to
Sponsor, Trustee
and Evaluator
23. Bonding arrangements Contents of
Registration
Statement
24. Other material provisions *
of trust agreement
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor Information as to
Sponsor, Trustee and
Evaluator
26. Fees received by depositor *
27. Business of depositor Information as to
Sponsor, Trustee and
Evaluator
28. Certain information as to
officials and affiliated *
persons of depositor
29. Voting securities of depositor *
30. Persons controlling depositor *
31. Payment by depositor for certain
services rendered to trust *
32. Payment by depositor for certain
other services rendered to trust *
33. Remuneration of employees of
depositor for certain services
rendered to trust *
34. Remuneration of other persons
for certain services rendered *
to trust
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of trust's Public Offering
securities by states
36. Suspension of sales of trust's
securities *
37. Revocation of authority to *
distribute
38. (a) Method of distribution Public Offering
(b) Underwriting agreements Public Offering
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as
underwriters to Sponsor, Trustee
and Evaluator
(b) N.A.S.D. membership of
principal underwriters Information as to
Sponsor, Trustee and
Evaluator
40. Certain fees received by See Items 13(a) and
principal underwriters 13(e)
41. (a) Business of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) Branch offices of
principal underwriters *
(c) Salesmen of principal *
underwriters
42. Ownership of trust's securities
by certain persons *
43. Certain brokerage commissions
received by principal *
underwriters
44. (a) Method of valuation Summary of Essential
Information; The
First Trust Special
Situations Trust,
Public Offering
(b) Schedule as to offering *
price
(c) Variation in offering Public Offering
price to certain persons
45. Suspension of redemption rights *
46. (a) Redemption valuation Rights of Unit Holders
(b) Schedule as to redemption *
price
47. Maintenance of position in Public Offering;
underlying securities Rights
of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of Information as
trustee to Sponsor, Trustee
and Evaluator
49. Fees and expenses of trustee The First Trust
Special Situations
Trust
50. Trustee's lien The First Trust
Special Situations
Trust
VI. INFORMATION CONCERNING THE INSURANCE OF HOLDERS OF
SECURITIES
51. Insurance of holders of
trust's ecurities *
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust The First Trust
agreement with respect to Special
selection or elimination of Situations Trust;
underlying securities Rights of Unit Holders
(b) Transactions involving
elimination of underlying *
securities
(c) Policy regarding substitution The First Trust
or elimination of underlying Special
securities Situations Trust;
Rights of Unit Holders
(d) Fundamental policy not
otherwise covered *
53. Tax status of Trust The First Trust
Special Situations
Trust
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during *
last ten years
55.
56.
57. Certain information regarding
period payment certificates *
58.
59. Financial statements Report of Independent
(Instruction 1(c) to Form S-6) Auditors; Statement of
Net Assets
* Inapplicable, answer negative or not required.
American Retail Growth Trust, Series 1
The Trust. The First Trust (registered trademark) Special Situations
Trust, Series 127 (the "Trust") is a unit investment trust consisting
of a portfolio containing common stocks issued by retail companies
incorporated or headquartered in the United States.
The objective of the Trust is to provide for potential capital
appreciation by investing the Trust's portfolio in common stocks
issued by retail companies which are incorporated or headquartered
in the United States (the "Equity Securities"). See "Schedule
of Investments." The Trust has a mandatory termination date ("Mandatory
Termination Date" or "Trust Ending Date") as set forth under "Summary
of Essential Information." There is, of course, no guarantee that
the objective of the Trust will be achieved. Each Unit of the
Trust represents an undivided fractional interest in all the Equity
Securities deposited in the Trust.
The Equity Securities deposited in the Trust's portfolio have
no fixed maturity date and the value of these underlying Equity
Securities will fluctuate with changes in the values of stocks
in general. See "Portfolio."
The Sponsor may, from time to time during a period of up to approximately
360 days after the Initial Date of Deposit, deposit additional
Equity Securities in the Trust. Such deposits of additional Equity
Securities will, therefore, be done in such a manner that the
original proportionate relationship amongst the individual issues
of the Equity Securities shall be maintained. Any deposit by the
Sponsor of additional Equity Securities will duplicate, as nearly
as is practicable, the original proportionate relationship established
on the Initial Date of Deposit, 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 Equity 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 Equity Securities be Removed from the Trust?"
Public Offering Price. The Public Offering Price per Unit of the
Trust during the initial offering period is equal to the aggregate
underlying value of the Equity Securities in the Trust (generally
determined by the closing sale prices of listed Equity Securities
and the ask prices of over-the-counter traded Equity Securities)
plus or minus a pro rata share of cash, if any, in the Capital
and Income Accounts of the Trust, plus a maximum sales charge
of 4.90% (equivalent to 5.152% of the net amount invested). A
pro rata share of accumulated dividends, if any, in the Income
Account is included in the Public Offering Price. The secondary
market Public Offering Price per Unit will be based upon the aggregate
underlying value of the Equity Securities in the Trust (generally
determined by the closing sale prices of listed Equity Securities
and the bid prices of over-the-counter traded Equity Securities)
plus or minus a pro rata share of cash, if any, in the Capital
and Income Accounts of the Trust plus a maximum sales charge of
4.90% (equivalent to 5.152% of the net amount invested) subject
to reduction beginning December 1, 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?"
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE
PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE
INVESTMENT RISK INCLUDING LOSS OF PRINCIPAL.
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.
First Trust (registered trademark)
The date of this Prospectus is November 13, 1995
Page 1
Estimated Net Annual Distributions. The estimated net annual dividend
distributions to Unit holders (based on the most recent quarterly
or semi-annual ordinary dividend declared with respect to the
Equity Securities in the Trust) on the Initial Date of Deposit
for the American Retail Growth Trust, Series 1 was $.0464 per
Unit. The actual net annual dividend distributions per Unit will
vary with changes in fees and expenses of the Trust, with changes
in dividends received and with the sale or liquidation of Equity
Securities; therefore, there is no assurance that the net annual
dividend distributions will be realized in the future.
Dividend and Capital Distributions. Distributions of dividends
and capital, if any, received by the Trust, net of expenses of
the Trust, will be paid 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. 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 intends to maintain
a market for Units of the Trust and offer to repurchase such Units
at prices which are based on the aggregate underlying value of
Equity Securities in the Trust (generally determined by the closing
sale prices of listed Equity Securities and the bid prices of
over-the-counter traded Equity Securities) plus or minus cash,
if any, in the Capital and Income Accounts of the Trust. If a
secondary market is maintained during the initial offering period,
the prices at which Units will be repurchased will also be based
upon the aggregate underlying value of the Equity Securities in
the Trust (generally determined by the closing sale prices of
listed Equity Securities and the ask prices of over-the-counter
traded Equity Securities) plus or minus cash, if any, in the Capital
and Income Accounts of the Trust. If a secondary market is not
maintained, a Unit holder may redeem Units through redemption
at prices based upon the aggregate underlying value of the Equity
Securities in the Trust (generally determined by the closing sale
prices of listed Equity Securities and the bid prices of over-the-counter
traded Equity Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust. A Unit
holder tendering 2,500 Units or more for redemption may request
a distribution of shares of Equity Securities (reduced by customary
transfer and registration charges) in lieu of payment in cash.
See "How May Units be Redeemed?"
Termination. Commencing on the Mandatory Termination Date, Equity
Securities will begin to be sold in connection with the termination
of the Trust. The Sponsor will determine the manner, timing and
execution of the sale of the Equity Securities. Written notice
of any termination of the Trust specifying the time or times at
which Unit holders may surrender their certificates for cancellation
shall be given by the Trustee to each Unit holder at his address
appearing on the registration books of the Trust maintained by
the Trustee. At least 60 days prior to the Mandatory Termination
Date of the Trust, the Trustee will provide written notice thereof
to all Unit holders and will include with such notice a form to
enable Unit holders to elect a distribution of shares of Equity
Securities (reduced by customary transfer and registration charges)
if such Unit holder owns at least 2,500 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. To be effective, the election form, together
with surrendered certificates and other documentation required
by the Trustee, must be returned to the Trustee at least five
business days prior to the Mandatory Termination Date of the Trust.
Unit holders not electing a distribution of shares of Equity Securities
will receive a cash distribution within a reasonable time after
the Trust is terminated. See "Rights of Unit Holders-How are Income
and Capital Distributed?"
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 financial
condition of the issuers of the Equity Securities or the general
condition of the stock market, volatile interest rates, economic
recession or changing consumer spending trends. The Trust's portfolio
is not managed and Equity Securities will not be sold by the Trust
regardless of market fluctuations, although some Equity Securities
may be sold under certain limited circumstances. See "What are
Equity Securities?-Risk Factors."
Page 2
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Equity Securities-November 13, 1995
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank (National Association)
Evaluator: FT Evaluators L.P.
<TABLE>
<CAPTION>
General Information
<S> <C>
Initial Number of Units 15,000
Fractional Undivided Interest in the Trust per Unit 1/15,000
Public Offering Price:
Aggregate Offering Price Evaluation of Equity
Securities in Portfolio (1) $139,816
Aggregate Offering Price Evaluation of Equity
Securities per Unit $ 9.3211
Sales Charge of 4.90% of the Public Offering Price per Unit
(5.152% of the net amount invested) $ .4803
Public Offering Price per Unit (2) $ 9.8014
Sponsor's Initial Repurchase Price per Unit $ 9.3211
Redemption Price per Unit (based on aggregate
underlying value of Equity Securities) (3) $ 9.3211
</TABLE>
CUSIP Number 33718R 195
First Settlement Date November 16, 1995
Mandatory Termination Date December 1, 2002
Discretionary Liquidation Amount The Trust may be terminated
if the value thereof is less
than the lower of $2,000,000 or
20% of the total value of Equity
Securities deposited in the Trust
during the primary offering period.
Trustee's Annual Fee $.0098 per Unit outstanding.
Evaluator's Annual Fee $0.0030 per Unit outstanding,
payable to an affiliate of the Spon-
sor. 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.
Estimated Organizational and Offering
Expenses (5) $.0225 per Unit.
Income Distribution Record Date Fifteenth day of each December
commencing December 15, 1995.
Income Distribution Date (6) Last day of each December
commencing December 30, 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.
(2) On the Initial Date of Deposit there will be no accumulated
dividends in the Income Account. Anyone ordering Units after such
date will pay a pro rata share of any accumulated dividends in
such Income Account. The Public Offering Price as shown reflects
the value of the Equity Securities at the opening of business
on the Initial Date of Deposit and establishes the original proportionate
relationship amongst the individual securities. No sales to investors
will be executed at this price. Additional Equity Securities will
be deposited during the day of the Initial Date of Deposit which
will be valued as of 4:00 p.m. Eastern time and sold to investors
at a Public Offering Price per Unit based on this valuation.
(3) See "How May Units be Redeemed?"
(4) In addition, the Sponsor will be reimbursed for bookkeeping
and other administrative expenses currently at a maximum annual
rate of $0.0028 per Unit.
(5) The Trust (and therefore Unit holders) will bear all or
a portion of its organizational and offering costs (including
costs of preparing the registration statement, the trust indenture
and other closing documents, registering Units with the Securities
and Exchange Commission and states, the initial audit of the Trust
portfolio, legal fees and the initial fees and expenses of the
Trustee but not including the expenses incurred in the printing
of preliminary and final prospectuses, and expenses incurred in
the preparation and printing of brochures and other advertising
materials and any other selling expenses) as is common for mutual
funds. Total organizational and offering expenses will be charged
off over a period not to exceed five years. See "What are the
Expenses and Charges?" and "Statement of Net Assets." Historically,
the sponsors of unit investment trusts have paid all the costs
of establishing such trusts.
(6) Distributions from the Capital Account will be made monthly
payable on the last day of the month to Unit holders of record
on the fifteenth day of such month if the amount available for
distribution equals at least $0.01 per Unit. Notwithstanding,
distributions of funds in the Capital Account, if any, will be
made in December of each year.
Page 3
American Retail Growth Trust, Series 1
The First Trust Special Situations Trust, Series 127
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust, Series 127 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:
American Retail Growth 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, The Chase Manhattan Bank (National
Association) 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 common
stocks issued by retail companies 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 objective of the Trust is to provide for potential capital
appreciation through an investment in equity securities issued
by retail companies incorporated or headquartered in the United
States (the "Equity Securities"). In general, the stock market
performance of retail companies has lagged the overall equity
market for the past few years. This sector can be considered "out
of favor," meaning that stocks are currently underperforming and
that share prices may be undervalued. The Sponsor believes that
a portfolio of industry leading retailers with above-average growth
prospects offers value today, along with long-term growth potential
for the future, as investor sentiment improves toward the retail
sector.
In the opinion of the Sponsor, the highly competitive nature
of the retailing industry makes it important to own the leading
retailers which have demonstrated the ability to consistently
provide the best combination of price, selection and service.
Only the strongest and most innovative retailers will be able
to successfully expand their market share. The Sponsor believes
it has selected the retailers which possess these characteristics
and are most likely to aggressively expand their earnings potential
through the opening of new stores, by increasing sales volume
at existing locations, and by raising profit margins through efficiency
gains from increased economies of scale and the enhanced use of
technology. Additionally, the Sponsor believes that retailing
is further developed in the United States than in most European,
South American or Asian countries. Therefore, the strongest retailers
will have opportunities to expand their retailing concepts internationally.
The Trust purposely avoids small market capitalization stocks,
newly issued stocks, and stocks with little or no earnings to
help reduce excessively high risk. The companies selected for
the Trust all have market capitalization of at least $750 million
and have been publicly traded for approximately two years or more.
There is, of course, no guarantee that the objective of the Trust
will be achieved.
With the deposit of the Equity Securities on the Initial Date
of Deposit, the Sponsor established a percentage relationship
between the amounts of Equity Securities in the Trust's portfolio.
From time to time following the Initial Date of Deposit, the Sponsor,
pursuant to the Indenture, may deposit additional Equity Securities
in the Trust and Units may be continuously offered for sale to
the public by means of this Prospectus, resulting in a potential
increase in the outstanding number of Units of the Trust. Any
deposit by the Sponsor of additional Equity Securities will duplicate,
as nearly as is practicable, the original proportionate relationship
and not the actual proportionate relationship on the subsequent
date of deposit, since the actual proportionate relationship may
be different than the original proportionate relationship. Any
such difference may be due to the sale, redemption or liquidation
of any of the Equity Securities deposited in the Trust on the
Initial, or any subsequent, Date of Deposit. See "How May Equity
Securities be Removed from the Trust?" The original percentage
relationship of each Equity Security to the Trust is set forth
herein under "Schedule of Investments." Since the prices of the
underlying Equity Securities will fluctuate daily, the ratio,
Page 4
on a market value basis, will also change daily. The portion
of Equity Securities represented by each Unit will not change
as a result of the deposit of additional Equity Securities in
the Trust.
On the Initial Date of Deposit, each Unit of the Trust represented
the undivided fractional interest in the Equity Securities deposited
in the Trust set forth under "Summary of Essential Information."
To the extent that Units of the Trust are redeemed, the aggregate
value of the Equity Securities in the Trust will be reduced and
the undivided fractional interest represented by each outstanding
Unit of the Trust will increase. However, if additional Units
are issued by the Trust in connection with the deposit of additional
Equity Securities by the Sponsor, the aggregate value of the Equity
Securities in the Trust will be increased by amounts allocable
to additional Units, and the fractional undivided interest represented
by each Unit of the Trust will be decreased proportionately. See
"How May Units be Redeemed?" The Trust has a Mandatory Termination
Date as set forth herein under "Summary of Essential Information."
What are the Expenses and Charges?
With the exception of bookkeeping and other administrative services
provided to each 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. However, First Trust Advisors L.P., an
affiliate of the Sponsor, will receive an annual supervisory fee,
which is not to exceed the amount set forth under "Summary of
Essential Information," for providing portfolio supervisory services
for the Trust. Such fee is based on the number of Units outstanding
in the Trust on January 1 of each year except for the year or
years in which an initial offering period occurs in which case
the fee for a month is based on the number of Units outstanding
at the end of such month. The fee may exceed the actual costs
of providing such supervisory services for this Trust, but at
no time will the total amount received for portfolio supervisory
services rendered to unit investment trusts of which Nike Securities
L.P. is the Sponsor in any calendar year exceed the aggregate
cost to First Trust Advisors L.P. of supplying such services in
such year.
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 services for the 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 $.0098 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.
Expenses incurred in establishing the Trust, including costs of
preparing the registration statement, the trust indenture and
other closing documents, registering Units with the Securities
and Exchange Commission and states, the initial audit of the Trust
portfolio and the initial fees and expenses of the Trustee and
any other out-of-pocket expenses, will be paid by the Trust and
charged off over a period not to exceed five years. 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,
Page 5
indemnification of the Trustee for any loss, liability or expense
incurred by it without negligence, bad faith or willful misconduct
on its part, arising out of or in connection with its acceptance
or administration of the Trust; indemnification of the Sponsor
for any loss, liability or expense incurred without gross negligence,
bad faith or willful misconduct in acting as Depositor of the
Trust; all taxes and other government charges imposed upon the
Securities or any part of the Trust (no such taxes or charges
are being levied or made or, to the knowledge of the Sponsor,
contemplated). The above expenses and the Trustee's annual fee,
when paid or owing to the Trustee, are secured by a lien on the
Trust. In addition, the Trustee is empowered to sell Equity Securities
in the Trust in order to make funds available to pay all these
amounts if funds are not otherwise available in the Income and
Capital Accounts of the Trust. Since the Equity Securities are
all common stocks and the income stream produced by dividend payments
is unpredictable, the Sponsor cannot provide any assurance that
dividends will be sufficient to meet any or all expenses of the
Trust. As described above, if dividends are insufficient to cover
expenses, it is likely that Equity Securities will have to be
sold to meet Trust expenses. These sales may result in capital
gains or losses to Unit holders. See "What is the Federal Tax
Status of Unit Holders?"
The Indenture requires the Trust to be audited on an annual basis
at the expense of the Trust by independent auditors selected by
the Sponsor. So long as the Sponsor is making a secondary market
for the Units, the Sponsor is required to bear the cost of such
annual audits to the extent such cost exceeds $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:
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 each of the assets of the
Trust under the Code; and the income of the Trust will be treated
as income of the Unit holders thereof under the Code. Each Unit
holder will be considered to have received his pro rata share
of the income derived from each Equity Security when such income
is considered to be received by the Trust.
2. Each Unit holder will have a taxable event when the Trust
disposes of an Equity Security (whether by sale, exchange, liquidation,
redemption, or otherwise) or upon the sale or redemption of Units
by such Unit holder. The price a Unit holder pays for his Units
is allocated among his pro rata portion of each Equity Security
held by the Trust (in proportion to the fair market values thereof
on the date the Unit holder purchases his Units) in order to determine
his tax basis for his pro rata portion of each Equity Security
held by the Trust. For Federal income tax purposes, a Unit holder's
pro rata portion of dividends, as defined by Section 316 of the
Code, paid by a corporation with respect to an Equity Security
held by the Trust is taxable as ordinary income to the extent
of such corporation's current and accumulated "earnings and profits."
A Unit holder's pro rata portion of dividends paid on such Equity
Security which exceed such current and accumulated earnings and
profits will first reduce a Unit holder's tax basis in such Equity
Security, and to the extent that such dividends exceed a Unit
holder's tax basis in such Equity Security shall generally be
treated as capital gain. In general, any such capital gain will
be short-term unless a Unit holder has held his Units for more
than one year.
3. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Equity Securities held
by the Trust will generally be considered a capital gain except
in the case of a dealer or a financial institution and will be
long-term if the Unit holder has held his Units for more than
one year (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,
Page 6
if any, upon the sale or redemption of Units or the disposition
of Equity Securities held by the Trust will generally be considered
a capital loss (except in the case of a dealer or a financial
institution) and, in general, will be long-term if the Unit holder
has held his Units for more than one year. Unit holders should
consult their tax advisers regarding the recognition of such capital
gains and losses for Federal income tax purposes.
Dividends Received Deduction. A Unit holder will be considered
to have received all of the dividends paid on his pro rata portion
of each Equity Security when such dividends are received by the
Trust.
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 Unit holders,
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). Final regulations have been recently 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.
Limitations on Deductibility of Trust Expenses by Unit holders.
Each Unit holder's pro rata share of each expense paid by the
Trust is deductible by the Unit holder to the same extent as though
the expense had been paid directly by such Unit holder. It should
be noted that as a result of the Tax Reform Act of 1986, certain
miscellaneous itemized deductions, such as investment expenses,
tax return preparation fees and employee business expenses will
be deductible by an individual only to the extent they exceed
2% of such individual's adjusted gross income. Unit holders may
be required to treat some or all of the expenses of the Trust
as miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Securities
by the Trust or Disposition of Units. As discussed above, a Unit
holder may recognize taxable gain (or loss) when an Equity Security
is disposed of by the Trust or if the Unit holder disposes of
a Unit. For taxpayers other than corporations, net capital gains
are subject to a maximum stated marginal tax rate of 28%. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Tax Act") 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.
If the Unit holder disposes of a Unit, he is deemed thereby to
have disposed of his entire pro rata interest in all assets of
the Trust involved including his pro rata portion of all the Equity
Securities represented by the Unit.
Special Tax Consequences of In-Kind Distributions Upon Redemption
of Units or Termination of the Trust. As discussed in "Rights
of Unit Holders-How are Income and Capital Distributed?", under
certain circumstances
Page 7
a Unit holder who owns at least 2,500 Units may request an In-Kind
Distribution upon the redemption of Units or the termination of
the Trust. The Unit holder requesting an In-Kind Distribution
will be liable for expenses related thereto (the "Distribution
Expenses") and the amount of such In-Kind Distribution will be
reduced by the amount of the Distribution Expenses. See "Rights
of Unit Holders-How are Income and Capital Distributed?" As previously
discussed, prior to the redemption of Units or the termination
of the Trust, a Unit holder is considered as owning a pro rata
portion of each of the Trust assets for Federal income tax purposes.
The receipt of an In-Kind Distribution will result in a Unit holder
receiving an undivided interest in whole shares of stock plus,
possibly, cash.
The potential tax consequences that may occur under an In-Kind
Distribution will depend on whether or not a Unit holder receives
cash in addition to Equity Securities. An "Equity Security" for
this purpose is a particular class of stock issued by a particular
corporation. A Unit holder will not recognize gain or loss if
a Unit holder only receives Equity Securities in exchange for
his or her pro rata portion in the Equity Securities held by the
Trust. However, if a Unit holder also receives cash in exchange
for a fractional share of an Equity Security held by the Trust,
such Unit holder will generally recognize gain or loss based upon
the difference between the amount of cash received by the Unit
holder and his tax basis in such fractional share of an Equity
Security held by the Trust.
Because the Trust will own many Equity Securities, a Unit holder
who requests an In-Kind Distribution will have to analyze the
tax consequences with respect to each Equity Security owned by
the Trust. The amount of taxable gain (or loss) recognized upon
such exchange will generally equal the sum of the gain (or loss)
recognized under the rules described above by such Unit holder
with respect to each Equity Security owned by the Trust. Unit
holders who request an In-Kind Distribution are advised to consult
their tax advisers in this regard.
Computation of the Unit holder's Tax Basis. Initially, a Unit
holder's tax basis in his Units will generally equal the price
paid by such Unit holder for his Units. The cost of the Units
is allocated among the Equity Securities held in the Trust in
accordance with the proportion of the fair market values of such
Equity Securities as of the valuation date nearest the date the
Units are purchased in order to determine such Unit holder's tax
basis for his pro rata portion of each Equity Security.
A Unit holder's tax basis in his Units and his pro rata portion
of an Equity Security held by the Trust will be reduced to the
extent dividends paid with respect to such Equity Security are
received by the Trust which are not taxable as ordinary income
as described above.
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. Such persons should consult their tax advisers.
Unit holders will be notified annually of the amounts of income
dividends includable in the Unit holder's gross income and amounts
of Trust expenses which may be claimed as itemized deductions.
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?"
The foregoing discussion relates only to United States Federal
income taxation of Unit holders; Unit holders may be subject to
state and local taxation in other jurisdictions. Unit holders
should consult their tax advisers regarding potential state or
local taxation with respect to the Units, and foreign investors
should consult their tax advisers with respect to United States
tax consequences of ownership of Units.
Page 8
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Trust for New York tax matters, under the existing income
tax laws of the State of New York, the Trust is not an association
taxable as a corporation and the income of the Trust will be treated
as the income of the Unit holders thereof.
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 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 Equity Securities?
The Trust consists of different issues of Equity Securities issued
by retail companies and are listed on a national securities exchange
or the NASDAQ National Market System or traded in the over-the-counter
market. The companies selected for the Trust have been researched
and evaluated using database screening techniques, fundamental
analysis, and the judgment of research analysts of the Sponsor.
See "What are the Equity Securities Selected for American Retail
Growth 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 problems and risks inherent in the
retail industry in general. The profitability of companies engaged
in the retail industry will be affected by various factors including
the general state of the economy and consumer spending trends.
Recently, there have been major changes in the retail environment
due to the declaration of bankruptcy by some of the major corporations
involved in the retail industry, particularly the department store
segment. The continued viability of the retail industry will depend
on the industry's ability to adapt and to compete in changing
economic and social conditions, to attract and retain capable
management, and to finance expansion. Weakness in the banking
or real estate industry, a recessionary economic climate with
the consequent slowdown in employment growth, less favorable trends
in unemployment or a marked deceleration in real disposable personal
income growth could result in significant pressure on both consumer
wealth and consumer confidence, adversely affecting consumer spending
habits. In addition, competitiveness of the retail industry will
require large capital outlays for investment in the installation
of automated checkout equipment to control inventory, to track
the sale of individual items and to gauge the success of sales
campaigns. Increasing employee and retiree benefit costs may also
have an adverse effect on the industry. In many sectors of the
retail industry, competition may be fierce due to market saturation,
converging consumer tastes and other factors. Because of these
factors and the recent increase in trade opportunities with other
countries, American retailers are now entering global markets
which entail added risks such as sudden weakening of foreign economies,
difficulty in adapting to local conditions and constraints and
added research costs.
The Trust consists of such of the Equity Securities listed under
"Schedule of Investments" as may continue to be held from time
to time in the Trust and any additional Equity Securities acquired
and held by the Trust pursuant to the provisions of the Trust
Agreement together with cash held in the Income and Capital Accounts.
Neither the Sponsor nor the Trustee shall be liable in any way
for any failure in any of the Equity Securities. However, should
any contract for the purchase of any of the Equity Securities
initially deposited hereunder fail, the Sponsor will, unless substantially
all of the moneys held in the Trust to cover such purchase are
reinvested in substitute Equity Securities in accordance with
the Trust Agreement, refund the cash and sales charge attributable
to such failed contract to all Unit holders on the next distribution
date.
Page 9
Because certain of the Equity Securities from time to time may
be sold under certain circumstances described herein, and because
the proceeds from such events will be distributed to Unit holders
and will not be reinvested, no assurance can be given that the
Trust will retain for any length of time its present size and
composition. Although the Portfolio is not managed, the Sponsor
may instruct the Trustee to sell Equity Securities under certain
limited circumstances. Pursuant to the Indenture and with limited
exceptions, the Trustee may sell any securities or other property
acquired in exchange for Equity Securities such as those acquired
in connection with a merger or other transaction. If offered such
new or exchanged securities or property, the Trustee shall reject
the offer. However, in the event such securities or property are
nonetheless acquired by the Trust, they may be accepted for deposit
in the Trust and either sold by the Trustee or held in the Trust
pursuant to the direction of the Sponsor (who may rely on the
advice of the Portfolio Supervisor). See "How May Equity Securities
be Removed from the Trust?" Equity Securities, however, will not
be sold by the Trust to take advantage of market fluctuations
or changes in anticipated rates of appreciation or depreciation.
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.
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
Page 10
of cumulative preferred stock. Preferred stockholders are also
generally entitled to rights on liquidation which are senior to
those of common stockholders.
Unit holders will be unable to dispose of any of the Equity Securities
in the Portfolio, as such, and will not be able to vote the Equity
Securities. As the holder of the Equity Securities, the Trustee
will have the right to vote all of the voting stocks in the Trust
and will vote such stocks in accordance with the instructions
of the Sponsor.
What are the Equity Securities Selected for American Retail Growth
Trust, Series 1?
Albertson's, Inc., based in Boise, Idaho, is a retail food and
drug chain in the United States. Albertson's, Inc. operates stores
and distribution facilities in western and southern states. Store
formats include combination food/drug stores, superstores, conventional
supermarkets and a small number of warehouse stores.
AutoZone, Inc., headquartered in Memphis, Tennessee, is a specialty
retailer of automotive parts and accessories targeting the "do-it-yourself"
consumer. The company's stores, which are located throughout the
sunbelt region of the United States, offer an extensive product
line, including new and remanufactured automotive hard parts,
maintenance items and accessories.
Barnes & Noble, Inc., headquartered in New York, New York, is
the largest operator of book superstores and the second largest
operator of mall bookstores in the United States. The company's
superstores operate under the "Barnes & Noble," "Bookstar" and
"Bookstop" trade names. Barnes & Noble also operates in malls
under the "B. Dalton Bookseller," "Doubleday Book Shops," and
"Scribner's Bookstore" trade names.
Best Buy Company, Inc., headquartered in Eden Prairie, New York,
is a specialty retailer of brand name consumer electronics, home
office products, major appliances, personal computers, entertainment
software and photographic equipment. The company markets its products
in stores located throughout the United States.
Dillard Department Stores, Inc., headquartered in Little Rock,
Arkansas, operates retail department stores located in the southwestern
and midwestern United States. The stores, primarily situated in
suburban shopping centers, offer brand name goods in the middle
to upper-middle price range.
Dollar General Corporation operates retail stores nationwide,
with concentration in Florida and Tennessee. These stores offer
reduced prices on apparel, housewares, health and beauty aids,
home cleaning items and shoes. The company has its headquarters
in Nashville, Tennessee.
Gap, Inc. retails apparel and operates stores that sell tops,
shorts, sweaters, jackets and jeans for children and adults. The
Gap operates "Gap," "Gapkids" and "Banana Republic" stores throughout
the United States. The Gap is headquartered in San Francisco,
California.
Hannaford Brothers Company, headquartered in Scarborough, Maine,
operates chains of retail food stores. The company owns supermarkets
in Maine, Massachusetts, New Hampshire, New York and Vermont.
The company is also a wholesale supplier to other supermarkets.
Heilig-Meyers Company operates a retail chain of home furnishing
stores in numerous states, primarily in the Southeast. The company
sells furniture, consumer electronics, appliances, bedding and
floor coverings. The company's operations are based in Richmond,
Virginia.
Home Depot, Inc., headquartered in Atlanta, Georgia, retails building
materials and home improvement products. The company's stores
sell plumbing, heating and electrical supplies, lumber, floor
and wall coverings, hardware, tools and paint. Home Depot, Inc.
operates stores throughout the United States and Canada.
Kohl's Corporation, headquartered in Menomonee Falls, Wisconsin,
through its subsidiary Kohl's Department Stores, Inc., is an operator
of family oriented, specialty department stores in Wisconsin,
Illinois, Indiana, Ohio, Michigan and Minnesota. The stores feature
moderately priced apparel, shoes, accessories and housewares targeted
to middle-income customers.
May Department Stores Company is headquartered in St. Louis, Missouri.
Through its various chains of department stores, the company retails
a variety of goods throughout the United States under names which
include
Page 11
"May Co.," "May D & F," "Lord & Taylor," "Robinson's," "Kaufmann's,"
"Famous-Barr" and "L.S. Ayers." May Department Stores Company
also owns "Payless ShoeSource," the nation's largest chain of
discount shoe stores.
Nordstrom's, Inc., headquartered in Seattle, Washington, is a
fashion specialty retailer offering a wide selection of apparel,
shoes and accessories for men, women and children through stores
located primarily in the western United States. Nordstrom also
operates clearance stores under the name "Nordstrom Rack" and
specialty stores under the name "Place Two" and leases shoe departments
in department stores in Hawaii.
Office Depot, Inc. headquartered in Delray Beach, Florida, operates
large-volume office supply stores which sell high-quality, brand
name office products primarily to small and medium-sized businesses
and the home office market. The company has stores throughout
the United States and Canada, with domestic concentration in California,
Florida and Texas.
Penney (J.C.) Company, Inc., headquartered in Plano, Texas, is
a major retailer of general merchandise through its stores and
catalog operations. The company markets family apparel, home furnishings,
jewelry and leisure lines through stores in the United States
and Puerto Rico. The company also operates "Thrift" and "Treasury
Drug Center" drug stores and markets insurance through J.C. Penney
Life Insurance Company.
Pep Boys-Manny, Moe & Jack is a retailer of automotive parts and
accessories and automotive maintenance, service and installation.
The company is headquartered in Philadelphia, Pennsylvania, and
operates "PEP BOYS" stores throughout the United States. The "PEP
BOYS" product line includes batteries, tires, new and rebuilt
parts for domestic and imported cars, antifreeze and other related
automotive accessories.
Price/Costco, Inc., headquartered in Kirkland, Washington, owns,
operates and manages a chain of wholesale cash and carry membership
warehouses. The warehouses are located throughout the United States,
Canada and Mexico.
Sears, Roebuck & Company, headquartered in Chicago, Illinois,
operates in the retail and financial services industries. The
company's subsidiaries include Sears, which conducts merchandising
and credit operations.
Talbots, Inc., headquartered in Hingham, Massachusetts, is a specialty
retailer and cataloger of women's classic apparel, shoes and accessories.
The company operates stores under a variety of names including
"Talbots," "Talbots Kids," "Talbots Petites" and "Talbots Intimates."
"Talbots Intimates" sells women's lingerie, and "Talbots Kids"
sells classic clothing for boys and girls.
Toys "R" Us, Inc., headquartered in Paramus, New Jersey is the
world's largest children's speciality retail chain, selling toys
and children's clothing. The company operates domestic and international
toy stores under the name "Toys "R" Us," and clothing stores under
the "Kids "R" Us" name. The toy stores carry a variety of items
including games, sporting goods, bicycle and wheel goods and electronic
video games.
Wal-Mart Stores, Inc., is a discount retailer based in Bentonville,
Arkansas. The company's stores sell apparel, automotive supplies,
housewares, sporting goods, hardware, health and beauty aids and
toys. The company operates stores under the "Wal-Mart", "Sam's
Wholesale Clubs", and "Hypermart USA" names. Wal-Mart operates
in numerous states. Wal-Mart currently is involved in a Mexican
joint venture with Cifra, Mexico's largest retailer.
Walgreen Company is the largest retail drugstore chain in the
U.S., with outlets in various states and Puerto Rico. Walgreen
Company is headquartered in Deerfield, Illinois.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before
making a decision to invest in the Trust.
The value of the Equity Securities will fluctuate over the life
of the Trust and may be more or less than the price at which they
were deposited in the Trust. The Equity Securities may appreciate
or depreciate in value (or
Page 12
pay dividends) depending on the full range of economic and market
influences affecting these securities.
The Sponsor and the Trustee shall not be liable in any way for
any default, failure or defect in any Security. In the event of
a notice that any Equity Security will not be delivered ("Failed
Contract Obligations") to the Trust, the Sponsor is authorized
under the Indenture to direct the Trustee to acquire other Equity
Securities ("Replacement Securities"). Any Replacement Security
will be identical to those which were the subject of the failed
contract. The Replacement Securities must be purchased within
20 days after delivery of the notice of a failed contract and
the purchase price may not exceed the amount of funds reserved
for the purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraphs is not utilized to acquire Replacement Securities in
the event of a failed contract, the Sponsor will refund the sales
charge attributable to such Failed Contract Obligations to all
Unit holders of the Trust and the Trustee will distribute the
principal attributable to such Failed Contract Obligations not
more than 120 days after the date on which the Trustee received
a notice from the Sponsor that a Replacement Security would not
be deposited in the Trust. In addition, Unit holders should be
aware that, at the time of receipt of such principal, they may
not be able to reinvest such proceeds in other securities at a
yield equal to or in excess of the yield which such proceeds would
have earned for Unit holders of the Trust.
The Indenture also authorizes the Sponsor to increase the size
of the Trust and the number of Units thereof by the deposit of
additional Equity Securities in the Trust and the issuance of
a corresponding number of additional Units.
The Trust consists of the Equity Securities listed under "Schedule
of Investments" (or contracts to purchase such Securities) as
may continue to be held from time to time in the Trust and any
additional Equity Securities acquired and held by the Trust pursuant
to the provisions of the Indenture (including provisions with
respect to deposits into the Trust of Equity Securities in connection
with the issuance of additional Units).
Once all of the Equity Securities in the Trust are acquired, the
Trustee will have no power to vary the investments of the Trust,
i.e., the Trustee will have no managerial power to take advantage
of market variations to improve a Unit holder's investment, and
may dispose of Equity Securities only under limited circumstances.
See "How May Equity Securities be Removed from the Trust?"
To the best of the Sponsor's knowledge, there is no litigation
pending as of the Initial Date of Deposit in respect of any Equity
Security which might reasonably be expected to have a material
adverse effect on the Trust. At any time after the Initial Date
of Deposit, litigation may be instituted on a variety of grounds
with respect to the Equity Securities. The Sponsor is unable to
predict whether any such litigation will be instituted, or if
instituted, whether such litigation might have a material adverse
effect on the Trust.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, the Public Offering Price is based on the aggregate
underlying value of the Equity Securities in the Trust, plus or
minus cash, if any, in the Income and Capital Accounts of the
Trust, plus a sales charge of 4.90% (equivalent to 5.152% of the
net amount invested) subject to reduction beginning December 1,
1996, divided by the amount of Units of the Trust outstanding.
During the initial offering period, the Sponsor's Repurchase Price
is based on the aggregate underlying value of the Equity Securities
in the Trust, plus or minus cash, if any, in the Income and Capital
Accounts of the Trust divided by the number of Units of the Trust
outstanding. For secondary market sales after the completion of
the initial offering period, the Public Offering Price is also
based on the aggregate underlying value of the Equity Securities
in the Trust, plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, plus a maximum sales charge of 4.90% of
the Public Offering Price (equivalent to 5.152% of the net amount
invested) divided by the number of outstanding Units of the Trust.
Page 13
The minimum purchase of the Trust is $1,000. The applicable sales
charge for both primary and secondary market sales is reduced
by a discount as indicated below for volume purchases (except
for sales made pursuant to a "wrap fee account" or similar arrangements
as set forth below):
Primary and Secondary
_____________________
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
_______________ __________ __________
5,000 but less than 10,000 0.25% 0.2506%
10,000 but less than 25,000 0.50% 0.5025%
25,000 but less than 50,000 1.00% 1.0101%
50,000 or more 2.00% 2.0408%
Any such reduced sales charge shall be the responsibility of the
selling broker/dealer, bank or other selling agent. 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 broker/dealer,
bank or other selling agent. 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 broker/dealer, bank or other selling agent 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,
siblings, mothers-in-law, fathers-in-law, sons-in-law and daughters-in-law,
and trustees, custodians or fiduciaries for the benefit of such
persons) of the Sponsor and the broker/dealer, bank or other selling
agent and their subsidiaries, 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 Equity Securities.
During the initial offering period, the aggregate value of the
Units of the Trust shall be determined on the basis of the aggregate
underlying value of the Equity Securities therein plus or minus
cash, if any, in the Income and Capital Accounts of the Trust.
The aggregate underlying value of the Equity Securities will be
determined in the following manner: if the Equity Securities are
listed on a national securities exchange or the NASDAQ National
Market System, this evaluation is generally based on the closing
sale prices on that exchange or that system (unless it is determined
that these prices are inappropriate as a basis for valuation)
or, if there is no closing sale price on that exchange or system,
at the closing ask prices. If the Equity Securities are not so
listed or, if so listed and the principal market therefor is other
than on the exchange, the evaluation shall generally be based
on the current ask prices on the over-the-counter market (unless
it is determined that these prices are inappropriate as a basis
for evaluation). If current ask prices are unavailable, the evaluation
is generally determined (a) on the basis of current ask prices
for comparable securities, (b) by appraising the value of the
Equity Securities on the ask side of the market or (c) by any
combination of the above.
Page 14
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the aggregate underlying
value of the Equity Securities therein, plus or minus cash, if
any, in the Income and Capital Accounts of the Trust plus the
applicable sales charge. The aggregate underlying value of the
Equity Securities for secondary market sales is calculated in
the same manner as described above for sales made during the initial
offering period with the exception that bid prices are used instead
of ask prices.
Although payment is normally made three business days following
the order for purchase (the "date of settlement"), payment may
be made prior thereto. A person will become owner of 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 three
business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are Units Distributed?
During the initial offering period (i) for Units issued on the
Initial Date of Deposit and (ii) for additional Units issued after
such date as additional Equity Securities are deposited by the
Sponsor, Units will be distributed to the public at the then current
Public Offering Price. The initial offering period may be up to
approximately 360 days. During such period, the Sponsor may deposit
additional Equity Securities in the Trust and create additional
Units. Units reacquired by the Sponsor during the initial offering
period (at prices based upon the aggregate underlying value of
the Equity Securities in the Trust plus or minus a pro rata share
of cash, if any in the Income and Capital Accounts of the Trust)
may be resold at the then current Public Offering Price. Upon
the termination of the initial offering period, unsold Units created
or reacquired during the initial offering period will be sold
or resold at the then current Public Offering Price.
Upon completion of the initial offering, Units repurchased in
the secondary market (see "Will There be a Secondary Market?")
may be offered by this prospectus at the secondary market public
offering price determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Trust
for sale in a number of states. Sales initially will be made to
dealers and other selling agents at prices which represent a concession
or agency commission of 3.2% of the Public Offering Price, and,
for secondary market sales, 3.2% of the Public Offering Price
(or 65% of the then current maximum sales charge after December
1, 1996). Volume concessions or agency commissions of an additional
0.40% of the Public Offering Price will be given to any broker/dealer
or bank, who purchases from the Sponsor at least $100,000 on the
Initial Date of Deposit or any subsequent Date of Deposit or $250,000
on any day thereafter. Volume concessions or agency commission
of an additional 0.45% and 0.55% of the Public Offering Price
will be given to any broker/dealer or bank who purchases from
the Sponsor at least $500,000 and $1,000,000, respectively, of
the Trust on the Initial Date of Deposit or any subsequent Date
of Deposit. Effective on each December 1, commencing December
1, 1996, such sales charge will be reduced by 1/2 of 1% to a
minimum sales charge of 3.0%. However, resales of Units of the
Trust by such dealers and other selling agents to the public will
be made at the Public Offering Price described in the prospectus.
The Sponsor reserves the right to change the amount of the concession
or agency commission from time to time. Certain commercial banks
may be making Units of the Trust available to their customers
on an agency basis. A portion of the sales charge paid by these
customers is retained by or remitted to the banks in the amounts
indicated in the fourth preceding sentence. Under the Glass-Steagall
Act, banks are prohibited from underwriting Trust Units; however,
the Glass-Steagall Act does permit certain agency transactions
and the banking regulators 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.
From time to time the Sponsor may implement programs under which
broker/dealers, banks or other selling agents 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
Page 15
times the Sponsor may implement other programs under which the
sales force of a broker/dealer, bank or other selling agent may
be eligible to win other nominal awards for certain sales efforts,
or under which the Sponsor will reallow to any such 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
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.
What are the Sponsor's Profits?
The Sponsor of the Trust will receive a gross sales commission
equal to 4.90% of the Public Offering Price of the Units (equivalent
to 5.152% of the net amount invested), less any reduced sales
charge for quantity purchases as described under "Public Offering-How
is the Public Offering Price Determined?" See "Public Offering-How
are Units Distributed?" for information regarding the receipt
of additional concessions available to dealers and other selling
agents. 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 Equity Securities
to the Trust (which is based on the Evaluator's determination
of the aggregate offering price of the underlying Equity Securities
of such Trust on the Initial Date of Deposit as well as subsequent
deposits) and the cost of such Equity Securities to the Sponsor.
See Note (2) of "Schedule of Investments." During the initial
offering period, the dealers and other selling agents also may
realize profits or sustain losses as a result of fluctuations
after the Initial Date of Deposit in the Public Offering Price
received by the dealers and other selling agents upon the sale of Units.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between
the price at which Units are purchased and the price at which
Units are resold (which price includes a sales charge of 4.90%
subject to reduction beginning December 1, 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.
Will There be a Secondary Market?
After the initial offering period, although not obligated to do
so, the Sponsor intends 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 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,
Page 16
will be borne by the Sponsor. If the supply of Units exceeds
demand, or for some other business reason, the Sponsor may discontinue
purchases of Units at such prices. IF A UNIT HOLDER WISHES TO
DISPOSE OF HIS UNITS, HE SHOULD INQUIRE OF THE SPONSOR AS TO CURRENT
MARKET PRICES PRIOR TO MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the
Trustee. Ownership of Units may be evidenced by registered certificates
executed by the Trustee and the Sponsor. Delivery of certificates
representing Units ordered for purchase is normally made three
business days following such order or shortly thereafter. Certificates
are transferable by presentation and surrender to the Trustee
properly endorsed or accompanied by a written instrument or instruments
of transfer. Certificates to be redeemed must be properly endorsed
or accompanied by a written instrument or instruments of transfer.
A Unit holder must sign exactly as his name appears on the face
of the certificate with the signature guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guaranty program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. In
certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates
of corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
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 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." Persons who purchase
Units will commence receiving distributions only after such person
becomes a record owner. Notification to the Trustee of the transfer
of Units is the responsibility of the purchaser, but in the normal
course of business such notice is provided by the selling broker-dealer.
The pro rata share of cash in the Capital Account of the Trust
will be computed as of the fifteenth day of each month. Proceeds
received on the sale of any Equity Securities in the Trust, to
the extent not used to meet redemptions of Units or pay expenses,
will, however, be distributed on the last day of each month to
Unit holders of record on the fifteenth day of such month if the
amount available for distribution equals at least $0.01 per Unit.
The Trustee is not required to pay interest on funds held in the
Capital Account of
Page 17
a Trust (but may itself earn interest thereon and therefore benefit
from the use of such funds). Notwithstanding, distributions of
funds in the Capital Account, if any, will be made on the last
day of each December to Unit holders of record as of December 15.
See "What is the Federal Tax Status of Unit Holders?"
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of any
distribution made by the Trust if the Trustee has not been furnished
the Unit holder's tax identification number in the manner required
by such regulations. Any amount so withheld is transmitted to
the Internal Revenue Service and may be recovered by the Unit
holder only when filing a tax return. Under normal circumstances
the Trustee obtains the Unit holder's tax identification number
from the selling broker. However, a Unit holder should examine
his or her statements from the Trustee to make sure that the Trustee
has been provided a certified tax identification number in order
to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should
be provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit
holder will, upon surrender of his Units for redemption, receive:
(i) the pro rata share of the amounts realized upon the disposition
of Equity Securities, unless he elects an In-Kind Distribution
as described below and (ii) a pro rata share of any other assets
of the Trust, less expenses of the Trust. Not less than 60 days
prior to the Mandatory Termination Date of the Trust, the Trustee
will provide written notice thereof to all Unit holders and will
include with such notice a form to enable Unit holders to elect
a distribution of shares of Equity Securities (an "In-Kind Distribution"),
if such Unit holder owns at least 2,500 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 Mandatory
Termination Date of the Trust. 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 Equity Securities sold during the year
and the Equity Securities held at the end of such year by the
Trust; (3) the redemption price per Unit based upon a computation
thereof on the 31st day of December of such year (or the last
business day prior thereto); and (4) amounts of income and capital
distributed during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its corporate trust office in the City of New
York of the certificates representing the Units to be redeemed,
or in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed as explained above (or by
providing satisfactory indemnity, as in connection with lost,
stolen or destroyed certificates), and payment of applicable governmental
Page 18
charges, if any. No redemption fee will be charged. On the third
business day following such tender, the Unit holder will be entitled
to receive in cash an amount for each Unit equal to the Redemption
Price per Unit next computed after receipt by the Trustee of such
tender of Units. The "date of tender" is deemed to be the date
on which Units are received by the Trustee, except that as regards
Units received after 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.
Any Unit holder tendering 2,500 Units or more for redemption may
request by written notice submitted at the time of tender from
the Trustee in lieu of a cash redemption a distribution of shares
of Equity Securities in an amount and value of Equity Securities
per Unit equal to the Redemption Price Per Unit as determined
as of the evaluation next following tender. To the extent possible,
in-kind distributions ("In-Kind Distributions") shall be made
by the Trustee through the distribution of each of the Equity
Securities in book-entry form to the account of the Unit holder's
bank or broker-dealer at the Depository Trust Company. An In-Kind
Distribution will be reduced by customary transfer and registration
charges. The tendering Unit holder will receive his pro rata number
of whole shares of each of the Equity Securities comprising the
portfolio and cash from the Capital Account equal to the fractional
shares to which the tendering Unit holder is entitled. The Trustee
may adjust the number of shares of any issue of Equity Securities
included in a Unit holder's In-Kind Distribution to facilitate
the distribution of whole shares, such adjustment to be made on
the basis of the value of Equity Securities on the date of tender.
If funds in the Capital Account are insufficient to cover the
required cash distribution to the tendering Unit holder, the Trustee
may sell Equity Securities in the manner described above.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the
principal amount of a Unit redemption if the Trustee has not been
furnished the redeeming Unit holder's tax identification number
in the manner required by such regulations. Any amount so 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, or from the Capital Account. All
other amounts paid on redemption shall be withdrawn from the Capital
Account of the Trust.
The Trustee is empowered to sell Equity Securities of the Trust
in order to make funds available for redemption. To the extent
that Equity Securities are sold, the size and diversity of the
Trust will be reduced. Such sales may be required at a time when
Equity Securities would not otherwise be sold and might result
in lower prices than might otherwise be realized.
The Redemption Price per Unit (as well as the secondary market
Public Offering Price) will be determined on the basis of the
aggregate underlying value of the Equity Securities in the Trust
plus or minus cash, if any, in the Income and Capital Accounts
of the Trust. The Redemption Price per Unit is the pro rata share
of each Unit determined by the Trustee by adding: (1) the cash
on hand in the Trust other than cash deposited in the Trust to
purchase Equity Securities not applied to the purchase of such
Equity Securities; (2) the aggregate value of the Equity Securities
held in the Trust, as determined by the Evaluator on the basis
of the aggregate underlying value of the Equity Securities in
the Trust next computed; and (3) dividends receivable on the Equity
Securities trading ex-dividend as of the date of computation;
and deducting therefrom: (1) amounts representing any applicable
taxes or governmental charges payable out of the Trust; (2) any
amounts owing to the Trustee for its advances; (3) an amount representing
estimated accrued expenses of the Trust, including but not limited
to fees and expenses of the Trustee (including legal and auditing
fees), the Evaluator and supervisory fees, if any; (4) cash held
for distribution to Unit holders of record
Page 19
of the Trust as of the business day prior to the evaluation being
made; and (5) other liabilities incurred by the Trust; and finally
dividing the results of such computation by the number of Units
of the Trust outstanding as of the date thereof.
The aggregate value of the Equity Securities will be determined
in the following manner: if the Equity Securities are listed on
a national securities exchange or the NASDAQ National Market System,
this evaluation is generally based on the closing sale prices
on that exchange or that system (unless it is determined that
these prices are inappropriate as a basis for valuation) or, if
there is no closing sale price on that exchange or system, at
the closing bid prices. If the Equity Securities are not so listed
or, if so listed and the principal market therefor is other than
on the exchange, the evaluation shall generally be based on the
current bid prices on the over-the-counter market (unless these
prices are inappropriate as a basis for evaluation). If current
bid prices are unavailable, the evaluation is generally determined
(a) on the basis of current bid prices for comparable securities,
(b) by appraising the value of the Equity Securities on the bid
side of the market or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on the New York Stock Exchange is restricted or any emergency
exists, as a result of which disposal or evaluation of the Securities
is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. Under
certain extreme circumstances, the Sponsor may apply to the Securities
and Exchange Commission for an order permitting a full or partial
suspension of the right of Unit holders to redeem their Units.
The Trustee is not liable to any person in any way for any loss
or damage which may result from any such suspension or postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before 1:00 p.m. eastern 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 may be tendered to the Trustee for redemption as any other
Units. In the event the Sponsor does not purchase Units, the Trustee
may sell Units tendered for redemption in the over-the-counter
market, if any, as long as the amount to be received by the Unit
holder is equal to the amount he would have received on redemption
of the Units.
The offering price of any Units acquired by the Sponsor will be
in accord with the Public Offering Price described in the then
effective prospectus describing such Units. Any profit or loss
resulting from the resale or redemption of such Units will belong
to the Sponsor.
How May Equity Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or
the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of
an Equity Security in the event that an issuer defaults in the
payment of a dividend that has been declared, that any action
or proceeding has been instituted restraining the payment of dividends
or there exists any legal question or impediment affecting such
Equity Security, that the issuer of the Equity Security has breached
a covenant which would affect the payments of dividends, the credit
standing of the issuer or otherwise impair the sound investment
character of the Equity Security, that the issuer has defaulted
on the payment on any other of its outstanding obligations, that
the price of the Equity Security has declined to such an extent
or other such credit factors exist so that in the opinion of the
Sponsor, the retention of such Equity Securities would be detrimental
to the Trust. Except as stated under "Portfolio - What are Some
Additional Considerations for Investors?" for Failed Obligations,
the acquisition by the Trust of any securities or other property
other than the Equity Securities is prohibited. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Equity Securities
such as those acquired in connection with a merger or other transaction.
If offered such new or exchanged securities or property, the Trustee
shall reject the offer. However,
Page 20
in the event such securities or property are nonetheless acquired
by the Trust, they may be accepted for deposit in the Trust and
either sold by the Trustee or held in the Trust pursuant to the
direction of the Sponsor (who may rely on the advice of the Portfolio
Supervisor). Proceeds from the sale of Equity Securities (or any
securities or other property received by the Trust in exchange
for Equity Securities) by the Trustee are credited to the Capital
Account of the Trust for distribution to Unit holders or to meet
redemptions.
The Trustee may also sell Equity Securities designated by the
Sponsor, or if not so directed, in its own discretion, for the
purpose of redeeming Units of the Trust tendered for redemption
and the payment of expenses.
The Sponsor, in designating Equity Securities to be sold by the
Trustee, will generally make selections in order to maintain,
to the extent practicable, the proportionate relationship among
the number of shares of individual issues of Equity Securities.
To the extent this is not practicable, the composition and diversity
of the Equity Securities may be altered. In order to obtain the
best price for the Trust, it may be necessary for the Sponsor
to specify minimum amounts (generally 100 shares) in which blocks
of Equity Securities are to be sold.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds 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 The Chase Manhattan Bank (National Association),
a national banking association with its principal executive office
located at 1 Chase Manhattan Plaza, New York, New York 10081 and
its unit investment trust office at 770 Broadway, New York, New
York 10003. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The
Trustee is subject to supervision by the Comptroller of the Currency,
the Federal Deposit Insurance Corporation and the Board of Governors
of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Equity Securities. For information relating
to the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes
Page 21
effective only when the successor trustee accepts its appointment
as such or when a court of competent jurisdiction appoints a successor
trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Equity Securities.
In the event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or
upon or in respect of the Trust which the Trustee may be required
to pay under any present or future law of the United States of
America or of any other taxing authority having jurisdiction.
In addition, the Indenture contains other customary provisions
limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor 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 or the Trustee, in
which event the Sponsor and the Trustee are to use their best
efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment
by the successor Evaluator. If upon resignation of the Evaluator
no successor has accepted appointment within 30 days after notice
of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator
shall be under no liability to the Trustee, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the
Mandatory Termination Date indicated herein under "Summary of
Essential Information." The Trust may be liquidated at any time
by consent of 100%
Page 22
of the Unit holders of the Trust or by the Trustee when the value
of the Equity Securities owned by the Trust as shown by any evaluation,
is less than the lower of $2,000,000 or 20% of the total value
of Equity Securities deposited in such Trust during the primary
offering period, or in the event that Units of the Trust not yet
sold aggregating more than 60% of the Units of the Trust are tendered
for redemption by a broker/dealer, including the Sponsor. If the
Trust is liquidated because of the redemption of unsold Units
of the Trust by a broker/dealer, the Sponsor will refund to each
purchaser of Units of the Trust the entire sales charge and the
transaction fees paid by such purchaser. In the event of termination,
written notice thereof will be sent by the Trustee to all Unit
holders of the Trust. Within a reasonable period after termination,
the Trustee will follow the procedures set forth under "How are
Income and Capital Distributed?"
Commencing on the Mandatory Termination Date, Equity Securities
will begin to be sold in connection with the termination of the
Trust. The Sponsor will determine the manner, timing and execution
of the sale of the Equity Securities. Written notice of any termination
of the Trust specifying the time or times at which Unit holders
may surrender their certificates for cancellation shall be given
by the Trustee to each Unit holder at his address appearing on
the registration books of the Trust maintained by the Trustee.
At least 60 days prior to the Maturity Date of the Trust the Trustee
will provide written notice thereof to all Unit holders and will
include with such notice a form to enable Unit holders to elect
a distribution of shares of Equity Securities (reduced by customary
transfer and registration charges), if such Unit holder owns at
least 2,500 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. To be
effective, the election form, together with surrendered certificates
and other documentation required by the Trustee, must be returned
to the Trustee at least five business days prior to the Mandatory
Termination Date of the Trust. Unit holders not electing a distribution
of shares of Equity Securities will receive a cash distribution
from the sale of the remaining Equity Securities within a reasonable
time after the Trust is terminated. Regardless of the distribution
involved, the Trustee will deduct from the funds of the Trust
any accrued costs, expenses, advances or indemnities provided
by the Trust Agreement, including estimated compensation of the
Trustee and costs of liquidation and any amounts required as a
reserve to provide for payment of any applicable taxes or other
governmental charges. Any sale of Equity Securities in the Trust
upon termination may result in a lower amount than might otherwise
be realized if such sale were not required at such time. The Trustee
will then distribute to each Unit holder his pro rata share of
the balance of the Income and Capital Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating
to Federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor. Carter, Ledyard & Milburn, will act as counsel for
the Trustee and as special New York tax counsel for the Trust.
Experts
The statement of net assets, including the schedule of investments,
of the Trust at the opening of business on the Initial Date of
Deposit appearing in this Prospectus and Registration Statement
has been audited by Ernst & Young 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 23
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 127
We have audited the accompanying statement of net assets, including
the schedule of investments, of The First Trust Special Situations
Trust, Series 127, comprised of American Retail Growth Trust,
Series 1, at the opening of business on November 13, 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 November 13, 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 127, comprised
of American Retail Growth Trust, Series 1, at the opening of business
on November 13, 1995 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 13, 1995
Page 24
Statement of Net Assets
American Retail Growth Trust, Series 1
The First Trust Special Situations Trust, Series 127
At the Opening of Business on the Initial Date of Deposit
November 13, 1995
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Equity Securities represented by purchase
contracts (1) (2) $139,816
Organizational and offering costs (3) 45,000
--------
184,816
Less accrued organizational and offering costs (3) (45,000)
--------
Net assets $139,816
========
Units outstanding 15,000
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (4) $147,020
Less sales charge (4) (7,204)
________
Net Assets $139,816
========
</TABLE>
[FN]
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Equity Securities listed under "Schedule
of Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $200,000 issued
by Bankers Trust Company has been deposited with the Trustee as
collateral, which is sufficient to cover the monies necessary
for the purchase of the Equity Securities pursuant to contracts
for the purchase of such Equity Securities.
(3) The Trust will bear all or a portion of its estimated organizational
and offering costs which will be deferred and charged off over
a period not to exceed five years from the Initial Date of Deposit.
The estimated organizational and offering costs are based on 2,000,000
Units of the Trust expected to be issued. To the extent the number
of Units issued is larger or smaller, the estimate will vary.
(4) The aggregate cost to investors includes a sales charge
computed at the rate of 4.90% of the Public Offering Price (equivalent
to 5.152% of the net amount invested), assuming no reduction of
sales charge for quantity purchases.
Page 25
Schedule of Investments
American Retail Growth Trust, Series 1
The First Trust Special Situations Trust, Series 127
At the Opening of Business on the Initial Date of Deposit
November 13, 1995
<TABLE>
<CAPTION>
Percentage Market Cost of
of Aggregate Value Equity
Number Ticker Symbol and Offering per Securities
of Shares Name of Issuer of Equity Securities (1) Price Share to Trust (2)
______ _______________________________________ ______________ ______ ____________
<C> <S> <C> <C> <C>
195 ABS Albertson's, Inc. 4.55% $32.625 $ 6,362
226 AZO AutoZone, Inc. 4.55% 28.125 6,356
165 BKS Barnes & Noble, Inc. 4.56% 38.625 6,373
282 BBY Best Buy Company, Inc. 4.54% 22.500 6,345
220 DDS Dillard Department Stores, Inc. 4.54% 28.875 6,353
227 DG Dollar General Corporation 4.55% 28.000 6,356
136 GPS Gap, Inc. 4.55% 46.750 6,358
254 HRD Hannaford Brothers Company 4.54% 25.000 6,350
339 HMY Heilig-Meyers Company 4.55% 18.750 6,356
153 HD Home Depot, Inc. 4.55% 41.625 6,369
127 KSS Kohl's Corporation 4.54% 50.000 6,350
145 MA May Department Stores Company 4.54% 43.750 6,344
162 NOBE Nordstrom's, Inc. 4.55% 39.250 6,358
214 ODP Office Depot, Inc. 4.55% 29.750 6,367
137 JCP Penney (J.C.) Company, Inc. 4.54% 46.375 6,353
259 PBY Pep Boys-Manny, Moe & Jack 4.54% 24.500 6,345
368 PCCW Price/Costco, Inc. 4.54% 17.250 6,348
165 S Sears, Roebuck & Company 4.56% 38.625 6,373
218 TLB Talbots, Inc. 4.54% 29.125 6,349
266 TOY Toys "R" Us, Inc. 4.54% 23.875 6,351
266 WMT Wal-Mart Stores, Inc. 4.54% 23.875 6,351
218 WAG Walgreen Company 4.54% 29.125 6,349
______ ___________
Total Investments 100% $139,816
====== ===========
</TABLE>
[FN]
(1) All Equity Securities are represented by regular way contracts
to purchase such Equity Securities for the performance of which
an irrevocable letter of credit has been deposited with the Trustee.
The contracts to purchase Equity Securities were entered into
by the Sponsor on November 13, 1995.
(2) The cost of the Equity Securities to the Trust represents
the aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the last sale prices of the
listed Equity Securities and the ask prices of the over-the-counter
traded Equity Securities at the opening of business on the Initial
Date of Deposit). The valuation of the Equity Securities has been
determined by the Evaluator, an affiliate of the Sponsor. The
aggregate underlying value of the Equity Securities on the Initial
Date of Deposit was $139,816. Cost and loss to Sponsor relating
to the Equity Securities sold to the Trust were $139,967 and $151,
respectively.
Page 26
This page is intentionally left blank.
Page 27
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
Summary of Essential Information 3
American Retail Growth Trust, Series 1
The First Trust Special Situations Trust, Series 127:
What is The First Trust Special Situations Trust? 4
What are the Expenses and Charges? 5
What is the Federal Tax Status of Unit Holders? 6
Why are Investments in the Trust Suitable for
Retirement Plans? 9
Portfolio:
What are Equity Securities? 9
Risk Factors 9
What are the Equity Securities Selected
for American Retail Growth Trust, Series 1? 11
What are Some Additional Considerations
for Investors? 12
Public Offering:
How is the Public Offering Price Determined? 13
How are Units Distributed? 15
What are the Sponsor's Profits? 16
Will There be a Secondary Market? 16
Rights of Unit Holders:
How is Evidence of Ownership
Issued and Transferred? 17
How are Income and Capital Distributed? 17
What Reports will Unit Holders Receive? 18
How May Units be Redeemed? 18
How May Units be Purchased by the Sponsor? 20
How May Equity Securities be Removed
from the Trust? 20
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 21
Who is the Trustee? 21
Limitations on Liabilities of Sponsor
and Trustee 22
Who is the Evaluator? 22
Other Information:
How May the Indenture be
Amended or Terminated? 22
Legal Opinions 23
Experts 23
Report of Independent Auditors 24
Statement of Net Assets 25
Notes to Statement of Net Assets 25
Schedule of Investments 26
</TABLE>
___________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE FUND HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
American Retail
Growth Trust
Series 1
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
1-800-682-7520
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
November 13, 1995
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being
National Union Fire Insurance Company of Pittsburgh.
B. This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
Exhibits
Financial Data Schedule
S-1
SIGNATURES
The Registrant, The First Trust Special Situations Trust,
Series 127, hereby identifies The First Trust Special Situations
Trust, Series 4 Great Lakes Growth and Treasury Trust, Series 1,
The First Trust Special Situations Trust, Series 18 Wisconsin
Growth and Treasury Securities Trust, Series 1 and The First
Trust Combined Series 248, for purposes of the representations
required by Rule 487 and represents the following:
(1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from
those deposited in such previous series;
(2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide
essential financial information for, the series with respect to
the securities of which this Registration Statement is being
filed, this Registration Statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities
Act of 1933.
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Special Situations Trust, Series
127, has duly caused this Amendment to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the Village of Lisle and State of Illinois on
November 13, 1995.
THE FIRST TRUST SPECIAL SITUATIONS
TRUST, SERIES 127
By NIKE SECURITIES L.P.
Depositor
By Carlos E. Nardo
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
Robert D. Van Kampen Sole Director )
of Nike Securities )
Corporation, the ) November 13, 1995
General Partner of )
Nike Securities L.P. )
)
)
) Carlos E. Nardo
) Attorney-in-Fact**
)
)
* The title of the person named herein represents his
capacity in and relationship to Nike Securities L.P.,
Depositor.
** An executed copy of the related power of attorney was
filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of The
First Trust Special Situations Trust, Series 18 (File No.
33-42683) and the same is hereby incorporated herein by
this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated November 13, 1995,
in Amendment No. 2 to the Registration Statement (Form S-6) (File
No. 33-63491) and related Prospectus of The First Trust Special
Situations Trust, Series 127.
ERNST & YOUNG LLP
Chicago, Illinois
November 13, 1995
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 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 will be
filed as Exhibit 4.1 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and First Trust
Advisors L.P. as Portfolio Supervisor (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
43693] filed on behalf of The First Trust Special
Situations Trust, Series 22).
1.1.1 Form of Trust Agreement for Series 127 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank
(National Association), 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 Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-
6 [File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42755] filed on
behalf of The First Trust Special Situations Trust,
Series 19).
2.1 Copy of Certificate of Ownership (included in Exhibit
1.1 filed herewith on page 2 and incorporated herein by
reference).
S-5
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion of counsel as to New York income tax status of
securities being registered.
3.4 Opinion of counsel as to advancement of funds by
Trustee.
4.1 Consent of 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).
S-6
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 127
TRUST AGREEMENT
Dated: November 13, 1995
This Trust Agreement among Nike Securities L.P., as
Depositor, The Chase Manhattan Bank (National Association),
as Trustee, FT Evaluators L.P., as Evaluator, and First
Trust Advisors L.P., as Portfolio Supervisor, sets forth
certain provisions in full and incorporates other provisions
by reference to the document entitled "Standard Terms and
Conditions of Trust for The First Trust Special Situations
Trust, Series 22 and certain subsequent Series, Effective
November 20, 1991" (herein called the "Standard Terms and
Conditions of Trust"), and such provisions as are
incorporated by reference constitute a single instrument.
All references herein to Articles and Sections are to
Articles and Sections of the Standard Terms and Conditions
of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and the Portfolio Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II and Part III
hereof, all the provisions contained in the Standard Terms
and Conditions of Trust are herein incorporated by reference
in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby
agreed to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and
Conditions of Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for
the Trust on the Initial Date of Deposit is 15,000 Units.
(2) The initial fractional undivided interest in
and ownership of the Trust represented by each Unit thereof
shall be 1/15,000.
Documents representing this number of Units for the
Trust are being delivered by the Trustee to the Depositor
pursuant to Section 2.03 of the Standard Terms and
Conditions of Trust.
C. The Percentage Ratio is as follows on the Initial
Date of Deposit:
4.55% Albertson's, Inc., 4.55%
AutoZone, Inc., 4.56% Barnes & Noble,
Inc., 4.54% Best Buy Company, Inc.,
4.54% Dillard Department Stores, Inc.,
4.55% Dollar General Corporation,
4.55% Gap, Inc., 4.54% Hannaford
Brothers Company, 4.55% Heilig-Meyers
Company, 4.55% Home Depot, Inc., 4.54%
Kohl's Corporation, 4.54% May
Department Stores Company, 4.55%
Nordstrom's, Inc., 4.55% Office Depot,
Inc., 4.54% Penny (J.C.) Company, Inc.,
4.54% Pep Boys-Manny, Moe & Jack,
4.54% Price/Costco, Inc. 4.56% Sears,
Roebuck & Company, 4.54% Talbots, Inc.,
4.54% Toys "R" Us, Inc., 4.54% Wal-
Mart Stores, Inc., 4.54% Walgreen
Company.
D. The Record Dates shall be as set forth in the
Prospectus under "Summary of Essential Information."
E. The Distribution Dates shall be as set forth in
the Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall
be December 1, 2002.
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust
shall be an annual fee of $0.0030 per Unit calculated on the
largest number of Units outstanding during each period in
respect of which a payment is made pursuant to Section 3.05,
payable on a Distribution Date.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust
shall be an annual fee of $.0098 per Unit, calculated on
the largest number of Units outstanding during each period
in respect of which a payment is made pursuant to Section
3.05. However, in no event, except as may be otherwise be
provided in the Standard Terms and Conditions of Trust,
shall the Trustee receive compensation in any one year from
any Trust of less than $2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is
November 13, 1995.
J. The minimum amount of Equity Securities to be sold
by the Trustee pursuant to Section 5.02 of the Indenture for
the redemption of Units shall be 100 shares.
PART III
A. The term "Capital Account" as set forth in the
Prospectus shall be deemed to refer to the "Principal
Account."
B. Paragraph (g) of Section 6.01 of the Standard
Terms and Conditions of Trust is hereby amended by inserting
the following after the first word thereof:
"(i) the value of any Trust as shown by an evaluation
by the Trustee pursuant to Section 5.01 hereof shall be less
than the lower of $2,000,000 or 20% of the total value the
Equity of Securities deposited in such Trust, or (ii)"
C. Paragraph (c) of Subsection II of Section 3.05 of
the Standard Terms and Conditions of Trust is hereby amended
to read as follows:
"On each Distribution Date the Trustee shall
distribute to each Unit holder of record at the close
of business on the Record Date immediately preceding
such Distribution Date an amount per Unit equal to such
Unit holder's pro rata share of the balance of the
Principal Account (except for monies on deposit therein
required to purchase Contract Obligations) computed as
of the close of business on such Record Date after
deduction of any amounts provided in Subsection I,
provided, however, that with respect to distributions
other than the distribution occurring in the month of
December of each year, the Trustee shall not be
required to make a distribution from the Principal
Account unless the amount available for distribution
shall equal $1.00 per 1000 Units in the case of Units
initially offered at approximately $1.00 per Unit, or,
$1.00 per 100 Units in the case of Units initially
offered at approximately $10.00 per Unit."
D. For purposes of this Trust, all references in the
Standard Terms and Conditions of Trust including provisions
thereof amended hereby to "$1.00 per Unit" shall be amended
to read "$10.00 per Unit" and all references to "per 1,000
Units" shall be amended to read "per 100 Units."
E. The first sentence in Section 4.03. of the
Standard Terms and Conditions of Trust is hereby amended to
read in its entirety as follows:
"As compensations for its services hereunder, the
Evaluator shall receive against a statement therefor
submitted to the Trustee on or before each Record Date
(upon which the Trustee may rely as the Evaluator's
certification that the amount stated does not exceed
the cost incurred by the Evaluator in providing
services as described below), an amount equal to the
amount specified as compensation for the Evaluator in
the Trust Agreement provided, however, if at any time
the fee of the Trustee shall have been increased
pursuant to Section 6.04, the compensation of the
Evaluator hereunder shall at the same time be ratably
increased."
F. Section 5.02 of the Standard Terms and Conditions
of Trust is amended by adding the following new paragraph
after the second paragraph of such section:
"In lieu of a cash redemption, Unit holders tendering
2,500 Units or more for redemption may request from the
Trustee by written notice submitted at the time of tender an
in kind distribution of shares of Securities, to the extent
of whole shares. To the extent possible, in kind
distributions of Securities shall be made by the Trustee
through the distribution of each of the Securities in book-
entry form to the account of the Unit holder's bank or
broker-dealer at the Depository Trust Company. An in kind
distribution will be reduced by all expenses in connection
with customary transfer and registration charges. The
tendering Unit holder will receive his pro rata number of
whole shares of each of the Securities comprising the
portfolio and cash from the Principal Account equal to the
fractional shares to which the tendering Unit holder is
entitled. The Trustee may, but shall not be required to,
adjust the number of shares of any issue of Securities
included in a Unit holder's in kind distribution to
facilitate the distribution of whole shares, such adjustment
to be made on the basis of the value of Securities on the
date of tender. If funds in the Principal Account are
insufficient to cover the required cash distribution to the
tendering Unit holder, the Trustee may sell Securities in
the manner described in this Section 5.02."
G. Section 8.02 of the Standard Terms and Conditions
of Trust shall be amended to delete the reference to
"100,000 Units" and substitute "2,500 Units" in the third
sentence of the second paragraph thereof.
H. The first paragraph of Section 3.05.II(a) of the
Standard Terms and Conditions of Trust is hereby amended to
read in its entirety as follows:
"II. (a) On each Distribution Date, the Trustee
shall distribute to each Unit holder of record at the
close of business on the Record Date immediately
preceding such Distribution Date an amount per Unit
equal to such Unit holder's Income Distribution (as
defined below), plus such Unit holder's pro rata share
of the balance of the Principal Account (except for
monies on deposit therein required to purchase Contract
Obligations) computed as of the close of business on
such Record Date after deduction of any amounts
provided in Subsection I, provided, however, that with
respect to distributions other than the distribution
occurring in the month of December of each year, the
Trustee shall not be required to make a distribution
from the Principal Account unless the amount available
for distribution shall equal $1.00 per 100 Units."
I. Section 3.05.II(b) of the Standard Terms and
Conditions of Trust is hereby amended to read in its
entirety as follows:
"(b) For purposes of this Section 3.05, the Unit
holder's Income Distribution shall be equal to such
Unit holder's pro rata share of the cash balance in the
Income Account computed as of the close of business on
the Record Date immediately preceding such Income
Distribution after deduction of (i) the fees and
expenses then deductible pursuant to Section 3.05.I.
and (ii) the Trustee's estimate of other expenses
properly chargeable to the Income Account pursuant to
the Indenture which have accrued, as of such Record
Date, or are otherwise properly attributable to the
period to which such Income Distribution relates."
J. Section 3.11 of the Standard Terms and Conditions
of Trust is hereby deleted in its entirety and replaced with
the following language:
"Section 3.11 Notice to Depositor. In the event
that the Trustee shall have been notified at any time
of any action to be taken or proposed to be taken by at
least a legally required number of holders of the
equity securities (the "Equity Securities") (including
but not limited to the making of any demand, direction,
request, giving of any notice, consent or waiver or the
voting with respect to any amendment or supplement to
any indenture, resolution, agreement or other
instrument under or pursuant to which the Contract
Obligations, if any, have been issued) the Trustee
shall promptly notify the Depositor and shall thereupon
take such action or refrain from taking any action as
the Depositor shall in writing direct; provided,
however, that if the Depositor shall not within five
Business Days of the giving of such notice to the
Depositor direct the Trustee to take or refrain from
taking any action, the Trustee shall take such action
as it, in its sole discretion, shall deem advisable.
In the event that the Trustee shall have been
notified at any time of any action to be taken or
proposed to be taken by at least a legally required
number of holders of any Equity Securities deposited in
a Trust, the Trustee shall take such action or omit
from taking any action, as appropriate, so as to insure
that the Equity Securities are voted as closely as
possible in the same manner and the same general
proportion as are the Equity Securities held by owners
other than the Trust.
In the event that an offer by the issuer of any of
the Securities or any other party shall be made to
issue new securities, or to exchange securities, for
Trust Securities, the Trustee shall reject such offer.
However, should any exchange or substitution be
effected notwithstanding such rejection or without an
initial offer, any Securities, cash and/or property
received in exchange shall be deposited hereunder and
shall be promptly sold, if securities or property, by
the Trustee pursuant to the Depositor's direction,
unless the Depositor advises the Trustee to keep such
securities or property. The Depositor may rely on the
Portfolio Supervisor in so advising the Trustee. The
cash received in such exchange and cash proceeds of any
such sales shall be distributed to Unit holders on the
next distribution date in the manner set forth in
Section 3.05 regarding distributions from the Principal
Account. The Trustee shall not be liable or
responsible in any way for depreciation or loss
incurred by reason of any such sale.
Neither the Depositor nor the Trustee shall be
liable to any person for any action or failure to take
action pursuant to the terms of this Section 3.11 other
than failure to notify the Depositor.
Whenever new securities or property is received
and retained by the Trust pursuant to this Section
3.11, the Trustee shall, within 5 days thereafter, mail
to all Unit holders of the Trust notices of such
acquisition unless legal counsel for the Trust
determines that such notice is not required by The
Investment Company Act of 1940, as amended."
K. Section 1.01(4) shall be amended to read as
follows:
"(4)"Portfolio Supervisor" shall mean First Trust
Advisors L.P. and its successors in interest, or any
successor portfolio supervisor appointed as hereinafter
provided."
L. Section 3.05 of Article III of the Standard Terms
and Conditions of Trust is hereby amended to include the
following subsection:
"Section 3.05.I.(e) deduct from the Interest
Account or, to the extent funds are not available in
such Account, from the Principal Account and pay to the
Depositor the amount that it is entitled to receive
pursuant to Section 3.14.
M. Article III of the Standard Terms and Conditions
of Trust is hereby amended by inserting the following
paragraphs which shall be entitled Section 3.14.:
"Section 3.14. Bookkeeping and Administrative
Expenses. As compensation for providing bookkeeping
and other administrative services of a character
described in Section 26(a)(2)(C) of the Investment Company Act
of 1940 to the extent such services are in addition to,
and do not duplicate, the services to be provided
hereunder by the Trustee or the Portfolio Supervisor,
the Depositor shall receive against a statement or
statements therefor submitted to the Trustee monthly or
annually an aggregate annual fee in an amount which
shall not exceed $0.0010 times the number of Units
outstanding as of January 1 of such year except for a
year or years in which an initial offering period as
determined by Section 4.01 of this Indenture occurs, in
which case the fee for a month is based on the number
of Units outstanding at the end of such month (such
annual fee to be pro rated for any calendar year in
which the Depositor provides service during less than
the whole of such year), but in no event shall such
compensation when combined with all compensation
received from other unit investment trusts for which
the Depositor hereunder is acting as Depositor for
providing such bookkeeping and administrative services
in any calendar year exceed the aggregate cost to the
Depositor providing services to such unit investment
trusts. Such compensation may, from time to time, be
adjusted provided that the total adjustment upward does
not, at the time of such adjustment, exceed the
percentage of the total increase, after the date
hereof, in consumer prices for services as measured by
the United States Department of Labor Consumer Price
Index entitled "All Services Less Rent of Shelter" or
similar index, if such index should no longer be
published. The consent or concurrence of any Unit
holder hereunder shall not be required for any such
adjustment or increase. Such compensation shall be
paid by the Trustee, upon receipt of invoice therefor
from the Depositor, upon which, as to the cost incurred
by the Depositor of providing services hereunder the
Trustee may rely, and shall be charged against the
Interest and Principal Accounts on or before the
Distribution Date following the Monthly Record Date on
which such period terminates. The Trustee shall have
no liability to any Certificateholder or other person
for any payment made in good faith pursuant to this
Section.
If the cash balance in the Interest and Principal
Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 3.14, the Trustee
shall have the power to sell (i) Bonds from the current
list of Bonds designated to be sold pursuant to Section
5.02 hereof, or (ii) if no such Bonds have been so
designated, such Bonds as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds
of any such sale in payment of the amounts payable
pursuant to this Section 3.14.
Any moneys payable to the Depositor pursuant to
this Section 3.16 shall be secured by a prior lien on
the Trust Fund except that no such lien shall be prior
to any lien in favor of the Trustee under the
provisions of Section 6.04 herein.
N. Section 1.01(3) shall be amended to read as
follows:
"(3) "Evaluator" shall mean FT Evaluators L.P. and
its successors in interest, or any successor evaluator
appointed as hereinafter provided."
O. Section 3.01 of the Standard Terms and Conditions
of Trust shall be replaced in its entirety with the
following:
"Section 3.01. Initial Cost. The expenses
incurred in establishing a Trust, including the cost of
the preparation and typesetting of the registration
statement, prospectuses (including preliminary
prospectuses), the indenture and other documents
relating to the Trust, printing of Certificates,
Securities and Exchange Commission and state blue sky
registration fees, the costs of the initial valuation
of the portfolio and audit of the Trust, the initial
fees and expenses of the Trustee, and legal and other
out-of-pocket expenses related thereto, but not
including the expenses incurred in the printing of
preliminary prospectuses and prospectuses, expenses
incurred in the preparation and printing of brochures
and other advertising materials and any other selling
expenses, to the extent not borne by the Depositor,
shall be borne by the Trust. To the extent the funds
in the Income and Principal Accounts of the Trust shall
be insufficient to pay the expenses borne by the Trust
specified in this Section 3.01, the Trustee shall
advance out of its own funds and cause to be deposited
and credited to the Income Account such amount as may
be required to permit payment of such expenses. The
Trustee shall be reimbursed for such advance on each
Record Date from funds on hand in the Income Account
or, to the extent funds are not available in such
Account, from the Principal Account, in the amount
deemed to have accrued as of such Record Date as
provided in the following sentence (less prior payments
on account of such advances, if any), and the
provisions of Section 6.04 with respect to the
reimbursement of disbursements for Trust expenses,
including, without limitation, the lien in favor of the
Trustee therefor and the authority to sell Securities
as needed to fund such reimbursement, shall apply to
the payment of expenses and the amounts advanced
pursuant to this Section. For the purposes of the
preceding sentence and the addition provided in clause
(4) of the first sentence of Section 5.01, the expenses
borne by the Trust pursuant to this Section shall be
deemed to have been paid on the date of the Trust
Agreement and to accrue at a daily rate over the time
period specified for their amortization provided in the
Prospectus; provided, however, that nothing herein
shall be deemed to prevent, and the Trustee shall be
entitled to, full reimbursement for any advances made
pursuant to this Section no later than the termination
of the Trust. For purposes of calculating the accrual
of organizational expenses under this Section 3.01, the
Trustee shall rely on the written estimates of such
expenses provided by the Depositor pursuant to Section
5.01."
P. Section 5.01 of the Standard Terms and Conditions
of Trust shall be amended as follows:
(i) The second sentence of the first paragraph of
Section 5.01 shall be amended by adding the following
at the conclusion thereof: ", plus (4) amounts
representing organizational expenses paid from the
Trust less amounts representing accrued organizational
expenses of the Trust, plus (5) all other assets of the
Trust"
(ii) The following shall be added at the end of
the first paragraph of Section 5.01:
Until the Depositor has informed the Trustee
that there will be no further deposits of
Additional Securities pursuant to section 2.01(b),
the Depositor shall provide the Trustee with
written estimates of (i) the total organizational
expenses to be borne by the Trust pursuant to
Section 3.01 and (ii) the total number of Units to
be issued in connection with the initial deposit
and all anticipated deposits of additional
Securities. For purposes of calculating the Trust
Fund Evaluation and Unit Value, the Trustee shall
treat all such anticipated expenses as having been
paid and all liabilities therefor as having been
incurred, and all Units as having been issued, in
each case on the date of the Trust Agreement, and,
in connection with each such calculation, shall
take into account a pro rata portion of such
expense and liability based on the actual number
of Units issued as of the date of such
calculation. In the event the Trustee is informed
by the Depositor of a revision in its estimate of
total expenses or total Units and upon the
conclusion of the deposit of additional
Securities, the Trustee shall base calculations
made thereafter on such revised estimates or
actual expenses, respectively, but such adjustment
shall not affect calculations made prior thereto
and no adjustment shall be made in respect
thereof.
Q. The first sentence of Section 3.13. shall be
amended to read as follows:
"As compensation for providing supervisory
portfolio services under this Indenture, the Portfolio
Supervisor shall receive, in arrears, against a
statement or statements therefor submitted to the
Trustee monthly or annually an aggregate annual fee in
an amount which shall not exceed $0.0035 per Unit
outstanding as of January 1 of such year except for a
Trust during the year or years in which an initial
offering period as determined in Section 4.01 of this
Indenture occurs, in which case the fee for a month is
based on the number of Units outstanding at the end of
such month (such annual fee to be pro rated for any
calendar year in which the Portfolio Supervisor
provides services during less than the whole of such
year), but in no event shall such compensation when
combined with all compensation received from other
series of the Trust for providing such supervisory
services in any calendar year exceed the aggregate cost
to the Portfolio Supervisor for the cost of providing
such services."
R. Section 1.01(2) shall be amended to read as
follows:
"(2) "Trustee" shall mean The Chase Manhattan Bank
(National Association), or any successor trustee appointed
as hereinafter provided."
All references to United States Trust Company of new
York in the Standard Terms and Conditions of Trust shall be
amended to refer to The Chase Manhattan Bank (National
Association).
IN WITNESS WHEREOF, Nike Securities L.P., The Chase
Manhattan Bank (National Association), FT Evaluators L.P.
and First Trust Advisors L.P. have each caused this Trust
Agreement to be executed and the respective corporate seal
to be hereto affixed and attested (if applicable) by
authorized officers; all as of the day, month and year first
above written.
NIKE SECURITIES L.P.,Depositor
By Carlos E. Nardo
Senior Vice President
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
Trustee
(SEAL) By Thomas Porrazzo
Vice President
Attest:
Rosalia A. Raviele
Second Vice President
FT EVALUATORS L.P., Evaluator
By Carlos E. Nardo
Senior Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Carlos E. Nardo
Senior Vice President
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
The First Trust Special Situations Trust, Series 127
(Note: Incorporated herein and made a part hereof for
the Trust is the "Schedule of Investments" for the Trust as
set forth in the Prospectus.)
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
November 13, 1995
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Special Situations Trust, Series 127
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of The First Trust Special Situations
Trust, Series 127 in connection with the preparation, execution
and delivery of a Trust Agreement dated November 13, 1995 among
Nike Securities L.P., as Depositor, The Chase Manhattan Bank
(National Association), as Trustee, FT Evaluators L.P., as
Evaluator, and First Trust Advisors L.P., as Portfolio
Supervisor, pursuant to which the Depositor has delivered to and
deposited the Securities listed in Schedule A to the Trust
Agreement with the Trustee and pursuant to which the Trustee has
issued to or on the order of the Depositor a certificate or
certificates representing units of fractional undivided interest
in and ownership of the Fund created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. the certificates evidencing the Units in the Fund when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 33-63491)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF:jln
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
November 13, 1995
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
Re: The First Trust Special Situations Trust, Series 127
Gentlemen:
We have acted as counsel for Nike Securities L.P., Depositor
of The First Trust Special Situations Trust, Series 127 (the
"Fund"), in connection with the issuance of units of fractional
undivided interests in the Trust of said Fund (the "Trust"),
under a Trust Agreement, dated November 13, 1995 (the
"Indenture"), among Nike Securities L.P., as Depositor, The Chase
Manhattan Bank (National Association), as Trustee, FT Evaluators
L.P., as Evaluator and First Trust Advisors L.P., as Portfolio
Supervisor.
In this connection, we have examined the Registration
Statement, the form of Prospectus proposed to be filed with the
Securities and Exchange Commission, the Indenture and such other
instruments and documents we have deemed pertinent. The opinions
expressed herein assume that the Trust will be administered, and
investments by the Trust from proceeds of subsequent deposits, if
any, will be made, in accordance with the terms of the Indenture.
The Trust holds Equity Securities as such term is defined in the
Prospectus.
Based upon the foregoing and upon an investigation of such
matters of law as we consider to be applicable, we are of the
opinion that, under existing federal income tax law:
I. The Trust is not an association taxable as a
corporation for Federal income tax purposes; each Unit holder
will be treated as the owner of a pro rata portion of each of the
assets of the Trust under the Internal Revenue Code of 1986 (the
"Code"); the income of the Trust will be treated as income of the
Unit holders thereof under the Code; and an item of Trust income
will have the same character in the hands of a Unit holder as it
would have in the hands of the Trustee. Each Unit holder will be
considered to have received his pro rata share of income derived
from each Trust asset when such income is considered to be
received by the Trust.
II. Each Unit holder will have a taxable event when the
Trust disposes of an Equity Security (whether by sale, exchange,
liquidation, redemption, or otherwise) or upon the sale or
redemption of Units by such Unit holder. The price a Unit holder
pays for his Units is allocated among his pro rata portion of
each Equity Security held by the Trust (in proportion to the fair
market values thereof on the date the Unit holder purchases his
Units) in order to determine his tax basis for his pro rata
portion of each Equity Security held by the Trust. For Federal
income tax purposes, a Unit holder's pro rata portion of
dividends as defined by Section 316 of the Code paid by a
corporation with respect to an Equity Security held by the Trust
is 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
exceeds 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 be treated as gain. In
general, any such capital gain will be short term unless a Unit
holder has held his Units for more than one year.
III. A Unit holder's portion of gain, if any, upon the sale
or redemption of Units or the disposition of Equity Securities
held by the Trust will generally be considered a capital gain
except in the case of a dealer or a financial institution and
will be generally long-term if the Unit holder has held his Units
for more than one year. A Unit holder's portion of loss, if any,
upon the sale or redemption of Units or the disposition of
Securities held by the Trust will generally be considered a
capital loss (except in the case of a dealer or a financial
institution) and will be generally long-term if the Unit holder
has held his Units for more than one year.
Each Unit holder's pro rata share of each expense paid by
the Trust is deductible by the Unit holder to the same extent as
though the expense had been paid directly by him. It should be
noted that as a result of the Tax Reform Act of 1986, certain
miscellaneous itemized deductions, such as investment expenses,
tax return preparation fees an employee business expenses will be
deductible by an individual only to the extent they exceed 2% of
such individuals' adjusted gross income. Unit holders may be
required to treat some or all of the expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
The scope of this opinion is expressly limited to the
matters set forth herein, and, except as expressly set forth
above, we express no opinion with respect to any other taxes,
including state or local taxes, United States tax consequences to
non-U.S. Unit holders or collateral tax consequences with respect
to the purchase, ownership and disposition of Units.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 33-63491)
relating to the Units referred to above and to the use of our
name and to the reference to our firm in said Registration
Statement and in the related Prospectus.
Very truly yours,
CHAPMAN AND CUTLER
EFF/jln
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
November 13, 1995
The Chase Manhattan Bank
(National Association), as Trustee of
The First Trust Special Situations
Trust, Series 127
770 Broadway - 6th Floor
New York, New York 10003
Attention: Mr. Paul J. Holland
Vice President
Re: The First Trust Special Situations Trust, Series 127
Dear Sirs:
We are acting as special counsel with respect to New York
tax matters for The First Trust Special Situations Trust, Series
127 consisting of American Retail Growth Trust, Series 1 (the
"Trust"), which will be established under a Standard Terms and
Conditions of Trust dated November 20, 1991, and a related Trust
Agreement dated as of today (collectively, the "Indenture"),
among Nike Securities L.P., as Depositor (the "Depositor"); FT
Evaluators L.P., as Evaluator; First Trust Advisors L.P., as
Portfolio Supervisor and The Chase Manhattan Bank (National
Association), as Trustee (the "Trustee"). Pursuant to the terms
of the Indenture, units of fractional undivided interest in the
Trust (the "Units") will be issued in the aggregate number set
forth in the Indenture.
We have examined and are familiar with originals or
certified copies, or copies otherwise identified to our
satisfaction, of such documents as we have deemed necessary or
appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each dated today
and addressed to the Trustee, of Chapman and Cutler, counsel for
the Depositor, with respect to the matters of law set forth
therein.
Based upon the foregoing, we are of the opinion that:
1. The Trust will not constitute an association taxable as
a corporation under New York law, and accordingly will not be
subject to the New York State franchise tax or the New York City
general corporation tax.
2. Under the income tax laws of the State and City of New
York, the income of the Trust will be considered the income of
the holders of the Units.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 33-63491) filed with the
Securities and Exchange Commission with respect to the
registration of the sale of the Units and to the references to
our name under the captions "What is the Federal Tax Status of
Unit Holders?" and "Legal Opinions" in such Registration
Statement and the preliminary prospectus included therein.
Very truly yours,
CARTER, LEDYARD & MILBURN
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
November 13, 1995
The Chase Manhattan Bank
(National Association), as Trustee of
The First Trust Special Situations
Trust, Series 127
770 Broadway - 6th Floor
New York, New York 10003
Attention: Mr. Paul J. Holland
Vice President
Re: The First Trust Special Situations Trust, Series 127
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank
(National Association) ("Chase") in connection with the execution
and delivery of a Trust Agreement ("the Trust Agreement") dated
today's date (which Trust Agreement incorporateds by reference
certain Standard Terms and Conditions of Trust dated November 20,
1991, and the same are collectively referred to herein as the
"Indenture") among Nike Securities L.P., as Depositor (the
"Depositor"); FT Evaluators L.P., as Evaluator; First Trust
Advisors L.P., as Portfolio Supervisor; and Chase, as Trustee
(the "Trustee"), establishing The First Trust Special Situations
Trust, Series 127, consisting of American Retail Growth Trust,
Series 1 (the "Trusts"), and the execution by Chase, as Trustee
under the Indenture, of a certificate or certificates evidencing
ownership of units (such certificate or certificates and such
aggregate units being herein called "Certificates" and "Units"),
each of which represents an undivided interest in the respective
Trust, which consists of common stocks (including confirmations
of contracts for the purchase of certain stocks and bonds not
delivered and cash, cash equivalents or an irrevocable letter of
credit or a combination thereof, in the amount required for such
purchase upon the receipt of such stocks and bonds), such stocks
and bonds being defined in the Indenture as Securities and listed
in the Schedule to the Indenture.
We have examined the Indenture, the Closing Memorandum dated
today's date, a specimen Certificate, and such other documents as
we have deemed necessary in order to render this opinion. Based
on the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing national banking
association authorized to exercise trust powers.
2. The Trust Agreement has been duly executed and
delivered by Chase and, assuming due execution and delivery by
the other parties thereto, constitutes the valid and legally
binding obligation of Chase.
3. The Certificates are in proper form for execution and
delivery by Chase, as Trustee.
4. Chase, as Trustee, has duly executed and delivered to
or upon the order of the Depositor a Certificate or Certificates
evidencing ownership of the Units, registered in the name of the
Depositor. Upon receipt of confirmation of the effectiveness of
the registration statement for the sale of the Units filed with
the Securities and Exchange Commission under the Securities Act
of 1933, the Trustee may deliver such other Certificates, in such
names and denominations as the Depositor may request, to or upon
the order of the Depositor as provided in the Closing Memorandum.
5. Chase, as Trustee, may lawfully advance to the Trust
amounts as may be necessary to provide periodic interest
distributions of approximately equal amounts, and be reimbursed,
without interest, for any such advances from funds in the
interest account, as provided in the Indenture.
In rendering the foregoing opinion, we have not considered,
among other things, whether the Securities have been duly
authorized and delivered.
Very truly yours,
CARTER, LEDYARD & MILBURN
FT Evaluators L.P.
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
November 13, 1995
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 127
Gentlemen:
We have examined the Registration Statement File No. 33-
63491 for the above captioned fund. We hereby consent to the use
in the Registration Statement of the references to FT Evaluators
L.P. as evaluator.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
FT Evaluators L.P.
Carlos E. Nardo
Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information
extracted from Amendment number 1 to form S-6 and is qualified
in its entirety by reference to such Amendment number 1 to form
S-6.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> American Retail Growth
Trust
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> NOV-13-1995
<PERIOD-START> NOV-13-1995
<PERIOD-END> NOV-13-1995
<INVESTMENTS-AT-COST> 139,816
<INVESTMENTS-AT-VALUE> 139,816
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<TOTAL-ASSETS> 139,816
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<PAID-IN-CAPITAL-COMMON> 139,816
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</TABLE>
