AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 23, 2005
1933 ACT FILE NO. 333-______
1940 ACT FILE NO. 811 - 03763
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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REGISTRATION STATEMENT ON
FORM S-6
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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: CLAYMORE SECURITIES DEFINED PORTFOLIOS,
SERIES 268
B. NAME OF DEPOSITOR: CLAYMORE SECURITIES, INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
Claymore Securities, Inc.
2455 Corporate West Drive
Lisle, Illinois 60532
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
Copies to:
NICHOLAS DALMASO, ESQ. ERIC F. FESS
Senior Managing Director and
General Counsel
Claymore Securities, Inc. Chapman and Cutler LLP
2455 Corporate West Drive 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(630) 505-3736 (312) 845-3000
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of rule 485 or 486
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
E. TITLE OF SECURITIES BEING REGISTERED: Units of fractional undivided
beneficial interest.
F. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: As soon as practicable
after the effective date of the Registration Statement.
/ / Check box if it is proposed that this filing will become effective on
(date) at (time) pursuant to Rule 487.
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The registration hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 268
GNMA PORTFOLIO, SERIES 17
[Claymore Logo]
PROSPECTUS PART A DATED _____ , 2005
A portfolio of mortgage-backed securities
seeking current interest income and principal distributions
The Securities and Exchange Commission has not
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus.
Any representation to the contrary is a criminal offense.
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INVESTMENT SUMMARY
OVERVIEW
Claymore Securities Defined Portfolios, Series 268 is a unit investment
trust that consists of the GNMA Portfolio, Series 17 (the "trust"). Claymore
Securities, Inc. ("Claymore" or the "sponsor") serves as the sponsor of the
trust. The trust is scheduled to terminate in approximately 30 years.
INVESTMENT OBJECTIVE
The trust seeks to provide current interest income and principal
distributions.
PRINCIPAL INVESTMENT STRATEGY
The trust seeks to provide monthly distributions of interest income and
principal by investing in a portfolio primarily consisting of fixed-rate
mortgage-backed securities representing pools of mortgages on 1- to 4-family
dwellings issued by the Government National Mortgage Association (known as
"Ginnie Mae"). The trust may also hold U.S. Treasury securities. The sponsor
generally considered the following factors, among others, in selecting the
securities:
o the types of Ginnie Mae securities available,
o the prices and yields of the securities relative to other comparable
securities, including the extent to which the securities were trading
at a premium or discount from their principal value, and
o the maturities of the securities.
Ginnie Mae was created in 1968 as a government-owned corporation within the
United States Department of Housing and Urban Development. The securities in the
portfolio are backed by the full faith and credit of the U.S. government. This
means that Ginnie Mae guarantees that the principal and interest will be paid on
the securities. However, Ginnie Mae does not guarantee price or yield on the
securities. The units in the trust are not guaranteed by Ginnie Mae or the
U.S.government in any way.
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ESSENTIAL INFORMATION
(AS OF THE INCEPTION DATE)
INCEPTION DATE
(INITIAL DATE OF DEPOSIT) _____ , 2005
UNIT PRICE (PUBLIC OFFERING PRICE) $_____
NUMBER OF UNITS 150,000
PRINCIPAL AMOUNT OF SECURITIES IN TRUST $150,000
FRACTIONAL UNDIVIDED INTEREST
IN TRUST PER UNIT $1/150,000
PRINCIPAL AMOUNT OF SECURITIES PER UNIT $1.00000
FIRST SETTLEMENT DATE _____
MANDATORY TERMINATION DATE _____
ESTIMATED CURRENT RETURN %
ESTIMATED LONG-TERM RETURN %
TYPE OF GINNIE MAE SECURITIES Long-term
ESTIMATED AVERAGE LIFE OF SECURITIES ____ years
MINIMUM VALUE OF THE 40% of the principal
TRUST UNDER WHICH THE amount of the securities
TRUST AGREEMENT MAY deposited in the trust at
BE TERMINATED the end of the initial
offering period
EVALUATION TIME Close of trading of the
New York Stock Exchange
(normally 4:00 p.m. Eastern Time)
ESTIMATED INITIAL
DISTRIBUTION DATE _____ , 2005
ESTIMATED INITIAL
RECORD DATE _____ , 2005
DISTRIBUTION DATES 25th day of each month
RECORD DATES 15th day of each month
CUSIP NUMBER
TICKER
MINIMUM INVESTMENT
All Accounts $250.00
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PRINCIPAL RISKS
As with all investments, you can lose money by investing in this trust. The
trust also might not perform as well as you expect. This can happen for reasons
such as these:
o SECURITY PRICES WILL FLUCTUATE. The value of your investment may fall
over time.
o THE SPONSOR DOES NOT ACTIVELY MANAGE THE PORTFOLIO. The trust will
generally hold, and continue to buy, the securities even if the market
value declines.
o THE VALUE OF THE SECURITIES WILL GENERALLY FALL IF INTEREST RATES, IN
GENERAL, RISE. No one can predict whether interest rates will rise or
fall in the future.
o Since mortgage-backed securities represent an interest in mortgage
loans made to finance purchases of homes, THE TRUST WILL RECEIVE
SCHEDULED PRINCIPAL PAYMENTS EACH MONTH DURING ITS LIFE AND IT IS ALSO
LIKELY THAT THE TRUST WILL RECEIVE UNSCHEDULED PREPAYMENTS OF
PRINCIPAL PRIOR TO A SECURITY'S SCHEDULED MATURITY DATE. As a result,
you might not be able to reinvest these principal payments and
prepayments in other investments with the same return as the trust. In
addition, the trust will not retain its present size and composition.
o THE TRUST COULD TERMINATE EARLIER THAN ANTICIPATED DUE TO UNSCHEDULED
PRINCIPAL PREPAYMENTS ON THE UNDERLYING LOANS.
o While the interest and principal payments are backed by the full faith
and credit of the U.S. government, NEITHER THE UNITS IN THE TRUST NOR
THE MARKET VALUE OF THE SECURITIES ARE GUARANTEED.
WHO SHOULD INVEST
You should consider this investment if:
o You want to own securities representing interests in pools of mortgage
loans on 1- to 4-family dwellings in a single investment; or
o You want the potential to receive monthly distributions of income and
principal.
You should not consider this investment if:
o You are uncomfortable with the risks of an unmanaged investment in
mortgage-backed securities; or
o You want capital appreciation.
FEES AND EXPENSES
The amounts below are estimates of the direct and indirect expenses that
you may incur based on a $1 unit price. Actual expenses may vary.
PERCENTAGE
OF PUBLIC AMOUNT PER
OFFERING $1,000
INVESTOR FEES PRICE (4) INVESTED
- ------------ --------- ---------
MAXIMUM SALES FEES
(including creation
and development fee) 3.95% $39.50
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INVESTOR FEES
ORGANIZATION COSTS
(amount per 1,000 units)(2)
=====
APPROXIMATE
ANNUAL FUND % OF PUBLIC
OPERATING OFFERING AMOUNT PER
EXPENSES PRICE (4) 1,000 UNITS
- ------------ --------- ---------
Trustee's fee 0.086% $0.910
Sponsor's supervisory fee 0.028 0.300
Bookkeeping and
administrative fee 0.033 0.350
Sponsor's Evaluation fee 0.033 0.350
Estimated other trust
operating expenses (3)
----- -----
Total %
===== =====
(1) Excludes organization costs.
(2) Organization costs are deducted from portfolio assets
six months after the Inception Date or at the close of the initial offering
period, in the discretion of the sponsor.
(3) Excludes brokerage costs and transactional fees.
EXAMPLE
This example helps you compare the cost of this trust with other unit
trusts and mutual funds. In the example we assume that the expenses do not
change and that the trust's annual return is 5%. Your actual returns and
expenses will vary. Based on these assumptions, you would pay these expenses for
every $10,000 you invest in the trust:
1 year $
3 years
5 years
10 years
These amounts are the same regardless of whether you sell your investment
at the end of a period or continue to hold your investment. This example does
not consider brokerage fees the trust pays or any transaction fees that
broker-dealers may charge for processing redemption requests or transactional
expenses.
See "Expenses of the Trust" in Part B of the prospectus for additional
information.
TRUST PORTFOLIO
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 268
GNMA PORTFOLIO, SERIES 17
THE TRUST PORTFOLIO AS OF THE INCEPTION DATE, _____ , 2005
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RANGE COST OF
PRINCIPAL INTEREST OF STATED SECURITIES
AMOUNT ISSUER COUPON MATURITIES (2) TO TRUST (3)
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---------- ----------
$ $
========== ==========
(1) Securities of these issuers are all represented by contracts to purchase
securities. All contracts to purchase the securities were entered into on
______ , 2005. All contracts are expected to be settled prior to or on
______ , 2005.
(2) The principal amount of securities listed as having the range of maturities
shown is an aggregate of individual securities having varying ranges of
maturities within that shown. They are listed as one category of securities
with a single range of maturities because current market conditions accord
no difference in price among the securities grouped together on the basis
of the difference in their maturity ranges. At some time in the future,
however, the difference in maturity ranges could affect the market value of
the individual securities.
(3) Some securities may be represented by contracts to purchase such
securities. During the initial offering period, evaluations of securities
are made on the basis of current offering side evaluations of the
securities. The aggregate offering price is greater than the aggregate bid
price of the securities, which is the basis on which redemption prices will
be determined for purposes of redemption of units after the initial
offering period.
(4) In addition to the information as to the Ginnie Mae modified pass-through
mortgage-backed securities shown above, the trustee will furnish
unitholders a statement listing the name of issuer, pool number, interest
rate, maturity date and principal amount for each security in the portfolio
upon written request.
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UNDERSTANDING YOUR INVESTMENT
HOW TO BUY UNITS
You can buy units of your trust on any business day by contacting your
financial professional. Public offering prices of units are available daily on
the Internet at WWW.CLAYMORESECURITIES.COM. The unit price includes:
o the value of the securities,
o the sales fee,
o accrued interest on the securities, and
o cash and other net assets in the portfolio.
We often refer to the purchase price of units as the "Public Offering
Price" or "offer price." We must receive your order to buy units prior to the
close of the New York Stock Exchange (normally 4:00 p.m. Eastern time) to give
you the price for that day. If we receive your order after this time, you will
receive the price computed on the next business day.
ORGANIZATION COSTS. During the initial offering period, your purchase price
includes a per unit amount sufficient to reimburse us for some or all of the
costs of creating your trust. These costs include the costs of preparing the
registration statement and legal documents, legal fees, federal and state
registration fees, the initial fees and expenses of the trustee and the initial
audit. Your trust will sell securities to reimburse us for these costs at the
end of the initial offering period or after six months, in the discretion of the
sponsor.
VALUE OF THE SECURITIES. We determine the value of the securities as of the
close of the New York Stock Exchange on each day that the exchange is open.
We generally determine the value of securities during the initial offering
period based on the aggregate institutional offering side evaluations of the
securities determined (a) on the basis of current offering prices of the
securities, (b) if offering prices are not available for any particular
security, on the basis of current offering prices for comparable securities, (c)
by determining the value of securities on the offer side of the market by
appraisal, or (d) by any combination of the above. After the initial offering
period ends, we generally determine the value of the securities as described in
the preceding sentence based on the institutional bid side evaluations rather
than the offering side evaluations. The offering side price generally represents
the price at which investors in the market are willing to sell a security and
the bid side evaluation generally represents the price that investors in the
market are willing to pay to buy a security. The bid side evaluation is lower
than the offering side evaluation.
There is a period of a few days (usually five business days), beginning on
the first day of each month, during which the total amount of payments
(including prepayments, if any) of principal for the preceding month of the
various mortgages underlying each security will not yet have been reported by
the issuer to Ginnie Mae. During this period, the precise principal amount of
the securities will not be known. For purposes of determining the aggregate
underlying value of the securities and the accrued interest on the units during
this period, the evaluator will base its valuation and calculations upon the
average monthly principal distribution for the preceding twelve month period.The
sponsor does not expect the differences in such principal amounts from month to
month to be material. The sponsor will, however, adopt procedures to minimize
the impact of such differences when necessary.
The sponsor determined the initial prices of the stocks shown in the "Trust
Portfolio" in this prospectus. The sponsor determined these initial prices as
described above at the close of the New York Stock Exchange on the business day
before the date of this prospectus. On the first day we sell units we will
compute the unit price as of the close of the New York Stock Exchange or the
time the registration statement filed with the Securities and Exchange
Commission becomes effective, if later.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest
on a security from the last day on which interest was paid. Ginnie Mae
securities generally pay interest monthly but the trust accrues this interest
daily. As a result, the trust always has an amount of interest earned but not
yet collected by the trustee. For this reason, with respect to unit orders made
after the inception date of the trust, the unit price will have added to it the
proportionate share of accrued interest to the date of settlement. On the next
distribution date, you will receive the amount of any accrued interest paid on
your units. In an effort to reduce the amount of accrued interest which you
would otherwise have to pay on your units, the trustee will advance the amount
of accrued interest as of the first settlement date (generally three business
days after the trust's inception date) and will distribute this amount to
Claymore as the unitholder of record as of that date. Consequently, the amount
of accrued interest to be added to your unit price will include only accrued
interest from the first settlement date to the date of settlement of your unit
trade, less any interest distributions after the first settlement date. Because
of the varying interest payment dates of the securities, accrued interest at any
point in time will be greater than the amount of interest actually received by
the trust and distributed to unitholders. Therefore, there will always remain an
item of accrued interest that is added to the unit price. If you sell or redeem
units, the proportionate share of the accrued interest will be included in your
unit price.
SALES FEE. You pay a fee when you buy units. We refer to this fee as the
"sales fee." The total sales fee equals 3.95% of the Public Offering Price
(excluding organization costs) at the time of purchase. This is equivalent to
4.112% of the net amount invested.
REDUCING YOUR SALES FEE. We offer a variety of ways for you to reduce the fee
you pay. It is your financial professional's responsibility to alert us of any
discount when you order units.
LARGE PURCHASES. You can reduce your sales fee by increasing the size of your
investment.
Investors who make large purchases are entitled to the following sales fees:
Sales Fee
(as a % of Public
Purchase Amount Offering Price)
- ----------------- --------------
Less than $100,000 3.95%
$100,000 - $249,999 3.70
$250,000 - $499,999 3.35
$500,000 - $999,999 3.10
$1,000,000 or more 2.90
We apply these fees as a percent of the unit price at the time of purchase.
We also apply the different purchase levels on a unit basis using a $1 unit
equivalent. For example, if you purchase between 100,000 and 249,999 units, your
fee is 3.70% of your unit price.
You may AGGREGATE unit purchases by the same person on any single day from
any one broker-dealer to qualify for a purchase level. You can include these
purchases as your own for purposes of this aggregation:
o Purchases by your spouse or minor
children; and
o Purchases by your trust estate or fiduciary accounts.
The discounts described above apply only during the initial offering
period.
There can be no assurance that the sponsor will create future trusts with
investment strategies similar to your trust or that may fit within your
investment parameters.
ADVISORY AND FEE ACCOUNTS. We reduce your sales fee for purchases made
through registered investment advisers, certified financial planners or
registered broker-dealers who charge periodic fees in lieu of commissions or who
charge for financial planning or for investment advisory or asset management
services or provide these services as part of an investment account where a
comprehensive "wrap fee" is imposed. We reduce your fee by the amount of the fee
that we would normally pay to your financial professional. You pay only the
portion of the sales fee that the sponsor retains. This table provides an
example of the sales fee you will pay per unit if you purchase units in this
type of account on the Inception Date.
Fee paid to broker 0.00%
Sponsor retention 1.20%
----
Total 1.20%
====
This discount applies during the initial offering period and in the
secondary market.
EMPLOYEES. We do not charge any sales fee for purchases made by officers,
directors and employees of Claymore and its affiliates. We also do not charge a
sales fee for purchases made by registered representatives of selling firms and
their family members (spouses, children and parents). This discount applies
during the initial offering period and in the secondary market. Dealers are not
entitled to a concession for such purchases.
See "Purchase, Redemption and Pricing of Units" in Part B of the prospectus
for more information regarding buying units.
HOW WE DISTRIBUTE UNITS. We sell units to the public through broker-dealers
and other firms. We pay part of the sales fee you pay to these distribution
firms when they sell units. The distribution fee during the initial offering
period paid for a given transaction is as follows:
Concession per Unit
Purchase Amount/ (as a % of Public
Form of Purchase Offering Price)
- ---------------- -----------------
Less than $100,000 2.75%
$100,000 - $249,999 2.50
$250,000 - $499,999 2.15
$500,000 - $999,999 1.90
$1,000,000 or more 1.70
Wrap Account and
Employee Purchases 0.00
We apply these amounts as a percent of the unit price per transaction at
the time of the transaction. We also apply the different distribution levels on
a unit basis using a $1 unit equivalent. For example, if a firm executes a
transaction between 100,000 and 249,999 units, it earns 2.50% of the unit price.
Broker-dealers and other firms that sell units of certain Claymore unit
trusts are eligible to receive additional compensation for volume sales. Such
payments will be in addition to the regular concessions paid to dealer firms as
set forth in the applicable trust's prospectus. The additional concession is
based on total sales of eligible Claymore unit trusts during a calendar quarter
as set forth in the following table:
Additional Volume
Concession
(as a percentage
Primary Offering of the value of
Period Sales During units sold over
Calendar Quarter $3 million)
--------------- --------------
$0 but less than $3 million 0.00%
$3 million
but less than $20 million 0.05
$20 million or more 0.10
Eligible unit trusts include all Claymore unit trusts, other than Claymore
municipal portfolios, sold in the primary market. Dealer firms will not receive
additional compensation for the first $3 million sold in units during a calendar
quarter. For example, if a dealer firm sells $4 million of eligible units in a
calendar quarter, the dealer firm will receive additional compensation of 0.05%
of $1 million. Also, if a dealer firm sells $26 million of eligible units in a
calendar quarter, the dealer firm will receive additional compensation of 0.10%
of $23 million. In addition, dealer firms will not receive volume concessions on
the sale of units which are not subject to a transactional sales charge.
However, such sales will be included in determining whether a firm has met the
sales level breakpoints for volume concessions.
Claymore reserves the right to modify or terminate the volume concession
program at any time. The sponsor may also pay to certain dealers an
administrative fee for information or service used in connection with the
distribution of trust units. Such amounts will be in addition to any concessions
received for the sale of units.
After the initial offering period ends, the distribution fee paid to firms
when they sell units in the secondary market through Claymore is as follows:
Concession per Unit
Purchase Amount/ (as a % of Public
Form of Purchase Offering Price)
- ---------------- -----------------
Less than $100,000 2.60%
$100,000 to $249,999 2.50
$250,000 to $499,999 2.30
$500,000 to $999,999 2.05
$1,000,000 or more 2.00
We apply these amounts as a percent of the total distribution price.
We generally register units for sale in various states in the U.S. We do
not register units for sale in any foreign country. It is your financial
professional's responsibility to make sure that units are registered or exempt
from registration if you are a foreign investor or if you want to buy units in
another country. This prospectus does not constitute an offer of units in any
state or country where units cannot be offered or sold lawfully. We may reject
any order for units in whole or in part.
We may gain or lose money when we hold units in the primary or secondary
market due to fluctuations in unit prices. The gain or loss is equal to the
difference between the price we pay for units and the price at which we sell or
redeem them. We may also gain or lose money when we deposit securities to create
units. For example, we gained $0 on the initial deposit of securities into the
trust.
See "Purchase, Redemption and Pricing of Units" in Part B of the prospectus
for additional information.
HOW TO SELL YOUR UNITS
You can sell your units on any business day by contacting your financial
professional or, in some cases, the trustee. Unit prices are available daily on
the Internet at WWW.CLAYMORESECURITIES.COM or through your financial
professional. We often refer to the sale price of units as the "bid price."
Certain broker-dealers may charge a transaction fee for processing unit
redemptions or sale requests.
During the initial offering period the sponsor collects organization costs,
the price at which the trustee will redeem units and the price at which the
sponsor may repurchase units include estimated organization costs. After such
period, the amount paid will not include such estimated organization costs.
SELLING UNITS. We intend to, but are not obligated to, maintain a secondary
market for units. This means that if you want to sell your units, we may buy
them at the current price which is based on their net asset value. We may then
resell the units to other investors at the Public Offering Price or redeem them
for the redemption price. Our secondary market repurchase price is generally the
same as the redemption price. Certain broker-dealers might also maintain a
secondary market in units. You should contact your financial professional for
current unit prices to determine the best price available. We may discontinue
our secondary market at any time without notice. Even if we do not make a
market, you will be able to redeem your units with the trustee on any business
day for the current price.
REDEEMING UNITS. You may also be able to redeem your units directly with
the trustee, The Bank of New York, on any day the New York Stock Exchange is
open. The trustee must receive your completed redemption request prior to the
close of the New York Stock Exchange for you to receive the unit price for a
particular day. (For what constitutes a completed redemption request, see
"Purchase, Redemption and Pricing of Units -- Redemption" in Part B of the
prospectus). If your request is received after that time or is incomplete in any
way, you will receive the next price computed after the trustee receives your
completed request. Rather than contacting the trustee directly, your financial
professional may also be able to redeem your unit by using the Investors'
Voluntary Redemptions and Sales (IVORS) automated redemption service offered
through Depository Trust Company.
If you redeem your units, the trustee will generally send you a payment for
your units no later than three business days after it receives all necessary
documentation.
To redeem your units, you must send the trustee any certificates for your
units. You must properly endorse your certificates or sign a written transfer
instrument with a signature guarantee. The trustee may require additional
documents such as a certificate of corporate authority, trust documents, a death
certificate, or an appointment as executor, administrator or guardian. The
trustee cannot complete your redemption or send your payment to you until it
receives all of these documents in completed form.
EXCHANGE OPTION. You may be able to exchange your units for units of other
Claymore unit trusts at a reduced sales fee. You can contact your financial
professional or Claymore for more information about trusts currently available
for exchanges. Before you exchange units, you should read the prospectus
carefully and understand the risks and fees. You should then discuss this option
with your financial professional to determine whether your investment goals have
changed, whether current trusts suit you and to discuss tax consequences. To
qualify for a reduced sales fee, you must purchase units in a subsequent trust
on the same day that you redeem units of your current trust. We may discontinue
this option at any time.
For more complete information regarding selling or redeeming your units,
see "Purchase, Redemption and Pricing of Units" in Part B of the prospectus.
DISTRIBUTIONS
MONTHLY DISTRIBUTIONS. Your trust generally pays interest from its net
investment income along with any principal paid or prepaid on the securities on
each monthly distribution date to unitholders of record on the preceding record
date. You will receive distributions in cash.
In some cases, your trust might pay a special distribution if it holds an
excessive amount of principal pending distribution. For example, this could
happen if underlying mortgages are paid prior to the scheduled termination of
the related loans. The amount of your distributions will vary from time to time
as mortgage loans are paid or trust expenses change.
REPORTS. The trustee will make available to your financial professional a
statement showing income and other receipts of your trust for each
distribution.Each year the trustee will also provide an annual report on your
trust's activity and certain tax information. You can request copies of security
evaluations to enable you to complete your tax forms and audited financial
statements for your trust, if available.
See "Administration of the Trust" in Part B of the prospectus for
additional information.
INVESTMENT RISKS
ALL INVESTMENTS INVOLVE RISK. This section describes the main risks that
can impact the value of the securities in your portfolio. You should understand
these risks before you invest. If the value of the securities falls, the value
of your units will also fall. We cannot guarantee that your trust will achieve
its objective or that your investment return will be positive over any period.
MARKET RISK. Market risk is the risk that the value of the securities in
your trust will fluctuate. This could cause the value of your units to fall
below your original purchase price or below the principal value. Market value
fluctuates in response to various factors. These can include securities market
movements, government policies, litigation, changes in interest rates,
inflation, the financial condition of a security's issuer, perceptions of the
issuer, or ratings on a security. Even though we carefully supervise your
portfolio, you should remember that we do not manage your portfolio. Your trust
will not sell a security solely because the market value falls as is possible in
a managed fund.
INTEREST RATE RISK. Interest rate risk is the risk that the value of
securities will fall if interest rates increase. The securities in your trust
typically fall in value when interest rates rise and rise in value when interest
rates fall. Securities with longer periods before maturity are often more
sensitive to interest rate changes.
CREDIT RISK. Credit risk is the risk that a security's issuer is unable to
meet its obligation to pay principal or interest on the security. While interest
and principal payments on Ginnie Mae securities are backed by the full faith and
credit of the U.S. government, the trust and the units are not guaranteed or
insured by the U.S. government or any government agency. In addition, neither
the U.S. government nor Ginnie Mae guarantees the market value or yield on
Ginnie Mae securities.
PREPAYMENT RISK. Prepayment risk is the chance that borrowers prepay their
mortgage loans earlier than expected. This reduces the trust's life and future
interest income.Any payment of mortgage debt before it is due is called
"prepayment." Most mortgage loans may be prepaid at any time by the borrower
without penalty. Each mortgage-backed security payment includes a return of
principal as well as interest. Prepayments of the entire mortgage occur when
borrowers refinance or sell their homes. They may refinance to consolidate debts
or take advantage of lower interest rate mortgages. Extra monthly principal
payments made near the trust's inception may significantly reduce the interest
amount paid by the borrower to the lender and, therefore, the future amount
received by the trust.
Your trust will distribute prepayments of principal to you but your future
interest distributions will fall as a result of the prepaid principal. You also
might not be able to reinvest this principal at as high a yield. This means that
you could receive less than the amount you paid for your units. If enough
principal is prepaid on the securities in your trust, your trust could terminate
earlier than expected.
CONCENTRATION RISK. Concentration risk is the risk that your trust is less
diversified because it concentrates in a particular type of security. When a
certain type of security makes up 25% or more of a trust, the trust is
considered to be "concentrated" in that security type. Your portfolio
concentrates in mortgage-backed securities. You should understand these
securities before you invest.
o These securities represent an ownership interest in mortgage loans
made by banks and other financial institutions to finance purchases of
homes. Individual loans are "pooled" together for sale to investors.
As the underlying loans are paid off, investors receive principal and
interest payments.
o The securities represent a pool of loans that pay a fixed rate of
interest over the life of the loan.
o The value of fixed-rate securities generally falls when interest rates
rise.
o Individual loans may be paid off early for various reasons, such as a
sale of the home, foreclosure on the mortgage, or a home owner's
desire to pay off the loan early to reduce debt. This involves
"prepayment risk" discussed above.
We describe these securities in more detail in the next section titled
"Ginnie Mae Securities".
REDUCED DIVERSIFICATION RISK. Reduced diversification risk is the risk that
your trust will become smaller and less diversified as securities or their
underlying mortgage loans are sold, are prepaid or mature. This could increase
your risk of loss and increase your share of trust expenses.
LIQUIDITY RISK. Liquidity risk is the risk that the value of a security
will fall if trading in the security is limited or absent. No one can guarantee
that a liquid trading market will exist for any security because these
securities generally trade in the over-the-counter market (they are not listed
on a securities exchange).
LITIGATION AND LEGISLATION RISK. Litigation and legislation risk is the
risk that future litigation or legislation could affect the value of your trust.
For example, future legislation could reduce tax rates, impose a flat tax,
exempt all investment income from tax or change the tax status of the
securities. Litigation could challenge an issuer's authority to issue or make
payments on securities.
ZERO COUPON SECURITIES. Certain of the securities in the trust may be zero
coupon securities. Zero coupon securities are original issue discount securities
that do not provide for the payment of any current interest. Zero coupon
securities are subject to substantially greater price fluctuations during
periods of changing market interest rates than securities of comparable quality
that pay current income.
See "Risk Factors" in Part B of the prospectus for additional information.
GINNIE MAE SECURITIES
The trust primarily invests in Ginnie Mae securities. These securities are
backed by mortgage loans. These securities represent an ownership interest in
mortgage loans made by banks and other financial institutions to finance
purchases of homes. Individual loans are pooled together by Ginnie Mae-approved
issuers for sale to investors. Commonly referred to as "pass-through"
certificates, these securities entitle an investor to an undivided interest in
the underlying mortgage loan pool. The investor receives a proportionate share
of the interest (reduced by servicing and guaranty fees) and principal on the
underlying mortgage loans.
Payments on Ginnie Mae securities to investors occur monthly. These
payments are called "modified pass-through" payments because, through Ginnie
Mae's MBS program, money is passed from the borrower through to the investors in
the Ginnie Mae securities. It is "modified" because if the amount collected from
the borrowers is less than the amount due, the issuer modifies the pass-through
to add on an amount from its corporate funds to make the payment complete.
Each group of Ginnie Mae securities shown in the "Trust Portfolio" under a
specified range of maturities includes individual mortgage-backed securities
which have varying ranges of maturities within each range. We show each group of
securities as one category of securities because current market conditions
accord no difference in price among the individual Ginnie Mae securities within
each group on the basis of the difference in the maturity dates of each
security. As long as this market condition prevails, a purchase of Ginnie Mae
securities with the same coupon rate and a maturity date within the related
range will be considered an acquisition of the same security. In the future,
however, the difference in maturity ranges could affect the market value of the
individual Ginnie Mae securities. If this happens, any additional purchases by
your trust will take into account the maturities of the individual securities.
The Government National Mortgage Association, known as Ginnie Mae, was
created in 1968 as a wholly owned corporation within the Department of Housing
and Urban Development. Through its mortgage-backed securities program, Ginnie
Mae seeks to increase the liquidity and efficiency of mortgage loan funding,
making more capital available to low and moderate-income homeowners at
competitive interest rates.
The primary function of Ginnie Mae is to operate its mortgage-backed
securities (MBS) program. Ginnie Mae helps to ensure mortgage funds are
available throughout the United States including in rural and urban areas in
which it has been harder to borrow money to buy a home. Ginnie Mae securities
are issued by Ginnie Mae-approved private institutions. The mortgages are
insured by the Federal Housing Administration, or by the Rural Housing Service,
or they are guaranteed by the Department of Veterans Affairs.
Because of the Ginnie Mae guaranty, investors in Ginnie Mae securities are
assured timely payments of scheduled principal and interest due on the pooled
mortgages that back their securities. The payments also include any prepayments
and early recoveries of principal on the pooled mortgages. These payments are
guaranteed even if borrowers or issuers default on their obligation. If the
issuer fails to make the payment, Ginnie Mae will make the payment to the
investor. Neither Ginnie Mae nor the U.S. government guarantees or insures (1)
the market value or yields of Ginnie Mae securities, (2) the trust or (3) the
units of the trust in any way.
See "Ginnie Mae Securities" in Part B of the prospectus for additional
information.
HOW THE TRUST WORKS
YOUR TRUST. Your trust is a unit investment trust registered under the
Investment Company Act of 1940 and the Securities Act of 1933. We created the
trust under a trust agreement between Claymore Securities, Inc. (as sponsor,
evaluator and supervisor) and The Bank of New York (as trustee). To create your
trust, we deposited contracts to purchase securities with the trustee along with
an irrevocable letter of credit or other consideration to pay for the
securities. In exchange, the trustee delivered units of your trust to us. Each
unit represents an undivided interest in the assets of your trust. These units
remain outstanding until redeemed or until your trust terminates.
CHANGING YOUR PORTFOLIO. Your trust is not a managed fund. Unlike a managed
fund, we designed your portfolio to remain relatively fixed. Your trust will
generally buy and sell securities:
o to pay expenses,
o to issue additional units or redeem units,
o in limited circumstances to protect the trust, or
o as permitted by the trust agreement.
Your trust will generally reject any offer for securities or other property
in exchange for the securities in its portfolio. If your trust receives
securities or other property, it will either hold the securities or property in
the portfolio or sell the securities or property and distribute the proceeds.
We will increase the size of your trust as we sell units. When we create
additional units, we will seek to maintain a portfolio that replicates the
maturity ranges of the securities in the portfolio. When your trust buys
securities, it may pay brokerage or other acquisition fees. You could experience
a dilution of your investment because of these fees and fluctuations in security
prices between the time we create units and the time your trust buys the
securities. When your trust buys or sells securities, we may direct that it
place orders with and pay brokerage commissions to brokers that sell units or
are affiliated with your trust. We may consider whether a firm sells units of
our trusts when we select firms to handle these transactions.
ESTIMATED CURRENT AND LONG-TERM RETURNS. Estimated current return shows the
estimated cash you should receive each year divided by the unit price. Estimated
long-term return shows the estimated return over the estimated life of your
trust. We base this estimate on an average of the security yields over their
estimated life.
This estimate also reflects the sales charge and estimated expenses. We
derive the average yield for your portfolio by weighting each security's yield
by its value and estimated life. Unlike estimated current return, estimated long
term return attempts to account for maturities, discounts and premiums of the
securities. These estimates show a comparison rather than a prediction of
returns. No return calculation can predict your actual return. Your actual
return will vary from these estimates. This will especially be the case if a
sizable amount of principal on the underlying mortgage loans is paid early. We
will provide you with estimated cash flows for the trust at no charge upon your
request.
In order to calculate the estimated returns, we determined an estimated
prepayment rate for the remaining term of the trust's mortgage loan pool. Each
of the primary market makers in Ginnie Mae securities uses sophisticated
computer models to determine the estimated prepayment rate. These models take
into account a number of factors and assumptions including actual prepayment
data reported by Ginnie Mae for recent periods on a particular pool, the impact
of aging on the prepayment of mortgage pools, the current interest rate
environment, the coupon, the housing environment, historical trends on Ginnie
Mae securities as a group, geographical factors and general economic trends. In
determining the estimated life of the securities in the trust, we have relied on
estimates of prepayment rates determined by primary market makers. No one can be
certain that these estimates will prove accurate or whether prepayment rates
determined by other market makers would have provided a better estimate. Any
difference between the estimate we use and the actual prepayment rate will
affect the estimated long-term return of the trust.
TERMINATION OF YOUR TRUST. Your trust will terminate upon the maturity,
payment, prepayment, sale or other liquidation of all of the securities in the
portfolio, but in no event will your trust continue after the mandatory
termination date listed in this prospectus. The trustee may terminate your trust
early if the value of the trust is less than 40% of the value of the securities
in the trust at the end of the initial offering period. At this size, the
expenses of your trust may create an undue burden on your investment. Investors
owning two-thirds of the units in your trust may also vote to terminate the
trust early. We may also terminate your trust in other limited circumstances.
The trustee will notify you of any termination and sell any remaining
securities. The trustee will send your final distribution to you within a
reasonable time following liquidation of all the securities after deducting
final expenses. Your termination distribution may be less than the price you
originally paid for your units.
See "Administration of the Trust" in Part B of the prospectus for
additional information.
GENERAL INFORMATION
CLAYMORE. Claymore Securities, Inc. specializes in the creation,
development and distribution of investment solutions for advisors and their
valued clients. In November 2001, we changed our name from Ranson & Associates,
Inc. to Claymore Securities, Inc. During our history we have been active in
public and corporate finance and have distributed bonds, mutual funds and unit
trusts in the primary and secondary markets. We are a registered broker-dealer
and member of the National Association of Securities Dealers, Inc. If we fail to
or cannot perform our duties as sponsor or become bankrupt, the trustee may
replace us, continue to operate your trust without a sponsor, or terminate your
trust. You can contact us at our headquarters at 2455 Corporate West Drive,
Lisle, Illinois 60532 or by using the contacts listed on the back cover of this
prospectus. Claymore personnel may from time to time maintain a position in
certain securities held by the trust.
Claymore and your trust have adopted a code of ethics requiring Claymore's
employees who have access to information on trust transactions to report
personal securities transactions. The purpose of the code is to avoid potential
conflicts of interest and to prevent fraud, deception or misconduct with respect
to your trust.
THE TRUSTEE. The Bank of New York is the trustee of your trust. It is a
trust company organized under New York law. You can contact the trustee by
calling the telephone number on the back cover of this prospectus or write to
Unit Investment Trust Division, 101 Barclay Street, 20th Fl., New York, New York
10286. We may remove and replace the trustee in some cases without your
consent.The trustee may also resign by notifying Claymore and investors.
See "Administration of the Trust" in Part B of the prospectus for
additional information.
EXPENSES
Your trust will pay various expenses to conduct its operations. The
"Investment Summary" section of this prospectus shows the estimated amount of
these expenses.
Your trust will pay a fee to the trustee for its services. The trustee also
benefits when it holds cash for your trust in non-interest bearing accounts.Your
trust will reimburse us as supervisor and evaluator for providing portfolio
supervisory services and for evaluating your portfolio. Our reimbursements may
exceed the costs of the services we provide to your trust but will not exceed
the costs of services provided to all Claymore unit investment trusts in any
calendar year. All of these fees may adjust for inflation without your approval.
Your trust will also pay its general operating expenses. Your trust may pay
expenses such as trustee expenses (including legal and auditing expenses),
various governmental charges, fees for extraordinary trustee services, costs of
taking action to protect your trust, costs of indemnifying the trustee and
Claymore, legal fees and expenses, expenses incurred in contacting you and costs
incurred to reimburse the trustee for advancing funds to meet distributions.Your
trust may pay the costs of updating its registration statement each year. The
trustee will generally pay trust expenses from interest income and principal
payments received on the securities but in some cases may sell securities to pay
trust expenses.
See "Expenses of the Trust" in Part B of the prospectus for additional
information.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNITHOLDERS
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 268
We have audited the accompanying statement of financial condition,
including the trust portfolio set forth on page 5 of this prospectus, of
Claymore Securities Defined Portfolios, Series 268, as of _____ , 2005, the
initial date of deposit. This statement of financial condition is the
responsibility of the trust's Sponsor. Our responsibility is to express an
opinion on this statement of financial condition based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
statement of financial condition is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of financial condition. Our procedures included
confirmation with The Bank of New York, Trustee, of cash deposited for the
purchases of securities, as shown in the statement of financial condition as of
_____ , 2005. An audit also includes assessing the accounting principles used
and significant estimates made by the Sponsor, as well as evaluating the overall
statement of financial condition presentation. We believe that our audit of the
statement of financial condition provides a reasonable basis for our opinion.
In our opinion, the statement of financial condition referred to above
presents fairly, in all material respects, the financial position of Claymore
Securities Defined Portfolios, Series 268 as of _____ , 2005, in conformity with
accounting principles generally accepted in the United States.
Grant Thornton LLP
Chicago, Illinois
_____ , 2005
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 268
STATEMENT OF FINANCIAL CONDITION
AS OF THE INCEPTION DATE, _____ , 2005
INVESTMENT IN SECURITIES
Sponsor's contracts to purchase underlying securities
backed by cash deposited (1) $
Accrued interest receivable (2)
---------
Total $
=========
LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Amount due to trustee (2) $
Organization costs (3)
---------
Total Liabilities
---------
Interest of investors:
Cost to investors (5)
Less: organization costs (3)
Less: gross underwriting commission (4)(5)
---------
Net interest of investors
---------
Total $
=========
Number of units
=========
Net Asset Value per Unit $
=========
- --------------------------------------------------------------------------------
(1) Aggregate cost of the securities is based on the "offer" side price
evaluations as determined by the sponsor. Aggregate cost to the trust of
the securities listed under "Trust Portfolio" is based on offering side
valuation determined by the evaluator. The aggregate bid side evaluation of
the securities in the portfolio, as determined by the evaluator, as of the
Inception Date was $_______ . Cash has been deposited with The Bank of New
York, trustee, covering the funds (aggregating $_______ ) necessary for the
purchase of the securities in the trust represented by purchase contracts.
(2) The trustee will advance an amount equal to the accrued interest on the
securities as of the First Settlement Date, plus any cash received by the
trustee with respect to interest on the securities prior to such date, and
the same will be distributed to the sponsor on the First Settlement Date.
Consequently, the amount of interest accrued on a unit to be added to the
public offering price thereof will include only such accrued interest from
the First Settlement Date to the date of settlement, less all withdrawals
and deductions from the Interest Account subsequent to the First Settlement
Date made with respect to the unit.
(3) A portion of the public offering price represents an amount sufficient to
pay for all or a portion of the costs incurred in establishing the trust.
These costs have been estimated at $____ per 100 units for the trust. A
distribution will be made as of the close of the initial offering period or
six months after the initial date of deposit (in the sponsor's discretion)
to an account maintained by the trustee from which this obligation of the
investors will be satisfied. To the extent that actual organization costs
are greater than the estimated amount, only the estimated organization
costs added to the public offering price will be deducted from the assets
of the trust.
(4) On the Inception Date, the maximum sales fee is 3.95% of the public
offering price (equivalent to 4.112% of the net amount invested).
(5) The aggregate cost to investors includes the applicable sales fee assuming
no reduction of sales fees for quantity purchases.
CLAYMORE SECURITIES DEFINED PORTFOLIOS
CLAYMORE GNMA PORTFOLIO
PROSPECTUS PART B DATED ______ , 2005
The prospectus for a Claymore Securities Defined Portfolio (a "trust") is
divided into two parts. Part A of the prospectus relates exclusively to a
particular trust or trusts and provides specific information regarding each
trust's portfolio, strategies, investment objectives, expenses, financial
highlights, income and capital distributions, hypothetical performance
information, risk factors and optional features. Part B of the prospectus
provides more general information regarding the Claymore Securities Defined
Portfolios. You should read both parts of the prospectus and retain them for
future reference. Except as provided in Part A of the prospectus, the
information contained in this Part B will apply to each trust.
CONTENTS
General Information 2
Investment Policies 2
Ginnie Mae Securities 5
Risk Factors 8
Administration of the Trust 10
Portfolio Transactions and Brokerage Allocation 16
Purchase, Redemption and Pricing of Units 16
Taxation 23
Experts 25
Performance Information 25
GENERAL INFORMATION
Each trust is one of a series of separate unit investment trusts created
under the name Claymore Securities Defined Portfolios and registered under the
Investment Company Act of 1940 and the Securities Act of 1933. Each trust was
created as a common law trust on the inception date described in the prospectus
under the laws of the state of New York. Each trust was created under a trust
agreement among Claymore Securities, Inc. (as sponsor, evaluator and supervisor)
and The Bank of New York (as trustee).
When your trust was created, the sponsor delivered to the trustee
securities or contracts for the purchase thereof for deposit in the trust and
the trustee delivered to the sponsor documentation evidencing the ownership of
units of the trust. Additional units of each trust may be issued from time to
time by depositing in the trust additional securities (or contracts for the
purchase thereof together with cash or irrevocable letters of credit) or cash
(including a letter of credit or the equivalent) with instructions to purchase
additional securities. As additional units are issued by a trust as a result of
the deposit of additional securities by the sponsor, the aggregate value of the
securities in the trust will be increased and the fractional undivided interest
in the trust represented by each unit will be decreased. The sponsor may
continue to make additional deposits of securities into a trust, provided that
such additional deposits will be in principal amounts which will maintain the
same original percentage relationship among the principal amounts of the
securities in such trust established by the initial deposit of the
securities.Thus, although additional units will be issued, each unit will
continue to represent the same principal amount of each security, and the
percentage relationship among the principal amount of each security in the
related trust will remain the same. If the sponsor deposits cash to purchase
additional securities existing and new investors may experience a dilution of
their investments and a reduction in their anticipated income because of
fluctuations in the prices of the securities between the time of the cash
deposit and the purchase of the securities and because the trust will pay any
associated brokerage fees.
A trust consists of (a) the securities listed under "The Trust Portfolio"
in the prospectus as may continue to be held from time to time in the trust, (b)
any additional securities acquired and held by the trust pursuant to the
provisions of the trust agreement and (c) any cash held in the accounts of the
trust. Neither the sponsor nor the trustee shall be liable in any way for any
failure in any of the securities. However, should any contract for the purchase
of any of the securities initially deposited in a trust fail, the sponsor will,
unless substantially all of the moneys held in the trust to cover such purchase
are reinvested in substitute securities in accordance with the trust agreement,
refund the cash and sales charge attributable to such failed contract to all
unitholders on the next distribution date.
INVESTMENT POLICIES
The trust is a unit investment trust and is not an "actively managed"
fund.Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of
economic,financial and market analysis. The portfolio of a trust, however, will
not be actively managed and therefore the adverse financial condition of an
issuer will not necessarily require the sale of its securities from a portfolio.
The trust intends to qualify as a "regulated investment company" under the
federal tax laws. If the trust qualifies as a regulated investment company and
distributes its income as required by the tax law, the trust generally will not
pay federal income tax. (See "Taxation").
The sponsor may not alter the portfolio of a trust by the purchase, sale or
substitution of securities, except in the special circumstances discussed herein
or provided for in the trust agreement.
The sponsor may direct the trustee to dispose of securities the value of
which has been affected by certain adverse events including institution of
certain legal proceedings or decline in price or the occurrence of other market
factors, including advance refunding, so that in the opinion of the sponsor the
retention of such securities in a trust would be detrimental to the interest of
the unitholders. The proceeds from any such sales, exclusive of any portion
which represents accrued interest, will be credited to the Principal Account of
such trust for distribution to the unitholders.
The sponsor is required to instruct the trustee to reject any offer made by
an issuer of securities to issue new obligations in exchange or substitution for
any of such securities pursuant to a refunding financing plan, except that the
sponsor may instruct the trustee to accept or reject such an offer or to take
any other action with respect thereto as the sponsor may deem proper if (1) the
issuer is in default with respect to such securities or (2) in the written
opinion of the sponsor the issuer will probably default with respect to such
securities in the reasonably foreseeable future. Any obligation so received in
exchange or substitution will be held by the trustee subject to the terms and
conditions of the trust agreement to the same extent as securities originally
deposited thereunder. Within five days after deposit of obligations in exchange
or substitution for underlying securities, the trustee is required to give
notice thereof to each unitholder, identifying the securities eliminated and the
securities substituted therefor.
The trustee may also sell securities, designated by the sponsor, from a
trust for the purpose of redeeming units of such trust tendered for redemption
and the payment of expenses. In addition, the trustee may dispose of certain
securities and take such further action as may be needed from time to time to
ensure that a trust continues to satisfy the qualifications of a regulated
investment company, including the requirements with respect to diversification
under Section 851 of the Internal Revenue Code, and as may be needed from time
to time to avoid the imposition of any excise tax on a trust as a regulated
investment company.
Proceeds from the sale of securities (or any securities or other property
received by a trust in exchange for securities) are credited to the Principal
Account of a trust for distribution to unitholders, to pay expenses or to meet
redemptions. Except for failed securities and as provided herein, in the
prospectus or in the trust agreement, the acquisition by a trust of any
securities other than the portfolio securities is prohibited.
Because certain of the securities in certain of the trusts may from time to
time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will be
distributed to unitholders and will not be reinvested, no assurance can be given
that a trust will retain for any length of time its present size and
composition. Neither the sponsor nor the trustee shall be liable in any way for
any default, failure or defect in any security. In the event of a failure to
deliver any security that has been purchased for a trust under a
contract,including those securities purchased on a "when, as and if issued"
basis ("Failed Securities"), the sponsor is authorized under the trust agreement
to direct the trustee to acquire other securities ("Replacement Securities") to
make up the original corpus of such trust.
Securities in certain of the trusts may have been purchased on a "when, as
and if issued" or delayed delivery basis with delivery expected to take place
after the first settlement date. Accordingly, the delivery of such securities
may be delayed or may not occur. Interest on these securities begins accruing to
the benefit of unitholders on their respective dates of delivery. Unitholders of
all trusts will be "at risk" with respect to any "when, as and if issued" or
"delayed delivery" securities included in their respective trust (i.e., may
derive either gain or loss from fluctuations in the evaluation of such
securities) from the date they commit for units.
The Replacement Securities must be purchased within 20 days after delivery
of the notice that a contract to deliver a security will not be honored and the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Securities. The Replacement Securities (i) must be payable in United
States currency, (ii) must be purchased at a price that results in a yield to
maturity and a current return at least equal to that of the Failed Securities as
of the trust's inception date, (iii) shall not be "when, as and if issued" or
restricted securities and (iv) must satisfy any rating criteria for securities
originally included in such trust. Whenever a Replacement Security is acquired
for a trust, the trustee shall, within five days thereafter, notify all
unitholders of the trust of the acquisition of the Replacement Security and
shall, on the next monthly distribution date which is more than 30 days
thereafter, make a pro rata distribution of the amount, if any, by which the
cost to the trust of the Failed Security exceeded the cost of the Replacement
Security. Once all of the securities in a 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
unitholder's investment.
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
Securities to all unitholders of the trust and the trustee will distribute the
principal and accrued interest attributable to such Failed Securities not more
than 30 days after the date on which the trustee would have been required to
purchase a Replacement Security. In addition, unitholders 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 unitholders of such trust.
Whether or not a Replacement Security is acquired, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) will be paid to
unitholders of the trust to the date the sponsor removes the Failed Securities
from the trust if the sponsor determines not to purchase a Replacement Security
or to the date of substitution if a Replacement Security is purchased. All such
interest paid to unitholders which accrued after the date of settlement for a
purchase of units will be paid by the sponsor. In the event a Replacement
Security could not be acquired by a trust, the net annual interest income per
unit for such trust would be reduced and the estimated current return and
estimated long-term return might be lowered.
Subsequent to the trust's inception, a security may cease to be rated or
its rating may be reduced below any minimum required as of the trust's
inception. Neither event requires the elimination of such investment from a
trust, but may be considered in the sponsor's determination to direct the
trustee to dispose of such investment.
The sponsor may not alter the portfolio of a trust except upon the
happening of certain extraordinary circumstances. Certain of the securities may
be subject to optional call or mandatory redemption pursuant to sinking fund
provisions, in each case prior to their stated maturity. A bond subject to
optional call is one which is subject to redemption or refunding prior to
maturity at the option of the issuer, often at a premium over par. A refunding
is a method by which a bond issue is redeemed, at or before maturity, by the
proceeds of a new bond issue. A bond subject to sinking fund redemption is one
which is subject to partial call from time to time at par with proceeds from a
fund accumulated for the scheduled retirement of a portion of an issue to
maturity. Special or extraordinary redemption provisions may provide for
redemption at par of all or a portion of an issue upon the occurrence of certain
circumstances. Redemption pursuant to optional call provisions is more likely to
occur, and redemption pursuant to special or extraordinary redemption provisions
may occur, when the securities have an offering side evaluation which represents
a premium over par, that is, when they are able to be refinanced at a lower
cost. The proceeds from any such call or redemption pursuant to sinking fund
provisions, as well as proceeds from the sale of securities and from securities
which mature in accordance with their terms from a trust, unless utilized to pay
for units tendered for redemption, will be distributed to unitholders of such
trust and will not be used to purchase additional securities for such
trust.Accordingly, any such call, redemption, sale or maturity will reduce the
size and diversity of a trust and the net annual interest income of such trust
and may reduce the estimated current return and the estimated long-term return.
The call, redemption, sale or maturity of securities also may have tax
consequences to a unitholder.
Certain of the securities in certain of the trusts may have been acquired
at a market discount from par value at maturity. The coupon interest rates on
the discount securities at the time they were purchased and deposited in the
trusts were lower than the current market interest rates for newly issued bonds
of comparable rating and type. If such interest rates for newly issued
comparable securities increase, the market discount of previously issued
securities will become greater, and if such interest rates for newly issued
comparable securities decline, the market discount of previously issued
securities will be reduced, other things being equal. Investors should also note
that the value of securities purchased at a market discount will increase in
value faster than securities purchased at a market premium if interest rates
decrease. Conversely, if interest rates increase, the value of securities
purchased at a market discount will decrease faster than securities purchased at
a market premium. In addition, if interest rates rise, the prepayment risk of
higher yielding, premium securities and the prepayment benefit for lower
yielding, discount securities will be reduced. Market discount attributable to
interest changes does not indicate a lack of market confidence in the issue.
Neither the sponsor nor the trustee shall be liable in any way for any default,
failure or defect in any of the securities.
GINNIE MAE SECURITIES
The Ginnie Mae securities included in the trust are backed by the
indebtedness secured by underlying mortgage pools of up to 30 year mortgages on
1- to 4-family dwellings. The securities are often referred to simply as "Ginnie
Maes". The pool of mortgages which is to underlie a particular new issue of
Ginnie Mae securities is assembled by the proposed issuer of such Ginnie Mae
securities. The issuer is typically a mortgage banking firm, and in every
instance must be a mortgagee approved by and in good standing with the Federal
Housing Administration ("FHA"). In addition, Ginnie Mae imposes its own criteria
on the eligibility of issuers, including a net worth requirement.
The mortgages which are to comprise a new Ginnie Mae pool may have been
originated by the issuer itself in its capacity as a mortgage lender or may be
acquired by the issuer from a third party, such as another mortgage banker, a
banking institution, the Veterans Administration ("VA") (which in certain
instances acts as a direct lender and thus originates its own mortgages) or one
of several other governmental agencies. All mortgages in any given pool will be
insured under the National Housing Act, as amended ("FHA-insured"), or Title V
of the Housing Act of 1949 ("FMHA Insured") or guaranteed under the Servicemen's
Readjustment Act of 1944, as amended, or Chapter 37 of Title 38, U.S.C.
("VA-guaranteed"). Such mortgages will have a date for the first scheduled
monthly payment of principal that is not more than one year prior to the date on
which Ginnie Mae issues its guaranty commitment as described below, will have
comparable interest rates and maturity dates, and will meet additional criteria
of Ginnie Mae. All mortgages in the pools backing the Ginnie Mae securities
contained in the trust are mortgages on 1- to 4-family dwellings (having a
stated maturity of up to 30 years for securities in the trust but generally an
estimated average life of considerably less). In general, the mortgages in these
pools provide for equal monthly payments over the life of the mortgage (aside
from prepayments) designed to repay the principal of the mortgage over such
period, together with interest at the fixed rate on the unpaid balance.
To obtain Ginnie Mae approval of a new pool of mortgages, the issuer will
file with Ginnie Mae an application containing information concerning
itself,describing generally the pooled mortgages, and requesting that Ginnie Mae
approve the issue and issue its commitment (subject to Ginnie Mae's satisfaction
with the mortgage documents and other relevant documentation) to guarantee the
timely payment of principal of and interest on the Ginnie Mae securities to be
issued by the issuer. If the application is in order, Ginnie Mae will issue its
commitment and will assign a Ginnie Mae pool number to the pool. Upon completion
of the required documentation (including detailed information as to the
underlying mortgages, a custodial agreement with a Federal or state regulated
financial institution satisfactory to Ginnie Mae pursuant to which the
underlying mortgages will be held in safekeeping, and a detailed guaranty
agreement between Ginnie Mae and the issuer), the issuance of the Ginnie Mae
securities is permitted. When the Ginnie Mae securities are issued, Ginnie Mae
will endorse its guarantee thereon. The aggregate principal amount of Ginnie Mae
securities issued will be equal to the then aggregate unpaid principal balances
of the pooled mortgages. The interest rate borne by the Ginnie Mae securities is
currently fixed at 1/2 of 1% below the interest rate of the pooled 1- to
4-family mortgages, the differential being applied to the payment of servicing
and custodial charges as well as Ginnie Mae's guaranty fee.
Ginnie Mae IIs consist of jumbo pools of mortgages from more than one
issuer. By allowing pools to consist of multiple issuers, it allows for larger
and more geographically diverse pools. Unlike Ginnie Mae Is, which have a
minimum pool size of $1 million, Ginnie Mae IIs have a minimum pool size of $7
million. In addition, the interest rates on the mortgages within the Ginnie Mae
II pools will vary unlike the mortgages within pools in Ginnie Mae Is which all
have the same rate. The rates on the mortgages will vary from 1/2 of 1% to 1.50%
above the coupon rate on the Ginnie Mae bond, which is allowed for servicing and
custodial fees as well as the Ginnie Mae's guaranty fee. The major advantage of
Ginnie Mae IIs lies in the fact that a central paying agent sends one check to
the holder on the required payment date. This greatly simplifies the current
procedure of collecting distributions from each issuer of a Ginnie Mae, since
such distributions are often received late.
All of the Ginnie Mae securities in the trust, including the Ginnie Mae
IIs, are of the "fully modified pass-through" type, i.e., they provide for
timely monthly payments to the registered holders thereof (including the
trust)of their pro rata share of the scheduled principal payments on the
underlying mortgages, whether or not collected by the issuers, including, on a
pro rata basis, any prepayments of principal of such mortgages received and
interest (net of the servicing and other charges described above) on the
aggregate unpaid principal balance of such Ginnie Mae securities, whether or not
the interest on the underlying mortgages has been collected by the issuers.
The Ginnie Mae securities in the trust are guaranteed as to timely payment
of principal and interest by Ginnie Mae. Funds received by the issuers on
account of the mortgages backing the Ginnie Mae securities in the trust are
intended to be sufficient to make the required payments of principal of and
interest on such Ginnie Mae securities but, if such funds are insufficient for
that purpose, the guaranty agreements between the issuers and Ginnie Mae require
the issuers to make advances sufficient for such payments. If the issuers fail
to make such payments, Ginnie Mae will do so.
Ginnie Mae is authorized by Section 306(g) of Title III of the National
Housing Act to guarantee the timely payment of and interest on securities which
are based on or backed by a trust or pool composed of mortgages insured by FHA,
the Farmers' Home Administration ("FMHA") or guaranteed by the VA. Section
306(g) provides further that the full faith and credit of the United States is
pledged to the payment of all amounts which may be required to be paid under any
guaranty under such subsection. An opinion of an Assistant Attorney General of
the United States, dated December 9, 1969, states that such guaranties
"constitute general obligations of the United States backed by its full faith
and credit." Any statement in this prospectus that a particular security is
backed by the full faith and credit of the United States is based upon the
opinion of an assistant attorney general of the United States and should be so
construed. Ginnie Mae is empowered to borrow from the United States Treasury to
the extent necessary to make any payments of principal and interest required
under such guaranties.
Ginnie Mae securities are backed by the aggregate indebtedness secured by
the underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages and, except
to the extent of funds received by the issuers on account of such mortgages,
Ginnie Mae securities do not constitute a liability of nor evidence any recourse
against such issuers, but recourse thereon is solely against Ginnie Mae. Holders
of Ginnie Mae securities (such as the trust) have no security interest in or
lien on the underlying mortgages.
The Ginnie Mae guaranties referred to herein relate only to payment of
principal of and interest on the Ginnie Mae securities in the trust and not to
the units offered hereby.
Monthly payments of principal will be made, and additional prepayments of
principal may be made, to each trust in respect of the mortgages underlying the
Ginnie Mae securities in the trust. All of the mortgages in the pools relating
to the Ginnie Mae securities in the trust are subject to prepayment without any
significant premium or penalty at the option of the mortgagors. While the
mortgages on 1- to 4-family dwellings underlying the Ginnie Mae securities have
a stated maturity of up to 30 years for the trust, it has been the experience of
the mortgage industry that the average life of comparable mortgages, owing to
prepayments, refinancings and payments from foreclosures, is considerably less.
In the mid-1970's, published yield tables for Ginnie Mae securities
utilized a 12- year average life assumption for Ginnie Mae pools of 26-30 year
mortgages on 1- to 4-family dwellings. This assumption was derived from the FHA
experience relating to prepayments on such mortgages during the period from the
mid-1950's to the mid-1970s. This 12-year average life assumption was calculated
in respect of a period during which mortgage lending rates were fairly stable.
The assumption is no longer an accurate measure of the average life of Ginnie
Mae securities or their underlying single family mortgage pools. Recently it has
been observed that mortgages issued at high interest rates have experienced
accelerated prepayment rates which would indicate a significantly shorter
average life than 12 years. Today, research analysts use complex formulae to
scrutinize the prepayments of mortgage pools in an attempt to predict more
accurately the average life of Ginnie Mae securities.
A number of factors, including homeowner's mobility, change in family size
and mortgage market interest rates will affect the average life of the Ginnie
Mae securities in the trust. For example, Ginnie Mae securities issued during a
period of high interest rates will be backed by a pool of mortgage loans bearing
similarly high rates. In general, during a period of declining interest
rates,new mortgage loans with interest rates lower than those charged during
periods of high rates will become available. To the extent a homeowner has an
outstanding mortgage with a high rate, he may refinance his mortgage at a lower
interest rate or he may rapidly repay his old mortgage. Should this happen, a
Ginnie Mae issued with a high interest rate may experience a rapid prepayment of
principal as the underlying mortgage loans prepay in whole or in
part.Accordingly, there can be no assurance that the prepayment levels which
will be actually realized will conform to the estimates or experience of the
FHA, other mortgage lenders, dealers or market makers or other Ginnie Mae
investors. It is not possible to meaningfully predict prepayment levels
regarding the Ginnie Mae securities in the trust. The termination of the trust
might be accelerated as a result of prepayments made as described herein.
RISK FACTORS
An investment in units of the trust should be made with an understanding of
the risks which an investment in fixed rate long-term debt obligations may
entail, including the risk that the value of the underlying securities and hence
of the units will decline with increases in interest rates. The value of the
underlying securities will fluctuate inversely with changes in interest rates.In
addition, the potential for appreciation of the underlying securities, which
might otherwise be expected to occur as a result of a decline in interest
rates,may be limited or negated by increased principal prepayments in respect of
the underlying mortgages. For example, the high inflation during certain
periods,together with the fiscal measures adopted to attempt to deal with it,
has resulted in wide fluctuations in interest rates and, thus, in the value of
fixed rate long-term debt obligations generally. The sponsor cannot predict
whether such fluctuations will continue in the future.
The portfolio of the trust includes Ginnie Mae securities (or contracts to
purchase Ginnie Mae securities) fully guaranteed as to payments of principal and
interest by Ginnie Mae. Each group of Ginnie Mae securities described herein as
having a specified range of maturities includes individual mortgage-backed
securities which have varying ranges of maturities within each range set forth
in "The Trust Portfolio" in Part A of the prospectus. Current market conditions
accord little or no difference in price among individual Ginnie Mae securities
with the same coupon within certain ranges of stated maturity dates on the basis
of the difference in the maturity dates of each Ginnie Mae security. A purchase
of Ginnie Mae securities with the same coupon rate and maturity date within such
range will be considered an acquisition of the same security for additional
deposits. In the future, however, the difference in maturity ranges could affect
market value of the individual Ginnie Mae securities. At such time, any
additional purchases by the trust will take into account the maturities of the
individual securities. The mortgages underlying the Ginnie Mae securities in the
trust have an original stated maturity of up to 30 years.
The trust may contain securities which were acquired at a market
discount.Such securities trade at less than par value because the interest
coupons thereon are lower than interest coupons on comparable debt securities
being issued at currently prevailing interest rates. If such interest rates for
newly issued and otherwise comparable securities increase, the market discount
of previously issued securities will become greater, and if such interest rates
for newly issued comparable securities decline, the market discount of
previously issued securities will be reduced, other things being equal.
Investors should also note that the value of Ginnie Mae securities purchased at
a market discount will increase in value faster than Ginnie Mae securities
purchased at a market premium if interest rates decrease. Conversely, if
interest rates increase, the value of Ginnie Mae securities purchased at a
market discount will decrease faster than Ginnie Mae securities purchased at a
premium. In addition, if interest rates rise, the prepayment risk of higher
yielding, premium Ginnie Mae securities and the prepayment benefit for lower
yielding, discount Ginnie Mae securities will be reduced. Market discount
attributable to interest changes does not indicate a lack of market confidence
in the issue.
Neither the sponsor nor the trustee shall be liable in any way for any
default, failure or defect in any of the securities. The trust may contain
securities which were acquired at a market premium. Such securities trade at
more than par value because the interest coupons thereon are higher than
interest coupons on comparable debt securities being issued at currently
prevailing interest rates. If such interest rates for newly issued and otherwise
comparable securities decrease, the market premium of previously issued
securities will be increased, and if such interest rates for newly issued
comparable securities increase, the market premium of previously issued
securities will be reduced, other things being equal. The current returns of
securities trading at a market premium are initially higher than the current
returns of comparably rated debt securities of a similar type issued at
currently prevailing interest rates because premium securities tend to decrease
in market value as they approach maturity when the face amount becomes payable.
Because part of the purchase price is thus returned not at maturity but through
current income payments, early redemption of a premium security at par or early
prepayments of principal will result in a reduction in yield. Prepayments of
principal on securities purchased at a market premium are more likely than
prepayments on securities purchased at par or at a market discount and the level
of prepayments will generally increase if interest rates decline.Market premium
attributable to interest changes does not indicate market confidence in the
issue.
The mortgages underlying a Ginnie Mae security may be prepaid at any time
without penalty. A lower or higher current return on units may occur depending
on a variety of factors such as whether the price at which the respective Ginnie
Mae securities were acquired by the trust is lower or higher than par. During
periods of declining interest rates, prepayments of Ginnie Mae securities may
occur with increasing frequency because, among other reasons, mortgagors may be
able to refinance their outstanding mortgages at lower interest rates. In such a
case, principal will be distributed to unitholders who may not be able to
reinvest such principal distributions in other securities at an attractive
yield.
Certain of the securities in the trust may be "zero coupon" bonds, i.e., an
original issue discount bond that does not provide for the payment of current
interest. Zero coupon bonds are purchased at a deep discount because the buyer
receives only the right to receive a final payment at the maturity of the bond
and does not receive any periodic interest payments. The effect of owning deep
discount bonds which do not make current interest payments (such as the zero
coupon bonds) is that a fixed yield is earned not only on the original
investment but also, in effect, on all discount earned during the life of such
obligation. This implicit reinvestment of earnings at the same rate eliminates
the risk of being unable to reinvest the income on such obligation at a rate as
high as the implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the future. For
this reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are
securities of comparable quality which pay interest currently. Unitholders of a
trust which contains U.S. Treasury Strips should note that these securities are
sold at a deep discount because the buyer of those securities obtains only the
right to receive a future fixed payment on the security and not any right to
periodic interest payments thereon. Purchasers of these securities acquire, in
effect, discount obligations that are economically identical to the "zero coupon
bonds" that have been issued by corporations.
To the best of the sponsor's knowledge, there is no litigation pending as
of the trust's inception in respect of any security which might reasonably be
expected to have a material adverse effect on the trust. At any time after the
trust's inception, litigation may be instituted on a variety of grounds with
respect to the securities. The sponsor is unable to predict whether any such
litigation may be instituted, or if instituted, whether such litigation might
have a material adverse effect on the trust. The sponsor and the trustee shall
not be liable in any way for any default, failure or defect in any security.
ADDITIONAL DEPOSITS. The trust agreement authorizes the sponsor to increase
the size of a trust and the number of units thereof by the deposit of additional
securities, or cash (including a letter of credit) with instructions to purchase
additional securities, in such trust and the issuance of a corresponding number
of additional units. If the sponsor deposits cash, existing and new investors
may experience a dilution of their investments and a reduction in their
anticipated income because of fluctuations in the prices of the securities
between the time of the cash deposit and the purchase of the securities and
because a trust will pay the associated brokerage fees.
ADMINISTRATION OF THE TRUST
DISTRIBUTIONS TO UNITHOLDERS. Interest received by a trust, including any
portion of the proceeds from a disposition of securities which represents
accrued interest, is credited by the trustee to the Interest Account for the
trust. All other receipts are credited by the trustee to a separate Principal
Account for the trust. The trustee normally has no cash for distribution to
unitholders until it receives interest payments on the securities in the trust.
Since interest usually is paid monthly, during the initial months of the trust,
the Interest Account consisting of accrued but uncollected interest and
collected interest (cash), will be predominantly the uncollected accrued
interest that is not available for distribution. On the dates set forth under
"Essential Information" in the prospectus, the trustee will commence
distributions, in part from funds advanced by the trustee.
Thereafter, assuming the trust retains its original size and
composition,after deduction of the fees and expenses of the trustee, the sponsor
and evaluator and reimbursements (without interest) to the trustee for any
amounts advanced to a trust, the trustee will normally distribute any income and
principal received by the trust on each distribution date or shortly thereafter
to unitholders of record on the preceding Record Date. However, interest earned
at any point in time will be greater than the amount actually received by the
trustee and distributed to the unitholders. Therefore, there will always remain
an item of accrued interest that is added to the daily value of the units. If
unitholders sell or redeem all or a portion of their units, they will be paid
their proportionate share of the accrued interest to, but not including, the
third business day after the date of a sale or to the date of tender in the case
of a redemption.
Persons who purchase units between a record date and a distribution date
will receive their first distribution on the second distribution date following
their purchase of units. Since interest on securities in the trust is payable at
varying intervals and distributions are made to unitholders at different
intervals from receipt of interest, the interest accruing to a trust may not be
equal to the amount of money received and available for distribution from the
Interest Account. Therefore, on each distribution date the amount of interest
actually deposited in the Interest Account and available for distribution may be
slightly more or less than the interest distribution made.
The trustee will distribute on each distribution date or shortly
thereafter, to each unitholder of record on the preceding record date, an amount
substantially equal to such holder's pro rata share of the cash balance, if any,
in the Principal Account computed as of the close of business on the preceding
record date. However, no distribution will be required if the balance in the
Principal Account is less than $0.001 per unit.
The terms of the Ginnie Mae securities provide for payment to the holders
thereof (including a trust) on the fifteenth day of each month of amounts
collected by or due to the issuers thereof with respect to the underlying
mortgages during the preceding month. The trustee will collect the interest due
a trust on the securities therein as it becomes payable and credit such interest
to a separate Interest Account for such trust created by the trust agreement.
Distributions will be made to each unitholder of record of a trust on the
appropriate distribution date.
STATEMENTS TO UNITHOLDERS. With each distribution, the trustee will furnish
to each unitholder a statement of the amount of income and the amount of other
receipts, if any, which are being distributed, expressed in each case as a
dollar amount per unit.
The accounts of a trust will not be audited annually, unless the sponsor
determines that such an audit would be in the best interest of the unitholders
of the trust. If an audit is conducted, it will be done at the related trust's
expense by independent public accountants designated by the sponsor. The
accountants' report will be furnished by the trustee to any unitholder upon
written request. 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 unitholder of a trust a statement, covering the calendar
year, setting forth for the trust:
(A) As to the Income Account:
(1) Income received;
(2) Deductions for applicable taxes and for fees and expenses of the
trust and for redemptions of units, if any; and
(3) The balance remaining after such distributions and deductions,
expressed in each case both as a total dollar amount and as a
dollar amount representing the pro rata share of each unit
outstanding on the last business day of such calendar year; and
(B) As to the Capital Account:
(1) The dates of disposition of any securities and the net proceeds
received therefrom;
(2) Deductions for payment of applicable taxes and fees and expenses
of the trust; and
(3) The balance remaining after such distributions and deductions
expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each unit outstanding on the
last business day of such calendar year; and
(C) The following information:
(1) A list of the securities as of the last business day of such
calendar year;
(2) The number of units outstanding on the last business day of such
calendar year;
(3) The redemption price based on the last evaluation made during
such calendar year; and
(4) The amount actually distributed during such calendar year from
the Income and Capital Accounts separately stated, expressed both
as total dollar amounts and as dollar amounts per unit
outstanding on the record dates for each such distribution.
RIGHTS OF UNITHOLDERS. A unitholder may at any time tender units to the
trustee for redemption. The death or incapacity of any unitholder will not
operate to terminate a trust nor entitle legal representatives or heirs to claim
an accounting or to bring any action or proceeding in any court for partition or
winding up of a trust. No unitholder shall have the right to control the
operation and management of a trust in any manner, except to vote with respect
to the amendment of the trust agreement or termination of a trust.
AMENDMENT AND TERMINATION. The trust agreement may be amended by the
trustee and the sponsor without the consent of any of the unitholders: (1) to
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (2) to change any provision thereof as may be
required by the Securities and Exchange Commission or any successor governmental
agency; (3) to make such provisions as shall not adversely affect the interests
of the unitholders or (4) to make such amendments as may be necessary for a
trust to continue to qualify as a regulated investment company for federal
income tax purposes. The trust agreement with respect to any trust may also be
amended in any respect by the sponsor and the trustee, or any of the provisions
thereof may be waived, with the consent of the holders of units representing 66
2/3% of the units then outstanding of the trust, provided that no such amendment
or waiver will reduce the interest of any unitholder thereof without the consent
of such unitholder or reduce the percentage of units required to consent to any
such amendment or waiver without the consent of all unitholders of the trust.
The trustee shall promptly notify unitholders of the substance of any such
amendment.
The trust agreement provides that a trust shall terminate upon the
maturity, liquidation, redemption or other disposition of the last of the
securities held in the trust but in no event is it to continue beyond the
mandatory termination date. If the value of a trust shall be less than the
applicable minimum value stated in the prospectus (generally 40% of the total
value of securities deposited in the trust during the initial offering period),
the trustee may, in its discretion, and shall, when so directed by the
sponsor,terminate the trust. A trust may be terminated at any time by the
holders of units representing 66 2/3% of the units thereof then outstanding.
Within a reasonable period after termination, the trustee will sell any
securities remaining in a trust and, after paying all expenses and charges
incurred by the trust, will distribute to unitholders thereof (upon surrender
for cancellation of certificates for units, if issued) their pro rata share of
the balances remaining in the Interest and Principal Accounts of the trust.
THE TRUSTEE. The trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its Unit Investment Trust
Division offices at 101 Barclay Street, 20th Fl., New York, New York 10286,
telephone 1-800-701-8178. The Bank of New York is subject to supervision and
examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law.
The trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of any trust. In accordance with the trust
agreement,the trustee shall keep records of all transactions at its office. Such
records shall include the name and address of, and the number of units held by,
every unitholder of a trust. Such books and records shall be open to inspection
by any unitholder at all reasonable times during usual business hours. The
trustee shall make such annual or other reports as may from time to time be
required under any applicable state or federal statute, rule or regulation. The
trustee shall keep a certified copy or duplicate original of the trust agreement
on file in its office available for inspection at all reasonable times during
usual business hours by any unitholder, together with a current list of the
securities held in each trust. Pursuant to the trust agreement, the trustee may
employ one or more agents for the purpose of custody and safeguarding of
securities comprising a trust.
Under the trust agreement, the trustee or any successor trustee may resign
and be discharged of a trust created by the trust agreement by executing an
instrument in writing and filing the same with the sponsor. The trustee or
successor trustee must mail a copy of the notice of resignation to all
unitholders then of record, not less than sixty days before the date specified
in such notice when such resignation is to take effect. The sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within thirty days after notification, the retiring
trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The sponsor may at any time remove the trustee, with or without
cause, and appoint a successor trustee as provided in the trust agreement.
Notice of such removal and appointment shall be mailed to each unitholder by the
sponsor.
Upon execution of a written acceptance of such appointment by such
successor trustee, all the rights, powers, duties and obligations of the
original trustee shall vest in the successor. The trustee must be a corporation
organized under the laws of the United States, or any state thereof, be
authorized under such laws to exercise trust powers and have at all times an
aggregate capital,surplus and undivided profits of not less than $5,000,000.
THE SPONSOR. Claymore Securities, Inc. specializes in the creation,
development and distribution of investment solutions for advisors and their
valued clients. Claymore Securities, Inc., the sponsor, was created as Ranson &
Associates, Inc. in 1995 and is the successor sponsor to unit investment trusts
formerly sponsored by EVEREN Unit Investment Trusts, a service of EVEREN
Securities, Inc. Claymore Securities, Inc. is also the sponsor and successor
sponsor of Series of Ranson Unit Investment Trusts and The Kansas Tax-Exempt
Trust and Multi-State Series of The Ranson Municipal Trust. On October 29, 2001,
Ranson & Associates, Inc. was acquired by Claymore Group LLC. The sale to
Claymore Group LLC was financed by a loan from The Bank of New York, the
trustee. In November 2001, the sponsor changed its name from Ranson &
Associates, Inc. to Claymore Securities, Inc. Claymore Securities, Inc. has been
active in public and corporate finance and has sold bonds and unit investment
trusts and maintained secondary market activities relating thereto. At present,
Claymore Securities, Inc. which is a member of the National Association of
Securities Dealers, Inc., is the sponsor to each of the above-named unit
investment trusts and serves as the financial advisor. The sponsor's offices are
located at 2455 Corporate West Drive, Lisle, Illinois 60532, and at 101 W. Elm
Street, Suite 310, Conshohoken, Pennsylvania 19428.
If at any time the sponsor shall fail to perform any of its duties under
the trust agreement or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs 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 such
reasonable amounts as may be prescribed by the Securities and Exchange
Commission, (b) terminate the trust agreement and liquidate any trust as
provided therein, or (c) continue to act as trustee without terminating the
trust agreement.
THE SUPERVISOR AND THE EVALUATOR. Claymore Securities, Inc., the sponsor,
also serves as evaluator and supervisor. The evaluator and supervisor may resign
or be removed by the trustee in which event the trustee is to use its best
efforts to appoint a satisfactory successor. Such resignation or removal shall
become effective upon acceptance of appointment by the successor evaluator. If
upon resignation of the evaluator no successor has accepted appointment within
thirty days after notice of resignation, the evaluator may apply to a court of
competent jurisdiction for the appointment of a successor. Notice of such
registration or removal and appointment shall be mailed by the trustee to each
unitholder.
LIMITATIONS ON LIABILITY. The sponsor is liable for the performance of its
obligations arising from its responsibilities under the trust agreement but will
be under no liability to the unitholders for taking any action or refraining
from any action in good faith pursuant to the trust agreement or for errors in
judgment, except in cases of its own gross negligence, bad faith or willful
misconduct or its reckless disregard for its duties thereunder. The sponsor
shall not be liable or responsible in any way for depreciation or loss incurred
by reason of the sale of any securities.
The trust agreement provides that the trustee shall be under no liability
for any action taken in good faith in reliance upon prima facie properly
executed documents or for the disposition of moneys, securities or certificates
except by reason of its own negligence, bad faith or willful misconduct, or its
reckless disregard for its duties under the trust agreement, nor shall the
trustee be liable or responsible in any way for depreciation or loss incurred by
reason of the sale by the trustee of any securities. In the event that the
sponsor shall fail to act, the trustee may act and shall not be liable for any
such action taken by it in good faith. The trustee shall not be personally
liable for any taxes or other governmental charges imposed upon or in respect of
the securities or upon the interest thereof. In addition, the trust agreement
contains other customary provisions limiting the liability of the trustee.
The trustee and unitholders may rely on any evaluation furnished by the
evaluator and shall have no responsibility for the accuracy thereof. The trust
agreement provides that the determinations made by the evaluator 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 or
unitholders for errors in judgment, but shall be liable for its gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the trust agreement.
EXPENSES OF THE TRUST. The sponsor does not charge a trust an annual
advisory fee. The sponsor will receive a portion of the sale commissions paid in
connection with the purchase of units and will share in profits, if any, related
to the deposit of securities in the trust.
INITIAL EXPENSES. Investors will bear all or a portion of the costs
incurred in organizing the trust - including costs of preparing the registration
statement, the trust indenture and other closing documents, registering units
with the Securities and Exchange Commission (the "SEC") and the states, the
initial audit of the trust's portfolio, legal expenses, payment of closing fees
and any other out-of-pocket expenses. During the initial public offering period
only, a pro rata portion of such organization costs will be charged upon the
investor's purchase of units.
FEES. The trustee's, sponsor's supervisory and sponsor's evaluation fees
are set forth under "Fees and Expenses" in Part A of the Prospectus. If so
provided in Part A of the prospectus, the sponsor may also receive an annual fee
for providing bookkeeping and administrative services for a trust (the
"Bookkeeping and Administrative Fee"). Such services may include, but are not
limited to, the preparation of various materials for unitholders and providing
account information to the unitholders. The trustee's fee and the sponsor's
evaluation fee, which is earned for portfolio evaluation services, are based on
the principal amount of Bonds on a monthly basis. The sponsor's supervisory fee,
which is earned for portfolio supervisory services and the Bookkeeping and
Administrative Fee are based on the largest number of units in the trust at any
time during such period. The Bookkeeping and Administrative Fee, sponsor's
supervisory fee and sponsor's evaluation fee, which are not to exceed the
maximum amount set forth under "Fees and Expenses" for the trust, may exceed the
actual costs of providing portfolio supervisory and evaluation services for the
trust, but at no time will the total amount the sponsor receives for portfolio
supervisory services, bookkeeping and administration services and evaluation
services rendered to all series of Claymore Securities Defined Portfolios in any
calendar year exceed the aggregate cost to them of supplying such services in
such year. The trust will bear all operating expenses. Estimated annual trust
operating expenses are as set forth in Part A of the prospectus; if actual
expenses are higher than the estimate, the excess will be borne by the trust.
The estimated expenses include listing fees but do not include the brokerage
commissions and other transactional fees payable by the trust in purchasing and
selling securities.
The trustee will receive for its ordinary recurring services to the trust
an annual fee in the amount set forth under "Fees and Expenses" for the trust.
There is no minimum fee and, except as hereinafter set forth, no maximum fee.
The trustee's fee, Bookkeeping and Administrative Fees and the sponsor's
fees are payable monthly, each from the Interest Account to the extent funds are
available and then from the Principal Account. These fees may be increased
without approval of the unitholders by amounts not exceeding proportionate
increases in consumer prices for services as measured by the United States
Department of Labor's Consumer Price Index entitled "All Services Less Rent";
except no such increase in the Trustee's fee will be so made for the sole
purpose of making up any downward adjustment therein. If the balances in the
Principal and Interest Accounts are insufficient to provide for amounts payable
by the trust, or amounts payable to the Trustee which are secured by its prior
lien on the trust, the Trustee is permitted to sell securities to pay such
amounts. The trustee benefits to the extent there are funds for future
distributions, payment of expenses and redemptions in the Principal and Interest
Accounts since these Accounts are non-interest bearing and the amounts earned by
the trustee are retained by the trustee. Part of the trustee's compensation for
its services to a trust is expected to result from the use of these funds.
The following additional charges are or may be incurred by the trust: (a)
fees for the trustee's extraordinary services; (b) expenses of the trustee
(including legal and auditing expenses, but not including any fees and expenses
charged by an agent for custody and safeguarding of securities) and of counsel,
if any; (c) various governmental charges; (d) expenses and costs of any action
taken by the trustee to protect the trust or the rights and interests of the
unitholders; (e) indemnification of the trustee for any loss, liability or
expense incurred by it in the administration of the trust not resulting from
negligence, bad faith or willful misconduct on its part or its reckless
disregard for its obligations under the trust agreement; (f) indemnification of
the sponsor for any loss, liability or expense incurred in acting in that
capacity without gross negligence, bad faith or willful misconduct or its
reckless disregard for its obligations under the trust agreement; (g) any
offering costs incurred after the end of the initial offering period; and (h)
expenditures incurred in contacting unitholders upon termination of the trust.
The fees and expenses set forth herein are payable out of a trust and, when
owing to the trustee, are secured by a lien on the trust. If the balances in the
Interest and Principal Accounts are insufficient to provide for amounts payable
by the trust, the trustee has the power to sell securities to pay such amounts.
These sales may result in capital gains or losses to unitholders. The trust
shall also bear the expenses associated with updating the trust's registration
statement and maintaining registration or qualification of the units and/or a
trust under federal or state securities laws subsequent to initial registration.
Such expenses shall include legal fees, accounting fees, typesetting fees,
electronic filing expenses and regulatory filing fees. The expenses associated
with updating registration statements have been historically paid by a unit
investment trust's sponsor.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
When a trust sells securities, the composition and diversity of the
securities in the trust may be altered. In order to obtain the best price for a
trust, it may be necessary for the sponsor to specify minimum amounts in which
blocks of securities are to be sold. In effecting purchases and sales of a
trust's portfolio securities, the sponsor may direct that orders be placed with
and brokerage commissions be paid to brokers, including brokers which may be
affiliated with the trust, the sponsor or dealers participating in the offering
of units.
PURCHASE, REDEMPTION AND PRICING OF UNITS
PUBLIC OFFERING PRICE. Units of a trust are offered at the public offering
price thereof. During the initial offering period, the public offering price per
unit is equal to the aggregate of the offering side evaluations of the
securities in such trust, plus or minus a pro rata share of cash, if any, in the
Principal Account held or owned by such trust plus accrued interest plus the
applicable sales charge referred to in the prospectus divided by the number of
outstanding units of such trust. During the initial offering period, a portion
of the public offering price includes an amount of securities to pay for all or
a portion of the costs incurred in establishing a trust ("organization costs").
These organization costs include the cost 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.
These costs will be deducted from a trust as of the end of the initial offering
period or after six months, at the sponsor's discretion. The public offering
price for secondary market transactions, on the other hand, is based on the
aggregate bid side evaluations of the securities in a trust, plus or minus cash,
if any, in the Principal Account held or owned by such trust, plus accrued
interest plus a sales charge based upon the dollar weighted average maturity of
such trust.
Had units of a trust been available for sale at the opening of business on
the inception date of the trust, the public offering price would have been as
shown under "Essential Information" in the prospectus. The public offering price
per unit of a trust on the date of the prospectus or on any subsequent date will
vary from the amount stated under "Essential Information" in the prospectus in
accordance with fluctuations in the prices of the underlying securities and the
amount of accrued interest on the units. The aggregate bid and offering side
evaluations of the securities shall be determined (a) on the basis of current
bid or offering prices of the securities, (b) if bid or offering prices are not
available for any particular security, on the basis of current bid or offering
prices for comparable securities, (c) by determining the value of securities on
the bid or offer side of the market by appraisal, or (d) by any combination of
the above.
There is a period of a few days (usually five business days), beginning on
the first day of each month, during which the total amount of payments
(including prepayments, if any) of principal for the preceding month of the
various mortgages underlying each security will not yet have been reported by
the issuer to Ginnie Mae. During this period, the precise principal amount of
the securities will not be known. For purposes of determining the aggregate
underlying value of the securities and the accrued interest on the units during
this period, the evaluator will base its valuation and calculations upon the
average monthly principal distribution for the preceding twelve month period.
We don't expect the differences in such principal amounts from month to
month to be material. We will, however, adopt procedures to minimize the impact
of such differences when necessary.
The foregoing evaluations and computations shall be made as of the
evaluation time stated under "Essential Information" in the prospectus, on each
business day commencing with the trust's inception date of the securities,
effective for all sales made during the preceding 24-hour period.
The interest on the securities deposited in a trust, less the related
estimated fees and expenses, will accrue daily. The amount of net interest
income which accrues per unit may change as securities mature or are redeemed,
exchanged or sold, or as the expenses of a trust change or the number of
outstanding units of a trust changes.
Although payment is normally made three business days following the order
for purchase, payments may be made prior thereto. A person will become the owner
of units on the date of settlement provided payment has been received. Cash, if
any, made available to the sponsor prior to the date of settlement for the
purchase of units may be used in the sponsor's business and may be deemed to be
a benefit to the sponsor, subject to the limitations of the Securities Exchange
Act of 1934. If a unitholder desires to have certificates representing units
purchased, such certificates will be delivered as soon as possible following his
written request therefor.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest
on a security from the last day on which interest thereon was paid. Interest on
securities generally is paid semi-annually (monthly in the case of Ginnie Mae
securities, if any) although a trust accrues such interest daily. Because of
this, a trust always has an amount of interest earned but not yet collected by
the trustee. For this reason, with respect to sales settling subsequent to the
first settlement date, the public offering price of units will have added to it
the proportionate share of accrued interest to the date of settlement.
Unitholders will receive on the next distribution date of a trust the amount, if
any, of accrued interest paid on their units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the public offering price in the sale of units to
the public, the trustee will advance the amount of accrued interest as of the
first settlement date and the same will be distributed to the sponsor as the
unitholder of record as of the first settlement date. Consequently, the amount
of accrued interest to be added to the public offering price of units will
include only accrued interest from the first settlement date to the date of
settlement, less any distributions from the Interest Account subsequent to the
first settlement date.
Because of the varying interest payment dates of the securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by the trusts and distributed to unitholders. Therefore, there
will always remain an item of accrued interest that is added to the value of the
units. If a unitholder sells or redeems all or a portion of his units, he will
be entitled to receive his proportionate share of the accrued interest from the
purchaser of his units. Since the trustee has the use of the funds held in the
Interest Account for distributions to unitholders and since such account is
noninterest-bearing to unitholders, the trustee benefits thereby.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. While the initial
public offering price of units will be determined on the basis of the current
offering prices of the securities in a trust, the redemption price per unit (as
well as the secondary market price per unit) at which units may be redeemed will
be determined on the basis of the current bid prices of the securities. As of
the opening of business on the trust's inception date, the public offering price
per unit (based on the offering prices of the securities in a trust and
including the sales charge) exceeded the redemption price at which units could
have been redeemed (based upon the current bid prices of the securities in a
trust). Under current market conditions the bid prices for U.S. Treasury
obligations are expected to be approximately 1/8 to 1/4 of 1% lower than the
offer price of such obligations. In the past, bid prices on securities similar
to those in the trust have been lower than the offering prices thereof by as
much as 5% or more of principal amount in the case of inactively traded bonds or
as little as 1/2 of 1% in the case of actively traded bonds, but the difference
between such offering and bid prices may be expected to average 3% to 4% of
principal amount. For this reason, among others (including fluctuations in the
market prices of the securities and the fact that the public offering price
includes a sales charge), the amount realized by a unitholder upon any
redemption of units may be less than the price paid for such units.
PUBLIC DISTRIBUTION OF UNITS. The sponsor intends to qualify the units for
sale in a number of states. Units will be sold through dealers who are members
of the National Association of Securities Dealers, Inc. and through others.
Sales may be made to or through dealers at prices which represent discounts from
the public offering price as set forth in the prospectus. Certain commercial
banks are making units available to their customers on an agency basis.
Furthermore, as a result of certain legislative changes effective November 1999,
banks are no longer prohibited from certain affiliations with securities firms.
This new legislation grants banks new authority to conduct certain authorized
activity, such as sales of units, through financial subsidiaries. A portion of
the sales charge discussed above is retained by or remitted to the banks or
their financial subsidiaries for these agency and brokerage transactions. The
sponsor reserves the right to change the discounts from time to time. In
addition to such discounts, the sponsor may, from time to time, pay or allow an
additional discount, in the form of cash or other compensation, to dealers
employing registered representatives who sell, during a specified time period, a
minimum dollar amount of units of a trust and other unit investment trusts
created by the sponsor. At various times the sponsor may implement programs
under which the sales force of a broker or dealer may be eligible to win nominal
awards for certain sales efforts, or under which the sponsor will reallow to any
such broker or dealer that sponsors sales contests or recognition programs
conforming to criteria established by the sponsor, or participates in sales
programs sponsored by the sponsor, an amount not exceeding the total applicable
sales charges on the sales generated by such person at the public offering price
during such programs. Also, the sponsor in its discretion may from time to time
pursuant to objective criteria established by the sponsor pay fees to qualifying
brokers or dealers for certain services or activities which are primarily
intended to result in sales of units of a trust. Such payments are made by the
sponsor out of its own assets, and not out of the assets of any trust. These
programs will not change the price unitholders pay for their units or the amount
that a trust will receive from the units sold. The difference between the
discount and the sales charge will be retained by the sponsor.
The sponsor reserves the right to reject, in whole or in part, any order
for the purchase of units.
PROFITS OF SPONSOR. The sponsor will receive gross sales charges equal to
the percentage of the public offering price of the units of such trusts stated
in the prospectus and will pay a fixed portion of such sales charges to dealers
and agents. In addition, the sponsor may realize a profit or a loss resulting
from the difference between the purchase prices of the securities to the sponsor
and the cost of such securities to a trust, which is based on the offering side
evaluation of the securities. The sponsor may also realize profits or losses
with respect to securities deposited in a trust which were acquired from
underwriting syndicates of which the sponsor was a member. An underwriter or
underwriting syndicate purchases securities from the issuer on a negotiated or
competitive bid basis, as principal, with the motive of marketing such
securities to investors at a profit. The sponsor may realize additional profits
or losses during the initial offering period on unsold units as a result of
changes in the daily evaluation of the securities in a trust.
MARKET FOR UNITS. After the initial offering period, while not obligated to
do so, the sponsor may, subject to change at any time, maintain a market for
units of the trust offered hereby and to continuously offer to purchase said
units at prices, determined by the evaluator, based on the aggregate bid prices
of the underlying securities in the trust, together with accrued interest to the
expected dates of settlement. To the extent that a market is maintained during
the initial offering period, the prices at which units will be repurchased will
be based upon the aggregate offering side evaluation of the securities in the
trust. The aggregate bid prices of the underlying securities in each trust are
expected to be less than the related aggregate offering prices (which is the
evaluation method used during the initial public offering period). Accordingly,
unitholders who wish to dispose of their units should inquire of their bank or
broker as to current market prices in order to determine whether there is in
existence any price in excess of the redemption price and, if so, the amount
thereof.
The offering price of any units resold by the sponsor will be in accord
with that described in the currently effective prospectus describing such units.
Any profit or loss resulting from the resale of such units will belong to the
sponsor. The sponsor may suspend or discontinue purchases of units of any trust
if the supply of units exceeds demand, or for other business reasons.
REDEMPTION. A unitholder who does not dispose of units in the secondary
market described above may cause units to be redeemed by the trustee by making a
written request to the trustee at its Unit Investment Trust Division office in
the city of New York and, in the case of units evidenced by a certificate, by
tendering such certificate to the trustee properly endorsed or accompanied by a
written instrument or instruments of transfer in form satisfactory to the
trustee. Unitholders must sign the request, and such certificate or transfer
instrument, exactly as their names appear on the records of the trustee and on
any certificate representing the units to be redeemed. If the amount of the
redemption is $500 or less and the proceeds are payable to the unitholder(s) of
record at the address of record, no signature guarantee is necessary for
redemptions by individual account owners (including joint owners). Additional
documentation may be requested, and a signature guarantee is always required,
from corporations, executors, administrators, trustees, guardians or
associations. The signatures must be 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. A certificate should only be sent by registered or
certified mail for the protection of the unitholder. Since tender of the
certificate is required for redemption when one has been issued, units
represented by a certificate cannot be redeemed until the certificate
representing such units has been received by the purchasers.
Redemption shall be made by the trustee no later than three business days
following the day on which a tender for redemption is properly received (the
"Redemption Date") by payment of cash equivalent to the redemption price,
determined as set forth below under "Computation of Redemption Price," as of the
close of the New York Stock Exchange next following such tender, multiplied by
the number of units being redeemed. Any units redeemed shall be canceled and any
undivided fractional interest in the related trust extinguished. The price
received upon redemption might be more or less than the amount paid by the
unitholder depending on the value of the securities in the trust at the time of
redemption.
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 unitholder'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 unitholder only when filing a tax return. Under normal circumstances the
trustee obtains the unitholder's tax identification number from the selling
broker. However, any time a unitholder elects to tender units for redemption,
such unitholder 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 interest shall be withdrawn from the Interest Account of a trust to
the extent that funds are available for such purpose. All other amounts paid on
redemption shall be withdrawn from the Principal Account for a trust.
The trustee is empowered to sell securities in order to make funds
available for the redemption of units. To the extent that securities are sold or
redeemed in kind, the size of a trust will be, and the diversity of a trust may
be, reduced but each remaining unit will continue to represent approximately the
same proportional interest in each security. Sales may be required at a time
when securities would not otherwise be sold and may result in lower prices than
might otherwise be realized. The price received upon redemption may be more or
less than the amount paid by the unitholder depending on the value of the
securities in the portfolio at the time of redemption.
The securities to be sold for purposes of redeeming units will be selected
from a list supplied by the sponsor. The securities will be chosen for this list
by the sponsor on the basis of such market and credit factors as it may
determine are in the best interests of such trusts. Provision is made under the
related trust agreements for the sponsor to specify minimum face amounts in
which blocks of securities are to be sold in order to obtain the best price
available. While such minimum amounts may vary from time to time in accordance
with market conditions, it is anticipated that the minimum face amounts which
would be specified would range from $25,000 to $100,000. Sales may be required
at a time when the securities would not otherwise be sold and might result in
lower prices than might otherwise be realized. Moreover, due to the minimum
principal amount in which U.S. Treasury Obligations and Ginnie Mae securities
may be required to be sold, the proceeds of such sales may exceed the amount
necessary for payment of units redeemed. To the extent not used to meet other
redemption requests in such trusts, such excess proceeds will be distributed pro
rata to all remaining unitholders of record of such trusts, unless reinvested in
substitute securities.
The trustee is irrevocably authorized in its discretion, if the sponsor
does not elect to purchase any unit tendered for redemption, in lieu of
redeeming such units, to sell such units in the over-the-counter market for the
account of tendering unitholders at prices which will return to the unitholders
amounts in cash, net after brokerage commissions, transfer taxes and other
charges, equal to or in excess of the redemption price for such units. In the
event of any such sale, the trustee shall pay the net proceeds thereof to the
unitholders on the day they would otherwise be entitled to receive payment of
the redemption price.
The right of redemption may be suspended and payment postponed for more
than three business days following the day on which tender for redemption is
made (1) for any period during which the New York Stock Exchange is closed,
other than customary weekend and holiday closings, or during which (as
determined by the Securities and Exchange Commission) trading on the New York
Stock Exchange is restricted; (2) for any period during which an emergency
exists as a result of which disposal by the trustee of securities is not
reasonably practicable or it is not reasonably practicable to fairly determine
the value of the underlying securities in accordance with the trust agreement;
or (3) for such other period as the Securities and Exchange Commission may by
order permit. 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.
COMPUTATION OF REDEMPTION PRICE. The redemption price for units of each
trust is computed by the evaluator as of the evaluation time stated in the
prospectus next occurring after the tendering of a unit for redemption and on
any other business day desired by it, by:
A. adding: (1) the cash on hand in the trust other than cash deposited in
the trust to purchase securities not applied to the purchase of such
securities; (2) the aggregate value of each issue of the securities
(including "when issued" contracts, if any) held in the trust as
determined by the evaluator on the basis of bid prices therefor; and
(3) interest accrued and unpaid on the securities in the trust as of
the date of computation;
B. deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the trust and for which no
deductions have been previously made for the purpose of additions to
the Reserve Account; (2) an amount representing estimated accrued
expenses of the trust, including but not limited to fees and expenses
of the trustee (including legal and auditing fees and any insurance
costs), the evaluator,the sponsor and bond counsel, if any; (3) cash
held for distribution to unitholders of record as of the business day
prior to the evaluation being made; and (4) other liabilities incurred
by the trust including organization costs; and
C. finally dividing the results of such computation by the number of
units of the trust outstanding as of the date thereof.
During the initial offering period, the redemption price and secondary
market repurchase price will also include estimated organization costs.
RETIREMENT PLANS. A trust may be suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other qualified retirement
plans. Generally, capital gains and income received under each of the foregoing
plans are deferred from Federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income 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. The trust will lower the
minimum investment requirement for IRA accounts. Fees and charges with respect
to such plans may vary.
OWNERSHIP OF UNITS. Ownership of units will not be evidenced by
certificates unless a unitholder, the unitholder's registered broker/dealer or
the clearing agent for such broker/dealer makes a written request to the
trustee. All evidence of ownership of uncertificated units will be recorded in
book-entry form either at Depository Trust Company ("DTC") through an investor's
broker's account or through registration of the units on the books of the
Trustee. Units held through DTC will be registered in the nominee name CEDE &CO.
Individual purchases of beneficial ownership interest in the trust will be made
in book-entry form through DTC or the trustee unless a certificate is properly
requested. Ownership and transfer of book-entry units will be evidenced and
accomplished by book-entries made by DTC and its participants if the units are
evidenced at DTC, or otherwise will be evidenced and accomplished by
book-entries made by the trustee. DTC will record ownership and transfer of the
units among DTC participants and forward all notices and credit all payments
received in respect of the units held by the DTC participants.
Beneficial owners of book-entry units will receive written confirmation of
their purchases and sale from the broker-dealer or bank from whom their purchase
was made. Units are transferable by making a written request to the trustee
and,in the case of units evidenced by a certificate, by presenting and
surrendering such certificate to the trustee properly endorsed or accompanied by
a written instrument or instruments of transfer which should be sent by
registered or certified mail for the protection of the unitholder. Unitholders
must sign such written request, and such certificate or transfer instrument,
exactly as their names appear on the records of the trustee and on any
certificate representing the units to be transferred. Such signatures must be
guaranteed as described above.
Units may be purchased and certificates, if requested, will be issued in
denominations of one unit or any multiple thereof, subject to the minimum
investment requirement. Fractions of units, if any, will be computed to three
decimal places. Any certificate issued will be numbered serially for
identification, issued in fully registered form and will be transferable only on
the books of the trustee. The trustee may require a unitholder to pay a
reasonable fee, to be determined in the sole discretion of the trustee, for each
certificate re-issued or transferred and to pay any governmental charge that may
be imposed in connection with each such transfer or interchange. The trustee at
the present time does not intend to charge for the normal transfer or
interchange of certificates. Destroyed, stolen, mutilated or lost certificates
will be replaced upon delivery to the trustee of satisfactory indemnity
(generally amounting to 3% of the market value of the units), affidavit of
loss,evidence of ownership and payment of expenses incurred. Any Unitholder who
holds a certificate may change to book entry ownership by submitting to the
trustee the certificate along with a written request that the Units represented
by such certificate be held in book entry form.
TAXATION
This section summarizes some of the main U.S. federal income tax
consequences of owning units of the trust. This section is current as of the
date of this prospectus. Tax laws and interpretations change frequently, and
this summary does not describe all of the tax consequences to all taxpayers. For
example, this summary generally does not describe your situation if you are a
corporation, a non-U.S. person, a broker/dealer, or other investor with special
circumstances. In addition, this section does not describe your state, local or
foreign taxes. As with any investment, you should consult your own tax
professional about your particular consequences. In addition, the Internal
Revenue Service issued new withholding and reporting regulations effective
January 1, 2001. Foreign investors should consult their own tax advisors
regarding the tax consequences of these regulations.
In the opinion of Chapman and Cutler, counsel to the trust, under existing
law as of the date of this prospectus:
TRUST STATUS. The trust intends to qualify as a "regulated investment
company" under the federal tax laws. If the trust qualifies as a regulated
investment company and distributes its income as required by the tax law, the
trust generally will not pay federal income tax.
DISTRIBUTIONS. Trust distributions are generally taxable. The end of each
year, you will receive a tax statement that separates trust distributions into
two categories, ordinary income distributions and capital gains dividends.
Ordinary income distributions are generally taxed at your ordinary tax rate.
Generally, you will treat all capital gains dividends as long-term capital gain
regardless of how long you have owned your units. To determine your actual tax
liability for your capital gains dividends, you must calculate your total net
capital gain or loss for the tax year after considering all of your other
taxable transactions, as described below. In addition, the trust may make
distributions that represent a return of capital for tax purposes and thus will
generally not be taxable to you. The tax status of distributions from the trust
is not affected by whether you reinvest your distributions in additional units
or receive them in cash. The tax laws may require you to treat distributions
made to you in January as if you had received them on December 31 of the
previous year.
DIVIDENDS RECEIVED DEDUCTION. A corporation that owns units generally will
not be entitled to the dividends received deduction with respect to many
dividends received from the trust because the dividends received deduction is
generally not available for distribution from regulated investment companies.
IF YOU SELL OR REDEEM UNITS. If you sell or redeem your units, you will
generally recognize a taxable gain or loss. To determine the amount of this gain
or loss, you must subtract your tax basis in your units from the amount you
receive in the transaction. Your tax basis in your units is generally equal to
the cost of your units, generally including sales charges. In some cases,
however, you may have to adjust your tax basis after you purchase your units.
TAXATION OF CAPITAL GAINS AND LOSSES. Under the "Jobs and Growth Tax Relief
Reconciliation Act of 2003" (the " Tax Act"), if you are an individual, the
maximum marginal federal tax rate for net capital gain is generally 15%
(generally 5% for certain taxpayers in the 10% and 15% tax brackets). These new
capital gains rates are generally effective for taxable years beginning before
January 1, 2009. For periods not covered by the Tax Act, if you are an
individual, the maximum marginal federal tax rate for net capital gain is
generally 20% (10% for certain taxpayers in the 10% and 15% tax brackets). The
20% rate is reduced to 18% and the 10% rate is reduced to 8% for long-term gains
from most property acquired after December 31, 2000 with a holding period of
more than five years.
Net capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if the
holding period for the asset is more than one year and is short-term if the
holding period for the asset is one year or less. You must exclude the date you
purchase your units to determine your holding period. However, if you receive a
capital gain dividend from your trust and sell your unit at a loss after holding
it for six months or less, the loss will be recharacterized as long-term capital
loss to the extent of the capital gain dividend received. The tax rates for
capital gains realized from assets held for one year or less are generally the
same as for ordinary income. In addition, the Internal Revenue Code treats
certain capital gains as ordinary income in special situations.
DEDUCTIBILITY OF TRUST EXPENSES. Expenses incurred and deducted by the
trust will generally not be treated as income taxable to you. In some cases,
however, you may be required to treat your portion of these trust expenses as
income. In these cases you may be able to take a deduction for these expenses.
However, certain miscellaneous itemized deductions, such as investment expenses,
may be deducted by individuals only to the extent that all of these deductions
exceed 2% of the individual's adjusted gross income.
FOREIGN INVESTORS. If you are a foreign investor (i.e., an investor other
than a U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust), you should be aware that, generally, subject to applicable tax treaties,
distributions from the trust will be characterized as dividends for federal
income tax purposes (other than dividends which the trust designates as capital
gain dividends) and will be subject to U.S. income taxes, including withholding
taxes, subject to certain exceptions described below. However, distributions
received by a foreign investor from the trust that are properly designated by
the trust as capital gain dividends may not be subject to U.S. federal income
taxes, including withholding taxes, provided that the trust makes certain
elections and certain other conditions are met. In the case of dividends with
respect to taxable years of the trust beginning after 2004 and prior to 2008,
distributions from the trust that are properly designated by the trust as an
interest-related dividend attributable to certain interest income received by
the trust or as a short-term capital gain dividend attributable to certain
short-term capital gain income received by the trust may not be subject to U.S.
federal income taxes, including withholding taxes, provided that the trust makes
certain elections and other conditions are met. Foreign investors should consult
their tax advisors with respect to U.S. tax consequences of ownership of units.
EXPERTS
LEGAL MATTERS. Chapman and Cutler LLP, 111 West Monroe Street, Chicago,
Illinois 60603, acts as counsel for the trust and has passed upon the legality
of the units.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. The statement of financial
condition, including the Trust Portfolio, appearing herein, have been audited by
Grant Thornton LLP, independent registered public accounting firm, as set forth
in their report thereon appearing elsewhere herein, and is included in reliance
on such report given on the authority of such firm as experts in accounting and
auditing.
PERFORMANCE INFORMATION
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of
the opening of business on the trust's inception date, the estimated long-term
return and the estimated current return, if applicable, for each trust were as
set forth in the "Essential Information" for each trust in the prospectus.
Estimated current return is calculated by dividing the estimated net annual
interest income per unit by the public offering price. The estimated net annual
interest income per unit will vary with changes in fees and expenses of the
trustee, the sponsor and the evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of the securities while the public
offering price will vary with changes in the offering price of the underlying
securities and accrued interest; therefore, there is no assurance that the
present estimated current return will be realized in the future. Estimated
long-term return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums and
the accretion of discounts) and estimated retirements or average life of all of
the securities in a trust and (2) takes into account the expenses and sales
charge associated with each trust unit. Since the market values and estimated
retirements of the securities and the expenses of a trust will change, there is
no assurance that the present estimated long-term return will be realized in the
future. Estimated current return and estimated long-term return are expected to
differ because the calculation of estimated long-term return reflects the
estimated date and amount of principal returned while estimated current return
calculations include only net annual interest income and public offering price.
GENERAL. Information contained in this prospectus, as it currently exists
or as further updated, may also be included from time to time in other
prospectuses or in advertising material. Information on the performance of a
trust strategy or the actual performance of a trust may be included from time to
time in other prospectuses or advertising material and may reflect sales charges
and expenses of a trust. The performance of a trust may also be compared to the
performance of money managers as reported in SEI Fund Evaluation Survey or of
mutual funds as reported by Lipper Analytical Services Inc. (which calculates
total return using actual dividends on ex-dates accumulated for the quarter and
reinvested at quarter end), Money Magazine Fund Watch (which rates fund
performance over a specified time period after sales charge and assuming all
dividends reinvested) or Wiesenberger Investment Companies Service (which states
fund performance annually on a total return basis) or of the New York Stock
Exchange Composite Index, the American Stock Exchange Index (unmanaged indices
of stocks traded on the New York and American Stock Exchanges, respectively),
the Dow Jones Industrial Average (an index of 30 widely traded industrial common
stocks) or the Standard & Poor's 500 Index (an unmanaged diversified index of
500 stocks) or similar measurement standards during the same period of time.
CLAYMORE SECURITIES DEFINED PORTFOLIOS
CLAYMORE GNMA PORTFOLIO PROSPECTUS-PART B
______ , 2005
WHERE TO LEARN MORE
You can contact us for free information about this and other investments.
VISIT US ON THE INTERNET
http://www.claymoresecurities.com
BY E-MAIL
invest@claymoresecurities.com
CALL CLAYMORE
(800) 345-7999
Pricing Line (888) 248-4954
CALL THE BANK OF NEW YORK
(800) 701-8178 (investors)
(800) 647-3383 (brokers)
ADDITIONAL INFORMATION
This prospectus does not contain all information filed with the
Securities and Exchange Commission. To obtain a copy of this information (a
duplication fee may be required):
E MAIL: publicinfo@sec.gov
WRITE: Public Reference Section
Washington, D.C. 20549-0102
VISIT: http://www.sec.gov (EDGAR Database)
CALL: 1-202-942-8090 (only for information on the operation of the
Public Reference System)
When units of the trust are no longer available, we may use this
prospectus as a preliminary prospectus for a future trust. In this case you
should note that:
The information in this prospectus is not complete with respect to
future trusts and may be changed. No one may sell units of a future trust
until a registration statement is filed with the Securities and Exchange
Commission and is effective. This prospectus is not an offer to sell units
and is not soliciting an offer to buy units in any state where the offer or
sale is not permitted.
CONTENTS
Investment Summary
- --------------------------------------------------------------------------------
A concise 2 Overview
description 2 Investment Objective
of essential 2 Principal Investment Strategy
information 2 Essential Information
about the 3 Principal Risks
portfolio 3 Who Should Invest
4 Fees and Expenses
4 Example
5 Trust Portfolio
Understanding Your Investments
- --------------------------------------------------------------------------------
Detailed 6 How to Buy Units
information 10 How to Sell Your Units
to help you 11 Distributions
understand 11 Investment Risks
your 13 Ginnie May Securities
investment 14 How the Trust Works
15 General Information
16 Expenses
17 Report of Independent Registered Public
Accounting Firm
18 Statement of Financial Condition
For the Table of Contents of Part B, See Part B of the prospectus.
Where to Learn More
- --------------------------------------------------------------------------------
You can contact us for VISIT US ON THE INTERNET
free information about http://www.claymoresecurities.com
these investments. BY E-MAIL
invest@claymoresecurities.com
CALL CLAYMORE (800) 345-7999
Pricing Line (888) 248-4954
CALL THE BANK OF NEW YORK
(800) 701-8178 (investors)
(800) 647-3383 (brokers)
Additional Information
- --------------------------------------------------------------------------------
This prospectus does not contain all information filed with the
Securities and Exchange Commission. To obtain or copy this information
(a duplication fee may be required):
E-MAIL: publicinfo@sec.gov
WRITE: Public Reference Section, Washington, D.C. 20549-0102
VISIT: http://www.sec.gov (EDGAR Database)
CALL: 1-202-942-8090 (only for information on
the operation of the Public Reference Section)
REFER TO:
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 268
Securities Act file number: 333-_____
Investment Company Act file number: 811-03763
When units of the trust are no longer available, we may use this
prospectus as a preliminary prospectus for a future trust. In this case
you should note that:
The information in this prospectus is not complete with respect to
future trusts and may be changed. No one may sell units of a future
trust until a registration statement is filed with the Securities and
Exchange Commission and is effective. This prospectus is not an offer to
sell units and is not soliciting an offer to buy units in any state
where the offer or sale is not permitted.
[photo of sword]
Claymore Securities
Defined Portfolios
Series 268
Prospectus
Dated ______ , 2005
GNMA PORTFOLIO, SERIES 17
[Claymore logo]
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
The Depositor has obtained the following Securities Dealer Blanket Bond for
its officers, directors and employees:
INSURER/POLICY NO. AMOUNT
National Union Fire Insurance
Company of Pittsburgh, Pennsylvania $250,000
959-9000
This Registration Statement comprises the following papers and documents.
The Facing Sheet
The Prospectus
The Signatures
Consents of Counsel
The following exhibits:
1.1 Reference Trust Agreement (to be supplied by amendment).
1.1.1 Standard Terms and Conditions of Trust (Reference is made to Exhibit
1.1.1 to Amendment No.1 to the Registration Statement on Form S-6 for
Claymore Securities Defined Portfolios, Series 116 (File No. 333-72828
filed on December 18, 2001).
2.1 Code of Ethics (Reference is made to Exhibit 2.1 to the Registration
Statement on Form S-6 for Claymore Securities Deferred Portfolios,
Series 213 (File No. 333-122184 filed on February 9, 2005).
3.1 Opinion of counsel as to legality of the securities being registered
including a consent to the use of its name in the Registration
Statement (to be supplied by amendment).
3.2 Opinion of counsel as to Federal Income tax status of the securities
being registered including a consent to the use of its name in the
Registration Statement (to be supplied by amendment).
3.3 Opinion of counsel as to New York Income tax status of the securities
being registered including a consent to the use of its name in the
Registration Statement (to be supplied by amendment).
3.4 Opinion of counsel as to the Trustee and the Trust (s) including a
consent to the use of its name in the Registration Statement (to be
supplied by amendment).
4.1 Consent of Independent Registered Public Accounting Firm (to be
supplied by amendment).
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Claymore Securities Defined Portfolios, Series 268 has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Lisle, and State of Illinois, on the
23rd day of November, 2005.
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 268
Registrant
By: CLAYMORE SECURITIES, INC., Depositor
By: /s/ Nicholas Dalmaso
--------------------------
Nicholas Dalmaso
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on November 23, 2005 by the
following persons, who constitute a majority of the Board of Directors of
Claymore Securities, Inc.
SIGNATURE* TITLE** DATE
) By: /s/ Nicholas Dalmaso
--------------------
) Nicholas Dalmaso
) Attorney-in-Fact*
)
DAVID HOOTEN* Chairman of the Board of ) November 23, 2005
Directors )
)
/S/ STEVEN HILL Chief Financial Officer November 23, 2005
- ------------------------------
STEVEN HILL
/S/ NICHOLAS DALMASO Executive Vice President, November 23, 2005
- --------------------
NICHOLAS DALMASO Secretary, Treasurer and
Director
- -------------
* An executed copy of the related power of attorney was filed as Exhibit
6.0 to Registration Statement No. 333-98345 on August 22, 2002.
** The titles of the persons named herein represent their capacity in and
relationship to Claymore Securities, Inc., the Depositor.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The consent of Grant Thornton LLP to the use of its report and to the
reference to such firm in the Prospectus included in the Registration Statement
will be filed as Exhibit 4.1 to the Registration Statement.
CONSENT OF CHAPMAN AND CUTLER LLP
The consent of Chapman and Cutler LLP to the use of its name in the
Prospectus included in the Registration Statement will be contained in its
opinions to be filed as Exhibits 3.1 and 3.2 to the Registration Statement.
CONSENT OF EMMET, MARVIN & MARTIN LLP
The consent of Emmet, Marvin & Martin LLP to the use of its name in the
Prospectus included in the Registration Statement will be contained in its
opinions to be filed as Exhibits 3.3 and 3.4 to the Registration Statement.
MEMORANDUM
Re: Claymore Securities Defined Portfolios, Series 268
The list of securities comprising the trust of the fund, the
evaluation, record and distribution dates and other changes pertaining
specifically to the new series, such as size and number of units of the trust in
the fund and the statement of financial condition of the new fund will be filed
by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
Form N-8A and Form N-8B-2 were filed in respect of Claymore Securities
Defined Portfolios, Series 116 (and subsequent series) (File No. 811-03763).
1933 ACT
THE INDENTURE
The form of the proposed Standard Terms and Conditions of Trust is
expected to be in all respects consistent with the form of the Standard Terms
and Conditions of Trust dated December 18, 2001 relative to Claymore Securities
Defined Portfolios, Series 116.
CHAPMAN AND CUTLER LLP
Chicago, Illinois
November 23, 2005