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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 2004
1933 ACT FILE NO. 333- ______
1940 ACT FILE NO. 811 - 03763
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
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 178
B. NAME OF DEPOSITOR: CLAYMORE SECURITIES, INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
Claymore Securities, Inc.
210 North Hale Street
Wheaton, Illinois 60187
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
210 North Hale Street 111 West Monroe Street
Wheaton, Illinois 60187 Chicago, Illinois 60603
(630) 784-6300 (312) 845-3000
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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.
================================================================================
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.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS DATED JUNE 4, 2004 SUBJECT TO COMPLETION
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 178
GOVERNMENT INFLATION PROTECTION PORTFOLIO, SERIES 1
[CLAYMORE LOGO]
PROSPECTUS PART A DATED __________, 2004
A PORTFOLIO OF U.S. TREASURY AND FANNIE MAE INFLATION PROTECTION
SECURITIES THAT SEEKS CURRENT INTEREST INCOME AND INFLATION
PROTECTION
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.
<Page>
INVESTMENT SUMMARY
OVERVIEW
Claymore Securities Defined Portfolios, Series 178 is a unit investment trust
that consists of the Government Inflation Protection Portfolio Series 1 (the
"TRUST"). Claymore Securities, Inc. ("CLAYMORE" or the "SPONSOR") serves as the
sponsor of the trust. The trust is scheduled to terminate in approximately ____
years.
INVESTMENT OBJECTIVE
The trust seeks to provide current interest income and inflation protection.
In addition, the trust will seek to reduce taxable yet undistributed income
("Phantom Income") normally associated with certain inflation-protected
securities through periodic distributions.
PRINCIPAL INVESTMENT STRATEGY
The trust includes United States Treasury Inflation Protected Securities
Series ("TIPS") and Federal National Mortgage Association Variable Rate Notes
(the "Fannie Mae Notes") (collectively, the "Securities") with maturities
greater than 9-years at the time of deposit. The sponsor selects those
securities that it believes have the best potential to obtain the objectives of
the trust.
See "Investment Policies" in Part B of the prospectus for more information.
SECURITY SELECTION
The sponsor selects Securities for the portfolio taking the following into
consideration:
- Current real yield;
- Real yield to maturity;
- Premium (discount) to original par and accreted maturity value; and
- Duration.
TIPS AND FANNIE MAE NOTES
Both TIPS and Fannie Mae Notes are inflation-indexed fixed-income securities
that utilize an inflation mechanism tied to the Consumer Price Index ("CPI").
TIPS and Fannie Mae Notes have the ability to help protect an investors
purchasing power.
Inflation has long been the enemy of fixed income investors. Inflation can
destroy the purchasing power of both the principal value and of the income
generated by fixed-coupon/fixed principal investments. Beginning in 1997, the
U.S. Treasury began to issue TIPS, officially recognizing the need of some
investors to minimize the inflation risk inherent in
fixed-coupon/fixed-principal investments such as Treasury notes and bonds. The
TIPS market has matured since their introduction with new issuance now amounting
to approximately 25% of U.S. Treasury financing needs.
U.S. TIPS help protect investors purchasing power through an inflation
mechanism tied to the Consumer Price Index. The securities are offered with
coupon interest rates lower than those of nominal rate (fixed coupon/fixed
principal) Treasury securities. The coupon interest rates equate to what is
known as the real interest rate (nominal rates less the rate of inflation). The
coupon interest rate remains fixed throughout the term of the securities.
However, each day the principal value of a TIPS security is adjusted (accreted)
based upon a pro-rata portion of the CPI as reported three months earlier.
Future interest payments are made based upon the coupon interest rate and the
accreted principal
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value. The maturity value of the bond will be equal to the accreted principal at
the time of maturity. As a result the real (after inflation) income of TIPS
rises with inflation maintaining buying power and the maturity value rises to
maintain the buying power of the investment principal.
Taxation of TIPS has been a major drawback for many individual investors. The
disadvantage to individual investors is that the accretion value as a result of
inflation is taxable each year in addition to the coupon interest. The obvious
problem is that investors do not realize cashflows from accretion to pay the tax
bill; this is known as Phantom Income. The trust addresses the Phantom Income
problem by distributing the accretion value to investors. On a quarterly basis,
the trust will sell securities in an amount sufficient to realize enough funds
to distribute to unit holders the amount accreted on the portfolio for the
month. This will allow the investors to realize the full amount of income on
which they will be taxed.
Much like the TIPS the Fannie Mae Notes provide some protection of an
investors purchasing power through an inflation mechanism tied to CPI. Fannie
Mae Notes pay monthly interest payments that are determined, in part, by the
current level of the CPI. Fannie Mae is a federally chartered and
stockholder-owned corporation organized and existing under the Federal National
Mortgage Association Charter Act. Fannie Mae is the largest investor in home
mortgage loans in the United States. Fannie Mae was established in 1938 as a
United States government agency to provide supplemental liquidity to the
mortgage market and was transformed into a stockholder-owned and privately
managed corporation by legislation enacted in 1968. The Fannie Mae Notes,
together with interest thereon, are not guaranteed by the United States and do
not constitute a debt or obligation of the United States or of any agency or
instrumentality thereof other than Fannie Mae.
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:
- SECURITY PRICES WILL FLUCTUATE. The value of your investment may fall over
time.
- 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.
- 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.
- THE TRUST COULD TERMINATE EARLIER THAN ANTICIPATED DUE TO THE REDEMPTION
OF THE UNDERLYING SECURITIES.
- NEITHER THE UNITS IN THE TRUST NOR THE MARKET VALUE OF THE SECURITIES ARE
GUARANTEED BY THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT.
WHO SHOULD INVEST
You should consider this investment if you want:
- inflation protected government securities.
- the potential to receive monthly distributions of income and principal.
You should not consider this investment if you:
- are uncomfortable with the risks of an unmanaged investment in a fixed
income securities.
- want a high growth investment strategy.
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ESSENTIAL INFORMATION
(AS OF THE INCEPTION DATE)
<Table>
UNIT PRICE (PUBLIC OFFERING PRICE) $
NUMBER OF UNITS:
PRINCIPAL AMOUNT OF SECURITIES IN TRUST: $
FRACTIONAL UNDIVIDED INTEREST IN TRUST PER UNIT
PRINCIPAL AMOUNT OF SECURITIES PER UNIT $ 10.00
INCEPTION DATE (INITIAL DATE OF DEPOSIT)
FIRST SETTLEMENT DATE
MANDATORY TERMINATION DATE
ESTIMATED CURRENT RETURN
ESTIMATED LONG-TERM RETURN
ESTIMATED AVERAGE LIFE OF SECURITIES years
MINIMUM VALUE OF THE 40% of the principal amount
TRUST UNDER WHICH THE of the securities deposited in
TRUST AGREEMENT MAY BE trust at the end of the initial
TERMINATED: offering period.
EVALUATION TIME: Close of trading of the New
York Stock Exchange
(normally 4:00 p.m. Eastern
Time)
ESTIMATED INITIAL DISTRIBUTION DATE
ESTIMATED INITIAL RECORD DATE
DISTRIBUTION DATES 15th day of each month
RECORD DATES 1st day of each month
CUSIP NUMBER
TICKER
MINIMUM INVESTMENT
Standard accounts $1,000/100 units
RETIREMENT ACCOUNTS AND
CUSTODIAL ACCOUNTS FOR MINORS $250/25 units
</Table>
FEES AND EXPENSES
The amounts below are estimates of the direct and indirect expenses that you
may incur based on a $10 unit price. Actual expenses may vary.
<Table>
<Caption>
PERCENTAGE AMOUNT
OF PUBLIC PER $1,000
OFFERING INVESTED (AS OF
INVESTOR FEES PRICE(1) INCEPTION DATE)
- ------------- ---------- ---------------
MAXIMUM SALES FEE % $
========== ===============
ORGANIZATION COSTS
(amount per 100 units)(2) $
===============
</Table>
<Table>
<Caption>
APPROXIMATE
ANNUAL % OF PUBLIC AMOUNT PER
OPERATING EXPENSES OFFERING PRICE 100 UNITS
- ------------------ -------------- ----------
Trustee's fee % $
Sponsor's Supervisory fee
Bookkeeping and
administration fees
Sponsor's Evaluation fee
Estimated other trust
operating expenses(3)
Total % $
============== ==========
</Table>
(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,
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you would pay these expenses for every $10,000 you invest in the trust:
<Table>
1 year $
3 years $
5 years $
10 years $
</Table>
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.
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TRUST PORTFOLIO
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 178
THE TRUST PORTFOLIO AS OF THE INCEPTION DATE,
<Table>
<Caption>
COST OF
PRINCIPAL INTEREST SECURITIES
AMOUNT ISSUER COUPON TO TRUST(2)(3)
- -----------------------------------------------------------
$ % $
%
- -------- --------------
$ $
======== ==============
</Table>
Notes to Portfolio
(1) Securities of these issuers are all represented by contracts to purchase
securities. All contracts to purchase the securities were entered into on
______________. All contracts are expected to be settled prior to or on
______________.
(2) 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.
(3) This security has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Securities
which pay no interest are normally described as "zero coupon" securities.
Over the life of these securities the value of the securities will increase
such that upon maturity the holders of the securities will receive 100% of
the principal amount thereof, however these securities may be sold for unit
redemptions or trust expenses therefore there is no assurance that you will
receive 100% of the principal amount.
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UNDERSTANDING YOUR INVESTMENT
HOW TO BUY UNITS
You can buy units of the 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 Public Offering Price includes:
- the value of the securities,
- the sales fee,
- accrued interest on the securities, and
- 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 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 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 Ginne 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
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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. 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 ____% of the Public Offering Price
(excluding organization costs) at the time of purchase. This is equivalent to
___% 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:
<Table>
<Caption>
SALES FEE
(AS A % OF PUBLIC
PURCHASE AMOUNT: OFFERING PRICE):
------------------- ------------------
Less than $100,000 %
$100,000 - $249,999
$250,000 - $499,999
$500,000 - $999,999
$1,000,000 or more
</Table>
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 $10 unit
equivalent. For example, if you
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purchase between 10,000 and 24,999 units, your fee is ____% 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:
- purchases by your spouse or minor children and
- purchases by your trust estate or fiduciary accounts.
You may also use a LETTER OF INTENT to combine purchases over time to qualify
for a purchase level. Under this option, you must give us a letter of intent to
purchase a specified amount of units of any Claymore unit trust over a specified
time period. The letter must specify a time period of no more than 13 months.
Once you sign a letter of intent, we will reduce your sales fee based on your
total purchase commitment as shown in the table above. If your purchases exceed
the level specified in your letter, you will still receive the additional fee
reduction for your purchases shown in the table above (we will not cap your
discount). If your total purchases are less than the level specified in your
letter, you must pay the fee difference to us. We reserve the right to redeem
your units if you do not pay the difference.
The discounts described above apply only during the initial offering period.
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.
<Table>
Fee paid to broker 0%
Sponsor retention %
-----
Total %
=====
</Table>
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.
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The distribution fee during the initial offering period paid for a given
transaction is as follows:
<Table>
<Caption>
CONCESSION PER UNIT
PURCHASE AMOUNT/ (AS A % OF PUBLIC
FORM OF PURCHASE: OFFERING PRICE):
-------------------- --------------------
Less than $100,000 %
$100,000 - $249,999
$250,000 - $499,999
$500,000 - $999,999
$1,000,000 or more
Wrap Account and
Employee Purchases
</Table>
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 $10 unit equivalent. For example, if a firm executes a
transaction between 10,000 and 24,999 units, it earns ____% of the unit price.
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:
<Table>
<Caption>
CONCESSION PER UNIT
PURCHASE AMOUNT/ (AS A % OF PUBLIC
FORM OF PURCHASE: OFFERING PRICE):
-------------------- -------------------
Less than $100,000 %
$100,000 to $249,999
$250,000 to $499,999
$500,000 to $999,999
$1,000,000 or more
</Table>
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 sales requests.
During the 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
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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. We may
discontinue this option at any time. 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.
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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.
For tax purposes, a portion of the income accrued by the TIPS is taxable
income despite the fact that owners of TIPS will not receive periodic income
distributions for that income. This undistributed but taxable income is often
referred to as "Phantom Income". To help avoid the Phantom Income issue the
trust will sell on a monthly basis securities from the Trust in order to pay
additional monthly income to unitholders. The trust will sell enough securities
on a pro rata basis to match the increases in Consumer Price Index over each
monthly period. The sponsor believes that such sales will generate distributions
sufficient to pay the taxes associated with any Phantom Income earned.
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 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 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.
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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 TIPS 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 Fannie Mae guarantees the market value or yield on Fannie Mae securities.
REDUCED DIVERSIFICATION RISK is the risk that your trust will become smaller
and less diversified as Securities are sold, are prepaid or mature. This could
increase your risk of loss and increase your share of trust expenses.
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 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.
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:
- to pay expenses,
- to issue additional units or redeem units,
- in limited circumstances to protect the trust,
- to make required or predetermined distributions or avoid imposition of
taxes on the trust, or
- as permitted by the trust agreement.
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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 is especially true
because the Trust's principal will steadily be reduced to supplement monthly
distributions. We will provide you with estimated cash flows for the trust at no
charge upon your request.
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,
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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 210 North Hale Street, Wheaton,
Illinois 60187 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.
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REPORT OF INDEPENDENT AUDITORS
UNITHOLDERS
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 178
We have audited the accompanying statement of financial condition, including
the trust portfolio set forth on page 6 of this prospectus, of Claymore
Securities Defined Portfolios, Series 178, as of _____________, 2004, 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 auditing standards generally
accepted in the 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 __________,
2004. 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 178 as of _____________, 2004, in
conformity with accounting principles generally accepted in the United States.
Grant Thornton LLP
Chicago, Illinois
_____________, 2004,
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CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 178
STATEMENT OF FINANCIAL CONDITION
AS OF THE INCEPTION DATE, __________, 2004
<Table>
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) $
--------------
==============
Interest of investors:
Cost to investors
Less: organization costs and settlement period interest(3)
Less: gross underwriting commission(4)(5)
--------------
Net interest of investors
--------------
Total $
==============
Number of units
==============
Net asset value per unit $
==============
</Table>
- ----------
(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 _________, 2004 (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 ____% of the public
offering price (equivalent to ____% 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.
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CLAYMORE SECURITIES DEFINED PORTFOLIOS
CLAYMORE GOVERNMENT SECURITIES PORTFOLIO
PROSPECTUS PART B DATED ___________, 2004
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
<Table>
General Information 2
Investment Policies 2
Risk Factors 5
Administration of the Trust 6
Portfolio Transactions and Brokerage Allocation 11
Purchase, Redemption and Pricing of Units 11
Taxation 16
Experts 18
Performance Information 18
</Table>
<Page>
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.
Each unit initially offered represents an undivided interest in the
trust. To the extent that any units are redeemed by the trustee or additional
units are issued as a result of additional securities being deposited by the
sponsor, the fractional undivided interest in a trust represented by each
unredeemed unit will increase or decrease accordingly, although the actual
interest in such trust represented by such fraction will remain unchanged. Units
will remain outstanding until redeemed upon tender to the trustee by
unitholders, which may include the sponsor, or until the termination of the
trust agreement.
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.
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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. Also, the Trust will sell securities on a periodic basis, in
accordance with increases in the Consumer Price Index, in order to make
additional distributions available to unitholders.
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
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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
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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.
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.
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. 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.
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.
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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 dsitribution 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. For tax purposes, a portion of
the income accrued by the TIPS is taxable income despite the fact that owners of
TIPS will not receive periodic income distributions for that income. This
undistributed but taxable income is often referred to as "Phantom Income". To
help avoid the Phantom Income issue the trust will sell on a monthly basis
securities from the Trust in order to pay additional monthly income to
unitholders. The trust will sell enough securities on a pro rata basis to match
the increases in Consumer Price index over each monthly period. The sponsor
believes that such sales will generate distributions sufficient to pay the taxes
associated with any Phantom Income earned.
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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 Interest 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 Principal 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 for redemptions of units, if any; 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;
(4) The amount actually distributed during such calendar year from the
Interest and Principal 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.
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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.
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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 210 North Hale Street, Wheaton, Illinois 60187 and at 620 West
Germantown Pike, Suite 440, Plymouth Meeting, Pennsylvania 19462.
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
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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
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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. In addition, in selecting among firms to handle a particular
transaction, the sponsor may take into account whether the firm has sold or is
selling products which it sponsors.
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
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mortgages underlying each security will not yet have been reported by the issuer
to Ginne 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. 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
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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.
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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
14
<Page>
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
15
<Page>
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.
16
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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. At 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 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 ending on or after May 6, 2003 and beginning before January 1, 2009.
However, special effective date provisions are set forth in the Tax Act. For
example, there are special transition rules provided with respect to gain
properly taken into account for the portion of the taxable year before May 6,
2003. 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. In the case of capital
gain dividends, the determination of which portion of the capital gain
dividend, if any, that may be treated as long term gain from property held for
more than five years eligible for the 18% (or 8%) tax rate will be made based on
regulations prescribed by the United States Treasury. 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.
17
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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. However, distributions received by a foreign investor from the trust that
are 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. 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 AUDITORS. The statement of financial condition, including the
Trust Portfolio, appearing herein, have been audited by Grant Thornton LLP,
independent auditors, 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.
18
<Page>
CLAYMORE SECURITIES DEFINED PORTFOLIOS
CLAYMORE GOVERNMENT SECURITIES PORTFOLIO
PROSPECTUS-PART B
__________, 2004
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.
<Page>
CONTENTS
<Table>
Investment Summary
A CONCISE DESCRIPTION OF ESSENTIAL INFORMATION ABOUT THE PORTFOLIO
2 Overview
2 Investment Objective
2 Principal Investment Strategy
3 Principal Risks
3 Who Should Invest
4 Essential Information
4 Fees and Expenses
6 The Trust Portfolio
Understanding Your Investment
DETAILED INFORMATION TO HELP YOU UNDERSTAND YOUR INVESTMENT
7 How to Buy Units
10 How to Sell Your Units
12 Distributions
12 Investment Risks
13 How the Trust Works
15 General Information
15 Expenses
17 Report of Independent Auditors
18 Statement of Financial Condition
</Table>
FOR THE TABLE OF CONTENTS OF PART B, SEE PART B OF THE PROSPECTUS.
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 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:
GOVERNMENT INFLATION PROTECTION PORTFOLIO, SERIES 1
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.
[GRAPHIC]
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 178
PROSPECTUS PART A
DATED __________, 2004
GOVERNMENT INFLATION PROTECTION PORTFOLIO, SERIES 1
[CLAYMORE LOGO]
<Page>
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:
<Table>
<Caption>
INSURER/POLICY NO. AMOUNT
National Union Fire Insurance
Company of Pittsburgh, Pennsylvania
959-9000 $ 250,000
</Table>
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 118 (File No. 333-81826
filed on February 6, 2002).
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 171 (File No. 333-112575 filed on February 19, 2004).
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 Auditors (to be supplied by amendment).
3
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Claymore Securities Defined Portfolios, Series 178 has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of Wheaton, and State of Illinois, on the
4th day of June, 2004.
CLAYMORE SECURITIES DEFINED PORTFOLIOS,
SERIES 178, 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 June 4, 2004 by the following
persons, who constitute a majority of the Board of Directors of Claymore
Securities, Inc.
<Table>
<Caption>
SIGNATURE* TITLE** DATE
) By: /s/ Nicholas Dalmaso
------------------------
) Nicholas Dalmaso
) Attorney-in-Fact*
)
DAVID HOOTEN* Chairman of the Board of ) June 4, 2004
Directors )
)
/S/ CHARLES MILLINGTON Chief Financial Officer June 4, 2004
- ----------------------
CHARLES MILLINGTON
/S/ NICHOLAS DALMASO Executive Vice President, June 4, 2004
- -------------------- Secretary, Treasurer and
NICHOLAS DALMASO Director
</Table>
- ----------
* 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.
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CONSENT OF INDEPENDENT AUDITORS
The consent of Grant Thronton 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.
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MEMORANDUM
Re: Claymore Securities Defined Portfolios, Series 178
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 February 6, 2002 relative to Claymore Securities
Defined Portfolios, Series 118.
CHAPMAN AND CUTLER LLP
Chicago, Illinois
June 4, 2004
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