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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 22, 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
------------------------
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 186
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.
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The registration hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
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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 JULY 22, 2004 SUBJECT TO COMPLETION
IQ/CLAYMORE MUNICIPAL PORTFOLIO (10-15 YEARS), SERIES 1
a series of
Claymore Securities Defined Portfolios, Series 186
[IQ INVESTMENT ADVISORS LOGO]
[CLAYMORE(R) LOGO]
A PORTFOLIO OF INVESTMENT GRADE MUNICIPAL BONDS WITH STATED MATURITIES BETWEEN
THE YEARS 2014 AND 2019 THAT IS DESIGNED TO PAY REGULAR FEDERALLY TAX-EXEMPT
INTEREST.
Prospectus
Dated July ____, 2004
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.
[GRAPHIC]
As Selling Agent
<Page>
INVESTMENT SUMMARY
THIS INVESTMENT SUMMARY PROVIDES AN ABBREVIATED DISCUSSION REGARDING THE
TRUST. MORE DETAILED INFORMATION CAN BE FOUND LATER IN THIS PROSPECTUS.
OVERVIEW
The IQ/Claymore Municipal Portfolio (10-15 years) Series 1 (the "TRUST").
is a unit investment trust and a series of the Claymore Securities Defined
Portfolios, Series 186. Claymore Securities, Inc. ("CLAYMORE" or the "SPONSOR")
serves as the sponsor of the trust.
The trust is scheduled to terminate in approximately 15 years.
PUBLIC OFFERING PRICE
If the units of the trust had been available for sale on _____, the Public
Offering Price per unit would have been $ . The Public Offering Price of the
units during the initial offering period is generally based on:
- the aggregate institutional offering price of the bonds in the trust's
portfolio divided by the number of units outstanding, plus
- a sales charge equal to 3.75% of the Public Offering Price excluding
organization costs ( % of aggregate institutional offering price of
the bonds per unit), and
- a pro rata portion of estimated organization costs.
INVESTMENT OBJECTIVE
The trust's primary objective is to seek to obtain federally tax-exempt
interest income through an investment in a fixed portfolio of investment grade
municipal bonds which mature in 6 consecutive years, 2014 to 2019 (the "BONDS").
The trust's secondary objective is preservation of capital. The trust intends to
pay interest distributions each month and expects to prorate the interest
distributed on an annual basis see "Distributions." There can be no assurance
that the trust will achieve these investment objectives; however, the sponsor
will select bonds that it believes have the best chance to meet the trust's
objectives over its approximate 15 year life.
Municipal bonds are debt instruments issued by state and local governments
to raise money for various public works projects such as highways, airports and
schools. The most distinct characteristic of municipal bonds is that generally
these bonds provide interest income exempt from normal federal income taxes, and
in some cases, is exempt from state and local taxes. In addition to offering the
potential for federally tax-exempt interest income, all of the municipal bonds
held in the trust will be rated investment-grade quality, as of the date of this
Prospectus, by at least one of the following ratings agencies: Standard &
Poor's, Fitch Inc. ("FITCH") or Moody's Investors Service ("MOODY'S").
Investment grade bonds are bonds that are rated at least in the category of BBB
by Standard & Poor's or Fitch or Baa by Moody's. A rating in the category of BBB
or Baa is the lowest possible investment grade rating. See "Description of Bond
Ratings" for details.
PORTFOLIO STRATEGY
The trust will invest in a portfolio of municipal bonds with maturities
ranging from 2014 to 2019. Municipal bonds with maturities of 10-15 years
typically have call provisions
2
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beginning 10-years from the date of initial issuance. For this reason investors
may receive principal distributions from bonds being called prior to their
maturity.
The trust includes bonds that are scheduled to mature in staggered
intervals during the life of the trust. As a result, the trust can potentially
offer investors some distinct advantages. Similar portfolio strategies are often
used as alternatives to investing in individual long-term bonds when investors
are concerned about an anticipated rise in interest rates. This approach intends
to provide these investors with the return of a portion of the initial par value
of the bonds in the trust at staggered intervals, which in turn, would allow
them to reinvest the returned amounts at the then current yields. Furthermore, a
portfolio of bonds with 10-15 year maturities could potentially provide lower
interest rate sensitivity than a portfolio comprised of longer maturity bonds,
and as a result, may better allow the trust to meet its secondary objective of
capital preservation.
BOND SELECTION FACTORS
The following factors, among others, were considered in selecting the
bonds:
- whether the bonds selected would generate interest income exempt from
normal federal income taxes imposed on holders of units;
- whether the bonds selected were rated at least in the category of BBB
by Standard & Poor's or Fitch or Baa by Moody's;
- the maturity dates of the bonds (including whether such bonds may be
called or redeemed prior to their stated maturies);
- the diversity of the issuer and the purpose of issue of bonds; and
- the cost of the bonds relative to what the sponsor believes to be
their value.
PRINCIPAL RISKS
INVESTORS CAN LOSE MONEY BY INVESTING IN THE TRUST. The value of the units
and the bonds held in the portfolio can each decline in value. An investor
should consider the following factors, among other things, when deciding whether
to purchase units of the trust:
- No assurance can be given that the trust's objectives will be
achieved. These objectives are subject to the continuing ability of
the respective issuers of the bonds to meet their obligations.
- Municipal bonds are fixed rate debt obligations that generally decline
in value with increases in interest rates, an issuer's worsening
financial condition, a drop in bond ratings or when there is a
decrease in federal income tax rates. Typically, bonds with longer
periods before maturity are more sensitive to interest rate changes.
- Changes in the tax treatment of bonds either due to future legislation
or due to the failure of a public issuer of a bond (or private
guarantor) to meet certain conditions imposed by various tax laws may
have an adverse impact on the value of the units and the bonds held in
the trust.
- If a decrease in net asset value occurs and units of the trust are
tendered for redemption, the trust may be forced to liquidate some of
its bonds which may be at a loss. If such redemptions are substantial
enough, provisions of the trust's indenture could cause a complete and
unexpected liquidation of the trust before its scheduled maturity,
resulting in unanticipated losses for investors.
- Since the portfolio is fixed and not managed, in general, the sponsor
only sells bonds at the trust's termination or
3
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in order to meet redemptions or to pay expenses. As a result, the
price at which a bond is sold may not be the highest price the trust
could have received during the life of the trust.
- Certain of the bonds included in the trust may be original issue
discount bonds or "zero coupon" bonds, as noted in "Trust Portfolio".
These bonds may be subject to greater price fluctuations with changing
interest rates and contain additional risks.
See "Risk Factors" for more information.
CLAYMORE SECURITIES INC.
THE SPONSOR. Claymore Securities, Inc. specializes in the creation,
development and distribution of investment solutions for advisors and their
valued clients. 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, mutual funds and unit
investment trusts in the primary and secondary markets. We are a registered
broker-dealer and a member of the National Association of Securities Dealers,
Inc. The sponsor's offices are located at 210 North Hale Street, Wheaton,
Illinois 60187, at 1952 McDowell Road, Suite 340, Naperville, Illinois 60563 and
at 101 Elm Street, Suite 310, Conshohocken, Pennsylvania 19428.
Claymore serves as sponsor of the trust and has sole responsibility for the
selection of the trust's bonds, and all execution and delivery responsibilities
in connection therewith.
ABOUT IQ INVESTMENT ADVISORS
A newly-formed indirect subsidiary of Merrill Lynch & Co., Inc., IQ
Investment Advisors LLC ("IQ") is an investment adviser registered with the
Securities and Exchange Commission ("SEC") under the Investment Advisers Act of
1940.
IQ Investment Advisors takes a non-traditional approach to asset
management. Unlike many other investment advisers, IQ does not design its
products around the views and skills of individual portfolio managers or
management teams. Instead, IQ Investment Advisors seeks to identify specific
economic or strategic investment themes that may fill a particular need of
investors. IQ then defines a disciplined portfolio management strategy based
on each such investment theme and seeks to provide the strategy to investors
in what it believes to be a scalable and cost-effective. In many cases, IQ
will collaborate in connection with its proprietary products with an asset
manager who has a high degree of expertise in the specific investment theme,
and may retain the manager to act as sub-adviser with respect to aspects of
portfolio implementation. IQ may also collaborate with other asset managers
in connection with products or services that those asset managers may create
or sponsor. IQ intends to offer its strategies through a variety of
investment vehicles, such as mutual funds, closed-end funds, private
partnerships, and unit investment trusts.
IQ has provided the sponsor with certain guidance in connection with the
design of the trust and, pursuant to a licensing agreement, has permitted the
sponsor and the trust to use IQ's trademark in connection with the trust. IQ
will not participate in the selection, execution or delivery of the trust's
bonds, which is the sole responsibility of the sponsor.
TAXES
Under existing law, in the opinion of recognized bond counsel to the
issuing governmental authorities, interest on the bonds in the trust is exempt
from normal federal income taxes for U.S. investors and the federal alternative
minimum tax for certain qualifying parties. You may receive principal payments
if bonds are sold or called, or mature. You will be subject to tax on any gain
realized by the trust on the disposition of bonds.
See "Tax Status" for further tax information.
DISTRIBUTIONS
Holders of units will receive interest payments from the trust each month.
The trust prorates the interest distributed on an annual basis.
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Annual interest distributions are expected to vary from year to year.
Each unit of the trust at the Initial Date of Deposit represents the
fractional undivided interest in the principal amount of underlying bonds set
forth in the "Summary of Essential Financial Information" and net income of the
trust.
MARKET FOR UNITS
A unitholder may dispose of its units by redemption through The Bank of
New York, which serves as the trustee of the trust (the "TRUSTEE"). The price
received from the trustee by the unitholder for units being redeemed is also
based upon the aggregate institutional bid price of the underlying bonds.
Units can be sold at any time to the sponsor or the trustee without fee or
penalty.
Until six months after the Initial Date of Deposit or the end of the
initial offering period, at the discretion of the sponsor, the price at which
the trustee will redeem units and the price at which the sponsor may repurchase
units includes estimated organization costs. After such period, the amount paid
will not include such estimated organization costs.
FEES AND EXPENSES
This table shows the fees and expenses you may pay, directly or indirectly,
when you invest in the portfolio.
<Table>
<Caption>
AS A % OF AMOUNT PER
PUBLIC $10 INVESTED
OFFERING (AS OF INITIAL
INVESTOR FEES PRICE DATE OF DEPOSIT)
- ------------- ---------- ----------------
MAXIMUM SALES CHARGE 3.75% $ 0.375
===== =======
MAXIMUM ESTIMATED ORGANIZATION COSTS
(amount per unit)(2) $
=======
<Caption>
ANNUAL FUND
OPERATING EXPENSES
(PER UNIT)
- ------------------
Trustee's fees(3) $
Sponsor's supervisory fee(3)
Bookkeeping and Administrative fee(3)
Sponsor's evaluation fee(3)
Estimated other trust operating expenses(4)
-------
Total $
=======
</Table>
(1) Excludes organization costs.
(2) Organization costs are deducted from portfolio assets six months after the
Initial Date of Deposit or at the close of the initial offering period, at
the discretion of the sponsor.
(3) The trustee's fees and the sponsor's evaluation fee are based on the
principal amount of the bonds in the trust on a monthly basis. Because such
fees are based on the principal amount of the bonds in the trust, rather
than the trust's net asset value, the fees will represent a greater
percentage of the trust's net asset value if the bonds in the trust, on
average, are valued below par. The sponsor's supervisory fee and the
bookkeeping and administrative fee are based on the largest number of units
in the trust at any time during that period. Because these fees are based
on the largest number of units during a particular period, these fees will
represent a greater percentage of the trust's net asset value as the number
of units decrease during that period. The sponsor serves as evaluator for
all evaluations.
(4) Other estimated trust operating expenses do not include brokerage
commissions and other transactional fees.
EXAMPLE
This example helps you compare the costs of this trust with other unit
investment trusts and mutual funds. In the example, we assume that the expenses
do not change and the trust's annual return is 5%. Your actual returns and
expenses will vary. Based on these assumptions, you would pay these expenses for
every $10,000 you invest:
<Table>
1 year $
3 years $
5 years $
10 years (Approximate life of trust) $
</Table>
5
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CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 186
ESSENTIAL INFORMATION
AS OF , THE BUSINESS DAY PRIOR TO THE INITIAL DATE OF DEPOSIT
These amounts are the same regardless of whether you sell your investment
at the end of a period or continue to hold your investment. The example does not
consider any transaction fees that broker-dealers may charge for processing
redemption requests or transactional expenses.
SPONSOR AND EVALUATOR: Claymore Securities, Inc.
TRUSTEE: The Bank of New York
INITIAL DATE OF DEPOSIT:
FIRST SETTLEMENT DATE:
MANDATORY TERMINATION DATE:
CUSIP NUMBER:
Cash
TICKER CIQMBX
MINIMUM INVESTMENT: 100 Units.
AVERAGE DOLLAR WEIGHTED MATURITY
OF BONDS IN THE TRUST: years.
EVALUATION TIME: As of the close of trading of the
New York Stock Exchange (normally
4:00 p.m. Eastern Time).
MINIMUM PRINCIPAL DISTRIBUTIONS: $0.01 per Unit.
MINIMUM PAR VALUE OF THE BONDS IN THE $2,000,000 par value of bonds
TRUST UNDER WHICH THE TRUST
AGREEMENT MAY BE TERMINATED:
RECORD DATE: 1st Day of each Month.
DISTRIBUTION DATE: 15th Day of each Month.
TYPES OF BONDS
The portfolio consists of the following types of bonds:
<Table>
<Caption>
APPROXIMATE
PORTFOLIO
TYPE OF ISSUER PERCENTAGE*
- -------------- -----------
Total 100.00%
=======
</Table>
- ----------
* Based on principal amount of the bonds in the trust.
BOND RATINGS
The portfolio consists of bonds rated in the following categories by
Standard & Poor's, Fitch and Moody's:
<Table>
<Caption>
APPROXIMATE
PORTFOLIO
STANDARD & POOR'S PERCENTAGE*
AAA %
AA
A
BBB
-------
100.00%
=======
<Caption>
APPROXIMATE
PORTFOLIO
FITCH PERCENTAGE*
AAA %
AA
A
BBB
N/A
-------
100.00%
=======
<Caption>
APPROXIMATE
PORTFOLIO
MOODY'S PERCENTAGE*
Aaa %
Aa
A
Baa
Baa
-------
100.00%
=======
</Table>
- ----------
* As of the Initial Date of Deposit
6
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CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 186
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AS OF , THE BUSINESS DAY PRIOR TO THE INITIAL DATE OF DEPOSIT
<Table>
PRINCIPAL AMOUNT OF BONDS IN TRUST: $
NUMBER OF UNITS:
FRACTIONAL UNDIVIDED INTEREST IN TRUST PER UNIT:
PRINCIPAL AMOUNT OF BONDS PER UNIT: $ 10.00
PUBLIC OFFERING PRICE:
Aggregate Offering Price of Bonds in the Portfolio: $
Aggregate Offering Price of Bonds per Unit: $
Organization Costs per Unit: $
Sales Charge of % (3.75% of Public Offering Price
excluding organization costs): $
PUBLIC OFFERING PRICE PER UNIT: $
REDEMPTION PRICE PER UNIT: $ *
EXCESS OF PUBLIC OFFERING PRICE OVER REDEMPTION PRICE PER UNIT: $
ESTIMATED ANNUAL INTEREST INCOME PER UNIT
(INCLUDES CASH INCOME ACCRUAL ONLY): $
Less Estimated Annual Expenses per Unit: $
-------------
ESTIMATED NET ANNUAL INTEREST INCOME PER UNIT: $
=============
ESTIMATED DAILY RATE OF NET INTEREST ACCRUAL PER UNIT: $
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE
(INCLUDES CASH INCOME ACCRUAL ONLY): %
ESTIMATED LONG-TERM RETURN: %
ESTIMATED INTEREST DISTRIBUTIONS PER UNIT:
- - Date of First Distribution:
- - Amount of First Distribution: $
- - Record Date of First Distribution:
- - Date of Regular Distribution: 15th of each Month
- - Amount of Regular Distribution: $
- - Record Date of Regular Distribution: 1st of each Month
- - Regular Total Annual Distributions: $
</Table>
- ----------
* Based solely upon the institutional bid prices of the bonds. Upon tender for
redemption, the price to be paid will include accrued interest as described
in "Rights of Unitholders-Redemption-Computation of Redemption Price per
Unit."
7
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TRUST PORTFOLIO
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 186
THE TRUST PORTFOLIO AS OF THE INITIAL DATE OF DEPOSIT,
<Table>
<Caption>
OPTIONAL COST OF
AGGREGATE REDEMPTION BONDS TO
PRINCIPAL CUSIP NAME OF ISSUER(1) FEATURES(2) MOODY'S(3) S&P(3) FITCH(3) TRUST(4)(5)
- --------- ----- ----------------- ----------- ---------- ------ -------- -----------
- --------- -----------
========= ===========
</Table>
NOTES TO TRUST PORTFOLIO
(1) Bonds of these issuers are all represented by contracts to purchase bonds.
All contracts to purchase the bonds were entered into on .
All contracts are expected to be settled prior to or on .
(2) If applicable, this heading shows the year in which each issue of bonds is
initially redeemable and the redemption price for that year unless
otherwise indicated. Each such issue generally continues to be redeemable
at declining prices thereafter, but not below par. "S.F." indicates a
sinking fund has been or will be established with respect to an issue of
bonds. In addition, certain bonds in the Trust may be redeemed in whole or
in part other than by operation of the stated optional call or sinking fund
provisions under certain unusual or extraordinary circumstances specified
in the instruments setting forth the terms and provisions of such bonds. A
sinking fund is a reserve fund accumulated over a period of time for the
retirement of debt. A sinking fund may be estimated based upon various
factors or may be mandatory.
Redemption pursuant to call provisions generally will, and redemption
pursuant to sinking fund provisions may, occur at times when the redeemed
bonds have an offering side valuation which represents a premium over par.
To the extent that the bonds were deposited in the trust at a price higher
than the price at which they are redeemed, this will represent a loss of
capital when compared with the original Public Offering Price of the units.
Conversely, to the extent that the bonds were acquired at a price lower
than the redemption price, this will represent an increase in capital when
compared with the original Public Offering Price of the units.
Distributions generally will be reduced by the amount of the income which
would otherwise have been paid with respect to redeemed bonds and there
will be distributed to unitholders the principal amount and any premium
received on such redemption. The estimated current return in this event may
be affected by such redemptions. The federal tax effect on unitholders of
such redemptions and resultant distributions is described in the section
entitled "Tax Status."
(3) The Standard & Poor's, Moody's and Fitch's corporate or municipal bond
ratings are a current assessment of the creditworthiness of an obligor with
respect to a specific obligation. This assessment of creditworthiness may
take into consideration obligors such as guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase, sell or hold a bond,
inasmuch as it does not comment as to market price or suitability for a
particular investor. A brief description of the rating symbols and their
meanings is set forth under "Description of Bond Ratings."
(4) See Note (1) to "Statement of Financial Condition" regarding cost of bonds.
The sponsor is responsible for acquiring each of the bonds that it selects
for the trust and will deliver the bonds to the trust on the Initial Date
of Deposit at a price determined by the evaluator based upon prices
provided by Standard & Poor's Securities Evaluations, an independent,
industry-recognized municipal bond pricing service. The sponsor acquired
such bonds from BNY Capital Markets, Inc., an affiliate of the Trustee, who
accumulated such bonds on behalf of the sponsor. Standard & Poor's
Securities Evaluations will provide the sponsor with an "institutional
offered side" quotation for the bonds, on the trust's initial date of
deposit. The institutional offering prices are greater than the current
institutional bid prices of the bonds which are the basis on which
Redemption Price per unit is determined for purposes of redemption of units
(see the first paragraphs under "Public Offering-Offering Price" and
"Rights of Unitholders-Redemption-Computation of Redemption Price Per
Unit"). On the business day prior to the Initial Date of Deposit, the
aggregate institutional bid side valuation of the bonds in the trust was
lower than the aggregate institutional offering side valuation by %.
Yield of bonds was computed on the basis of institutional offering prices
on the Initial Date of Deposit.
(5) Estimated annual interest income to the trust is $ .
8
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REPORT OF INDEPENDENT AUDITORS
UNITHOLDERS
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 186
We have audited the accompanying statement of financial condition, including the
trust portfolio set forth on pages and of this prospectus, of Claymore
Securities Defined Portfolios, Series 181, as of , 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 of America. 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 bonds, as
shown in the statement of financial condition as of . 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 181 as of , in conformity with accounting
principles generally accepted in the United States of America.
GRANT THORNTON LLP
Chicago, Illinois
, 2004
9
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STATEMENT OF FINANCIAL CONDITION
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 186
AS OF THE INITIAL DATE OF DEPOSIT,
<Table>
INVESTMENT IN BONDS
Sponsor's contracts to purchase underlying bonds 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(3)
Less: organization costs and settlement period interest(4)
Less: gross underwriting commission(5)
Net interest of investors
Total $
============
Number of units ============
Net Asset Value per Unit $
============
</Table>
- ----------
(1) Aggregate cost to the trust of the bonds listed under "Trust Portfolio" is
based on offering side valuation determined by the evaluator, based upon
prices provided by Standard & Poor's Securities Evaluations, on the basis
set forth under "Public Offering-Offering Price." The aggregate bid side
evaluation of the bonds in the portfolio, as determined by the evaluator,
as of the Initial Date of Deposit was $ .
(2) On the basis set forth under "Rights of Unitholders-Distribution of
Interest and Principal" the trustee will advance an amount equal to the
accrued interest on the bonds as of (the "First Settlement Date"),
plus any cash received by the trustee with respect to interest on the bonds
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) Aggregate Public Offering Price (exclusive of interest) is computed on
units on the basis set forth above under "Public Offering-Offering Price."
(4) A portion of the Public Offering Price consists of an amount sufficient to
pay for all or a portion of the costs of establishing the trust. These
costs have been estimated at $ per unit for the trust.
(5) A sales charge of 3.75% of the Public Offering Price (excluding
organization costs) is computed on units. See "Public Offering-Offering
Price" for volume discounts on sales of $ or more.
10
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UNDERSTANDING YOUR INVESTMENT
THE TRUST
ORGANIZATION. The trust is one of a series of similar but separate unit
investment trusts created under the laws of the State of New York by a Trust
Indenture and Agreement* (the "TRUST AGREEMENT"). The Trust Agreement is dated
as of the Initial Date of Deposit and is between Claymore Securities, Inc. as
sponsor and as evaluator ("EVALUATOR") and The Bank of New York, as trustee. The
evaluator determines the value of the bonds held in the trust generally based
upon prices provided by a pricing service. On the Initial Date of Deposit, the
sponsor deposited bonds, contracts and/or funds (represented by cash or a
certified check(s) and/or an irrevocable letter(s) of credit, issued by a major
commercial bank) for the purchase of certain interest-bearing obligations. After
the deposit of the bonds and the creation of the trust, the trustee delivered to
the sponsor the units (the "UNITS") comprising the ownership of the trust. These
units are now being offered pursuant to this prospectus.
UNITS. Each unit represents the fractional undivided interest in the
principal and net income of the trust. If any units of the trust are redeemed
after the date of this prospectus, the fractional undivided interest in the
trust represented by each unredeemed unit will increase. Units will remain
outstanding until redeemed or until the termination of the Trust Agreement for
the related trust.
- ----------
* References in this Prospectus to the Trust Agreement are qualified in their
entirety by the Trust Agreement which is incorporated herein by reference.
RISK FACTORS
An investment in units is subject to the following risks:
FAILURE OF ISSUERS TO PAY INTEREST AND/OR PRINCIPAL. The primary risk
associated with an investment in bonds is that the issuer of a bond may default
on principal and/or interest payments when due on the bond. Such a default would
have the effect of lessening the income generated by the trust and/or the value
of the bonds and the trust's units. The bond ratings assigned by major rating
organizations are an indication of the issuer's ability to make interest and
principal payments when due on its bonds. Subsequent to the Initial Date of
Deposit the rating assigned to a bond may decline. NEITHER THE SPONSOR NOR THE
TRUSTEE SHALL BE LIABLE IN ANY WAY FOR ANY DEFAULT, FAILURE OR DEFECT IN ANY
BOND OR RESPONSIBLE FOR A DECLINE IN THE RATING OF ANY BOND IN THE PORTFOLIO.
FIXED-RATE BONDS. An investment in units of the trust should be made with
an understanding of the risks entailed in investments in fixed-rate bonds,
including the risk that the value of such bonds (and, therefore, of the units)
will decline with increases in interest rates. Inflation and the overall economy
are two of the major factors, among others, which contribute to fluctuations in
interest rates and the values of fixed-rate bonds. Bonds are also subject to the
risk that their values may decline if the issuer's financial condition worsens
or if perceptions of the issuer's financial condition change.
ORIGINAL ISSUE DISCOUNT BONDS AND ZERO COUPON BONDS. Certain of the bonds
in the trust may be original issue discount bonds and/or zero coupon bonds.
Original issue discount bonds are bonds originally issued at
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less than the market interest rate. Zero coupon bonds are original issue
discount bonds that do not provide for the payment of any current interest. Zero
coupon bonds are subject to substantially greater price fluctuations during
periods of changing market interest rates than bonds of comparable quality that
pay current income. For federal income tax purposes, original issue discount on
bonds must be accrued over the term of the bonds. As a result, on sale or
redemption of the bonds, the difference between (i) the amount realized and (ii)
the tax basis of such bonds (properly adjusted for the accrual of original issue
discount) will generally be treated as taxable gain or loss. Your basis in
original issue discount bonds increases as original issue discount accrues. See
"Tax Status" herein.
"WHEN ISSUED" AND "DELAYED DELIVERY" BONDS. Certain bonds in the trust may
have been purchased by the sponsor on a "when issued" basis. Bonds purchased on
a "when issued" basis have not yet been issued by the issuer on the Initial Date
of Deposit (although such issuer had committed to issue such bonds). In the case
of these and/or certain other bonds, the delivery of the bonds may be delayed
("delayed delivery") or may not occur. The effect of the trust containing
"delayed delivery" or "when issued" bonds is that unitholders who purchased
their units prior to the date such bonds are actually delivered to the trustee
may have to make a downward adjustment in the tax basis of their units. Such
downward adjustment may be necessary to account for interest accruing on such
"when issued" or "delayed delivery" bonds during the time between their purchase
of units and delivery of such bonds to the trust.
REDEMPTION OR SALE PRIOR TO MATURITY. Certain of the bonds in the portfolio
of the trust may be called prior to their stated maturity date pursuant to
sinking fund or call provisions. A call provision is more likely to be exercised
when the institutional offering price valuation of a bond is higher than its
call price. Such price valuation is likely to be higher in periods of declining
interest rates. Certain of the bonds may be sold or otherwise mature. In such
cases, the proceeds from such events will be distributed to unitholders and will
not be reinvested. Thus, no assurance can be given that the trust will retain
for any length of time its present size and composition.
The trust may contain bonds that have "make whole" call options that
generally cause the bonds to be redeemable at any time at a designated price.
Such bonds are generally more likely to be subject to early redemption and may
result in the reduction of income received by the trust and the early
termination of the trust.
To the extent that a bond was deposited in the trust at a price higher than
the price at which it is redeemable, or at a price higher than the price at
which it is sold, a sale or redemption will result in a loss in the value of
units. Distributions will generally be reduced by the amount of the income which
would otherwise have been paid with respect to sold or redeemed bonds. The
Estimated Current Return and Estimated Long-Term Return of the Units may be
adversely affected by such sales or redemptions.
MARKET DISCOUNT. The portfolio of the trust may consist of some bonds whose
current market values were below principal value on the Initial Date of Deposit.
A primary reason for the market value of such bonds being less than principal
value at maturity is that the interest rate of such bonds is at lower rates than
the current market interest rate for comparably rated bonds. Bonds selling at
market discounts tend to increase in
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market value as they approach maturity. A market discount tax-exempt bond held
to maturity will have a larger portion of its total return in the form of
taxable ordinary income and less in the form of tax-exempt income than a
comparable Bond bearing interest at current market rates.
FAILURE OF A CONTRACT TO PURCHASE BONDS AND SUBSTITUTION OF BONDS. In the
event of a failure to deliver any bond that has been purchased for the trust
under a contract ("FAILED BONDS"), the sponsor is authorized to purchase other
bonds ("REPLACEMENT BONDS"). The trustee shall pay for replacement bonds out of
funds held in connection with the failed bonds and will accept delivery of such
bonds to make up the original principal of the trust. The replacement bonds must
be purchased within 20 days after delivery of the notice of the failed contract,
and the purchase price (exclusive of accrued interest) may not exceed the
principal attributable to the failed bonds. Whenever a replacement bond has been
acquired for the trust, the trustee shall, within five days thereafter, notify
all unitholders of the trust of the acquisition of the replacement bond and
shall, on the next 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 bond exceeded the cost of the replacement bond. In addition, a
replacement bond must (at the time of purchase):
- be a tax exempt bond;
- have a fixed maturity or disposition date comparable to that of the
failed bond it replaces;
- be purchased at a price that results in a yield to maturity and in a
current return which is approximately equivalent to the yield to
maturity and current return of the failed bond which it replaces; and
- be rated at least in the category of BBB or Baa by a major rating
organization.
If the right of limited substitution described above shall not be used to
acquire replacement bonds in the event of a failed contract, the sponsor will
refund the sales charge attributable to such failed bonds to all unitholders of
the trust, and distribute the principal attributable to such failed bonds on the
next monthly distribution date which is more than 30 days thereafter. In the
event a replacement bond is not acquired by the trust, the Estimated Net Annual
Interest Income per unit for the trust would be reduced and the Estimated
Current Return thereon might be lowered.
RISK INHERENT IN AN INVESTMENT IN DIFFERENT TYPES OF BONDS. CONCENTRATION
RISK. A trust may contain or be concentrated in one or more of the
classifications of bonds referred to below. A trust is considered to be
"concentrated" in a particular category when the bonds in that category
constitute 25% or more of the aggregate value of the portfolio. This makes a
trust less diversified and subject to more market risk. An investment in units
of a trust should be made with an understanding of the risks that these
investments may entail, certain of which are described below.
GENERAL OBLIGATION BONDS. Certain of the bonds in the portfolio may be
general obligations of a governmental entity that are secured by the taxing
power of the entity. General obligation bonds are backed by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and
interest.
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The taxing power of any governmental entity may be limited, however, by
provisions of state constitutions or laws. An entity's credit will depend on
many factors: tax base, reliance on federal or state aid, and factors which are
beyond the entity's control.
APPROPRIATIONS BONDS. Certain bonds in a trust may be bonds that are, in
whole or in part, subject to and dependent upon either the governmental entity
making appropriations from time to time or the continued existence of special
temporary taxes which require legislative action for their reimposition. The
availability of any appropriation is subject to the willingness or ability of
the governmental entity to continue to make such special appropriations or to
reimpose such special taxes. The obligation to make lease payments exists only
to the extent of the monies available to the governmental entity therefor, and
no liability is incurred by the governmental entity beyond the monies so
appropriated. Once an annual appropriation is made, the governmental entity's
obligation to make lease rental payments is absolute and unconditional
regardless of any circumstances or occurrences which might arise. In the event
of non-appropriation, certificateholders' or bondowners' sole remedy (absent
credit enhancement) generally is limited to repossession of the collateral for
resale or releasing. In the event of non-appropriation, the sponsor may instruct
the trustee to sell such bonds.
INDUSTRIAL DEVELOPMENT REVENUE BONDS ("IDRS"). IDRs, including pollution
control revenue bonds, are tax-exempt bonds issued by states, municipalities,
public authorities or similar entities to finance the cost of acquiring,
constructing or improving various projects. These projects are usually operated
by corporate entities. IDRs are not general obligations of governmental entities
backed by their taxing power. Issuers are only obligated to pay amounts due on
the IDRs to the extent that funds are available from the unexpended proceeds of
the IDRs or receipts or revenues of the issuer. Payment of IDRs is solely
dependent upon the creditworthiness of the corporate operator of the project or
corporate guarantor. Such corporate operators or guarantors that are industrial
companies may be affected by many factors which may have an adverse impact on
the credit quality of the particular company or industry.
HOSPITAL AND HEALTH CARE FACILITY BONDS. The ability of hospitals and other
health care facilities to meet their obligations with respect to revenue bonds
issued on their behalf is dependent on various factors. Some such factors are
the level of payments received from private third-party payors and government
programs and the cost of providing health care services. There can be no
assurance that payments under governmental programs will remain at levels
comparable to present levels or will be sufficient to cover the costs associated
with their bonds. It also may be necessary for a hospital or other health care
facility to incur substantial capital expenditures or increased operating
expenses to effect changes in its facilities, equipment, personnel and services.
Hospitals and other health care facilities are additionally subject to claims
and legal actions by patients and others in the ordinary course of business.
There can be no assurance that a claim will not exceed the insurance coverage of
a health care facility or that insurance coverage will be available to a
facility.
HOUSING BONDS. Multi-family housing revenue bonds and single family
mortgage revenue bonds are state and local housing issues that have been issued
to provide financing for various housing projects. Multi-family housing revenue
bonds are payable primarily from mortgage loans to housing projects for low to
moderate income families. Single-family
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mortgage revenue bonds are issued for the purpose of acquiring notes secured by
mortgages on residences. The ability of housing issuers to make debt service
payments on their obligations may be affected by various economic and
non-economic factors. Such factors include: occupancy levels, adequate rental
income in multi-family projects, the rate of default on mortgage loans
underlying single family issues and the ability of mortgage insurers to pay
claims. All single family mortgage revenue bonds and certain multi-family
housing revenue bonds are prepayable over the life of the underlying mortgage or
mortgage pool. Therefore, the average life of housing obligations cannot be
determined. However, the average life of these obligations will ordinarily be
less than their stated maturities. Mortgage loans are frequently partially or
completely prepaid prior to their final stated maturities. To the extent that
these obligations were valued at a premium when a unitholder purchased units,
any prepayment at par would result in a loss of capital to the unitholder and
reduce the amount of income that would otherwise have been paid to unitholders.
POWER BONDS. The ability of utilities to meet their obligations with
respect to bonds they issue is dependent on various factors. These factors
include the rates they may charge their customers, the demand for a utility's
services and the cost of providing those services. Utilities may also be subject
to extensive regulations relating to the rates which they may charge customers.
Utilities can experience regulatory, political and consumer resistance to rate
increases. Utilities engaged in long-term capital projects are especially
sensitive to regulatory lags in granting rate increases. Utilities are
additionally subject to increased costs due to governmental environmental
regulation and decreased profits due to increasing competition. Any difficulty
in obtaining timely and adequate rate increases could adversely affect a
utility's results of operations. The sponsor cannot predict at this time the
ultimate effect of such factors on the ability of any issuers to meet their
obligations with respect to bonds.
WATER AND SEWER REVENUE BONDS. Water and sewer bonds are generally payable
from user fees. The ability of state and local water and sewer authorities to
meet their obligations may be affected by a number of factors. Some such factors
are the failure of municipalities to utilize fully the facilities constructed by
these authorities, declines in revenue from user charges, the possible inability
to obtain rate increases, rising construction and maintenance costs, impact of
environmental requirements, the difficulty of obtaining or discovering new
supplies of fresh water, the effect of conservation programs, the impact of "no
growth" zoning ordinances and the continued availability of federal and state
financial assistance and of municipal bond insurance for future bond issues.
EDUCATION, UNIVERSITY AND COLLEGE BONDS. The ability of educational
institutions, including universities and colleges, to meet their obligations is
dependent upon various factors. Some of these factors include the size and
diversity of their sources of revenues, enrollment, reputation, management
expertise, the availability and restrictions on the use of endowments and other
funds, the quality and maintenance costs of campus facilities. Also, in the case
of public institutions, the financial condition of the relevant state or other
governmental entity and its policies with respect to education may affect an
institution's ability to make payment on its own.
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LEASE RENTAL BONDS. Lease rental bonds are predominantly issued by
governmental authorities that have no taxing power or other means of directly
raising revenues. Rather, the authorities are financing vehicles created solely
for the construction of buildings or the purchase of equipment that will be used
by a state or local government. Thus, the bonds are subject to the ability and
willingness of the lessee government to meet its lease rental payments which
include debt service on the bonds. Lease rental bonds are subject to the risk
that the lessee government is not legally obligated to budget and appropriate
for the rental payments beyond the current fiscal year. These bonds are also
subject to the risk of abatement in many states as rental bonds cease in the
event that damage, destruction or condemnation of the project prevents its use
by the lessee. Also, in the event of default by the lessee government, there may
be significant legal and/or practical difficulties involved in the reletting or
sale of the project.
CAPITAL IMPROVEMENT FACILITY BONDS. The portfolio of a trust may contain
bonds which are in the capital improvement facilities category. Capital
improvement bonds are bonds issued to provide funds to assist political
subdivisions or agencies of a state through acquisition of the underlying debt
of a state or local political subdivision or agency. The risks of an investment
in such bonds include the risk of possible prepayment or failure of payment of
proceeds on and default of the underlying debt.
SOLID WASTE DISPOSAL BONDS. Bonds issued for solid waste disposal
facilities are generally payable from tipping fees and from revenues that may be
earned by the facility on the sale of electrical energy generated in the
combustion of waste products. The ability of solid waste disposal facilities to
meet their obligations depends upon the continued use of the facility, the
successful and efficient operation of the facility and, in the case of
waste-to-energy facilities, the continued ability of the facility to generate
electricity on a commercial basis. Also, increasing environmental regulation of
the federal, state and local level has a significant impact on waste disposal
facilities. While regulation requires most waste producers to use waste disposal
facilities, it also imposes significant costs on the facilities.
MORAL OBLIGATION BONDS. A trust may also include "moral obligation" bonds.
If an issuer of moral obligation bonds is unable to meet its obligations, the
repayment of the bonds becomes a moral commitment but not a legal obligation of
the state or municipality in question. Thus, such a commitment generally
requires appropriation by the state legislature and accordingly does not
constitute a legally enforceable obligation of debt of the state. The agencies
or authorities generally have no taxing power.
REFUNDED BONDS. Refunded bonds are typically secured by direct obligations
of the U.S. Government, or in some cases obligations guaranteed by the U.S.
Government, placed in an escrow account maintained by an independent party until
maturity or a predetermined redemption date. These obligations are generally
non-callable prior to maturity or the predetermined redemption date. In a few
isolated instances to date, however, bonds which were thought to be escrowed to
maturity have been called for redemption prior to maturity.
AIRPORT, PORT AND HIGHWAY REVENUE BONDS. Certain facility revenue bonds are
payable from and secured by the revenues from the ownership and operation of
particular facilities, such as
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airports, highways and port authorities. Airport operating income may be
affected by the ability of airlines to meet their obligations under the
agreements with airports. Similarly, payment on bonds related to other
facilities is dependent on revenues from the projects, such as use fees from
ports, tolls on turnpikes and bridges and rents from buildings. Payment may be
adversely affected by reduction in revenues due to such factors and increased
cost of maintenance or decreased use of a facility. The sponsor cannot predict
what effect conditions may have on revenues which are dependent for payment on
these bonds.
SPECIAL TAX BONDS. Special tax bonds are payable for and secured by the
revenues derived by a municipality from a particular tax. Examples of special
taxes are a tax on the rental of a hotel room, on the purchase of food and
beverages, on the rental of automobiles or on the consumption of liquor. Special
tax bonds are not secured by the general tax revenues of the municipality, and
they do not represent general obligations of the municipality. Payment on
special tax bonds may be adversely affected by a reduction in revenues realized
from the underlying special tax. Also, should spending on the particular goods
or services that are subject to the special tax decline, the municipality may be
under no obligation to increase the rate of the special tax to ensure that
sufficient revenues are raised from the shrinking taxable base.
TAX ALLOCATION BONDS. Tax allocation bonds are typically secured by
incremental tax revenues collected on property within the areas where
redevelopment projects, financed by bond proceeds are located. Bond payments are
expected to be made from projected increases in tax revenues derived from higher
assessed values of property resulting from development in the particular project
area and not from an increase in tax rates. Special risk considerations include:
variations in taxable values of property in the project area; successful appeals
by property owners of assessed valuations; substantial delinquencies in the
payment of property taxes; or imposition of any constitutional or legislative
property tax rate decrease.
TRANSIT AUTHORITY BONDS. Mass transit is generally not self-supporting from
fare revenues. Additional financial resources must be made available to ensure
operation of mass transit systems as well as the timely payment of debt service.
Often such financial resources include federal and state subsidies, lease
rentals paid by funds of the state or local government or a pledge of a special
tax. If fare revenues or the additional financial resources do not increase
appropriately to pay for rising operating expenses, the ability of the issuer to
adequately service the debt may be adversely affected.
CONVENTION FACILITY BONDS. The portfolio of a trust may contain bonds of
issuers in the convention facilities category. Bonds in the convention
facilities category include special limited obligation bonds issued to finance
convention and sports facilities payable from rental payments and annual
governmental appropriations. The governmental agency is not obligated to make
payments in any year in which the monies have not been appropriated to make such
payments. In addition, these facilities are limited use facilities that may not
be used for purposes other than as convention centers or sports facilities.
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CORRECTIONAL FACILITY BONDS. The portfolio of a trust may contain bonds of
issuers in the correctional facilities category. Bonds in the correctional
facilities category include special limited obligation bonds issued to
construct, rehabilitate and purchase correctional facilities payable from
governmental rental payments and/or appropriations.
LITIGATION AND LEGISLATION. To the best knowledge of the sponsor, there is
no litigation pending as of the Initial Date of Deposit in respect of any bonds
which might reasonably be expected to have a material adverse effect upon the
trust. Nevertheless, lawsuits involving the bonds included in the trust or their
issuers may exist. At any time after the Initial Date of Deposit, litigation may
be initiated on a variety of grounds, or legislation may be enacted, with
respect to bonds in the trust. The outcome of litigation of this nature can
never be entirely predicted. In addition, other factors may arise from time to
time which potentially may impair the ability of issuers to make payments due on
the bonds.
TAX EXEMPTION. From time to time Congress considers proposals to tax the
interest on state and local obligations, such as the bonds. The Supreme Court
has concluded that the U.S. Constitution does not prohibit Congress from passing
a nondiscriminatory tax on interest on state and local obligations. This type of
legislation, if enacted into law, could adversely affect an investment in the
units. See "Tax Status" herein for a more detailed discussion concerning the tax
consequences of an investment in the units. Unitholders are urged to consult
their own tax advisers.
PUBLIC OFFERING
OFFERING PRICE. The sponsor will serve as the trust's underwriter. The
price of the units of the trust as of the Initial Date of Deposit was determined
by adding to the evaluator's determination of the aggregate institutional
offering price of the bonds per unit, based upon prices provided by Standard &
Poor's Securities Evaluations a sales charge of 3.75% of the Public Offering
Price (excluding organization costs) thereof equal to % of the aggregate
institutional offering price of the bonds per unit and a pro rata portion of
estimated organization costs. During the initial public offering period, sales
of at least $500,000 or 50,000 units will be entitled to a volume discount from
the Public Offering Price as described below. For purchases settling after the
First Settlement Date, a proportionate share of accrued and undistributed
interest on the bonds at the date of delivery of the units to the purchaser is
also added to the Public Offering Price. However, after the initial offering
period or six months after the Initial Date of Deposit, at the discretion of the
sponsor, the Public Offering Price of the units will not include a pro rata
portion of estimated organizational costs.
During the initial offering period the aggregate institutional offering
price of the bonds in the trust is determined by the evaluator. To determine
such prices, the evaluator utilizes prices received from Standard & Poor's
Securities Evaluations. Standard & Poor's Securities Evaluations determines such
institutional offering prices (1) on the basis of current institutional offering
prices for the bonds, (2) if institutional offering prices are not available for
any bonds, on the basis of current institutional offering prices for comparable
bonds, (3) by making an appraisal of the value of the bonds on the basis of
institutional offering prices in the market, or (4) by any combination of the
above. On or after the Initial Date of
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Deposit, such determinations are made each business day during the initial
public offering period as of the Evaluation Time set forth in "Essential
Information," effective for all sales made subsequent to the last preceding
determination. For information relating to the calculation of the Redemption
Price, which is based upon the aggregate institutional bid price of the
underlying bonds and which is to be expected to be less than the aggregate
institutional offering price, see "Rights of Unitholders-Redemption."
During the initial offering period, purchasers of $500,000 or more will be
entitled to a volume discount from the Public Offering Price as set forth in the
table below. In addition, dealers that sell units will be entitled to the
concession provided below for a given transaction.
<Table>
<Caption>
AMOUNT OF SALES DEALER
PURCHASE CHARGE CONCESSION
--------- ------ ----------
Less than $500,000 3.75% 3.00%
$500,000 -- $1,000,000 3.25% 2.50%
$1,000,000 or more 2.75% 2.00%
</Table>
We apply these sales charges and dealer concessions as a percent of the
unit price at the time of purchase. The dealer concessions are paid out of the
sales charges received by the sponsor. We also apply the different purchase
levels on a unit basis using a $10 unit equivalent. For example, if you purchase
between 50,000 and 100,000 units during the initial offering period, your sales
charge is 3.25% of your unit price.
Except as discussed under "Distribution of Units" below, the above volume
discount will be the responsibility of the selling agent or dealer and will
apply on all purchases at any one time by the same person of units in the trust
in the amounts stated. The graduated sales charges are also applicable to a
trustee or other fiduciary purchasing units for a single trust estate or single
fiduciary account.
DISTRIBUTION OF UNITS. It is the sponsor's intention to qualify units of
the trust for sale in certain of the states and to effect a public distribution
of the units through the sponsor and dealers. Upon completion of the initial
public offering, units which remain unsold or which may be acquired in the
secondary market may be offered by this prospectus at the Public Offering Price
determined in the manner provided for secondary market sales.
It is the sponsor's intention to qualify units of the trust for sale
through the sponsor and dealers who are members of the National Association of
Securities Dealers, Inc. Units will initially be sold to dealers at prices which
reflect a concession equal to the amount designated in the tables under "Public
Offering-Offering Price." The sponsor reserves the right to change the amount of
the concession to dealers from time to time and to vary the amount of the
concession to affiliated dealers.
Sales will be made only with respect to whole units, and the sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
units. A purchaser does not become a unitholder or become entitled to exercise
the rights of a unitholder (including the right to redeem his units) until he
has paid for his units. Generally, such payment must be made within three
business days after an order for the purchase of units has been placed. The
price paid by a unitholder is the Public Offering Price in effect at the time
his order is received, plus accrued interest. This price may be different from
the Public Offering Price in effect on any other day, including the day on which
he made payment for the units.
The sponsor in its discretion may from time to time, pursuant to objective
criteria established by the sponsor, pay fees to qualifying brokers,
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dealers, banks and/or others for certain services or activities which are
primarily intended to result in sales of units of the trust. Such payments are
made by the sponsor out of their own assets and not out of the assets of the
trust. These programs will not change the price unitholders pay for their units
or the amount that the trust will receive from the units sold.
SPONSOR'S AND DEALERS' PROFITS. As set forth under "Public
Offering-Offering Price," the dealers will receive gross commissions equal to
the specified percentages of the Public Offering Price of the units of the
trust.
In offering the units of the trust the sponsor and dealers will also
realize profits or sustain losses in the amount of any difference between the
price at which they acquire or buy units and the price at which they resell
or redeem such units and to the extent they earn sales charges on purchases.
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN TO UNITHOLDERS
The rate of return on each unit is measured in terms of both Estimated
Current Return and Estimated Long-Term Return. The Estimated Current Return per
unit and Estimated Long-Term Return per unit, each as of the Initial Date of
Deposit, is set forth under "Summary of Essential Financial Information."
Information regarding the estimated distributions of principal and interest to
unitholders of the trust is available from the sponsor on request.
Estimated Current Return is computed by dividing the Estimated Net Annual
Interest Income per unit by the Public Offering Price. Estimated Net Annual
Interest Income per unit will vary with changes in fees and expenses of the
trustee and the evaluator and with principal prepayment, redemption, maturity,
exchange or sale of bonds. The Public Offering Price per unit will vary with
changes in the institutional offering price of the bonds. Estimated Current
Return takes into account only the interest payable on the bonds and does not
involve a computation of yield to maturity or to an earlier redemption date nor
does it reflect any amortization of premium or discount from principal value on
the bond's purchase price. Moreover, because interest rates on bonds purchased
at a premium are generally higher than current interest rates on newly issued
bonds of a similar type with comparable ratings, the Estimated Current Return
per unit may be affected adversely if such bonds are redeemed prior to their
maturity. Therefore, there is no assurance that the Estimated Current Return as
set forth under "Summary of Essential Financial Information" will be realized in
the future.
Estimated Long-Term Return is calculated using a formula that (i) takes
into consideration, and determines and factors in the relative weightings of,
the market values, yields (taking into account the amortization of premiums and
the accretion of discounts) and estimated retirements of all the bonds in the
trust and (ii) takes into account the expenses and sales charge associated with
each unit of the trust. The Estimated Long-Term Return assumes that each bond is
retired on its pricing life date (I.E., that date which produces the lowest
dollar price when yield price calculations are done for each optional call date
and the maturity date of a callable bond). If the bond is retired on any
optional call or maturity date other than the pricing life date, the yield to
the holder of that bond may be different than the initial quoted yield. Since
the market values and estimated retirements of the bonds, the expenses of the
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trust and the Net Annual Interest Income and Public Offering Price per unit may
change, there is no assurance that the Estimated Long-Term Return as set forth
under "Summary of Essential Financial Information" will be realized in the
future.
FEDERAL TAX STATUS
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
these summaries do not describe all of the tax consequences to all taxpayers.
For example, these summaries generally do 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 or
foreign taxes. As with any investment, you should consult your own tax
professional about your particular consequences.
ASSETS OF THE TRUST. The trust will hold various debt obligations (the
"DEBT OBLIGATIONS"). All of the assets held by the trust constitute the "trust
assets." For purposes of this federal tax discussion, it is assumed that the
Debt Obligations constitute debt for federal income tax purposes the interest on
which is excluded from gross income for federal income tax purposes.
In the opinion of Chapman and Cutler LLP, counsel to the trust, under
existing law as of the date of this Prospectus:
TRUST STATUS. The trust will not be taxed as a corporation for federal
income tax purposes. As a unit owner, you will be treated as the owner of a pro
rata portion of the assets of your trust, and as such you will be considered to
have received a pro rata share of income (E.G., accruals of market discount, and
capital gains, if any) from the trust assets when such income would be
considered to be received by you if you directly owned the trust assets. This is
true even if you elect to have your distributions automatically reinvested into
additional units. In addition, the income from the trust assets which you must
take into account for federal income tax purposes is not reduced by amounts used
to pay trust expenses (including the deferred sales charge, if any).
EXCLUSION FROM GROSS INCOME OF INTEREST. At the respective times of
issuance of the Debt Obligations, opinions relating to the validity thereof and
to the exclusion of interest thereon from Federal gross income were rendered by
bond counsel to the respective issuing authorities, based on certain
representations and subject to compliance with certain covenants. Neither the
sponsor, nor its counsel have made any special review for the fund of the
proceedings relating to the issuance of the Debt Obligations, the bases for the
bond counsel opinions, or compliance with the covenants required for
tax-exemption. The Internal Revenue Service (the "SERVICE") has an ongoing
program of auditing tax-exempt obligations to determine whether, in the view of
the Service, interest on such tax-exempt obligations is includible in the gross
income of the owners thereof for federal income tax purposes. It cannot be
predicted whether or not the Service will commence an audit of any of the Debt
Obligations. If an audit is commenced, under current procedures of the Service,
unitholders may have no right to participate in such procedure. If the interest
on a Debt Obligation should be determined to be taxable, the Debt Obligation
would generally have to be sold at a substantial discount. In addition,
investors could
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be required to pay income tax on interest received both prior to and after the
date on which interest is determined to be taxable.
Your pro rata share of interest on the Debt Obligations will be excluded
from your gross income for federal income tax purposes to the same extent that
such interest would be excluded from your gross income if you directly owned the
Debt Obligations. However, such interest may be taken into account in computing
the alternative minimum tax.
Ownership of the units may result in collateral federal income tax
consequences to certain unitholders, including, without limitation, financial
institutions, certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and unitholders
who may be deemed to have incurred (or continued) indebtedness to purchase or
carry tax-exempt obligations.
If you are a "substantial user" of the facilities financed with the
proceeds of certain Debt Obligations, or a related person to a substantial user,
you will not be able to exclude from your gross income interest with respect to
these Debt Obligations. "Substantial user" and "related person" are defined
under federal income tax law.
For purposes of computing the alternative minimum tax for individuals and
corporations, interest on certain bonds is included as an item of tax
preference. EXCEPT AS OTHERWISE NOTED HEREIN, THE TRUST DOES NOT INCLUDE ANY
SUCH BONDS.
In the case of certain corporations, the alternative minimum tax depends
upon the corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the adjustment
items used in computing AMTI of a corporation (excluding S Corporations,
Regulated Investment Companies, Real Estate Investment Trusts, REMICs or FASITs)
is an amount equal to 75% of the excess of such corporation's "adjusted current
earnings" over an amount equal to its AMTI (before such adjustment item and the
alternative tax net operating loss deduction). "Adjusted current earnings"
includes all tax-exempt interest, including interest on all of the Debt
Obligations in the trust.
YOUR TAX BASIS AND INCOME OR LOSS UPON DISPOSITION. If your trust disposes
of trust assets, you will generally recognize gain or loss. If you dispose of
your units or redeem your units for cash, you will also generally recognize gain
or loss. To determine the amount of this gain or loss, you must subtract your
tax basis in the related trust assets from your share of the total amount
received in the transaction. You can generally determine your initial tax basis
in each trust asset by apportioning the cost of your units, generally including
sales charges, among each trust asset ratably according to their value on the
date you purchase your units. In certain circumstances, however, you may have to
adjust your tax basis after you purchase your units (for example, in the case of
accruals of original issue discount, market discount, premium and accrued
interest, as discussed below).
Under the "Jobs and Growth Tax Relief Reconciliation Act of 2003" (the "TAX
ACT"), if you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 15% (generally 5% for certain taxpayers in the 10% and
15% tax brackets). These new capital gains rates are generally effective for
taxable years beginning before January 1, 2009. For
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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. The tax rates for capital
gains realized from assets held for one year or less are generally the same as
for ordinary income. The Internal Revenue Code, however, treats certain capital
gains as ordinary income in special situations.
DISCOUNT, ACCRUED INTEREST AND PREMIUM ON DEBT OBLIGATIONS. Some Debt
Obligations may have been issued with original issue discount. This generally
means that the Debt Obligations were originally issued at a price below their
principal value. Original issue discount accrues on a daily basis and generally
is treated as interest income for federal income tax purposes. Thus, the accrual
of original discount will be excluded from your gross income for federal income
tax purposes to the same extent as interest on the Debt Obligations, as
discussed above. Your basis of each Debt Obligation which was issued with
original issue discount must be increased as original issue discount accrues.
Some Debt Obligations may have been purchased by you or the trust at a
market discount. Market discount is generally the excess of the stated
redemption price at maturity for the Debt Obligation over the purchase price of
the Debt Obligation. Market discount can arise based on the price the trust pays
for a Debt Obligation or on the price you pay for your units. Market discount is
taxed as ordinary income. You will recognize this income when your trust
receives principal payments on the Debt Obligation, when the Debt Obligation is
disposed of or redeemed, or when you sell or redeem your units. Alternatively,
you may elect to include market discount in taxable income as it accrues.
Whether or not you make this election will affect how you calculate your basis
and the timing of certain interest expense deductions.
Alternatively, some Debt Obligations may have been purchased by you or your
trust at a premium. Generally, if the tax basis of your pro rata portion of any
Debt Obligation, generally including sales charges, exceeds the amount payable
at maturity, such excess is considered premium. You must amortize bond premium
on a constant yield basis over the remaining term of the Debt Obligation in a
manner that takes into account potential call dates and call prices. You cannot
deduct amortized bond premium relating to a Debt Obligation. The amortized bond
premium is treated as a reduction in the tax-exempt interest received. As bond
premium is amortized, it reduces your basis in the bond. The tax basis reduction
requirement may result in your realizing a taxable gain when your units are sold
or redeemed for an amount equal to or less than your cost.
If the price of your units includes accrued interest on a Debt Obligation,
you must include
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the accrued interest in your tax basis in that Debt Obligation. When your trust
receives this accrued interest, you must treat it as a return of capital and
reduce your tax basis in the Debt Obligation.
This discussion provides only the general rules with respect to the tax
treatment of original issue discount, market discount and premium. The rules,
however, are complex and special rules apply in certain circumstances. For
example, the accrual of market discount or premium may differ from the
discussion set forth above in the case of Debt Obligations that were issued with
original issue discount.
EXCHANGES. If you elect to reinvest amounts received from your trust into a
future trust, it is considered a sale for federal income tax purposes, and any
gain on the sale will be treated as a capital gain, and any loss will be treated
as a capital loss. However, any loss you incur in connection with the exchange
of your units of the trust for units of a future trust will generally be
disallowed with respect to this deemed sale and subsequent deemed repurchase, to
the extent the two trusts have substantially identical assets under the wash
sale provisions of the Internal Revenue Code.
LIMITATIONS ON THE DEDUCTIBILITY OF TRUST EXPENSES. Generally, for federal
income tax purposes, you must take into account your full pro rata share of your
trust's income, even if some of that income is used to pay trust expenses. You
may deduct your pro rata share of each expense paid by the trust to the same
extent as if you directly paid the expense. You may, however, be required to
treat some or all of the expenses of your trust as miscellaneous itemized
deductions. Individuals may only deduct certain miscellaneous itemized
deductions to the extent they exceed 2% of adjusted gross income. Your share of
the trust's expenses are non-deductible to the extent the expenses are allocable
to tax-exempt interest from the trust.
RIGHTS OF UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of units of the trust 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
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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.
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.
DISTRIBUTION OF INTEREST AND PRINCIPAL. Unitholders will receive interest
distributions on a monthly basis. Principal, including capital gains, and
interest will be distributed on the distribution date; provided, however, that,
other than for purposes of redemption, no distribution need be made from the
Principal Account if the balance therein is less than $0.01 per unit then
outstanding. If such condition exists, the trustee shall, on the next succeeding
distribution date, distribute the unitholder's pro rata share of the balance of
the Principal Account. Interest received by the trust will be distributed on
each applicable distribution date to unitholders of record of the trust as of
the preceding applicable Record Date who are entitled to such distributions at
that time. All distributions will be net of applicable expenses and funds
required for the redemption of units. See "Essential Information," "Rights of
Unitholders-Expenses and Charges" and "Rights of Unitholders-Redemption."
The trustee will credit to the Interest Account for the trust all interest
received by the trust, including that part of the proceeds of any disposition of
bonds which represents accrued interest. Other receipts of the trust will be
credited to the Principal Account for the trust. The pro rata share of the
Interest Account of the trust and the pro rata share of cash in the Principal
Account (other than amounts representing failed contracts as previously
discussed) represented by each unit thereof will be computed by the trustee each
applicable Record Date. See "Essential Information." The trustee is not required
to pay interest on funds held in the Principal or Interest Accounts (but may
itself earn interest thereon and therefore benefits from the use of such funds).
Proceeds received from the disposition of any of the bonds subsequent to a
monthly Record Date and prior to the next succeeding monthly distribution date
will be held in the Principal Account for the trust and will not be distributed
until the second succeeding monthly distribution date. Because interest on the
bonds is not received by the trust at a constant rate throughout the year, any
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particular interest distribution may be more or less than the amount credited to
the Interest Account of the trust as of the applicable Record Date. See
"Essential Information." 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 under the applicable plan of
distribution.
The difference between the estimated net interest accrued to the first
Record Date and to the related distribution date is an asset of the respective
unitholder and will be realized in subsequent distributions or upon the earlier
of the sale of such units or the maturity, redemption or sale of bonds in the
trust.
Record dates for interest distributions will be the first day of the month.
All unitholders, however, who purchase units during the initial public offering
period and who hold them of record on the first Record Date will receive the
first distribution of interest. Details of estimated interest distributions, on
a per unit basis, appear in the "Summary of Essential Financial Information."
The amount of the regular distributions will generally change when bonds are
redeemed, mature or are sold or when fees and expenses increase or decrease.
The trustee will, as of the fifteenth day of each month, deduct from the
Interest Account and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the trust as of the
first day of such month. See "Rights of Unitholders-Expenses and Charges." The
trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any governmental charges payable out of the
trust. Amounts so withdrawn shall not be considered a part of the trust's assets
until such time as the trustee shall return all or any part of such amounts to
the appropriate account. In addition, the trustee may withdraw from the Interest
Account and the Principal Account such amounts as may be necessary to cover
redemption of units by the trustee. See "Rights of Unitholders-Redemption."
Funds which are available for future distributions, payments of expenses and
redemptions are in accounts which are non-interest bearing to the unitholders
and are available for use by the trustee pursuant to normal banking procedures.
Because interest on bonds in the trust is payable at varying intervals,
usually in semi-annual installments, the interest accruing to the trust will not
be equal to the amount of money received and available for distribution from the
Interest Account to unitholders. Therefore, on each applicable 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. In order to eliminate fluctuations in interest distributions
resulting from such variances during the first year of the trust, the trustee is
required by the Trust Agreement to advance such amounts as may be necessary to
provide interest distributions of approximately equal amounts. In addition, the
trustee has agreed to advance sufficient funds to the trust in order to reduce
the amount of time before distributions of interest to unitholders commence. The
trustee will be reimbursed, without interest, for any such advances from funds
available from the Interest Account of the trust. The trustee's fee takes into
account the costs attributable to the outlay of capital needed to make such
advances.
In order to acquire certain of the bonds subject to contract, it may be
necessary to pay
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on the settlement dates for delivery of such bonds amounts covering accrued
interest on such bonds which exceed the amounts paid by unitholders. The trustee
has agreed to pay for any amounts necessary to cover any such excess and will be
reimbursed therefor (without interest) when funds become available from interest
payments on the particular bonds with respect to which such payments may have
been made. Also, since interest on such bonds in the portfolio of a trust (see
"The Trust Portfolio") does not begin accruing as tax-exempt interest income to
the benefit of unitholders until such bonds' respective dates of delivery
(accrued interest prior to delivery being treated under the Code as a return of
principal), the trustee will, in order to cover interest treated as a return of
principal, adjust its fee downward in an amount equal to the amount of interest
that would have so accrued as tax-exempt interest (if not treated as a return of
principal) on such bonds between the date of settlement for the units and such
dates of delivery.
In addition, because of the varying interest payment dates of the bonds
comprising the trust portfolio, accrued interest at any point in time,
subsequent to the recovery of any advancements of interest made by the trustee,
will be greater than the amount of interest actually received by the trust and
distributed to unitholders. Therefore, there will usually remain an item of
accrued interest that is added to the value of the units. If a unitholder sells
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. Similarly, if a
unitholder redeems all or a portion of his units, the Redemption Price per unit
which he is entitled to receive from the trustee will also include accrued
interest on the bonds. Thus, the accrued interest attributable to a unit will
not be entirely recovered until the unitholder either redeems or sells such unit
or until the trust is terminated.
EXPENSES AND CHARGES. 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 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, bookkeeping and administrative
and sponsor's evaluation fees are set forth under "Fees and Expenses" in the
Investment Summary. 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. Because such fees are based on the principal amount of
the bonds in the trust, rather than the trust's net asset value, the fees will
represent a greater percentage of the trust's net asset value if the bonds in
the trust, on average, are valued below par. The sponsor's supervisory fee,
which is earned for portfolio supervisory services, and the bookkeeping and
administrative fees are based on the largest number of units in the trust at any
time during such period. Because these fees are based on the largest number of
units during a particular period, these fees will represent a greater percentage
of the trust's net asset value as the number of units decreased during that
period. The sponsor's supervisory fee, bookkeeping and administrative and
sponsor's evaluation fee, which are not to exceed the maximum amount set forth
under "Fees and
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Expenses" for the trust, may exceed the actual costs of providing portfolio
supervisory, bookkeeping and administrative or evaluation services for the
trust, but at no time will the total amount the sponsor receives for portfolio
supervisory services, bookkeeping and administrative or 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 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;
provided, however, that such fees may be adjusted as set forth under "Fees and
Expenses." There is no minimum fee and, except as hereinafter set forth, no
maximum fee. For a discussion of certain benefits derived by the trustee from
the trust's funds, see "Rights of Unitholders-Distribution of Interest and
Principal." For a discussion of the services performed by the trustee pursuant
to its obligations under the Trust Agreement, reference is made to the material
set forth under "Rights of Unitholders."
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 bonds to pay such amounts.
OTHER CHARGES. The following additional charges are or may be incurred by
the trust: all expenses (including audit and counsel fees) of the trustee
incurred in connection with its activities under the Trust Agreement, including
annual audit expenses by independent public accountants selected by the sponsor,
the expenses and costs of any action undertaken by the trustee to protect the
trust and the rights and interests of the unitholders; fees of the trustee for
any extraordinary services performed under the Trust Agreement; indemnification
of the trustee for any loss or liability accruing to it without willful
misconduct, bad faith, or gross negligence on its part, arising out of or in
connection with its acceptance or administration of the trust; and all taxes and
other governmental charges imposed upon the bonds or any part of the trust (no
such taxes or charges are being levied or made or, to the knowledge of the
sponsor, contemplated). To the extent lawful, the trust shall 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
bonds 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. All
direct distribution expenses of the trusts (including the costs of maintaining
the secondary market for the trusts), such as printing and distributing
prospectuses, and preparing, printing and distributing any
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advertisements or sales literature will be paid at no cost to the trust. Any
payments received by the sponsor reimbursing it for payments made to update the
trust's registration statement will not exceed the costs incurred by the
sponsor. The above expenses, including the trustee's fee, when paid by or owing
to the trustee, are secured by a lien on the trust. In addition, the trustee is
empowered to sell bonds in order to make funds available to pay all expenses.
REPORTS AND RECORDS. The trustee shall furnish unitholders of the trust in
connection with each distribution a statement of the amount of interest, if any,
and the amount of other receipts, if any, which are being distributed, expressed
in each case as a dollar amount per unit. Within a reasonable time after the end
of each calendar year, the trustee will furnish to each person who at any time
during the calendar year was a unitholder of record, a statement providing the
following information: (1) as to the Interest Account: interest received
(including amounts representing interest received upon any disposition of bonds
and any earned original issue discount), deductions for payment of applicable
taxes and for fees and expenses of the trust, redemptions of units and 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; (2) as to
the Principal Account: the dates of disposition of any bonds and the net
proceeds received therefrom (excluding any portion representing interest),
deductions for payments of applicable taxes and for fees and expenses of the
trust, purchase of replacement bonds, redemptions of units, the amount of any
"when issued" interest treated as a return of capital and 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; (3) a list of the bonds held and
the number of units outstanding on the last business day of such calendar year;
(4) the Redemption Price per unit based upon the last computation thereof made
during such calendar year; and (5) amounts actually distributed during such
calendar year from the Interest Account and from the Principal Account,
separately stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each unit outstanding.
The trustee shall keep available for inspection by unitholders at all
reasonable times during usual business hours, books of record and account of its
transactions as trustee including records of the names and addresses of
unitholders of the trust, certificates issued or held, a current list of bonds
in the trust and a copy of the Trust Agreement.
REDEMPTION. TENDER OF UNITS. Units may be tendered to the trustee for
redemption at its Unit Investment Trust Division offices at 101 Barclay
Street, New York, New York 10286, on any day the New York Stock Exchange is
open. At the present time there are no specific taxes related to the
redemption of the units. No redemption fee will be charged by the sponsor or
the trustee. Units redeemed by the trustee will be canceled.
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. If your request is received after that time or is incomplete in
any
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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 units by using the Investors'
Voluntary Redemptions and Sales (IVORS) automated redemption service offered
through Depository Trust Company.
To redeem your units which are evidenced by registered certificates, if
any, 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 cannot complete your redemption or send your
payment to you until it receives all of these documents in completed form.
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 $ or less and the proceeds are payable to the unitholder 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.
Within three business days following such tender, the unitholder will be
entitled to receive in cash an amount for each unit tendered equal to the
Redemption Price per unit computed as of the Evaluation Time set forth under
"Essential Information" as of the next subsequent Evaluation Time. See
"Redemption-Computation of Redemption Price per Unit." The "date of tender" is
deemed to be the date on which units are properly received by the trustee,
except that with regard to units received after the Evaluation Time on the New
York Stock Exchange, the date of tender is the next day on which such Exchange
is open for trading and such units will be deemed to have been tendered to the
trustee on such day for redemption at the Redemption Price computed on that day.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account, or, if the balance therein is insufficient, from the Principal Account.
All other amounts paid on redemption shall be withdrawn from the Principal
Account. The trustee is empowered to sell securities in order to make funds
available for redemption. Such sales, if required, could result in a sale of
bonds by the trustee at a loss. To the extent bonds are sold, the size and
diversity of the trust may be reduced.
The trustee reserves the right to suspend the right of redemption and to
postpone the date of payment of the Redemption Price per Unit for any period
during which the New York Stock Exchange is closed, other than weekend and
holiday closings, or during which trading on that Exchange is restricted (as
determined by the SEC by rule or regulation) or during which an emergency exists
as a result of which
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disposal or evaluation of the underlying bonds is not reasonably practicable, or
for such other periods as the SEC has by order permitted.
COMPUTATION OF REDEMPTION PRICE PER UNIT. The Redemption Price per unit is
determined by the trustee on the basis of the institutional bid prices of the
bonds in the trust, while the Public Offering Price of units during the initial
offering period is determined on the basis of the institutional offering prices
of the bonds, both as of the Evaluation Time on the day any such determination
is made. The institutional bid prices of the securities may be expected to be
less than the institutional offering prices. This Redemption Price per unit is
each unit's pro rata share, determined by the trustee, of: (1) the aggregate
value of the bonds in the trust (determined by the evaluator, generally based
upon prices provided by a pricing service as set forth below), (2) cash on hand
in the trust (other than cash covering contracts to purchase bonds), and (3)
accrued and unpaid interest on the bonds as of the date of computation, less (a)
amounts representing taxes or governmental charges payable out of the trust, (b)
the accrued expenses of the trust, (c) cash held for distribution to unitholders
of record as of a date prior to the evaluation, and (d) unpaid organization
costs. The evaluator, generally based upon prices provided by a pricing service
may determine the value of the bonds in the trust (1) on the basis of current
institutional bid prices for the bonds, (2) if institutional bid prices are not
available for any bonds, on the basis of current institutional bid prices for
comparable bonds, (3) by appraisal, or (4) by any combination of the above.
Until six months after the Initial Date of Deposit or the end of the
initial offering period, at the discretion of the sponsor, the price at which
the trustee will redeem units and the price at which the sponsor may repurchase
units includes estimated organization costs. After such period, the amount paid
will not include such estimated organization costs.
The difference between the institutional bid and institutional offer prices
of bonds with characteristics consistent with the objectives of the trust are
expected to be 0.25% to 0.50% of the principal value of the bonds. This value
can fluctuate depending on liquidity and the balance of supply and demand for
the individual issues. On the business day prior to the date of this prospectus,
the aggregate bid side evaluation was lower than the aggregate offering side
evaluation by the amount set forth in the footnotes to the "Trust Portfolio."
For this reason, among others, the price at which units may be redeemed could be
less than the price paid by the unitholder.
PURCHASE BY THE SPONSOR OF UNITS TENDERED FOR REDEMPTION. The Trust
Agreement requires that the trustee notify the sponsor of any tender of units
for redemption. So long as the sponsor maintains a bid in the secondary market,
the sponsor, prior to the close of business on the second succeeding business
day, will purchase any units tendered to the trustee for redemption at the price
so bid by making payment therefor to the unitholder in an amount not less than
the Redemption Price on the date of tender not later than the day on which the
units would otherwise have been redeemed by the trustee (see "Public
Offering-Offering Price-Market for Units"). Units held by the sponsor may be
tendered to the trustee for redemption as any other units.
31
<Page>
SPONSOR
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.
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 to
be 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 SEC, or (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 foregoing information with regard to the sponsor relates to the sponsor
only and not to the trust. Such information is included in this prospectus only
for the purpose of informing investors as to the financial responsibility of the
sponsor and its ability to carry out its contractual obligations with respect to
the trust. More comprehensive financial information can be obtained upon request
from the sponsor.
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 or for errors in judgment; nor will
they be responsible in any way for depreciation or loss incurred by reason of
the sale of any bonds, except in cases of their willful misconduct, bad faith,
gross negligence or reckless disregard for their obligations and duties.
RESPONSIBILITY. The trustee shall sell, for the purpose of redeeming units
tendered by any unitholder and for the payment of expenses for which funds are
not available, such of the bonds in a list furnished by the sponsor as the
trustee in its sole discretion may deem necessary.
It is the responsibility of the sponsor to instruct the trustee to reject
any offer made by an issuer of any of the bonds to issue new obligations in
exchange and substitution for any bonds pursuant to a refunding or refinancing
plan, except that the sponsor may instruct the trustee to accept such an offer
or to take any other action with respect thereto as the sponsor may deem proper
if the issuer is in default with respect to such bonds or in the judgment of the
sponsor the issuer will probably default in respect to such bonds in the
foreseeable future.
Any obligations 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 bonds originally deposited thereunder. Within five days after the
deposit of obligations in exchange or substitution for underlying bonds, the
trustee is required to give notice thereof to each unitholder, identifying the
obligations eliminated and the bonds substituted therefor. Except as stated in
the Trust
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Agreement or in this and the preceding paragraph and in the discussion under
"Risk Factors-Failure of a Contract to Purchase Bonds and Substitution of Bonds"
regarding the substitution of replacement bonds for failed bonds, the
acquisition by the trust of any bonds other than the bonds initially deposited
is prohibited.
The sponsor may direct the trustee to dispose of bonds in certain limited
circumstances, including upon default in the payment of principal or interest,
institution of certain legal proceedings or the existence of certain other
impediments to the payment of bonds, default under other documents which may
adversely affect debt service, default in the payment of principal or interest
on other obligations of the same issuer, decline in projected income pledged for
debt service on revenue bonds, 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 bonds in the trust would be detrimental to the
interest of the unitholders. The proceeds from any such sales will be credited
to the Principal Account for distribution to the unitholders.
RESIGNATION. If the sponsor resigns or becomes unable to perform its duties
under the Trust Agreement, and no express provision is made for action by the
trustee in such event, the trustee may appoint a successor sponsor, terminate
the Trust Agreement and liquidate the trusts or continue to act as Trustee.
TRUSTEE
THE TRUSTEE. The trustee is The Bank of New York, a trust company organized
under the laws of State 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 selected the
portfolio of the trust. However, the bonds included in the portfolio on the
Initial Date of Deposit may be purchased by the sponsor or the trust from BNY
Capital Markets, Inc. ("BNY"), which is a wholly-owned subsidiary of Bank of New
York Company, Inc. ("BONY COMPANY"). The trustee is also a wholly-owned
subsidiary of BONY Company. Subsequent to the Initial Date of Deposit, the
trustee may purchase bonds from BNY in order to create additional units.
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 the 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 or available for
inspection at all reasonable times during usual business hours by any
unitholder, together with a current list of the bonds 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 bonds comprising the trust.
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<Page>
LIMITATIONS ON LIABILITY. The trustee shall not be liable or responsible in
any way for depreciation or loss incurred by reason of the disposition of any
monies, bonds or certificates or in respect of any evaluation or for any action
taken in good faith reliance on prima facie properly executed documents except,
generally, in cases of its willful misconduct, lack of good faith or gross
negligence. In addition, the trustee shall not be personally liable for any
taxes or other governmental charges imposed upon or in respect of the trust
which the trustee may be required to pay under current or future law of the
United States or any other taxing authority having jurisdiction. See "Trust
Portfolio."
RESPONSIBILITY. For information relating to the responsibilities of the
trustee under the Trust Agreement, reference is made to the material set forth
under "Rights of Unitholders," "Sponsor-Responsibility" and
"Sponsor-Resignation."
RESIGNATION. Under the Trust Agreement, the trustee or any successor
trustee may resign and be discharged of a trust created by the Trust Agreement
by executing an instrument in writing and filing the same with the sponsor.
The trustee or successor trustee must mail a copy of the notice of
resignation to all unitholders then of record, not less than sixty days before
the date specified in such notice when such resignation is to take effect. The
sponsor upon receiving notice of such resignation is obligated to appoint a
successor trustee promptly. If, upon such resignation, no successor trustee has
been appointed and has accepted the appointment within thirty days after
notification, the retiring trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The sponsor may at any time
remove the trustee, with or without cause, and appoint a successor trustee as
provided in the Trust Agreement. Notice of such removal and appointment shall be
mailed to each unitholder by the sponsor. Upon execution of a written acceptance
of such appointment by such successor trustee, all the rights, powers, duties
and obligations of the original trustee shall vest in the successor. The trustee
must be a corporation organized under the laws of the United States, or any
state thereof, be authorized under such laws to exercise trust powers and have
at all times an aggregate capital, surplus and undivided profits of not less
than $5,000,000.
EVALUATOR
THE EVALUATOR. Claymore Securities, Inc. will serve as the evaluator of the
bonds in the trust, and as such will appraise the bonds or cause the bonds to be
appraised. To appraise the bonds, the evaluator generally utilizes prices
received from Standard & Poor's Securities Evaluations.
LIMITATIONS ON LIABILITY. The trustee and the sponsor may rely on any
evaluation furnished by the evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the evaluator under the Trust Agreement
shall be made in good faith upon the basis of the best information available to
it; provided, however, that the evaluator shall be under no liability to the
trustee, the sponsor or unitholders for errors in judgment. However, this
provision shall not protect the evaluator in cases of its willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties.
RESPONSIBILITY. The Trust Agreement requires the evaluator to evaluate the
bonds on the basis of their institutional bid prices on each business day after
the initial offering period,
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<Page>
when any unit is tendered for redemption and on any other day such evaluation is
desired by the trustee or is requested by the sponsor. For information relating
to the responsibility of the evaluator to evaluate the bonds on the basis of
their institutional offering prices, see "Public Offering-Offering Price."
RESIGNATION. The evaluator may resign or may be removed by the sponsor and
the trustee, and the sponsor and the trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor evaluator. If upon
resignation of the evaluator no successor has accepted appointment within thirty
days after notice of resignation, the evaluator may apply to a court of
competent jurisdiction for the appointment of a successor.
IQ INVESTMENT ADVISORS
IQ has provided the sponsor with certain guidance in connection with the
design of the trust. IQ will not participate in the selection, execution or
delivery of the trust's bonds, which is the sole responsibility of the sponsor.
NO LIABILITY. IQ has no responsibility in connection with the formation
of the trust, the selection, execution or delivery of the trust's bonds, or
the ongoing maintenance or operations of the trust. IQ will have no liability
to unitholders or any other persons in connection with any aspect of the
trust, or its depreciation in value or other loss, including in cases where
the sponsor, trustee, or evaluator have failed in their duties by reason of
willful misconduct, bad faith, negligence or reckless disregard for their
obligations or duties, In addition, IQ will have no responsibility for, or
liability in connection with, replacements of the sponsor, trustee or
evaluator when such parties resign or are removed from their duties.
AMENDMENT AND TERMINATION OF THE TRUST AGREEMENT
The sponsor and the trustee have the power to amend the Trust Agreement
without the consent of any of the unitholders when such an amendment is (1) to
cure any ambiguity or to correct or supplement any provision of the Trust
Agreement which may be defective or inconsistent with any other provision
contained therein, (2) to change any provision required to be changed by the
SEC, or (3) to make such other provisions as shall not adversely affect the
interest of the unitholders. The sponsor and the trustee may amend the Trust
Agreement with the consent of unitholders representing 662/3% of the units then
outstanding, provided that no such amendment will reduce the interest in the
trust of any unitholder without the consent of such unitholder or reduce the
percentage of units required to consent to any such amendment without the
consent of all the unitholders. In no event shall the Trust Agreement be amended
to permit the deposit or acquisition of bonds either in addition to or in
substitution for any of the bonds initially deposited in the trust, except in
accordance with the provisions of each Trust Agreement. In the event of any
amendment, the trustee is obligated to notify promptly all unitholders of the
substance of such amendment. The Trust Agreement specifies other limitations on
amending the Trust Agreement.
The trust shall terminate upon the maturity, redemption, sale or other
disposition, as the case may be, of the last of the bonds. The trustee shall
notify the sponsor when the par value of the bonds in the trust is less than
$2,000,000. The trust may also be terminated (i) by the consent of 662/3% of the
units or (ii) by the trustee in certain circumstances. In no event, however, may
the
35
<Page>
trust continue beyond the Mandatory Termination Date set forth herein. In the
event of termination, written notice thereof will be sent by the trustee to all
unitholders. Within a reasonable period after termination, the trustee will sell
any remaining bonds, and, after paying all expenses and charges incurred by the
trust, will distribute to each unitholder, upon surrender of his units
(including certificates, if any), his pro rata share of the balances remaining
in the Interest and Principal Accounts of the trust.
DISTRIBUTION OF UNITS
Units may be sold to dealers at prices reflecting the per unit concession
stated under "Public Offering-Offering Price." However, resales of units by such
dealers to the public will be made at the Public Offering Price described in the
prospectus. The sponsor reserves the right to reject, in whole or in part, any
order for the purchase of units and the right to change the amount of the
concession from time to time.
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. Emmet, Marvin & Martin, LLP, has acted as counsel for the trustee
with respect to the trust and special New York Tax counsel for the trust.
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.
CODE OF ETHICS
The sponsor and the trust have adopted a code of ethics requiring the
sponsor's employees who have access to information on trust transactions to
report personal bonds transactions. The purpose of the code is to avoid
potential conflicts of interest and to prevent fraud, deception or misconduct
with respect to the trust.
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S RATING. A Standard & Poor's issue credit rating is a
current opinion of the creditworthiness of an obligor with respect to a specific
financial obligation, a specific class of financial obligations, or a specific
financial program (including ratings on medium term note programs and commercial
paper programs). It takes into consideration the creditworthiness of guarantors,
insurers, or other forms of credit enhancement on the obligation and takes into
account the currency in which the obligation is denominated. The issue credit
rating is not a recommendation to purchase, sell, or hold a financial
obligation, inasmuch as it does not comment as to market price or suitability
for a particular investor. Issue credit ratings are based on current information
furnished by the obligors or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit in connection
with any credit rating and may, on occasion, rely on unaudited financial
information. Credit ratings may be changed, suspended, or withdrawn as a result
of changes in, or unavailability of, such information, or based on other
circumstances.
Issue credit ratings are based, in varying degrees, on the following
considerations:
* Likelihood of payment-capacity and willingness of the obligor to meet
its financial commitment on an obligation in
36
<Page>
accordance with the terms of the obligation;
* Nature of and provisions of the obligation; and
* Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA -- An obligation rated 'AAA' has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
AA -- An obligation rated 'AA' differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A -- An obligation rated 'A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB -- An obligation rated 'BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation. Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are
regarded as having significant speculative characteristics. 'BB' indicates the
least degree of speculation and 'C' the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
Plus (+) or minus(-) -- The ratings from 'AA' to 'CCC' may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
r -- This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating.
N.R. -- This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy.
*MOODY'S INVESTORS SERVICE RATING. A summary of the meaning of the
applicable rating symbols as published by Moody's follows:
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
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Baa-Bonds which are rated Baa are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba-Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any long period of time may be small.
Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from "Aa" through "Caa". The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking ranks in
the lower end of its generic rating category.
**FITCH RATINGS. A brief description of the applicable Fitch Ratings'
symbols and their meanings is as follows:
AAA -- Highest credit quality. 'AAA' ratings denote the lowest expectation
of credit risk. They are assigned only in case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA -- Very high credit quality. 'AA' ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A -- High credit quality. 'A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB -- Good credit quality. 'BBB' ratings indicate that there is currently
a low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the 'AAA' Long-term
rating category or to categories below 'CCC'.
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EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN TABLES
As of the date of the prospectus, the following tables show the approximate
taxable estimated current returns for individuals that are equivalent to
tax-exempt estimated current returns under Federal taxes using the published
marginal Federal tax rates scheduled to be in effect in 2004. These tables
illustrate approximately what you would have to earn on taxable investments to
equal the tax-exempt estimated current return in your income tax bracket. The
tables do not reflect any state or local taxes, any alternative minimum taxes or
any taxes other than personal income taxes. The tables do not show the
approximate taxable estimated current returns for individuals that are subject
to the alternative minimum tax. The taxable equivalent estimated current returns
may be somewhat higher than the equivalent returns indicated in the following
tables for those individuals who have adjusted gross incomes in excess of
$142,700. The tables do not reflect the effect of Federal or State limitations
(if any) on the amount of allowable itemized deductions or the phase-outs of
personal or dependent exemption credits or any other credits. These limitations
were designed to phase out certain benefits of these deductions and credits for
higher income taxpayers. These limitations, in effect, raise the current maximum
marginal Federal tax rate to approximately 39.52 percent for taxpayers filing a
joint return and entitled to four personal exemptions and to approximately 36.05
percent for taxpayers filing a single return entitled to only one personal
exemption. These limitations are subject to certain maximums, which depend on
the number of exemptions claimed and the total amount of taxpayer's itemized
deductions. For example, the limitation on itemized deductions will not cause a
taxpayer to lose more than 80% of his allowable itemized deductions, with
certain exceptions. See "Tax Status" for a more detailed discussion of Federal
tax legislation.
FEDERAL
<Table>
<Caption>
TAXABLE INCOME TAX-EXEMPT ESTIMATED CURRENT RETURN
---------------------------------------- ----------------------------------------------------
SINGLE JOINT TAX 3 1/2% 3 3/4% 4% 4 1/4% 4 1/2%
RETURN RETURN RATE EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
---------------------------------------- ------ ----------------------------------------------------
$ 0-7,150 $ 0-14,300 10.0% 3.89% 4.17% 4.44% 4.72% 5.00%
7,150-29,050 14,300-58,100 15.0 4.12 4.41 4.71 5.00 5.29
29,050-70,350 58,100-117,250 25.0 4.67 5.00 5.33 5.67 6.00
70,350-146,750 117,250-178,650 28.0 4.86 5.21 5.56 5.90 6.25
146,750-319,100 178,650-319,100 33.0 5.22 5.60 5.97 6.34 6.72
Over 319,100 Over 319,100 35.0 5.38 5.77 6.15 6.54 6.92
</Table>
A comparison of tax-free and equivalent taxable estimated current returns
with the returns on various taxable investments is one element to consider in
making an investment decision. The sponsor may from time to time in its
advertising and sales materials compare the then current estimated returns on
the trust and returns over specified periods on other similar Claymore sponsored
unit investment trusts with inflation rates and with returns on taxable
investments such as corporate or U.S. Government bonds, bank CDs and money
market accounts or money market funds; each of which has investment
characteristics that may differ from those of the trust. U.S. Government bonds,
for example, are backed by the full faith and credit of the federal government.
Money market accounts and money market funds provide stability of principal, but
pay interest at rates that vary with the condition of the short-term debt
market. The investment characteristics of the trust are described more fully in
the prospectus.
39
<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
4 Taxes
4 Distributions
2 Public Offering Price
5 Market for Units
5 Fees and Expenses
5 Example
6 Essential Information
7 Summary of Essential Financial Information
8 The Trust Portfolio
9 Report of Independent Auditors
10 Statement of Financial Condition
Understanding Your Investment
DETAILED INFORMATION TO HELP YOU UNDERSTAND YOUR INVESTMENT
11 The Trust
11 Risk Factors
18 Public Offering
20 Estimated Current Return and Estimated Long-Term Return to Unitholders
21 Tax Status
24 Rights of Unitholders
32 Sponsor
33 Trustee
34 Evaluator
35 Amendment and Termination of the Trust Agreement
36 Underwriting
36 Experts
36 Code of Ethics
36 Description of Bond Ratings
</Table>
Where to Learn More
YOU CAN CONTACT US FOR FREE INFORMATION ABOUT THIS 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)
CALL IQ INVESTMENT ADVISORS
(877) 345-7999
Additional Information
This prospectus does not contain all information filed with the Securities and
Exchange Commission. To obtain or copy this information (a duplication fee may
be required):
E-MAIL: publicinfo@sec.gov
WRITE: Public Reference Section, Washington, D.C. 20549-0102
VISIT: http://www.sec.gov (EDGAR Database)
CALL: 1-202-942-8090 (only for information on the operation of the
Public Reference Section)
REFER TO:
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 186
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]
IQ/CLAYMORE
MUNICIPAL
PORTFOLIO
(10-15) YEARS),
SERIES 1
A SERIES OF
CLAYMORE SECURITIES
DEFINED PORTFOLIOS
SERIES 186
PROSPECTUS
DATED JULY , 2004
[IQ INVESTMENT ADVISORS LOGO]
[CLAYMORE(R) 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 $250,000
959-9000
</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).
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Claymore Securities Defined Portfolios, Series 186 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 22nd day
of July, 2004.
CLAYMORE SECURITIES DEFINED PORTFOLIOS,
SERIES 186, 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 July 22, 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 ) July 22, 2004
Directors )
)
/S/ CHARLES MILLINGTON Chief Financial Officer July 22, 2004
- ----------------------
CHARLES MILLINGTON
/S/ NICHOLAS DALMASO Executive Vice President, July 22, 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.
<Page>
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.
<Page>
MEMORANDUM
Re: Claymore Securities Defined Portfolios, Series 186
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
July 22, 2004