<Page>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 2004
1933 ACT FILE NO. 333-_____
1940 ACT FILE NO. 811-03763
================================================================================
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 198
B. NAME OF DEPOSITOR: CLAYMORE SECURITIES, INC.
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
Claymore Securities, Inc.
2455 Corporate West Drive
Lisle, Illinois 60532
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
Copies to:
NICHOLAS DALMASO, ESQ. ERIC F. FESS
Senior Managing Director
and General Counsel
Claymore Securities, Inc. Chapman and Cutler LLP
2455 Corporate West Drive 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(630) 784-6300 (312) 845-3000
It is proposed that this filing will become effective (check appropriate
box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of rule 485 or 486
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
E. TITLE OF SECURITIES BEING REGISTERED: Units of fractional undivided
beneficial interest.
F. APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: As soon as practicable after
the effective date of the
Registration Statement.
/ / Check box if it is proposed that this filing will become effective on
(date) at (time) pursuant to Rule 487.
================================================================================
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 OCTOBER 14, 2004 SUBJECT TO COMPLETION
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 198
CLOSED-END EQUITY AND INCOME PORTFOLIO, SERIES 1
[CLAYMORE LOGO]
PROSPECTUS PART A DATED _____________, 2004
A DIVERSIFIED PORTFOLIO CONTAINING CLOSED-END INVESTMENT COMPANIES
THAT INVEST PRIMARILY IN EQUITY SECURITIES.
The Securities and Exchange Commission has not approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus.
Any representation to the contrary is a criminal offense.
<Page>
INVESTMENT SUMMARY
USE THIS INVESTMENT SUMMARY TO HELP YOU DECIDE WHETHER AN INVESTMENT IN
THIS TRUST IS RIGHT FOR YOU. MORE DETAILED INFORMATION CAN BE FOUND LATER IN
THIS PROSPECTUS.
OVERVIEW
Claymore Securities Defined Portfolios, Series 198 is a unit investment
trust that consists of the Closed-End Equity and Income Portfolio, Series 1 (the
"TRUST"). Claymore Securities, Inc. ("CLAYMORE" or the "SPONSOR") serves as the
sponsor of the trusts.
The trust is scheduled to terminate in approximately 2 years.
INVESTMENT OBJECTIVE
The trust seeks to provide total return that is comprised of current income
and capital appreciation.
PRINCIPAL INVESTMENT STRATEGY
The trust contains closed-end investment companies ("CLOSED-END FUNDS")
that invest primarily in equity securities.
SECURITY SELECTION
The sponsor has selected for the portfolio common stocks of Closed-End
Funds believed to have the best potential to achieve the trust's investment
objective (the "SECURITIES"). The Closed-End Funds' portfolios consist
primarily of Equity and/or income producing securities.
As of the trust's inception date (the "INCEPTION DATE"), 100% of the
trust's portfolio is invested in securities of Closed-End Funds with
portfolios that consist primarily of Equity and/or income producing
securities.
PRINCIPAL RISKS
As with all investments, you can lose money by investing in the trust. The
trust also might not perform as well as you expect. This can happen for reasons
such as these:
- SHARE PRICES CAN BE VOLATILE. The value of your investment may fall
over time.
- THE SPONSOR DOES NOT ACTIVELY MANAGE THE PORTFOLIO. The trust will
generally hold, and may continue to buy, the same securities even
though the security's outlook or its market value or yield may have
changed.
- Share prices or distribution rates on the securities may decline
during the life of the trust.
- THE VALUE OF THE SECURITIES IN THE CLOSED-END FUNDS WILL GENERALLY
FALL IF INTEREST RATES, IN GENERAL, RISE. Typically, securities with
longer periods before maturity are more sensitive to interest rate
changes.
- AN ISSUER MAY BE UNWILLING OR UNABLE TO MAKE PRINCIPAL PAYMENTS AND/OR
TO DECLARE DISTRIBUTIONS IN THE FUTURE, MAY CALL A SECURITY BEFORE ITS
STATED
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MATURITY, OR MAY REDUCE THE LEVEL OF DISTRIBUTIONS DECLARED. This may
result in a reduction in the value of your units.
- THE FINANCIAL CONDITION OF AN ISSUER MAY WORSEN OR ITS CREDIT RATINGS
MAY DROP, RESULTING IN A REDUCTION IN THE VALUE OF YOUR UNITS. This
may occur at any point in time, including during the primary offering
period.
- THE TRUST IS CONCENTRATED IN SECURITIES OF CLOSED-END FUNDS.
Closed-End Funds are actively managed investment companies that invest
in various types of securities. Closed-End Funds issue shares of
common stock that are traded on a securities exchange. Closed-End
Funds are subject to various risks, including management's ability to
meet the Closed-End Fund's investment objective, and to manage the
Closed-End Fund portfolio when the underlying securities are redeemed
or sold, during periods of market turmoil and as investors'
perceptions regarding Closed-End Funds or their underlying investments
change. Closed-End Funds are not redeemable at the option of the
shareholder and they may trade in the market at a discount to their
net asset value.
- THE TRUST IS CONSIDERED TO BE A "TRUST OF FUNDS." As such, it is
subject to certain termination restrictions that may result in a
reduction in the value of your units.
- Inflation may decrease the value of money, which may lead to a
decrease in the value of assets or income from investments.
ESSENTIAL INFORMATION
(AS OF THE INCEPTION DATE)
<Table>
UNIT PRICE AT INCEPTION (PUBLIC OFFERING PRICE) $10.00
INCEPTION DATE (INITIAL DATE OF DEPOSIT) ,2004
TERMINATION DATE
DISTRIBUTION DATES 25th day of each month,
commencing
RECORD DATES 15th day of each month,
commencing
CUSIP NUMBERS
CASH DISTRIBUTIONS (ALL ACCOUNTS)
REINVESTED DISTRIBUTIONS
Standard Accounts
Wrap Fee Accounts
TICKER
MINIMUM INVESTMENT
Standard accounts $1,000/100 units
Retirement accounts and
custodial accounts for minors $250/25 units
</Table>
See "Risk Factors" in Part B of the prospectus and "Investment Risks" in
Part A of the prospectus for additional information.
WHO SHOULD INVEST
You should consider this investment if:
- You want current income and diversification;
- The trust represents only a portion of your overall investment
portfolio; and
- The trust is part of a longer term investment strategy.
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You should not consider this investment if:
- You are unwilling to take the risks involved with owning closed-end
fund securities;
- You are seeking capital preservation as a primary investment
objective;
- You are seeking a short-term investment or an investment to be used as
a trading vehicle; or
- You are uncomfortable with the risks of an unmanaged investment in
securities.
FEES AND EXPENSES
The amounts below are estimates of the direct and indirect expenses that
you may incur based on a $10 unit price. Actual expenses may vary.
<Table>
<Caption>
PERCENTAGE AMOUNT
OF PUBLIC PER $1,000
INVESTOR FEES OFFERING PRICE INVESTED(4)
- ------------- -------------- -----------
INITIAL SALES FEE PAID ON
PURCHASE(1) 1.00% $ 10.00
DEFERRED SALES FEE(2) 2.45 24.50
CREATION AND
DEVELOPMENT FEE(3) 0.50 5.00
---- -----------
MAXIMUM SALES FEES
(including creation and
development fee) 3.95% $ 39.50
==== ===========
<Caption>
INVESTOR FEES
- -------------
ESTIMATED ORGANIZATION
COSTS
(amount per 100 units paid
by trust at end of initial
offering period or after six
months, at the discretion of
the sponsor) $ 5.00
</Table>
<Table>
<Caption>
ANNUAL FUND APPROXIMATE
OPERATING EXPENSES % OF PUBLIC AMOUNT PER
OF THE TRUST OFFERING PRICE(4) 100 UNITS
- ------------ ----------------- ---------
Trustee's fee 0.0950% $ 0.950
Sponsor's supervisory
fee 0.0300 0.300
Evaluator's fee 0.0350 0.350
Bookkeeping and
administrative fee 0.0350 0.350
Estimated other trust
operating expenses(5) 0.0162 0.162
Estimated Closed-End
Fund expenses(6)
------ ----------
Total 1.3712% $ 13.712
====== ==========
</Table>
(1) The initial sales fee provided above is based on the unit price on the
Inception Date. Because the initial sales fee equals the difference between
the maximum sales fee and the sum of the remaining deferred sales fee and
the creation and development fee ("C&D FEE") (as described below), the
percentage and dollar amount of the initial sales fee will vary as the unit
price varies and after deferred charges begin. Despite the variability of
the initial sales fee, each investor is obligated to pay the entire
applicable maximum sales fee.
(2) The deferred sales fee is fixed at $0.245 per unit and is deducted in
monthly installments of $0.0817 per unit on the last business day of May,
2005 and June, 2005 and $0.0816 in July, 2005. The percentage provided is
based on a $10 unit as of the Inception Date and the percentage amount will
vary over time.
(3) The C&D Fee compensates the sponsor for creating and developing your trust.
The actual C&D Fee is $0.05 per unit and is paid to the sponsor at the
close of the initial offering period, which is expected to be approximately
six months from the Inception Date. The percentages provided are based on a
$10 unit as of the Inception Date and the percentage amount will vary over
time. If the unit price exceeds $10.00 per unit, the C&D Fee will be less
than 0.50% of the Public Offering Price; if the unit price is less than
$10.00 per unit, the C&D Fee will exceed 0.50% of the Public Offering
Price.
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(4) Based on 100 units with a $10.00 per unit Public Offering Price as of the
Inception Date.
(5) Other operating expenses do not include brokerage cost and other
transactional fees.
(6) Although not an actual trust operating expense, the trust, and therefore
the unitholders, will indirectly bear similar operating expenses of the
Closed-End Funds held by the trust in the estimated amount provided above.
Estimated Closed-End Fund expenses are based upon the net asset value of
the number of Closed-End Fund shares held by the trust per Unit multiplied
by the Annual Operating Expenses of the Closed-End Funds for the most
recent fiscal year.
EXAMPLE
This example helps you compare the costs of this trust with other unit
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
</Table>
These amounts are the same regardless of whether you sell your investment
at the end of a period or continue to hold your investment. The example does not
consider any brokerage fees the trust pays or any transaction fees that
broker-dealers may charge for processing redemption requests.
ESTIMATED ANNUAL INCOME DISTRIBUTIONS
The portfolio's estimated annual income distributions are $ per unit for
the first year. The amount of distributions may increase or decrease as
securities in the portfolio mature, are called or are sold, as the dividends
received change or as fees and expenses increase or decrease. Estimated
distributions assume that all of the securities and expected dividends are
delivered to the portfolio. These figures are estimates as of the business day
prior to the Inception Date; actual payments may vary.
See "Expenses of the Trust" in Part B of the prospectus for additional
information.
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TRUST PORTFOLIO
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 198
CLOSED-END EQUITY AND INCOME PORTFOLIO, SERIES 1
THE TRUST PORTFOLIO AS OF THE INCEPTION DATE, ___________, 2004
<Table>
<Caption>
PERCENTAGE PER
NUMBER OF OF SHARE COST TO
SHARES TICKER COMPANY NAME(1) PORTFOLIO PRICE PORTFOLIO(2)(3)
- -----------------------------------------------------------------------------------
------
$
======
</Table>
Notes to Portfolio
(1) All securities are represented entirely by contracts to purchase
securities, which were entered into by the sponsor on ____________, 2004.
All contracts for domestic securities are expected to be settled by the
initial settlement date for the purchase of units.
(2) Valuation of securities by the trustee was made using the market value per
share as of the Evaluation Time on ____________, 2004. Subsequent to
inception, securities are valued, for securities quoted on a national
securities exchange or Nasdaq National Market System, or a foreign
securities exchange, at the closing sales price.
(3) There was a $___ loss to the sponsor on the Inception Date.
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UNDERSTANDING YOUR INVESTMENT
HOW TO BUY UNITS
You can buy units of a trust on any business day by contacting your
financial professional. Public Offering Prices of units are available daily on
the Internet at www.claymoresecurities.com. The Public Offering Price includes:
- the value of the securities,
- the initial sales fee, and
- cash and other net assets in the portfolio.
We often refer to the purchase price of units as the "OFFER PRICE" or the
"PUBLIC OFFERING PRICE." We must receive your order to buy units prior to the
close of the New York Stock Exchange (normally 4:00 p.m. Eastern time) to give
you the price for that day. If we receive your order after this time, you will
receive the price computed on the next business day.
VALUE OF THE SECURITIES. The sponsor serves as the evaluator of each trust
(the "EVALUATOR"). We determine the value of the securities as of the close of
the New York Stock Exchange on each day that the exchange is open (the
"EVALUATION TIME").
Pricing the Securities. We generally determine the value of securities
using the last sale price for securities traded on a national securities
exchange or the Nasdaq National Market System. In some cases we will price a
security based on the last asked or bid price in the over-the-counter market or
by using other recognized pricing methods. We will only do this if a security is
not principally traded on a national securities exchange or the Nasdaq National
Market System, or if the market quotes are unavailable or inappropriate.
The sponsor determined the initial prices of the securities shown in "Trust
Portfolio" for each trust in this prospectus. The sponsor determined these
initial prices as described above at the close of the New York Stock Exchange on
the business day before the date of this prospectus. On the first day we sell
units we will compute the unit price as of the close of the New York Stock
Exchange or the time the registration statement filed with the Securities and
Exchange Commission becomes effective, if later.
ORGANIZATION COSTS. During the initial offering period, part of your
purchase price includes a per unit amount sufficient to reimburse us for some or
all of the costs of creating your trust. These costs include the costs of
preparing the registration statement and legal documents, legal fees, federal
and state registration fees and the initial fees and expenses of the trustee.
Your trust will sell securities to reimburse us for these costs at the end of
the initial offering period or after six months, at the discretion of the
sponsor.
TRANSACTIONAL SALES FEE. You pay a fee when you buy units. We refer to this
fee as the "TRANSACTIONAL SALES FEE." The transactional sales fee has both an
initial and a deferred component and is 3.45% of the Public Offering Price based
on a $10 unit. This percentage amount of the transactional sales fee is based on
the unit price on the Inception Date. Because the transactional sales fee equals
the difference between the maximum sales fee and the C&D Fee, the percentage and
dollar amount of the
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transactional sales fee will vary as the unit price varies. The transactional
sales fee does not include the C&D Fee which is described under "Expenses of the
Trust" in Part B of the prospectus and in "Fees and Expenses" in Part A of the
prospectus.
INITIAL SALES FEE. Based on a $10 unit, the initial sales fee is initially
1% of the Public Offering Price. The initial sales fee, which you will pay at
the time of purchase, is equal to the difference between the maximum sales
charge (3.95% of the Public Offering Price) and the sum of the maximum remaining
deferred sales fees and the C&D Fee (initially $0.295 per unit). The dollar
amount and percentage amount of the initial sales fee will vary over time.
DEFERRED SALES FEE. To keep your money working longer, we defer payment of
the rest of the transactional sales fee through the deferred sales fee ($0.245
per unit).
REDUCING YOUR SALES FEE. We offer a variety of ways for you to reduce the
maximum sales fee you pay. It is your financial professional's responsibility to
alert us of any discount when you order units. Since the deferred sales fee and
the C&D Fee are a fixed dollar amount per unit, your trust must charge the
deferred sales fee and the C&D Fee per unit regardless of any discounts.
However, if you are eligible to receive a discount such that your total maximum
sales fee is less than the fixed dollar amount of the deferred sales fee and the
C&D Fee, the sponsor will credit you the difference between your maximum sales
fee and the sum of the deferred sales fee and the C&D Fee at the time you buy
units by providing you with additional units.
LARGE PURCHASES. You can reduce your maximum sales fee by increasing the
size of your investment.
INVESTORS WHO MAKE LARGE PURCHASES ARE ENTITLED TO THE FOLLOWING SALES
CHARGE REDUCTIONS:
<Table>
<Caption>
SALES CHARGE
REDUCTIONS
(AS A % OF THE
PUBLIC
PURCHASE AMOUNT(1) OFFERING PRICE)
------------------ ---------------
Less than $50,000 0.00%
$50,000 - $99,999 0.25
$100,000 - $249,999 0.50
$250,000 - $499,999 0.75
$500,000 - $999,999 1.50
$1,000,000 or more 2.20
</Table>
(1) Sales charge reductions are computed both on a dollar basis and on the
basis of the number of units purchased, at any point of purchase, using the
equivalent of 5,000 units to $50,000, 10,000 units to $100,000 etc., and
will be applied on that basis which is more favorable to you.
You may AGGREGATE unit purchases by the same person on any single day from
any one broker-dealer to qualify for a purchase level.
You can include these purchases as your own for purposes of this
aggregation:
- purchases by your spouse or minor children and
- purchases by your trust estate or fiduciary accounts.
You may also use a LETTER OF INTENT to combine purchases over time to
qualify for a purchase level. Under this option, you must give us a letter of
intent to purchase a specified amount of units of any Claymore unit trust over a
specified time period. The letter must specify a time period of no more than 13
months. Once you sign a letter of intent, we will reduce your fee based on your
total purchase commitment as shown in the table above. If your purchases
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exceed the level specified in your letter, you will still receive the additional
fee reduction for your purchases shown in the table above (we will not cap your
discount). If your total purchases are less than the level specified in your
letter, you must pay the fee difference to us. We reserve the right to redeem
your units if you do not pay the difference.
The discounts described above apply only during the initial offering
period.
There can be no assurance that the sponsor will create future trusts with
investment strategies similar to your trust or that may fit within your
investment parameters. As a result you may not be able to satisfy your letter of
intent.
ADVISORY AND FEE ACCOUNTS. We eliminate your transactional sales fee for
purchases made through registered investment advisers, certified financial
planners or registered broker-dealers who charge periodic fees in lieu of
commissions or who charge for financial planning or for investment advisory or
asset management services or provide these services as part of an investment
account where a comprehensive "wrap fee" is imposed (a "FEE ACCOUNT").
This discount applies during the initial offering period and in the
secondary market. Your financial professional may purchase units with the Fee
Account CUSIP number to facilitate purchases under this discount, however, we do
not require that you buy units with this CUSIP number to qualify for the
discount. If you purchase units with this special CUSIP number, you should be
aware that all distributions will automatically reinvest into additional units
of your trust. We reserve the right to limit or deny purchases of units not
subject to the transactional sales charge by investors whose frequent trading
activity we determine to be detrimental to the trust. We, as sponsor, will
receive and you will pay the C&D Fee. See "Expenses of the Trust" in Part B of
the prospectus.
EXCHANGE OR ROLLOVER OPTION. If you are buying units of your trust in the
primary market with redemption or termination proceeds from any other Claymore
unit trust, you may purchase units at 99% of the maximum Public Offering Price,
which may include an upfront sales charge and a deferred sales charge. You may
also buy units with this reduced sales fee if you are purchasing units in the
primary market with (1) the termination proceeds from a non-Claymore unit trust
with a similar investment strategy or (2) the redemption proceeds from a
non-Claymore trust if such trust has a similar investment strategy and the
corresponding Claymore trust provides a periodic update of that investment
strategy. To qualify for this sales charge reduction, the termination or
redemption proceeds being used to purchase units of the trust must be no more
than 90 days old. Such purchases entitled to this sales charge reduction may be
classified as "ROLLOVER PURCHASES."
Rollover Purchases are also subject to the C&D Fee. See "Expenses of the
Trust" in Part B of the prospectus.
EMPLOYEES. We do not charge the portion of the transactional sales fee that
we would normally pay to your financial professional for purchases made by
officers, directors and employees and their family members (spouses, children
and parents) of Claymore and its affiliates, or by registered representatives of
selling firms and their family members (spouses, children and parents). You pay
only the portion of the fee that the sponsor retains. Such purchases are also
subject to the C&D Fee. This discount applies during the initial offering period
and in the secondary market.
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DIVIDEND REINVESTMENT PLAN. We do not charge any transactional sales fee
when you reinvest distributions from your trust into additional units of the
trust. Since the deferred sales fee is a fixed dollar amount per unit, your
trust must charge the deferred sales fee per unit regardless of this discount.
If you elect the distribution reinvestment plan, we will credit you with
additional units with a dollar value sufficient to cover the amount of any
remaining deferred sales fee that will be collected on such units at the time of
reinvestment. The dollar value of these units will fluctuate over time. This
discount applies during the initial offering period and in the secondary market.
See "Purchase, Redemption and Pricing of Units" in Part B of the prospectus
for more information regarding buying units.
HOW WE DISTRIBUTE UNITS. We sell units to the public through broker-dealers
and other firms. We pay part of the sales fee you pay to these distribution
firms when they sell units. The distribution fee paid for a given transaction is
as follows:
<Table>
<Caption>
CONCESSION PER UNIT:
PURCHASE AMOUNT/ (AS A % OF PUBLIC
FORM OF PURCHASE: OFFERING PRICE):
----------------- ----------------
Less than $50,000 3.10%
$50,000 - $99,999 2.85
$100,000 - $249,999 2.60
$250,000 - $499,999 2.35
$500,000 - $999,999 1.60
$1,000,000 or more 1.00
Rollover Purchases 2.20
Wrap Account and
Employee Purchases 0.00
</Table>
We apply these amounts as a percent of the unit price per transaction at
the time of the transaction. We also apply the different distribution levels on
a unit basis using a $10 unit equivalent. For example, if a firm executes a
transaction between 10,000 and 24,999 units, it earns 3.10% of the unit price.
We generally register units for sale in various states in the U.S. We do
not register units for sale in any foreign country. It is your financial
professional's responsibility to make sure that units are registered or exempt
from registration if you are a foreign investor or if you want to buy units in
another country. This prospectus does not constitute an offer of units in any
state or country where units cannot be offered or sold lawfully. We may reject
any order for units in whole or in part.
We may gain or lose money when we hold units in the primary or secondary
market due to fluctuations in unit prices. The gain or loss is equal to the
difference between the price we pay for units and the price at which we sell or
redeem them. We may also gain or lose money when we deposit securities to create
units. For example, we lost the amount set forth in the Trust Portfolio on the
initial deposit of securities into your trust.
See "Purchase, Redemption and Pricing of Units" in Part B of the prospectus
for additional information.
HOW TO SELL YOUR UNITS
You can sell your units on any business day by contacting your financial
professional or, in some cases, the trustee. Unit prices are available daily on
the Internet at www.claymoresecurities.com or through your financial
professional. We often refer to the sale price of units as the "BID PRICE." You
pay any remaining deferred sales fee when you
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sell or redeem your units. Certain broker-dealers may charge a transaction fee
for processing unit redemptions or sale requests.
Until the end of the initial offering period or six months after the
Inception Date, 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
include estimated organization costs. After such period, the amount paid will
not include such estimated organization costs.
SELLING UNITS. We intend to, but are not obligated to, maintain a secondary
market for units. This means that if you want to sell your units, we may buy
them at the current price which is based on their net asset value. We may then
resell the units to other investors at the Public Offering Price or redeem them
for the redemption price. Our secondary market repurchase price is generally the
same as the redemption price. Certain broker-dealers might also maintain a
secondary market in units. You should contact your financial professional for
current unit prices to determine the best price available. We may discontinue
our secondary market at any time without notice. Even if we do not make a
market, you will be able to redeem your units with the trustee on any business
day for the current price.
REDEEMING UNITS. You may also be able to redeem your units directly with
the trustee, The Bank of New York, on any day the New York Stock Exchange is
open. The trustee must receive your completed redemption request prior to the
close of the New York Stock Exchange for you to receive the unit price for a
particular day. (For what constitutes a completed redemption request, see
"Purchase, Redemption and Pricing of Units - Redemption" in the Part B of the
prospectus.) If your request is received after that time or is incomplete in any
way, you will receive the next price computed after the trustee receives your
completed request. Rather than contacting the trustee directly, your financial
professional may also be able to redeem your units by using the Investors'
Voluntary Redemptions and Sales (IVORS) automated redemption service offered
through Depository Trust Company.
If you redeem your units, the trustee will generally send you a payment for
your units no later than three business days after it receives all necessary
documentation.
You can generally request an in-kind distribution of the securities
underlying your units if you own units worth at least $25,000 or you originally
paid at least that amount for your units. This option is generally available
only for securities traded and held in the United States. You may not request
this option in the last five days of your trust's life. We may modify or
discontinue this option at any time without notice. If you request an in-kind
distribution of the securities underlying your units, you will incur any
distribution or service fees (Rule 12b-1 fees) applicable to those securities.
EXCHANGE OPTION. You may be able to exchange your units for units of other
Claymore unit trusts at a reduced sales fee. You can contact your financial
professional or Claymore for more information about trusts currently available
for exchanges. Before you exchange units, you should read the prospectus
carefully and understand the risks and fees. You should then discuss this option
with your financial professional to determine whether your investment goals have
changed, whether current trusts suit you and to discuss tax consequences. To
qualify
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for a reduced sales fee, you must purchase units in a subsequent trust on the
same day that you redeem units of your current trust. We may discontinue this
option at any time.
For more complete information regarding selling or redeeming your units,
see "Purchase, Redemption and Pricing of Units" in Part B of the prospectus.
DISTRIBUTIONS
MONTHLY DIVIDENDS. Your trust generally pays dividends from its net
investment income along with any excess capital on each monthly distribution
date to unitholders of record on the preceding record date. You can elect to:
- reinvest distributions in additional units of your trust at no fee, or
- receive distributions in cash.
You may change your election by contacting your financial professional or
the trustee. Once you elect to participate in a reinvestment program, the
trustee will automatically reinvest your distributions into additional units at
their net asset value on the distribution date. We waive the sales fee for
reinvestments into units of your trust. We cannot guarantee that units will
always be available for reinvestment. If units are unavailable, you will receive
cash distributions. We may discontinue these options at any time without notice.
In some cases, your trust might pay a special distribution if it holds an
excessive amount of principal pending distribution. For example, this could
happen as a result of a merger or similar transaction involving a company whose
stock is in your portfolio. The amount of your distributions will vary from time
to time as companies change their dividends or trust expenses change.
REINVEST IN YOUR TRUST. You can keep your money working by electing to
reinvest your distributions in additional units of your trust. The easiest way
to do this is to have your financial professional purchase units with one of the
Reinvestment CUSIP numbers listed in the "Investment Summary" section of this
prospectus. You may also make or change your election by contacting your
financial professional or the trustee.
REPORTS. The trustee will send your financial professional a statement
showing income and other receipts of your trust for each distribution. Each year
the trustee will also provide an annual report on your trust's activity and
certain tax information. You can request copies of stock evaluations to enable
you to complete your tax forms and audited financial statements for your trust,
if available.
See "Administration of the Trust" in Part B of the prospectus for
additional information.
INVESTMENT RISKS
ALL INVESTMENTS INVOLVE RISK. This section describes the main risks that
can impact the value of the securities in your portfolio. You should understand
these risks before you invest. If the value of the securities falls, the value
of your units will also fall. We cannot guarantee that your trust will achieve
its objective or that your investment return will be positive over any period.
MARKET RISK. Market risk is the risk that a particular security in a trust,
the trust itself or
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securities in general may fall in value. Market value may be affected by a
variety of factors including:
- General securities markets movements;
- Changes in the financial condition of an issuer or an industry;
- Changes in perceptions about an issuer or an industry;
- Interest rates and inflation;
- Governmental policies and litigation; and
- Purchases and sales of securities by the trust.
INTEREST RATE RISK. Interest rate risk is the risk that the value of
securities held by a Closed-End Fund in a trust will decline in value because of
a rise in interest rates. Generally, securities that pay fixed rates of return
will increase in value when interest rates decline and decrease in value when
interest rates rise. Typically, securities that pay fixed rates of return with
longer periods before maturity are more sensitive to interest rate changes.
CREDIT AND DIVIDEND PAYMENT RISK. Credit risk is the risk that an issuer of
a security held by a Closed-End Fund in the trust is unable or unwilling to make
dividend and/or principal payments. High yield or "junk" securities that are
rated below investment grade are generally more susceptible to this risk than
investment grade securities.
CALL RISK. Call risk is the risk that securities held by a Closed-End Fund
in the trust can be prepaid or "called" by the issuer before their stated
maturity. If securities are called, your income will decline and you may not be
able to reinvest the money you receive at as high a yield. Also, an early call
at par of a security trading at a premium will reduce your return. Securities
held by a Closed-End Fund in a trust are more likely to be called when interest
rates decline. This would result in early returns of principal to the Closed-End
Funds in the trust. The securities may also be subject to special or
extraordinary call provisions and "mandatory put" features that may cause the
securities to be removed from a fund prior to maturity or stated call dates.
High yield or "junk" securities that are rated below investment grade are
generally more susceptible to this risk than investment grade securities.
SECURITY QUALITY RISK. Security quality risk is the risk that a reduction
in a securities rating may decrease its value the value of a Closed-End Fund and
the value of your investment in a trust. Securities ratings may be reduced at
any time, including during the primary offering period of the trust. High yield
or "junk" securities that are rated below investment grade are generally more
susceptible to this risk than investment grade securities.
SPLIT RATINGS RISK. Split-rated securities are those securities that, at
the time of investment, are rated below investment grade by Moody's or Standard
& Poor's, so long as at least one rating agency rates such securities within the
four highest grades (i.e., investment grade quality). This means that a
split-rated security may be regarded by one rating agency as having
predominately speculative characteristics with respect to the issuer's capacity
to pay interest and repay principal, and accordingly subject to a greater risk
of default. The prices of split-rated securities, in the view of one but not all
rating
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agencies, may be more sensitive than securities without a split-rating to
negative developments, such as a decline in the issuer's revenues or a general
economic downturn.
CLOSED-END FUND RISK. Closed-End Funds are subject to various risks,
including management's ability to meet the Closed-End Fund's investment
objective, and to manage the Closed-End Fund portfolio when the underlying
securities are redeemed or sold, during periods of market turmoil and as
investors' perceptions regarding Closed-End Funds or their underlying
investments change.
Shares of Closed-End Funds frequently trade at a discount from their net
asset value in the secondary market. This risk is separate and distinct from the
risk that the net asset value of Closed-End Fund shares may decrease. The amount
of such discount from net asset value is subject to change from time to time in
response to various factors.
Certain of the Closed-End Funds included in the Municipal Trust and the
Income Trust may employ the use of leverage in their portfolios through the
issuance of preferred stock. While leverage often serves to increase the yield
of a Closed-End Fund, this leverage also subjects the Closed-End Fund to
increased risks, including the likelihood of increased volatility and the
possibility that the Closed-End Fund's common share income will fall if the
dividend rate on the preferred shares or the interest rate on any borrowings
rises. In addition, Closed-End Funds are subject to their own annual fees and
expenses, including a management fee. Such fees reduce the potential benefits
associated with owning a Closed-End Fund and are in addition to the trust's
expenses.
TRUST OF FUNDS RISK. In order to hold securities of Closed-End Funds, each
trust has agreed to the following condition. This condition may negatively
affect the value of the units.
- The trust has agreed that it will not terminate within 30 days of the
termination of any other Claymore trust that holds shares of one or
more common Closed-End Funds.
INFLATION RISK. Inflation risk is the risk that the value of assets or
income from investments will be less in the future as inflation decreases the
value of money.
CONCENTRATION RISK. When securities of a particular type or in a particular
industry make up 25% or more of a trust, it is said to be "concentrated" in that
type of security or in that industry which makes the trust subject to more
market risk. The trust is concentrated in the securities of Closed-End Funds.
See "Closed-End Fund risk" for a description of the risks associated with a
concentration in the securities of Closed-End Funds.
See "Risk Factors" in Part B of the prospectus for additional information.
HOW THE TRUST WORKS
YOUR TRUST. Your trust is a unit investment trust registered under the
Investment Company Act of 1940 and the Securities Act of 1933. We created the
trust under a trust agreement between Claymore Securities, Inc. (as sponsor,
evaluator and supervisor) and The Bank of New York (as trustee). To create your
trust, we deposited contracts to purchase securities with the trustee along with
an irrevocable letter of credit or other consideration to pay for the
securities.
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In exchange, the trustee delivered units of your trust to us. Each unit
represents an undivided interest in the assets of your trust. These units remain
outstanding until redeemed or until your trust terminates.
CHANGING YOUR PORTFOLIO. Your trust is not a managed fund. Unlike a managed
fund, we designed your portfolio to remain relatively fixed after its inception.
Your trust will generally buy and sell securities:
- to pay expenses,
- to issue additional units or redeem units,
- in limited circumstances to protect the trust,
- to make required distributions or avoid imposition of taxes on the
trust, or
- as permitted by the trust agreement.
Your trust will generally reject any offer for securities or property other
than cash in exchange for the securities in its portfolio. However, if a public
tender offer has been made for a security or a merger or acquisition has been
announced affecting a security, your trust may either sell the security or
accept a tender offer for cash if the supervisor determines that the sale or
tender is in the best interest of unitholders. The trustee will distribute any
cash proceeds to unitholders. If a trust receives securities or property other
than cash, it may either hold the securities or property in its portfolio or
sell the securities or property and distribute the proceeds. For example, this
could happen in a merger or similar transaction.
Only the trustee may vote the shares of the Closed-End Funds held in the
trust. The trustee will vote the shares in the same general proportion as the
shares held by other shareholders of the Closed-End Fund.
We will increase the size of your trust as we sell units. When we create
additional units, we will seek to replicate the existing portfolio. When your
trust buys securities, it will pay brokerage or other acquisition fees. You
could experience a dilution of your investment because of these fees and
fluctuations in stock prices between the time we create units and the time your
trust buys the securities. When your trust buys or sells securities, we may
direct that it place orders with and pay brokerage commissions to brokers that
sell units or are affiliated with your trust. We may consider whether a firm
sells units of our trusts when we select firms to handle these transactions.
TERMINATION OF YOUR TRUST. Your trust will terminate no later than the
termination date listed in the "Investment Summary" section of this prospectus.
The trustee may terminate your trust early if the value of the trust is less
than 20% of the value of the securities in the trust at the end of the initial
offering period. At this size, the expenses of your trust may create an undue
burden on your investment. Investors owning two-thirds of the units in your
trust may also vote to terminate the trust early. We may also terminate your
trust in other limited circumstances.
The trustee will notify you of any termination and will sell any remaining
securities. The trustee will send your final distribution to you within a
reasonable time following liquidation of all the securities after deducting
final expenses. Your termination distribution may be
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less than the price you originally paid for your units. You may be able to
request an in-kind distribution of the securities underlying your units at
termination. Please refer to the section entitled "How to Sell Your Units -
Redeeming Units" for information on in-kind distributions.
See "Administration of the Trust" in Part B of the prospectus for
additional information.
GENERAL INFORMATION
CLAYMORE. Claymore Securities, Inc. specializes in the creation,
development and distribution of investment solutions for advisors and their
valued clients. In November 2001, we changed our name from Ranson & Associates,
Inc. to Claymore Securities, Inc. During our history we have been active in
public and corporate finance and have distributed bonds, mutual funds and unit
trusts in the primary and secondary markets. We are a registered broker-dealer
and member of the National Association of Securities Dealers, Inc. If we fail to
or cannot perform our duties as sponsor or become bankrupt, the trustee may
replace us, continue to operate your trust without a sponsor, or terminate your
trust. You can contact us at our headquarters at 2455 Corporate West Drive,
Lisle, Illinois 60532 or by using the contacts listed on the back cover of this
prospectus. Claymore personnel may from time to time maintain a position in
certain securities held by the trust. Claymore personnel may from time to time
maintain a position in certain securities held by your trust.
Claymore and your trust have adopted a code of ethics requiring Claymore's
employees who have access to information on trust transactions to report
personal securities transactions. The purpose of the code is to avoid potential
conflicts of interest and to prevent fraud, deception or misconduct with respect
to your trust.
See "Administration of the Trust" in Part B of the prospectus for
additional information.
THE TRUSTEE. The Bank of New York is the trustee of your trust. It is a
trust company organized under New York law. You can contact the trustee by
calling the telephone number on the back cover of this prospectus or write to
Unit Investment Trust Division, 101 Barclay Street, 20th Fl., New York, New York
10286. We may remove and replace the trustee in some cases without your consent.
The trustee may also resign by notifying Claymore and investors.
See "Administration of the Trust" in Part B of the prospectus for
additional information.
EXPENSES
Your trust will pay various expenses to conduct its operations. The
"Investment Summary" section of this prospectus shows the estimated amount of
these expenses.
Your trust will pay a fee to the trustee for its services. The trustee also
benefits when it holds cash for your trust in non-interest bearing accounts.
Your trust will reimburse us as supervisor and evaluator for providing portfolio
supervisory services and for evaluating your portfolio. Our reimbursements may
exceed the costs of the services we provide to your trust but will not exceed
the costs of services provided to all Claymore unit investment trusts in any
calendar year. All of these fees may adjust for inflation without your approval.
Your trust will pay a fee to the sponsor for creating and developing the
trust, including
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determining the trust objective, policies, composition and size, selecting
service providers and information services, and for providing other similar
administrative and ministerial functions. Your trust pays this "creation and
development fee" of $0.05 per unit from the assets of the trust as of the close
of the initial public offering period. The sponsor does not use the fee to pay
distribution expenses or as compensation for sales efforts.
Your trust will also pay its general operating expenses. Your trust may pay
expenses such as trustee expenses (including legal and auditing expenses),
various governmental charges, fees for extraordinary trustee services, costs of
taking action to protect your trust, costs of indemnifying the trustee and
Claymore, legal fees and expenses, expenses incurred in contacting you and costs
incurred to reimburse the trustee for advancing funds to meet distributions.
Your trust may pay the costs of updating its registration statement each year.
The trustee may sell securities to pay any trust expenses.
The trust, and therefore the unitholders of each of this trust, will also
indirectly bear the expenses of the underlying Closed-End Funds. While this
trust will not pay these expenses directly out of its assets, these expenses are
shown under "Annual Fund Operating Expenses of the Trust" in the "Fees and
Expenses" section of the trust to illustrate the impact of these expenses.
See "Expenses of the Trust" in Part B of the prospectus for additional
information.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNITHOLDERS
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 198
We have audited the accompanying statement of financial condition, including the
trust portfolio set forth on page 7 of this prospectus, of Claymore Securities
Defined Portfolios, Series 198, as of ____________, the initial date of deposit.
This statement of financial condition is the responsibility of the trusts'
sponsor. Our responsibility is to express an opinion on this financial statement
based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. Our procedures included confirmation with The Bank of New York,
Trustee, of cash deposited for the purchases of securities, as shown in the
statement of financial condition as of _______________. An audit also includes
assessing the accounting principles used and significant estimates made by the
sponsor, as well as evaluating the overall financial statement 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
present fairly, in all material respects, the financial position of Claymore
Securities Defined Portfolios, Series 198 as of _______________, in conformity
with accounting principles generally accepted in the United States of America.
Grant Thornton LLP
Chicago, Illinois
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CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 198
STATEMENT OF FINANCIAL CONDITION
AS OF THE INCEPTION DATE, ________________
<Table>
<Caption>
EQUITY AND
INCOME
TRUST
----------
INVESTMENT IN SECURITIES
Sponsor's contracts to purchase
underlying securities backed
by cash deposited(1)(2) $
----------
==========
LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Organization costs(3) $
Deferred sales fee(4)
----------
Interest of investors:
Cost to investors(5)
Less: gross underwriting commission
and organization costs(3)(4)(5)(6)
----------
Net interest of investors
----------
Total $
==========
Number of units
==========
Net Asset Value per Unit $
==========
</Table>
- ----------
(1) Aggregate cost of the securities is based on the closing sale price
evaluations as determined by the trustee.
(2) Cash has been deposited with The Bank of New York, trustee, covering the
fund (aggregating) necessary for the purchase of the securities in the
trust represented by purchase contracts.
(3) A portion of the Public Offering Price represents an amount sufficient to
pay for all or a portion of the costs incurred in establishing the trust.
These costs have been estimated at $5.00 per 100 units for each trust. A
distribution will be made as of the close of the initial offering period or
six months after the initial date of deposit (at the discretion of the
sponsor) to an account maintained by the trustee from which this obligation
of the investors will be satisfied. To the extent that actual organization
costs are greater than the estimated amount, only the estimated
organization costs added to the Public Offering Price will be deducted from
the assets of the trust.
(4) The total transactional sales fee consists of an initial sales fee and a
deferred sales fee. The initial sales fee is equal to the difference
between the maximum sales fee and the sum of the remaining deferred sales
fee and the C&D Fee. On the Inception Date, the total transactional sales
fee is 3.45% of the Public Offering Price (equivalent to _____% of the net
amount invested for each trust). The deferred sales fee is equal to $0.245
per unit.
(5) The aggregate cost to investors includes the applicable transactional sales
fee assuming no reduction of transactional sales fees for quantity
purchases.
(6) The trust is committed to pay a creation and development fee of $5.00 per
$1,000 invested at the close of the initial public offering period.
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<Page>
CLAYMORE SECURITIES DEFINED PORTFOLIOS
CLAYMORE CLOSED-END PORTFOLIO PROSPECTUS
PROSPECTUS PART B DATED __________________
THE PROSPECTUS FOR A CLAYMORE SECURITIES DEFINED PORTFOLIO (A "TRUST") IS
DIVIDED INTO TWO PARTS. PART A OF THE PROSPECTUS RELATES EXCLUSIVELY TO A
PARTICULAR TRUST OR TRUSTS AND PROVIDES SPECIFIC INFORMATION REGARDING EACH
TRUST'S PORTFOLIO, STRATEGIES, INVESTMENT OBJECTIVES, EXPENSES, FINANCIAL
HIGHLIGHTS, INCOME AND CAPITAL DISTRIBUTIONS, HYPOTHETICAL PERFORMANCE
INFORMATION, RISK FACTORS AND OPTIONAL FEATURES. PART B OF THE PROSPECTUS
PROVIDES MORE GENERAL INFORMATION REGARDING THE CLAYMORE SECURITIES DEFINED
PORTFOLIOS. YOU SHOULD READ BOTH PARTS OF THE PROSPECTUS AND RETAIN THEM FOR
FUTURE REFERENCE. EXCEPT AS PROVIDED IN PART A OF THE PROSPECTUS, THE
INFORMATION CONTAINED IN THIS PART B WILL APPLY TO EACH TRUST.
CONTENTS
<Table>
General Information 2
Investment Policies 2
Risk Factors 3
Administration of the Trust 5
Expenses of the Trust 10
Portfolio Transactions and Brokerage Allocation 11
Purchase, Redemption and Pricing of Units 12
Taxes 15
Experts 17
Performance Information 18
Description of Ratings 18
</Table>
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GENERAL INFORMATION
Each trust is one of a series of separate unit investment trusts created
under the name Claymore Securities Defined Portfolios and registered under the
Investment Company Act of 1940 and the Securities Act of 1933. Each trust was
created as a common law trust on the inception date described in the prospectus
under the laws of the state of New York. Each trust was created under a trust
agreement among Claymore Securities, Inc. (as sponsor, evaluator and supervisor)
and The Bank of New York (as trustee).
When your trust was created, the sponsor delivered to the trustee
securities or contracts for the purchase thereof for deposit in the trust and
the trustee delivered to the sponsor documentation evidencing the ownership of
units of the trust. After your trust is created, the sponsor may deposit
additional securities in the trust, contracts to purchase additional securities
along with cash (or a bank letter of credit in lieu of cash) to pay for such
contracted securities or cash (including a letter of credit) with instructions
to purchase additional securities. Such additional deposits will be in amounts
which will seek to maintain, for the first 90 days, as closely as possible the
same original percentage relationship among the number of shares of each
security in the trust established by the initial deposit of securities and,
thereafter, the same percentage relationship that existed on such 90th day. If
the sponsor deposits cash, existing and new investors may experience a dilution
of their investments and a reduction in their anticipated income because of
fluctuations in the prices of the securities between the time of the cash
deposit and the purchase of the securities and because the trust will pay the
associated brokerage fees.
A trust consists of (a) the securities listed under "Trust Portfolio" in
the prospectus as may continue to be held from time to time in the trust, (b)
any additional securities acquired and held by the trust pursuant to the
provisions of the trust agreement and (c) any cash held in the accounts of the
trust. Neither the sponsor nor the trustee shall be liable in any way for any
failure in any of the securities. However, should any contract for the purchase
of any of the securities initially deposited in a trust fail, the sponsor will,
unless substantially all of the moneys held in the trust to cover such purchase
are reinvested in substitute securities in accordance with the trust agreement,
refund the cash and sales charge attributable to such failed contract to all
unitholders on the next distribution date.
INVESTMENT POLICIES
The trust is a unit investment trust and is not an "actively managed" fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analysis. The portfolio of a trust, however, will not be
actively managed and therefore the adverse financial condition of an issuer will
not necessarily require the sale of its securities from a portfolio.
The trust agreement provides that the sponsor may (but need not) direct the
trustee to dispose of a security in certain events such as the issuer having
defaulted on the payment on any of its outstanding obligations or the price of a
security has declined to such an extent or other such credit factors exist so
that in the opinion of the sponsor the retention of such securities would be
detrimental to the trust. If a public tender offer has been made for a security
or a merger or acquisition has been announced affecting a security, the trustee
may either sell the security or accept a tender offer for cash if the supervisor
determines that the sale or tender is in the best interest of unitholders. The
trustee will distribute any cash proceeds to unitholders. Pursuant to the trust
agreement and with limited exceptions, the trustee may sell any securities or
other properties acquired in exchange for securities such as those acquired in
connection with a merger or other transaction. If offered such new or exchanged
securities or property other than cash, the trustee shall reject the offer.
However, in the event such securities or property are nonetheless acquired by
the trust, they may be accepted for deposit in a trust and either sold by the
trustee or held in a trust pursuant to the direction of the sponsor. Proceeds
from the sale of securities (or any securities or other property received by the
trust in exchange for securities) are credited to the Capital Account for
distribution to unitholders or to meet redemptions.
Except as stated in the trust agreement, or in the prospectus, the
acquisition by the trust of any securities other than the portfolio securities
is prohibited. The trustee may sell securities, designated by the sponsor, from
the trust for
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the purpose of redeeming units of a trust tendered for redemption and the
payment of expenses and for such other purposes as permitted under the trust
agreement.
Notwithstanding the foregoing, the trustee is authorized to reinvest any
funds held in the Capital or Income Accounts, pending distribution, in U.S.
Treasury obligations which mature on or before the next applicable distribution
date. Any obligations so acquired must be held until they mature and proceeds
therefrom may not be reinvested.
Proceeds from the sale of securities (or any securities or other property
received by a trust in exchange for securities) are credited to the Capital
Account of a trust for distribution to unitholders or to meet redemptions.
Except for failed securities and as provided in the prospectus or in the trust
agreement, the acquisition by a trust of any securities other than the portfolio
securities is prohibited. The trustee may sell securities from a trust for
limited purposes, including redeeming units tendered for redemption and the
payment of expenses.
RISK FACTORS
The primary risk factors are set forth in Part A of the prospectus. An
additional discussion of certain risk factors is set forth below.
CLOSED-END FUND RISKS. The trust may invest in the common stock of
closed-end funds ("CLOSED-END FUNDS"). Closed-End Funds are actively managed
investment companies which invest in various types of securities. Closed-End
Funds issue shares of common stock that are traded on a securities exchange.
Closed-End Funds are subject to various risks, including management's ability to
meet the Closed-End Fund's investment objective, and to manage the Closed-End
Fund portfolio when the underlying securities are redeemed or sold, during
periods of market turmoil and as investors' perceptions regarding Closed-End
Funds or their underlying investments change.
Shares of Closed-End Funds frequently trade at a discount from their net
asset value in the secondary market. This risk is separate and distinct from the
risk that the net asset value of Closed-End Fund shares may decrease. The amount
of such discount from net asset value is subject to change from time to time in
response to various factors.
Certain of the Closed-End Funds included in the trust may employ the use of
leverage in their portfolios through the issuance of preferred stock. While
leverage often serves to increase the yield of a Closed-End Fund, this leverage
also subjects the Closed-End Fund to increased risks, including the likelihood
of increased volatility and the possibility that the Closed-End Fund's common
share income will fall if the dividend rate on the preferred shares or the
interest rate on any borrowings rises.
PREFERRED STOCK RISKS. If set forth in Part A of the prospectus, a trust,
or issuers of securities held by a trust, may invest in preferred stock. If this
is the case, an investment in units should be made with an understanding of the
risks which an investment in preferred stocks entails, including the risk that
the financial condition of the issuers of the securities or the general
condition of the preferred stock market may worsen, and the value of the
preferred stocks and therefore the value of the units may decline. Preferred
stocks may be susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions of the
issuers change. These perceptions are based on unpredictable factors, including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, market
liquidity, and global or regional political, economic or banking crises.
Preferred stocks are also vulnerable to congressional reductions in the
dividends-received deduction which would adversely affect the after-tax return
to the investors who can take advantage of the deduction. Such a reduction might
adversely affect the value of preferred stocks in general. Holders of preferred
stocks, as owners of the entity, have rights to receive payments from the
issuers of those preferred stocks that are generally subordinate to those of
creditors of, or holders of debt obligations or, in some cases, other senior
preferred stocks of, such issuers. Preferred stocks do not represent an
obligation of the issuer and, therefore, do not offer any assurance of income or
provide the same degree of protection of capital as do debt securities. The
issuance of additional debt securities or senior preferred stocks will create
prior claims for payment of principal and interest and senior
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dividends which could adversely affect the ability and inclination of the issuer
to declare or pay dividends on its preferred stock or the rights of holders of
preferred stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of preferred stocks is subject to market fluctuations for
as long as the preferred stocks remain outstanding, and thus the value of the
securities may be expected to fluctuate over the life of the trust to values
higher or lower than those prevailing on the initial date of deposit.
TRUST PREFERRED SECURITIES RISKS. If set forth in Part A of the prospectus,
a trust, or issuers of securities held by a trust, may invest in trust preferred
securities. Holders of trust preferred securities incur risks in addition to or
slightly different than the typical risks of holding preferred stocks. Trust
preferred securities are limited-life preferred securities that are typically
issued by corporations, generally in the form of interest-bearing notes or
preferred securities issued by corporations, or by an affiliated business trust
of a corporation, generally in the form of beneficial interests in subordinated
debentures issued by the corporation, or similarly structured securities. The
maturity and dividend rate of the trust preferred securities are structured to
match the maturity and coupon interest rate of the interest-bearing notes,
preferred securities or subordinated debentures. Trust preferred securities
usually mature on the stated maturity date of the interest-bearing notes,
preferred securities or subordinated debentures and may be redeemed or
liquidated prior to the stated maturity date of such instruments for any reason
on or after their stated call date or upon the occurrence of certain
circumstances at any time. Trust preferred securities generally have a yield
advantage over traditional preferred stocks, but unlike preferred stocks,
distributions on the trust preferred securities are generally treated as
interest rather than dividends for federal income tax purposes. Unlike most
preferred stocks, distributions received from trust preferred securities are
generally not eligible for the dividends-received deduction. Certain of the
risks unique to trust preferred securities include: (i) distributions on trust
preferred securities will be made only if interest payments on the
interest-bearing notes, preferred securities or subordinated debentures are
made; (ii) a corporation issuing the interest-bearing notes, preferred
securities or subordinated debentures may defer interest payments on these
instruments for up to 20 consecutive quarters and if such election is made,
distributions will not be made on the trust preferred securities during the
deferral period; (iii) certain tax or regulatory events may trigger the
redemption of the interest-bearing notes, preferred securities or subordinated
debentures by the issuing corporation and result in prepayment of the trust
preferred securities prior to their stated maturity date; (iv) future
legislation may be proposed or enacted that may prohibit the corporation from
deducting its interest payments on the interest-bearing notes, preferred
securities or subordinated debentures for tax purposes, making redemption of
these instruments likely; (v) a corporation may redeem the interest-bearing
notes, preferred securities or subordinated debentures in whole at any time or
in part from time to time on or after a stated call date; (vi) trust preferred
securities holders have very limited voting rights; and (vii) payment of
interest on the interest-bearing notes, preferred securities or subordinated
debentures, and therefore distributions on the trust preferred securities, is
dependent on the financial condition of the issuing corporation.
MARKET DISCOUNTS OR PREMIUMS. Certain of the securities may have been
deposited at a market discount or premium principally because their dividend
rates are lower or higher than prevailing rates on comparable securities. The
current returns of market discount securities are lower than comparably rated
securities selling at par because discount securities tend to increase in market
value as they approach maturity. The current returns of market premium
securities are higher than comparably rated securities selling at par because
premium securities tend to decrease in market value as they approach maturity.
Because part of the purchase price is returned through current income payments
and not at maturity, an early redemption at par of a premium security will
result in a reduction in yield to the trust. Market premium of discount
attributable to dividend rate changes does not indicate market confidence or
lack of confidence in the issue.
LITIGATION AND LEGISLATION. From time to time Congress considers proposals
to reduce the rate of the dividends-received deduction. Enactment into law of a
proposal to reduce the rate would adversely affect the after-tax return to
investors who can take advantage of the deduction. Unitholders are urged to
consult their own tax advisers. Further, at any time litigation may be initiated
on a variety of grounds, or legislation may be enacted with respect to the
securities in a trust or the issuers of the securities. There can be no
assurance that future litigation or legislation will not have a material adverse
effect on the trust or will not impair the ability of issuers to achieve their
business goals.
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FIXED PORTFOLIO. Investors should be aware that the trust is not "managed"
and as a result, the adverse financial condition of a company will not result in
the elimination of its securities from the portfolio of the trust except under
extraordinary circumstances. Investors should note in particular that the
securities were selected on the basis of the criteria set forth in the
prospectus and that the trust may continue to purchase or hold securities
originally selected through this process even though the evaluation of the
attractiveness of the securities may have changed. A number of the securities in
the trust may also be owned by other clients of the sponsor. However, because
these clients may have differing investment objectives, the sponsor may sell
certain securities from those accounts in instances where a sale by the trust
would be impermissible, such as to maximize return by taking advantage of market
fluctuations. In the event a public tender offer is made for a security or a
merger or acquisition is announced affecting a security, the sponsor may
instruct the trustee to tender or sell the security on the open market when, in
its opinion, it is in the best interest of the unitholders of the unit to do so.
Although the portfolio is regularly reviewed and evaluated and the sponsor may
instruct the trustee to sell securities under certain limited circumstances,
securities will not be sold by the trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation. As a result, the
amount realized upon the sale of the securities may not be the highest price
attained by an individual security during the life of the trust. The prices of
single shares of each of the securities in the trust vary widely, and the effect
of a dollar of fluctuation, either higher or lower, in stock prices will be much
greater as a percentage of the lower-price stocks' purchase price than as a
percentage of the higher-price stocks' purchase price.
LIQUIDITY. Whether or not the securities are listed on a national
securities exchange, the principal trading market for the securities may be in
the over-the-counter market. As a result, the existence of a liquid trading
market for the securities may depend on whether dealers will make a market in
the securities. There can be no assurance that a market will be made for any of
the securities, that any market for the securities will be maintained or of the
liquidity of the securities in any markets made. In addition, a trust is
restricted under the Investment Company Act of 1940 from selling securities to
the sponsor. The price at which the securities may be sold to meet redemptions
and the value of a trust will be adversely affected if trading markets for the
securities are limited or absent.
ADDITIONAL DEPOSITS. The trust agreement authorizes the sponsor to increase
the size of a trust and the number of units thereof by the deposit of additional
securities, or cash (including a letter of credit) with instructions to purchase
additional securities, in such trust and the issuance of a corresponding number
of additional units. If the sponsor deposits cash, existing and new investors
may experience a dilution of their investments and a reduction in their
anticipated income because of fluctuations in the prices of the securities
between the time of the cash deposit and the purchase of the securities and
because a trust will pay the associated brokerage fees. To minimize this effect,
the trust will attempt to purchase the securities as close to the evaluation
time or as close to the evaluation prices as possible.
Some of the securities may have limited trading volume. The trustee, with
directions from the sponsor, will endeavor to purchase securities with deposited
cash as soon as practicable reserving the right to purchase those securities
over the 20 business days following each deposit in an effort to reduce the
effect of these purchases on the market price of those securities. This could,
however, result in the trust's failure to participate in any appreciation of
those securities before the cash is invested. If any cash remains at the end of
this period (and such date is within the 90-day period following the inception
date) and cannot be invested in one or more securities, at what the sponsor
considers reasonable prices, it intends to use that cash to purchase each of the
other securities in the original proportionate relationship among those
securities. Similarly, at termination of the trust, the sponsor reserves the
right to sell securities over a period of up to 20 business days to lessen the
impact of its sales on the market price of the securities. The proceeds received
by unitholders following termination of the trust will reflect the actual sales
proceeds received on the securities, which will likely differ from the closing
sale price on the termination date.
ADMINISTRATION OF THE TRUST
DISTRIBUTIONS TO UNITHOLDERS. Income received by a trust is credited by the
trustee to the Income Account of the trust. Other receipts are credited to the
Capital Account of a trust. Income received by a trust will be distributed on or
shortly after the distribution dates each year shown in the prospectus on a pro
rata basis to unitholders of record as of
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the preceding record date shown in the prospectus. All distributions will be net
of applicable expenses. There is no assurance that any actual distributions will
be made since all dividends received may be used to pay expenses. In addition,
excess amounts from the Capital Account of a trust, if any, will be distributed
at least annually to the unitholders then of record. Proceeds received from the
disposition of any of the securities after a record date and prior to the
following distribution date will be held in the Capital Account and not
distributed until the next distribution date applicable to the Capital Account.
The trustee shall be required to make a distribution from the Capital Account if
the cash balance on deposit therein available for distribution shall be
sufficient to distribute at least $1.00 per 100 units. The trustee is not
required to pay interest on funds held in the Capital or Income Accounts (but
may itself earn interest thereon and therefore benefits from the use of such
funds). The trustee is authorized to reinvest any funds held in the Capital or
Income Accounts, pending distribution, in U.S. Treasury obligations which mature
on or before the next applicable distribution date. Any obligations so acquired
must be held until they mature and proceeds therefrom may not be reinvested.
The distribution to the unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such portion of the unitholders' pro rata share of
the dividend distributions then held in the Income Account after deducting
estimated expenses. Because dividends are not received by a trust at a constant
rate throughout the year, such distributions to unitholders are expected to
fluctuate. Persons who purchase units will commence receiving distributions only
after such person becomes a record owner. A person will become the owner of
units, and thereby a unitholder of record, on the date of settlement provided
payment has been received. Notification to the trustee of the transfer of units
is the responsibility of the purchaser, but in the normal course of business
such notice is provided by the selling broker-dealer.
The trustee will periodically deduct from the Income Account of a trust
and, to the extent funds are not sufficient therein, from the Capital Account of
a trust amounts necessary to pay the expenses of a trust. 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 a trust. Amounts
so withdrawn shall not be considered a part of a trust's assets until such time
as the trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the trustee may withdraw from the Income and Capital
Accounts of a trust such amounts as may be necessary to cover redemptions of
units.
DISTRIBUTION REINVESTMENT. Unitholders may elect to have distributions of
capital (including capital gains, if any) or dividends or both automatically
invested into additional units of their trust without a sales fee.
Your trust will pay any deferred sales fee per unit regardless of any sales
fee discounts. However, if you elect to have distributions on your units
reinvested into additional units of your trust, you will be credited the amount
of any remaining deferred sales charge on such additional units at the time of
reinvestment.
Unitholders who are receiving distributions in cash may elect to
participate in distribution reinvestment by filing with the Program Agent an
election to have such distributions reinvested without charge. Such election
must be received by the Program Agent at least ten days prior to the record date
applicable to any distribution in order to be in effect for such record date.
Any such election shall remain in effect until a subsequent notice is received
by the Program Agent.
The Program Agent is The Bank of New York. All inquiries concerning
participating in distribution reinvestment should be directed to The Bank of New
York at its Unit Investment Trust Division office.
STATEMENTS TO UNITHOLDERS. With each distribution, the trustee will furnish
to each unitholder a statement of the amount of income and the amount of other
receipts, if any, which are being distributed, expressed in each case as a
dollar amount per unit.
The accounts of a trust will not be audited annually, unless the sponsor
determines that such an audit would be in the best interest of the unitholders
of the trust. If an audit is conducted, it will be done at the related trust's
expense,
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by independent public accountants designated by the sponsor. The accountants'
report will be furnished by the trustee to any unitholder upon written request.
Within a reasonable period of time after the end of each calendar year, the
trustee shall furnish to each person who at any time during the calendar year
was a unitholder of a trust a statement, covering the calendar year, generally
setting forth for the trust:
(A) As to the Income Account:
(1) Income received;
(2) Deductions for applicable taxes and for fees and expenses of the
trust and for redemptions of units, if any; and
(3) The balance remaining after such distributions and deductions,
expressed in each case both as a total dollar amount and as a dollar
amount representing the pro rata share of each unit outstanding on
the last business day of such calendar year; and
(B) As to the Capital Account:
(1) The dates of disposition of any securities and the net proceeds
received therefrom;
(2) Deductions for payment of applicable taxes and fees and expenses of
the trust held for distribution to unitholders of record as of a date
prior to the determination; and
(3) The balance remaining after such distributions and deductions
expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each unit outstanding on the last
business day of such calendar year; and
(C) The following information:
(1) A list of the securities as of the last business day of such calendar
year;
(2) The number of units outstanding on the last business day of such
calendar year;
(3) The redemption price based on the last evaluation made during such
calendar year;
(4) The amount actually distributed during such calendar year from the
Income and Capital Accounts separately stated, expressed both as
total dollar amounts and as dollar amounts per unit outstanding on
the record dates for each such distribution.
RIGHTS OF UNITHOLDERS. A unitholder may at any time tender units to the
trustee for redemption. The death or incapacity of any unitholder will not
operate to terminate a trust nor entitle legal representatives or heirs to claim
an accounting or to bring any action or proceeding in any court for partition or
winding up of a trust. No unitholder shall have the right to control the
operation and management of a trust in any manner, except to vote with respect
to the amendment of the trust agreement or termination of a trust.
AMENDMENT AND TERMINATION. The trust agreement may be amended by the
trustee and the sponsor without the consent of any of the unitholders: (1) to
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (2) to change any provision thereof as may be
required by the Securities and Exchange Commission or any successor governmental
agency; or (3) to make such provisions as shall not adversely affect the
interests of the unitholders. The trust agreement with respect to any trust may
also be amended in any respect by the sponsor and the trustee, or any of the
provisions thereof may be waived, with the consent of the holders of units
representing 66 2/3% of the units then outstanding of the trust, provided that
no such amendment or waiver will reduce
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the interest of any unitholder thereof without the consent of such unitholder or
reduce the percentage of units required to consent to any such amendment or
waiver without the consent of all unitholders of the trust. In no event shall
the trust agreement be amended to increase the number of units of a trust
issuable thereunder or to permit the acquisition of any securities in addition
to or in substitution for those initially deposited in the trust, except in
accordance with the provisions of the trust agreement. The trustee shall
promptly notify unitholders of the substance of any such amendment.
The trust agreement provides that a trust shall terminate upon the
liquidation, redemption or other disposition of the last of the securities held
in the trust but in no event is it to continue beyond the mandatory termination
date set forth in Part A of the prospectus. If the value of a trust shall be
less than the applicable minimum value stated in the prospectus (generally 20%
of the total value of securities deposited in the trust during the initial
offering period), the trustee may, in its discretion, and shall, when so
directed by the sponsor, terminate the trust. A trust may be terminated at any
time by the holders of units representing 66 2/3% of the units thereof then
outstanding. In addition, the sponsor may terminate a trust if it is based on a
security index and the index is no longer maintained.
Beginning nine business days prior to, but no later than, the mandatory
termination date described in the prospectus, the trustee may begin to sell all
of the remaining underlying securities on behalf of unitholders in connection
with the termination of the trust. The sponsor may assist the trustee in these
sales and receive compensation to the extent permitted by applicable law. The
sale proceeds will be net of any incidental expenses involved in the sales.
The trustee will attempt to sell the securities as quickly as it can during
the termination proceedings without in its judgment materially adversely
affecting the market price of the securities, but it is expected that all of the
securities will in any event be disposed of within a reasonable time after a
trust's termination. The sponsor does not anticipate that the period will be
longer than one month, and it could be as short as one day, depending on the
liquidity of the securities being sold. The liquidity of any security depends on
the daily trading volume of the security and the amount that the sponsor has
available for sale on any particular day. Of course, no assurances can be given
that the market value of the securities will not be adversely affected during
the termination proceedings.
Approximately thirty days prior to termination of certain trusts, the
trustee will notify unitholders of the termination and provide a form allowing
qualifying unitholders to elect an in-kind distribution (a "DISTRIBUTION IN
KIND"). A unitholder who owns the minimum number of units shown in Part A of the
prospectus may request a Distribution In Kind from the trustee instead of cash.
The trustee will make a Distribution In Kind through the distribution of each of
the securities of the trust in book entry form to the account of the
unitholder's bank or broker-dealer at Depository Trust Company. The unitholder
will be entitled to receive whole shares of each of the securities comprising
the portfolio of a trust and cash from the Capital Account equal to the
fractional shares to which the unitholder is entitled. The trustee may adjust
the number of shares of any security included in a unitholder's Distribution In
Kind to facilitate the distribution of whole shares. The sponsor may terminate
the Distribution In Kind option at any time upon notice to the unitholders.
Special federal income tax consequences will result if a unitholder requests a
Distribution In Kind. Unitholders who request a Distribution In Kind will be
subject to any 12b-1 Fees applicable to the underlying securities.
Within a reasonable period after termination, the trustee will sell any
securities remaining in a trust and, after paying all expenses and charges
incurred by the trust, will distribute to unitholders thereof (upon surrender
for cancellation of certificates for units, if issued) their pro rata share of
the balances remaining in the Income and Capital Accounts of the trust.
The sponsor currently intends, but is not obligated, to offer for sale
units of a subsequent series of certain trusts. If the sponsor does offer such
units for sale, unitholders may be given the opportunity to purchase such units
at a public offering price which includes a reduced sales fee. There is,
however, no assurance that units of any new series of a trust will be offered
for sale at that time, or if offered, that there will be sufficient units
available for sale to meet the requests of any or all unitholders.
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THE TRUSTEE. The trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its Unit Investment Trust
Division offices at 101 Barclay Street, 20th Fl., New York, New York 10286,
telephone 1-800-701-8178. The Bank of New York is subject to supervision and
examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law.
The trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of any trust. In accordance with the trust agreement,
the trustee shall keep records of all transactions at its office. Such records
shall include the name and address of, and the number of units held by, every
unitholder of a trust. Such books and records shall be open to inspection by any
unitholder at all reasonable times during usual business hours. The trustee
shall make such annual or other reports as may from time to time be required
under any applicable state or federal statute, rule or regulation. The trustee
shall keep a certified copy or duplicate original of the trust agreement on file
in its office available for inspection at all reasonable times during usual
business hours by any unitholder, together with a current list of the securities
held in each trust. Pursuant to the trust agreement, the trustee may employ one
or more agents for the purpose of custody and safeguarding of securities
comprising a trust.
Under the trust agreement, the trustee or any successor trustee may resign
and be discharged of a trust created by the trust agreement by executing an
instrument in writing and filing the same with the sponsor. The trustee or
successor trustee must mail a copy of the notice of resignation to all
unitholders then of record, not less than sixty days before the date specified
in such notice when such resignation is to take effect. The sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within thirty days after notification, the retiring
trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The sponsor may at any time remove the trustee, with or without
cause, and appoint a successor trustee as provided in the trust agreement.
Notice of such removal and appointment shall be mailed to each unitholder by the
sponsor. Upon execution of a written acceptance of such appointment by such
successor trustee, all the rights, powers, duties and obligations of the
original trustee shall vest in the successor. The trustee must be a corporation
organized under the laws of the United States, or any state thereof, be
authorized under such laws to exercise trust powers and have at all times an
aggregate capital, surplus and undivided profits of not less than $5,000,000.
THE SPONSOR. Claymore Securities, Inc. specializes in the creation,
development and distribution of investment solutions for advisors and their
valued clients. Claymore Securities, Inc., the sponsor, is an investment banking
firm created as Ranson & Associates, Inc. in 1995 and is the successor sponsor
to unit investment trusts formerly sponsored by EVEREN Unit Investment Trusts, a
service of EVEREN Securities, Inc. Claymore Securities, Inc. is also the sponsor
and successor sponsor of Series of Ranson Unit Investment Trusts and The Kansas
Tax-Exempt Trust and Multi-State Series of The Ranson Municipal Trust. On
October 29, 2001, Ranson & Associates, Inc. was acquired by Claymore Group LLC.
The sale to Claymore Group LLC was financed by a loan from The Bank of New York,
the trustee. In November 2001, the sponsor changed its name from Ranson &
Associates, Inc. to Claymore Securities, Inc. Claymore Securities, Inc. has been
active in public and corporate finance and has sold bonds and unit investment
trusts and maintained secondary market activities relating thereto. At present,
Claymore Securities, Inc. which is a member of the National Association of
Securities Dealers, Inc., is the sponsor to each of the above-named unit
investment trusts. The sponsor's offices are located at 2455 Corporate West
Drive, Lisle, Illinois 60532 and at 101 Elm Street, Suite 310, Conshohocken,
Pennsylvania 19428.
If at any time the sponsor shall fail to perform any of its duties under
the trust agreement or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the Securities and Exchange
Commission, 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.
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THE SUPERVISOR AND THE EVALUATOR. Claymore Securities, Inc., the sponsor,
also serves as evaluator and supervisor. The evaluator and supervisor may resign
or be removed by the trustee in which event the trustee is to use its best
efforts to appoint a satisfactory successor. Such resignation or removal shall
become effective upon acceptance of appointment by the successor evaluator. If
upon resignation of the evaluator no successor has accepted appointment within
thirty days after notice of resignation, the evaluator may apply to a court of
competent jurisdiction for the appointment of a successor. Notice of such
registration or removal and appointment shall be mailed by the trustee to each
unitholder.
LIMITATIONS ON LIABILITY. The sponsor is liable for the performance of its
obligations arising from its responsibilities under the trust agreement, but
will be under no liability to the unitholders for taking any action or
refraining from any action in good faith pursuant to the trust agreement or for
errors in judgment, except in cases of its own gross negligence, bad faith or
willful misconduct or its reckless disregard for its duties thereunder. The
sponsor shall not be liable or responsible in any way for depreciation or loss
incurred by reason of the sale of any securities.
The trust agreement provides that the trustee shall be under no liability
for any action taken in good faith in reliance upon prima facie properly
executed documents or for the disposition of moneys, securities or certificates
except by reason of its own gross negligence, bad faith or willful misconduct,
or its reckless disregard for its duties under the trust agreement, nor shall
the trustee be liable or responsible in any way for depreciation or loss
incurred by reason of the sale by the trustee of any securities. In the event
that the sponsor shall fail to act, the trustee may act and shall not be liable
for any such action taken by it in good faith. The trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the securities or upon the interest thereof. In addition, the trust
agreement contains other customary provisions limiting the liability of the
trustee.
The trustee and unitholders may rely on any evaluation furnished by the
evaluator and shall have no responsibility for the accuracy thereof. The trust
agreement provides that the determinations made by the evaluator shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the evaluator shall be under no liability to the trustee or
unitholders for errors in judgment, but shall be liable for its gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the trust agreement.
EXPENSES OF THE TRUST
The sponsor does not charge trusts an annual advisory fee. The sponsor will
receive a portion of the sale commissions paid in connection with the purchase
of units and will share in profits, if any, related to the deposit of securities
in the trust. The sponsor and/or its affiliates do, also, receive an annual fee
as set forth in Part A of the Prospectus for maintaining surveillance over the
portfolio and for performing certain administrative services for the Trust (the
"SPONSOR'S SUPERVISORY FEE"). In providing such supervisory services, the
sponsor may purchase research from a variety of sources, which may include
dealers of the trusts. If so provided in Part A of the prospectus, the sponsor
may also receive an annual fee for providing bookkeeping and administrative
services for a trust (the "BOOKKEEPING AND ADMINISTRATIVE FEE"). Such services
may include, but are not limited to, the preparation of various materials for
unitholders and providing account information to the unitholders. If so provided
in Part A of the prospectus, the evaluator may also receive an annual fee for
performing evaluation services for the trusts (the "EVALUATOR'S FEE"). In
addition, if so provided in Part A of the prospectus, a trust may be charged an
annual licensing fee to cover licenses for the use of service marks, trademarks,
trade names and intellectual property rights and/or for the use of databases and
research. The trust will bear all operating expenses. Estimated annual trust
operating expenses are as set forth in Part A of the prospectus; if actual
expenses are higher than the estimate, the excess will be borne by the trust.
The estimated expenses include listing fees but do not include the brokerage
commissions and other transactional fees payable by the trust in purchasing and
selling securities.
The trustee receives for its services that fee set forth in Part A of the
prospectus. The trustee's fee which is calculated monthly, is based on the
largest number of units of a trust outstanding at any time during the primary
offering period. After the primary offering period, the fee shall accrue daily
and be based on the number of units
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outstanding on the first business day of each calendar year in which the fee is
calculated or the number of units outstanding at the end of the primary offering
period, as appropriate. The Sponsor's Supervisory Fee, the Bookkeeping and
Administrative Fee and the Evaluator's Fee are calculated monthly and are based
on the largest number of units outstanding at any time during the period for
which such compensation is being computed. The trustee benefits to the extent
there are funds for future distributions, payment of expenses and redemptions in
the Capital and Income Accounts since these Accounts are non- interest bearing
and the amounts earned by the trustee are retained by the trustee. Part of the
trustee's compensation for its services to a trust is expected to result from
the use of these funds. In addition, the Sponsor's Supervisory Fee, Bookkeeping
and Administrative Fee, Evaluator's Fee and the Trustee's Fee may be adjusted in
accordance with the cumulative percentage increase of the United States
Department of Labor's Consumer Price Index entitled "All Services Less Rent"
since the establishment of the trust. In addition, with respect to any fees
payable to the sponsor or an affiliate of the sponsor for providing bookkeeping
and other administrative services, supervisory services and evaluation services,
such individual fees may exceed the actual costs of providing such services for
a trust, but at no time will the total amount received for such services, in the
aggregate, rendered to all unit investment trusts of which Claymore is the
sponsor in any calendar year exceed the actual cost to the sponsor or its
affiliates of supplying such services, in the aggregate, in such year.
The trust will also will pay a fee to the sponsor for creating and
developing the trust, including determining the trust objective, policies,
composition and size, selecting service providers and information services, and
for providing other similar administrative and ministerial functions. Your trust
pays this "creation and development fee" as a fixed dollar amount at the close
of the initial offering period. The sponsor does not use the fee to pay
distribution expenses or as compensation for sales efforts.
The following additional charges are or may be incurred by the trust: (a)
fees for the trustee's extraordinary services; (b) expenses of the trustee
(including legal and auditing expenses, but not including any fees and expenses
charged by an agent for custody and safeguarding of securities) and of counsel,
if any; (c) various governmental charges; (d) expenses and costs of any action
taken by the trustee to protect the trust or the rights and interests of the
unitholders; (e) indemnification of the trustee for any loss, liability or
expense incurred by it in the administration of the trust not resulting from
gross negligence, bad faith or willful misconduct on its part; (f)
indemnification of the sponsor for any loss, liability or expense incurred in
acting in that capacity without gross negligence, bad faith or willful
malfeasance or its reckless disregard for its obligations under the trust
agreement; (g) any offering costs incurred after the end of the initial offering
period; and (h) expenditures incurred in contacting unitholders upon termination
of the trust. The fees and expenses set forth herein are payable out of a trust
and, when owing to the trustee, are secured by a lien on the trust. Since the
securities are all stocks, and the income stream produced by the dividend
payments, if any, is unpredictable, the sponsor cannot provide any assurance
that dividends will be sufficient to meet any or all expenses of a trust. If the
balances in the Income and Capital Accounts are insufficient to provide for
amounts payable by the trust, the trustee has the power to sell securities to
pay such amounts. These sales may result in capital gains or losses to
unitholders. It is expected that the income stream produced by dividend payments
may be insufficient to meet the expenses of a trust and, accordingly, it is
expected that securities will be sold to pay all of the fees and expenses of the
trust.
The trust shall also bear the expenses associated with updating the trust's
registration statement and maintaining registration or qualification of the
units and/or a trust under federal or state securities laws subsequent to
initial registration. Such expenses shall include legal fees, accounting fees,
typesetting fees, electronic filing expenses and regulatory filing fees. The
expenses associated with updating registration statements have been historically
paid by a unit investment trust's sponsor.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
When a trust sells securities, the composition and diversity of the
securities in the trust may be altered. In order to obtain the best price for a
trust, it may be necessary for the supervisor to specify minimum amounts (such
as 100 shares) in which blocks of securities are to be sold. In effecting
purchases and sales of a trust's portfolio securities, the sponsor may direct
that orders be placed with and brokerage commissions be paid to brokers,
including brokers which
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may be affiliated with the trust, the sponsor or dealers participating in the
offering of units. In addition, in selecting among firms to handle a particular
transaction, the sponsor may take into account whether the firm has sold or is
selling products which it sponsors.
PURCHASE, REDEMPTION AND PRICING OF UNITS
PUBLIC OFFERING PRICE. Units of a trust are offered at the public offering
price (which is based on the aggregate underlying value of the securities in the
trust and includes the initial sales fee plus a pro rata share of any
accumulated amounts in the accounts of the trust). The initial sales fee is
equal to the difference between the maximum sales fee and the sum of the
remaining deferred sales fee and the creation and development fee ("C&D FEE").
The maximum sales fee is set forth in Part A of the prospectus. The deferred
sales fee and the C&D Fee will be collected as described in this prospectus.
Units purchased subsequent to the initial deferred sales fee payment will be
subject to the initial sales fee, the remaining deferred sales fee payments and
the C&D Fee. Units sold or redeemed prior to such time as the entire applicable
deferred sales fee has been collected will be assessed the remaining deferred
sales fee at the time of such sale or redemption. During the initial offering
period, a portion of the public offering price includes an amount of securities
to pay for all or a portion of the costs incurred in establishing a trust
("ORGANIZATION COSTS"). These organization costs include the cost of preparing
the registration statement, the trust indenture and other closing documents,
registering units with the Securities and Exchange Commission and states, the
initial audit of the trust portfolio, legal fees and the initial fees and
expenses of the trustee. These costs will be deducted from a trust as of the end
of the initial offering period or after six months, at the discretion of the
sponsor. As indicated above, the initial public offering price of the units was
established by dividing the aggregate underlying value of the securities by the
number of units outstanding. Such price determination as of the opening of
business on the date a trust was created was made on the basis of an evaluation
of the securities in the trust prepared by the evaluator. After the opening of
business on this date, the evaluator will appraise or cause to be appraised
daily the value of the underlying securities as of the close of the New York
Stock Exchange on days the New York Stock Exchange is open and will adjust the
public offering price of the units commensurate with such valuation. Such public
offering price will be effective for all orders properly received at or prior to
the close of trading on the New York Stock Exchange on each such day. Orders
received by the trustee, sponsor or any dealer for purchases, sales or
redemptions after that time, or on a day when the New York Stock Exchange is
closed, will be held until the next determination of price.
The value of the securities is determined on each business day by the
evaluator based on the closing sale prices on a national securities exchange or
the Nasdaq National Market System or by taking into account the same factors
referred to under "Computation of Redemption Price."
PUBLIC DISTRIBUTION OF UNITS. During the initial offering period, units of
a trust will be distributed to the public at the public offering price thereof.
Upon the completion of the initial offering, units which remain unsold or which
may be acquired in the secondary market may be offered at the public offering
price determined in the manner provided above.
The sponsor intends to qualify units of a trust for sale in a number of
states. Units will be sold through dealers who are members of the National
Association of Securities Dealers, Inc. and through others. Broker-dealers and
others will be allowed a concession or agency commission in connection with the
distribution of units during the initial offering period as set forth in the
prospectus.
Certain commercial banks may be making units of a trust available to their
customers on an agency basis. Furthermore, as a result of certain legislative
changes effective November 1999, banks are no longer prohibited from certain
affiliations with securities firms. This new legislation grants banks new
authority to conduct certain authorized activity, such as sales of Units,
through financial subsidiaries. A portion of the sales charge discussed above is
retained by or remitted to the banks or their financial subsidiaries for these
agency and brokerage transactions. The sponsor reserves the right to change the
concessions or agency commissions set forth in the prospectus from time to time.
In addition to such concessions or agency commissions, the sponsor may, from
time to time, pay or allow additional concessions or agency commissions, in the
form of cash or other compensation, to dealers employing registered
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representatives who sell, during a specified time period, a minimum dollar
amount of units of unit investment trusts underwritten by the sponsor. At
various times the sponsor may implement programs under which the sales force of
a broker or dealer may be eligible to win nominal awards for certain sales
efforts, or under which the sponsor will reallow to any such broker or dealer
that sponsors sales contests or recognition programs conforming to criteria
established by the sponsor, or participates in sales programs sponsored by the
sponsor, an amount not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such programs.
Also, the sponsor in its discretion may from time to time pursuant to objective
criteria established by the sponsor pay fees to qualifying brokers or dealers
for certain services or activities which are primarily intended to result in
sales of units of a trust. Such payments are made by the sponsor out of its own
assets, and not out of the assets of any trust. These programs will not change
the price unitholders pay for their units or the amount that a trust will
receive from the units sold. The difference between the discount and the sales
charge will be retained by the sponsor.
The sponsor reserves the right to reject, in whole or in part, any order
for the purchase of units.
SPONSOR PROFITS. The sponsor will receive gross sales fees equal to the
percentage of the public offering price of the units of a trust described in the
prospectus. In addition, the sponsor may realize a profit (or sustain a loss) as
of the date a trust is created resulting from the difference between the
purchase prices of the securities to the sponsor and the cost of such securities
to the trust. Thereafter, on subsequent deposits the sponsor may realize profits
or sustain losses from such deposits. The sponsor may realize additional profits
or losses during the initial offering period on unsold units as a result of
changes in the daily market value of the securities in the trust.
MARKET FOR UNITS. After the initial offering period, the sponsor may
maintain a market for units of a trust offered hereby and continuously offer to
purchase said units at prices, determined by the evaluator, based on the value
of the underlying securities. Unitholders who wish to dispose of their units
should inquire of their broker as to current market prices in order to determine
whether there is in existence any price in excess of the redemption price and,
if so, the amount thereof. Unitholders who sell or redeem units prior to such
time as the entire deferred sales fee on such units has been collected will be
assessed the amount of the remaining deferred sales fee at the time of such sale
or redemption. The offering price of any units resold by the sponsor will be in
accord with that described in the currently effective prospectus describing such
units. Any profit or loss resulting from the resale of such units will belong to
the sponsor. If the sponsor decides to maintain a secondary market, it may
suspend or discontinue purchases of units of the trust if the supply of units
exceeds demand, or for other business reasons.
REDEMPTION. A unitholder who does not dispose of units in the secondary
market described above may cause units to be redeemed by the trustee by making a
written request to the trustee at its Unit Investment Trust Division office in
the city of New York. Unitholders must sign the request, and such transfer
instrument, exactly as their names appear on the records of the trustee. If the
amount of the redemption is $500 or less and the proceeds are payable to the
unitholder(s) of record at the address of record, no signature guarantee is
necessary for redemptions by individual account owners (including joint owners).
Additional documentation may be requested, and a signature guarantee is always
required, from corporations, executors, administrators, trustees, guardians or
associations. The signatures must be guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other signature
guaranty program in addition to, or in substitution for, STAMP, as may be
accepted by the trustee.
Redemption shall be made by the trustee no later than the third business
day following the day on which a tender for redemption is received (the
"REDEMPTION DATE") by payment of cash equivalent to the redemption price,
determined as set forth below under "Computation of Redemption Price," as of the
close of the New York Stock Exchange next following such tender, multiplied by
the number of units being redeemed. Any units redeemed shall be canceled and any
undivided fractional interest in the related trust extinguished. The price
received upon redemption might be more or less than the amount paid by the
unitholder depending on the value of the securities in the trust at the time of
redemption. Unitholders who sell or redeem units prior to such time as the
entire deferred sales fee on such units has been collected will be assessed the
amount of the remaining deferred sales fee at the time of such sale or
redemption. Certain broker-dealers may charge a transaction fee for processing
redemption requests.
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Under regulations issued by the Internal Revenue Service, the trustee is
required to withhold a specified percentage of the principal amount of a unit
redemption if the trustee has not been furnished the redeeming unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the unitholder only when filing a tax return. Under normal circumstances the
trustee obtains the unitholder's tax identification number from the selling
broker. However, any time a unitholder elects to tender units for redemption,
such unitholder should make sure that the trustee has been provided a certified
tax identification number in order to avoid this possible "back-up withholding."
In the event the trustee has not been previously provided such number, one must
be provided at the time redemption is requested. Any amounts paid on redemption
representing unpaid dividends shall be withdrawn from the Income Account of a
trust to the extent that funds are available for such purpose. All other amounts
paid on redemption shall be withdrawn from the Capital Account for a trust.
Unitholders tendering units for redemption may request a Distribution In
Kind from the trustee in lieu of cash redemption. A unitholder may request a
Distribution In Kind of an amount and value of securities per unit equal to the
redemption price per unit as determined as of the evaluation time next following
the tender, provided that the tendering unitholder is (1) entitled to receive at
least $25,000 of proceeds as part of his or her distribution or if he paid at
least $25,000 to acquire the units being tendered and (2) the unitholder has
elected to redeem at least thirty days prior to the termination of the trust. If
the unitholder meets these requirements, a Distribution In Kind will be made by
the trustee through the distribution of each of the securities of the trust in
book entry form to the account of the unitholder's bank or broker-dealer at
Depository Trust Company. The tendering unitholder shall be entitled to receive
whole shares of each of the securities comprising the portfolio of the trust and
cash from the Capital Account equal to the fractional shares to which the
tendering unitholder is entitled. The trustee shall make any adjustments
necessary to reflect differences between the redemption price of the units and
the value of the securities distributed in kind as of the date of tender. If
funds in the Capital Account are insufficient to cover the required cash
distribution to the tendering unitholder, the trustee may sell securities. The
in-kind redemption option may be terminated by the sponsor at any time. The
trustee is empowered to sell securities in order to make funds available for the
redemption of units. To the extent that securities are sold or redeemed in kind,
the size of a trust will be, and the diversity of a trust may be, reduced but
each remaining unit will continue to represent approximately the same
proportional interest in each security. Sales may be required at a time when
securities would not otherwise be sold and may result in lower prices than might
otherwise be realized. The price received upon redemption may be more or less
than the amount paid by the unitholder depending on the value of the securities
in the portfolio at the time of redemption.
The right of redemption may be suspended and payment postponed for more
than three business days following the day on which tender for redemption is
made (1) for any period during which the New York Stock Exchange is closed,
other than customary weekend and holiday closings, or during which (as
determined by the Securities and Exchange Commission) trading on the New York
Stock Exchange is restricted; (2) for any period during which an emergency
exists as a result of which disposal by the trustee of securities is not
reasonably practicable or it is not reasonably practicable to fairly determine
the value of the underlying securities in accordance with the trust agreement;
or (3) for such other period as the Securities and Exchange Commission may by
order permit. The trustee is not liable to any person in any way for any loss or
damage which may result from any such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The redemption price per unit (as well as
the secondary market public offering price) will generally be determined on the
basis of the last sale price of the securities in a trust. The redemption price
per unit is the pro rata share of each unit in a trust determined generally on
the basis of (i) the cash on hand in the trust or moneys in the process of being
collected and (ii) the value of the securities in the trust less (a) amounts
representing taxes or other governmental charges payable out of the trust, (b)
any amount owing to the trustee for its advances and (c) the accrued expenses or
remaining deferred sales fees of the trust. During the initial offering period,
the redemption price and the secondary market repurchase price will also include
estimated organizational costs. The evaluator may determine the value of the
securities in the trust in the following manner: if the securities are listed on
a national securities exchange or foreign securities exchange, or the Nasdaq
National Market System, such evaluation shall generally be based on the last
available sale price on or immediately prior to the Evaluation Time on the
exchange or the Nasdaq National Market System, which is the principal market
therefor, which shall be deemed to be the New
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York Stock Exchange if the Securities are listed thereon (unless the evaluator
deems such price inappropriate as a basis for evaluation) or, if there is no
such available sale price on such exchange, at the last available bid prices
(offer prices for primary market purchases) of the securities. Securities not
listed on the New York Stock Exchange but principally traded on the Nasdaq
National Market System will be valued at Nasdaq National Market System's
official close price. If the securities are not so listed or, if so listed, the
principal market therefor is other than on such exchange or there is no such
available sale price on such exchange, such evaluation shall generally be based
on the following methods or any combination thereof whichever the evaluator
deems appropriate: (i) on the basis of the current bid price (offer prices for
primary market purchases) for comparable securities (unless the evaluator deems
such price inappropriate as a basis for evaluation), (ii) by determining the
valuation of the Securities on the bid side (offer side for primary market
purchases) of the market by appraisal or (iii) by any combination of the above.
If the trust holds securities denominated in a currency other than U.S. dollars,
the evaluation of such security shall be converted to U.S. dollars based on
current bid side (offer side for primary market purchases) exchange rates
(unless the evaluator deems such prices inappropriate as a basis for valuation).
RETIREMENT PLANS. A trust may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other qualified retirement
plans. Generally, capital gains and income received under each of the foregoing
plans are deferred from federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered by
brokerage firms and other financial institutions. The trust will lower the
minimum investment requirement for IRA accounts to $250. Fees and charges with
respect to such plans may vary.
OWNERSHIP OF UNITS. Ownership of units will not be evidenced by
certificates. All evidence of ownership of units will be recorded in book entry
form either at Depository Trust Company("DTC") through an investor's brokers'
account or through registration of the units on the books of the trustee. Units
held through DTC will be registered in the nominee name of Cede & Co. Individual
purchases of beneficial ownership interest in the trust will be made in book
entry form through DTC or the trustee. Ownership and transfer of 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 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 properly accompanied by a written instrument or
instruments of transfer which should be sent registered or certified mail for
the protection of the unitholder. Unitholders must sign such written request
exactly as their names appear on the records of the trust. The signatures must
be guaranteed by a participant in the STAMP or such other signature guaranty
program in addition to, or in substitution for, STAMP, as may be acceptable by
the trustee.
Units may be purchased 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.
TAXES
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,
local or foreign taxes. As with any investment, you should consult your own tax
professional about your particular consequences. In addition, the Internal
Revenue Service issued new withholding and reporting regulations effective
January 1, 2001. Foreign investors should consult their own tax advisors
regarding the tax consequences of these regulations.
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In the opinion of Chapman and Cutler LLP, counsel for the trust, under
existing law:
ASSETS OF THE TRUST. The trusts will hold shares of Closed-End Funds (the
"SECURITIES") qualifying as regulated investment companies ("RICs"). For
purposes of this federal tax discussion, it is assumed that the Securities
constitute shares in an entity treated as a regulated investment company for
federal income tax purposes. All of the assets held by the trusts constitute the
"Trust Assets."
TRUST STATUS AND DISTRIBUTIONS. Each of the trusts 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 Trust Assets held by your
trust, and as such you will be considered to have received a pro rata share of
income (e.g., dividends 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 a
trust 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).
Distributions from a trust attributable to dividends received from the
Securities will generally not be eligible for the dividends received deduction
for corporations.
YOUR TAX BASIS AND INCOME OR LOSS UPON DISPOSITION. If a 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
certain dividends paid to a trust on the Securities that exceed the RIC's
accumulated earnings and profits).
Under the recently enacted "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 ending on or after May 6, 2003 and
beginning before January 1, 2009. However, special effective date provisions are
set forth in the Tax Act. For example, there are special transition rules
provided with respect to gain properly taken into account for the portion of the
taxable year before May 6, 2003.
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.
DIVIDENDS FROM SECURITIES. Some dividends on the Securities may qualify as
"capital gain dividends," generally taxable to you as long-term capital gains.
In addition, some dividends on the Securities in the Municipal Trust may qualify
as "exempt interest dividends," which generally are excluded from your gross
income for federal income tax purposes. Some or all of the exempt-interest
dividends, however, may be taken into account in determining your alternative
minimum tax, and may have other tax consequences (e.g., they may affect the
amount of your social security benefits that are taxed). Other dividends on the
Securities will generally be taxable to you as ordinary income. However, it is
important to note that pursuant to the Tax Act, certain ordinary income
dividends received by a trust (and distributed to the Unitholders) from a
regulated investment company may qualify to be taxed at the same new rates that
apply to net capital gain (as discussed above), provided certain holding period
requirements are satisfied and provided the dividends are attributable to
qualifying dividends received by the RIC itself. These special rules relating to
the taxation of ordinary income dividends from regulated investment companies
generally apply to taxable years beginning after
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December 31, 2002 and beginning before January 1, 2009. Regulated investment
companies will provide notice to their shareholders of the amount of any
distribution which may be taken into account as a dividend which is eligible for
the new capital gains tax rates.
If you hold a Unit for six months or less or if a trust holds a Security
for six months or less, any loss incurred by you related to the disposition of
such Security will be disallowed to the extent of the exempt-interest dividends
you received. If such loss is not entirely disallowed, it will be treated as
long-term capital loss to the extent of any long-term capital gain distributions
received (or deemed to have been received) with respect to such Security.
Distributions of income or capital gains declared on the Securities in October,
November, or December will be deemed to have been paid to you on December 31 of
the year they are declared, even when paid by the RIC during the following
January.
IN-KIND DISTRIBUTIONS. Under certain circumstances, as described in this
prospectus, you may request a distribution of Securities (an "IN-KIND
DISTRIBUTION") when you redeem your Units or at a trust's termination. By
electing to receive an In-Kind Distribution, you will receive Securities plus,
possibly, cash.
You will not recognize gain or loss if you only receive Securities in
exchange for your pro rata portion of the Securities held by a trust. However,
if you also receive cash in exchange for a Security or a fractional share of a
Security held by a trust, you will generally recognize gain or loss based on the
difference between the amount of cash you receive and your tax basis in such
Security or fractional share.
LIMITATIONS ON THE DEDUCTIBILITY OF TRUST EXPENSES AND YOUR INTEREST
EXPENSES. Generally, for federal income tax purposes, you must take into account
your full pro rata share of a 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 a 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 a trust as
miscellaneous itemized deductions. Individuals may only deduct certain
miscellaneous itemized deductions to the extent they exceed 2% of adjusted gross
income.
Because some of the Securities pay exempt interest dividends, which are
treated as tax-exempt interest for federal income tax purposes, you will not be
able to deduct some of your share of the Trust expenses. In addition, you will
not be able to deduct some of your interest expense for debt that you incur or
continue to purchase or carry your Units.
FOREIGN, STATE AND LOCAL TAXES. Under certain circumstances, a RIC may
elect to pass through to its shareholders certain foreign taxes paid by the RIC.
If a RIC makes this election with respect to Securities, you must include in
your income for federal income tax purposes your portion of such taxes, and you
may be entitled to a credit or deduction for such taxes.
If you are a foreign investor (i.e., an investor other than a U.S. citizen
or resident or a U.S. corporation, partnership, estate or trust), you will not
be subject to U.S. federal income taxes, including withholding taxes, on some of
the income from a trust or on any gain from the sale or redemption of your
Units, provided that certain conditions are met. You should consult your tax
advisor with respect to the conditions you must meet in order to be exempt for
U.S. tax purposes.
In the opinion of Emmet, Marvin & Martin, LLP, Special Counsel to the trust
for New York tax matters, under the existing income tax laws of the State of New
York, each trust is not an association taxable as a corporation and the income
of each trust will be treated as the income of the unitholders thereof.
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.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. The statements of financial
condition, including the Trust Portfolios, appearing herein, have been audited
by Grant Thornton LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance on such report
given on the authority of such firm as experts in accounting and auditing.
PERFORMANCE INFORMATION
Information contained in the prospectus, as it currently exists or as
further updated, may also be included from time to time in other prospectuses or
in advertising material. Information on the performance of a trust strategy or
the actual performance of a trust may be included from time to time in other
prospectuses or advertising material and may reflect sales charges and expenses
of a trust. The performance of a trust may also be compared to the performance
of money managers as reported in SEI Fund Evaluation Survey or of mutual funds
as reported by Lipper Analytical Services Inc. (which calculates total return
using actual dividends on ex-dates accumulated for the quarter and reinvested at
quarter end), Money Magazine Fund Watch (which rates fund performance over a
specified time period after sales charge and assuming all dividends reinvested)
or Wiesenberger Investment Companies Service (which states fund performance
annually on a total return basis) or of the New York Stock Exchange Composite
Index, the American Stock Exchange Index (unmanaged indices of stocks traded on
the New York and American Stock Exchanges, respectively), the Dow Jones
Industrial Average (an index of 30 widely traded industrial common stocks) or
the Standard & Poor's 500 Index (an unmanaged diversified index of 500 stocks)
or similar measurement standards during the same period of time.
DESCRIPTION OF RATINGS
STANDARD & POOR'S ISSUE CREDIT RATINGS
A Standard & Poor's issue credit rating is a current opinion of the
credit-worthiness 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.
LONG-TERM ISSUE CREDIT RATINGS
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 accordance with the terms of the
obligation;
- Nature of and provisions of the obligation;
- 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.
The issue rating definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above. (Such differentiation applies when an entity has
both senior and subordinated obligations, secured and
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unsecured obligations, or operating company and holding company obligations.)
Accordingly, in the case of junior debt, the rating may not conform exactly with
the category definition.
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.
BB An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B An obligation rated "B" is more vulnerable to nonpayment than obligations
rated "BB", but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the obligation.
CCC An obligation rated "CCC" is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on
the obligation.
CC An obligation rated "CC" is currently highly vulnerable to nonpayment.
CA A subordinated debt or preferred stock obligation rated "C" is CURRENTLY
HIGHLY VULNERABLE to nonpayment. The "C" rating may be used to cover a
situation where a bankruptcy petition has been filed or similar action
taken, but payments on this obligation are being continued. A "C" also
will be assigned to a preferred stock issue in arrears on dividends or
sinking fund payments, but that is currently paying.
D An obligation rated "D" is in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The
"D" rating also will be used upon the filing of a bankruptcy petition or
the taking of a similar action if payments on an obligation are
jeopardized.
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.
19
<Page>
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 RATINGS
Aaa Bonds and preferred stock 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 and preferred stock 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
risk appear somewhat larger than the Aaa securities.
A Bonds and preferred stock 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 some time in the future.
Baa Bonds and preferred stock 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 out standing investment characteristics and in fact have speculative
characteristics as well.
Ba Bonds and preferred stock 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 and preferred stock which are rated B generally lack
characteristics of the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa Bonds and preferred stock which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds and preferred stock which are rated Ca represent obligations which
are speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C Bonds and preferred stock which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
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 in the
lower end of that generic rating category.
20
<Page>
CLAYMORE SECURITIES DEFINED PORTFOLIOS
CLAYMORE CLOSED-END PORTFOLIO
PROSPECTUS-PART B
WHERE TO LEARN MORE
You can contact us for free information about this and other investments.
VISIT US ON THE INTERNET
http://www.claymoresecurities.com
BY E MAIL
invest@claymoresecurities.com
CALL CLAYMORE
(800) 345-7999
Pricing Line (888) 248-4954
CALL THE BANK OF NEW YORK
(800) 701-8178 (investors)
(800) 647-3383 (brokers)
ADDITIONAL INFORMATION
This prospectus does not contain all information filed with the Securities
and Exchange Commission. To obtain a copy of this information (a duplication fee
may be required):
E MAIL: publicinfo@sec.gov
WRITE: Public Reference Section
Washington, D.C. 20549-0102
VISIT: http://www.sec.gov (EDGAR Database)
CALL: 1-202-942-8090 (only for information on the operation of the
Public Reference System)
When units of the trust are no longer available, we may use this prospectus
as a preliminary prospectus for a future trust. In this case you should note
that:
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE WITH RESPECT TO FUTURE
TRUSTS AND MAY BE CHANGED. NO ONE MAY SELL UNITS OF A FUTURE TRUST UNTIL A
REGISTRATION STATEMENT IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL UNITS AND IS NOT
SOLICITING AN OFFER TO BUY UNITS IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<Page>
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<Page>
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<Page>
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<Page>
CONTENTS
<Table>
Investment Summary
A CONCISE DESCRIPTION OF ESSENTIAL INFORMATION ABOUT THE PORTFOLIOS
2 Overview
2 Investment Objective
2 Principal Investment Strategy
2 Security Selection
2 Principal Risks
3 Who Should Invest
3 Essential Information
4 Fees and Expenses
5 Example
5 Estimated Annual Income Distributions
6 Trust Portfolio
Understanding Your Investment
DETAILED INFORMATION TO HELP YOU UNDERSTAND YOUR INVESTMENT
7 How to Buy Units
10 How to Sell Your Units
12 Distributions
12 Investment Risks
14 How the Trust Works
16 General Information
16 Expenses
18 Report of Independent Registered Public Accounting Firm
19 Statements of Financial Condition
</Table>
FOR THE TABLE OF CONTENTS OF PART B, SEE PART B OF THE PROSPECTUS.
Where to Learn More
YOU CAN CONTACT US FOR FREE INFORMATION ABOUT THIS AND OTHER INVESTMENTS.
VISIT US ON THE INTERNET
http://www.claymoresecurities.com
BY E-MAIL
invest@claymoresecurities.com
CALL CLAYMORE (800) 345-7999
Pricing Line (888) 248-4954
CALL THE BANK OF NEW YORK
(800) 701-8178 (investors)
(800) 647-3383 (brokers)
Additional Information
This prospectus does not contain all information filed with the Securities and
Exchange Commission. To obtain or copy this information (a duplication fee may
be required):
E-MAIL: publicinfo@sec.gov
WRITE: Public Reference Section, Washington, D.C. 20549-0102
VISIT: http://www.sec.gov (EDGAR Database)
CALL: 1-202-942-8090 (only for information on the operation of the Public
Reference Section)
REFER TO:
CLAYMORE SECURITIES DEFINED PORTFOLIOS, SERIES 198
Securities Act file number: 333-
Investment Company Act file number: 811-03763
When units of the trust are no longer available, we may use this prospectus as a
preliminary prospectus for a future trust. In this case you should note that:
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE WITH RESPECT TO FUTURE TRUSTS
AND MAY BE CHANGED. NO ONE MAY SELL UNITS OF A FUTURE TRUST UNTIL A REGISTRATION
STATEMENT IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL UNITS AND IS NOT SOLICITING AN OFFER TO
BUY UNITS IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
[GRAPHIC]
CLAYMORE SECURITIES
DEFINED PORTFOLIOS
SERIES 198
PROSPECTUS
CLOSED-END EQUITY AND
INCOME PORTFOLIO, SERIES 1
[CLAYMORE LOGO]
<Page>
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
The Depositor has obtained the following Securities Dealer Blanket Bond
for its officers, directors and employees:
INSURER/POLICY NO. AMOUNT
National Union Fire Insurance
Company of Pittsburgh, Pennsylvania $250,000
959-9000
This Registration Statement comprises the following papers and documents.
The Facing Sheet
The Prospectus
The Signatures
Consents of Counsel
The following exhibits:
1.1 Reference Trust Agreement (to be supplied by amendment).
1.1.1 Standard Terms and Conditions of Trust (Reference is made to
Exhibit 1.1.1 to Amendment No.1 to the Registration Statement on
Form S-6 for Claymore Securities Defined Portfolios, Series 116
(File No. 333-72828 filed on December 18, 2001).
2.1 Code of Ethics (Reference is made to Exhibit 2.1 to the Registration
Statement on Form S-6 for Claymore Securities Deferred Portfolios,
Series 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 Registered Public Accounting Firm (to be
supplied by amendment).
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Claymore Securities Defined Portfolios, Series 198 has duly
caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Lisle, and State of
Illinois, on the 14th day of October, 2004.
CLAYMORE SECURITIES DEFINED PORTFOLIOS,
SERIES 198, 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 October 14, 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 ) October 14, 2004
Directors )
)
/S/ CHARLES MILLINGTON Chief Financial Officer October 14, 2004
- ----------------------
CHARLES MILLINGTON
/S/ NICHOLAS DALMASO
- ----------------------
NICHOLAS DALMASO Senior Managing Director, October 14, 2004
General Counsel and 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 REGISTERED PUBLIC ACCOUNTING FIRM
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 198
The list of securities comprising the trust of the fund, the
evaluation, record and distribution dates and other changes pertaining
specifically to the new series, such as size and number of units of the trust
in the fund and the statement of financial condition of the new fund will be
filed by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
Form N-8A and Form N-8B-2 were filed in respect of Claymore Securities
Defined Portfolios, Series 116 (and subsequent series) (File No. 811-03763).
1933 ACT
THE INDENTURE
The form of the proposed Standard Terms and Conditions of Trust is
expected to be in all respects consistent with the form of the Standard Terms
and Conditions of Trust dated December 18, 2001 relative to Claymore
Securities Defined Portfolios, Series 116.
CHAPMAN AND CUTLER LLP
Chicago, Illinois
October 14, 2004