SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: FT 754
B. Name of Depositor: FIRST TRUST PORTFOLIOS L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: FIRST TRUST PORTFOLIOS L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN & CUTLER LLP
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
E. Title of Securities
Being Registered: An indefinite number of
Units pursuant to Rule
24f-2 promulgated under
the Investment Company Act
of 1940, as amended.
F. Approximate Date of Proposed
Sale to the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant 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.
SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 2003
Equity Dividend Covered Call Portfolio Series
FT 754
FT 754 is a series of a unit investment trust, the FT Series. FT 754
consists of a single portfolio known as Equity Dividend Covered Call
Portfolio Series (the "Trust"). The Trust invests in a portfolio of
common stocks ("Equity Securities") and U.S. Treasury securities
("Treasury Obligations"). The Equity Securities will be subject to
FLEX(R) Options which give the option holder the right to buy the Equity
Securities at the termination of the Trust at a predetermined price (the
"Purchase Right"), which means you give up any increase in the Equity
Security above that price. Collectively, the Equity Securities and
Treasury Obligations are referred to as the "Securities." The objective
of the Trust is to provide the potential for total return (limited
capital appreciation and income).
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.
FIRST TRUST (R)
1-800-621-9533
The date of this prospectus is ________, 2003
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statement of Net Assets 6
Schedule of Investments 7
The FT Series 10
Portfolio 10
Risk Factors 12
Equity Securities Descriptions 13
Public Offering 14
Distribution of Units 17
The Sponsor's Profits 18
The Secondary Market 18
How We Purchase Units 18
Expenses and Charges 18
Tax Status 19
Retirement Plans 21
Rights of Unit Holders 22
Income and Capital Distributions 22
Redeeming Your Units 23
Removing Securities from the Trust 24
Amending or Terminating the Indenture 24
Information on the Sponsor, Trustee and Evaluator 25
Other Information 26
Page 2
Summary of Essential Information
Equity Dividend Covered Call Portfolio Series
FT 754
At the Opening of Business on the Initial Date of Deposit-________, 2003
Sponsor: First Trust Portfolios L.P.
Trustee: JPMorgan Chase Bank
Evaluator: First Trust Advisors L.P.
Initial Number of Units
Fractional Undivided Interest in the Trust per Unit 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (1) $
Maximum Sales Charge of % of the Public Offering Price per Unit
( % exclusive of the deferred sales charge and creation and development fee) (2) $
Less Deferred Sales Charge per Unit $ ( )
Less Creation and Development Fee per Unit $ ( )
Public Offering Price per Unit (3) $
Sponsor's Initial Repurchase Price per Unit (4) $
Redemption Price per Unit (based on the bid side evaluation of the Treasury Obligations and
the aggregate underlying value of the Equity Securities, less the deferred sales charge) (4) $
Estimated Net Annual Distribution per Unit for the first year (5) $
Cash CUSIP Number
Reinvestment CUSIP Number
Fee Accounts Cash CUSIP Number
Fee Accounts Reinvestment CUSIP Number
Security Code
Ticker Symbol
First Settlement Date ________, 2003
Mandatory Termination Date (6) ________, 20__
Income Distribution Record Date Fifteenth day of each March, June, September and December, commencing ________, 2003.
Income Distribution Date (5) Last day of each March, June, September and December, commencing ________, 2003.
______________
<FN>
(1) Each listed Equity Security is valued at its last closing sale
price, which has been reduced by the value of the Purchase Rights. Each
Treasury Obligation is valued at its last offering price. If an Equity
Security is not listed, or if no closing sale price exists, it is valued
at its closing ask price. Purchase Rights are valued at their last
closing sale price. Evaluations for purposes of determining the
purchase, sale or redemption price of Units are made as of the close of
trading on the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern time) on each day on which it is open (the "Evaluation Time").
(2) The maximum sales charge consists of an initial sales charge, a
deferred sales charge and the creation and development fee. See "Fee
Table" and "Public Offering."
(3) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit. No
investor will purchase Units at this price. The price you pay for your
Units will be based on their valuation at the Evaluation Time on the
date you purchase your Units. On the Initial Date of Deposit, the Public
Offering Price per Unit will not include any accumulated dividends on
the Equity Securities. After this date, a pro rata share of any
accumulated dividends on the Equity Securities will be included. In
calculating the price of a Unit, the value of the Equity Securities is
reduced by the value of the Purchase Rights on ________, 2003 as
determined by the Evaluator.
(4) Until the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period the Sponsor's Initial Repurchase
Price per Unit and the Redemption Price per Unit will include the
creation and development fee and estimated organization costs per Unit
set forth under "Fee Table." After such date, the Sponsor's Repurchase
Price and Redemption Price per Unit will not include such creation and
development fee and estimated organization costs. See "Redeeming Your
Units."
(5) The estimated net annual distribution for subsequent years, $ per
Unit, is expected to be less than that set forth above for the first
year because a portion of the Securities included in the Trust will be
sold during the first year to pay for organization costs, the deferred
sales charge and the creation and development fee. The actual net annual
distribution you will receive will vary from that set forth above with
changes in the Trust's fees and expenses, in dividends and interest
received and with the sale of Securities. See "Fee Table" and "Expenses
and Charges." Distributions from the Capital Account will be made
monthly on the last day of each month to Unit holders of record on the
fifteenth day of such month if the amount available for distribution
equals at least $1.00 per 100 Units. In any case, the Trustee will
distribute any funds in the Capital Account in December of each year and
as part of the final liquidation distribution.
(6) See "Amending or Terminating the Indenture."
</FN>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of the Trust. See "Public
Offering" and "Expenses and Charges." Although the Trust has a term of
approximately 18 months and is a unit investment trust rather than a
mutual fund, this information allows you to compare fees.
Amount
per Unit
_____
Unit Holder Sales Fees (as a percentage of public offering price)
Maximum Sales Charge
Initial sales charge %(a) $
Deferred sales charge %(b) $
Creation and development fee %(c) $
_______ _______
Maximum Sales Charges (including creation and development fee) % $
======= =======
Organization Costs (as a percentage of public offering price)
Estimated organization costs %(d) $
======= =======
Estimated Annual Trust Operating Expenses(e)
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative and evaluation fees % $
Trustee's fee and other operating expenses %(f) $
_______ _______
Total % $
======= =======
Example
This example is intended to help you compare the cost of investing in
the Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trust for the periods
shown and sell your Units at the end of those periods. The example also
assumes a 5% return on your investment each year and that the Trust's
operating expenses stay the same. The example does not take into
consideration transaction fees which may be charged by certain
broker/dealers for processing redemption requests. Although your actual
costs may vary, based on these assumptions your costs would be:
1 Year 18 Months
__________ __________
$ $
The example will not differ if you hold rather than sell your Units at
the end of each period.
_____________
<FN>
(a) The combination of the initial and deferred sales charge comprises
what we refer to as the "transactional sales charge." The initial sales
charge is actually equal to the difference between the maximum sales
charge of % and the sum of any remaining deferred sales charge and
creation and development fee.
(b) The deferred sales charge is a fixed dollar amount equal to $ per
Unit which, as a percentage of the Public Offering Price, will vary over
time. The deferred sales charge will be deducted in _____ monthly
installments commencing ________, 2004.
(c) The creation and development fee compensates the Sponsor for creating
and developing the Trust. The creation and development fee is a charge
of $ per Unit collected at the end of the initial offering period
which is expected to be approximately 30 days from the Initial Date of
Deposit. If the price you pay for your Units exceeds $ per Unit, the
creation and development fee will be less than %; if the price you
pay for your Units is less than $ per Unit, the creation and
development fee will exceed %.
(d) Estimated organization costs will be deducted from the assets of the
Trust at the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period.
(e) Each of the fees listed herein is assessed on a fixed dollar amount
per Unit basis which, as a percentage of average net assets, will vary
over time.
(f) Other operating expenses include the costs incurred by the Trust for
annually updating the Trust's registration statement. Other operating
expenses, however, do not include brokerage costs and other portfolio
transaction fees. In certain circumstances the Trust may incur
additional expenses not set forth above. See "Expenses and Charges."
</FN>
Page 4
Report of Independent Auditors
The Sponsor, First Trust Portfolios L.P., and Unit Holders
FT 754
We have audited the accompanying statement of net assets, including the
schedule of investments, of FT 754, comprising Equity Dividend Covered
Call Portfolio Series (the "Trust"), as of the opening of business on
________, 2003 (Initial Date of Deposit). This statement of net assets
is the responsibility of the Trust's Sponsor. Our responsibility is to
express an opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the statement of net assets is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the statement of net assets. Our procedures
included confirmation of the irrevocable letter of credit held by
JPMorgan Chase Bank, the Trustee, and deposited in the Trust for the
purchase of Securities, as shown in the statement of net assets, as of
the opening of business on ________, 2003, by correspondence with the
Trustee. An audit also includes assessing the accounting principles used
and significant estimates made by the Trust's Sponsor, as well as
evaluating the overall presentation of the statement of net assets. We
believe that our audit of the statement of net assets provides a
reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of FT 754,
comprising Equity Dividend Covered Call Portfolio Series, at the opening
of business on ________, 2003 (Initial Date of Deposit) in conformity
with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
________, 2003
Page 5
Statement of Net Assets
Equity Dividend Covered Call Portfolio Series
FT 754
At the Opening of Business on the
Initial Date of Deposit-________, 2003
NET ASSETS
Investment in Securities represented by purchase contracts (1) (2) $
Accrued interest on underlying Treasury Obligations (2) (3)
Less liability for Purchase Rights (call options written) (1)
Less liability for reimbursement to Sponsor for organization costs (4) ( )
Less liability for deferred sales charge (5) ( )
Less liability for creation and development fee (6) ( )
________
Net assets $
========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (7) $
Less maximum sales charge (7) ( )
Less estimated reimbursement to Sponsor for organization costs (4) ( )
________
Net assets $
========
_____________
<FN>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" is based on their aggregate underlying value, less the
value of the Purchase Rights on the Equity Securities.
(2) An irrevocable letter of credit issued by JPMorgan Chase Bank of
which $ will be allocated to the Trust, has been deposited with
the Trustee as collateral, covering the monies necessary for the
purchase of the Securities according to their purchase contracts
($_______), accrued interest to the Initial Date of Deposit ($______)
and accrued interest from the Initial Date of Deposit to the expected
dates of delivery of the Treasury Obligation.
(3) The Trustee will advance to the Trust the amount of net interest
accrued to the First Settlement Date which will be distributed to the
Sponsor as Unit holder of record.
(4) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trust. These costs have been estimated at $ per
Unit. A payment will be made at the earlier of six months after the
Initial Date of Deposit or the end of the initial offering period to an
account maintained by the Trustee from which the obligation of the
investors to the Sponsor 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
reimbursed to the Sponsor and deducted from the assets of the Trust. The
Securities were deposited at prices equal to their market value as
determined by the Evaluator, which value has been reduced to reflect
the Trust's obligation under the Purchase Right.
(5) Represents the amount of mandatory deferred sales charge
distributions from the Trust ($ per Unit), payable to the Sponsor in
______ approximately equal monthly installments beginning on ________,
2004 and on the twentieth day of each month thereafter (or if such date
is not a business day, on the preceding business day) through ________,
2004. If Unit holders redeem Units before ________, 2004, they will have
to pay the remaining amount of the deferred sales charge applicable to
such Units when they redeem them.
(6) The creation and development fee ($ per Unit) is payable by the
Trust on behalf of Unit holders out of assets of the Trust at the end of
the initial offering period. If Units are redeemed prior to the close of
the initial offering period, the fee will not be deducted from the
proceeds.
(7) The aggregate cost to investors in the Trust includes a maximum
sales charge (comprised of an initial sales charge, a deferred sales
charge and the creation and development fee) computed at the rate of
% of the Public Offering Price per Unit (equivalent to % of the net
amount invested, exclusive of the deferred sales charge and the creation
and development fee), assuming no reduction of the maximum sales charge
as set forth under "Public Offering."
</FN>
Page 6
Schedule of Investments
Equity Dividend Covered Call Portfolio Series
FT 754
At the Opening of Business on the Initial Date of Deposit-________, 2003
Number Percentage Market Market Value Value
of Ticker Symbol and of Aggregate Value per Purchase of Purchase
Shares Name of Issuer of Equity Securities (1) Offering Price per Share Right (2) Rights
________ ________________________________ ________ _______ _______ _______
% $ $ $
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
Cost of
Securities
less Current
Cost of Value of Annual
Securities to Purchase Dividend
the Trust (3) Rights per Share (4)
________ ________ ________
$ $ $
Page 7
Schedule of Investments (cont'd.)
Equity Dividend Covered Call Portfolio Series
FT 754
At the Opening of Business on the
Initial Date of Deposit-________, 2003
Number Percentage Market Market Value Value
of Ticker Symbol and of Aggregate Value per Purchase of Purchase
Shares Name of Issuer of Equity Securities (1) Offering Price per Share Right (2) Rights
________ ________________________________ ______________ _________ ____________ __________
% $ $ $
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
%
(purchase right at: _____ per share)
______
Total Equity Securities %
======
Maturity
Value Name of Issuer and Title of Treasury Obligation (1)
________ ________________________________
$ U.S. Treasury bonds, ___%,
maturing ________, 20__ % N.A. N.A. N.A.
Total Investments 100.00%
======
Cost of
Securities
less Current
Cost of Value of Annual
Securities to Purchase Dividend
the Trust (3) Rights per Share (4)
_____________ ________ _____________
$ $ $
_________ _________
$ $
====== ======
$ $ N.A.
$ $
====== ======
______________
<FN>
See "Notes to Schedule of Investments" on page 9.
Page 8
NOTES TO SCHEDULE OF INVESTMENTS
(1) All Securities are represented by regular way contracts to purchase
such Securities which are backed by an irrevocable letter of credit
deposited with the Trustee. The Sponsor entered into purchase contracts
for the Securities on ________, 2003. Such purchase contracts are
expected to settle within three business days.
(2) The exercise date of the Purchase Rights is _____________, 20__.
(3) The cost of the Securities to the Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the closing sale prices of the listed Equity Securities
less the value of the Purchase Rights, the ask prices of the over-the-
counter traded Equity Securities less the value of the Purchase Rights,
and the offering side price of the Treasury Obligations at the
Evaluation Time on the business day preceding the Initial Date of
Deposit). The offering side price of the Treasury Obligations is greater
than the bid side price of the Treasury Obligations which is the basis
on which the Redemption Price per Unit will be determined. The Evaluator
valued the Purchase Rights at their last closing sale price on ________,
20__. In calculating the price of a Unit, the value of the Equity
Securities are reduced by the value of the Purchase Rights on ________,
20__, as determined by the Evaluator. The value of the Securities based
on the bid side price of the Treasury Obligations, the value of the
Equity Securities and the value of the Purchase Rights is $_______. The
valuation of the Securities has been determined by the Evaluator, an
affiliate of the Sponsor. The cost of the Securities to the Sponsor and
the Sponsor's profit or loss (which is the difference between the cost
of the Securities to the Sponsor and the cost of the Securities to the
Trust) are $ and $ , respectively.
(4) Current Annual Dividend per Share for each Equity Security was
annualized based on the latest quarterly or semi-annual dividend
declared by an issuer. There can be no assurance that future dividend
payments, if any, will be maintained in an amount equal to the dividend
listed above.
</FN>
Page 9
The FT Series
The FT Series Defined.
We, First Trust Portfolios L.P. (the "Sponsor"), have created hundreds
of similar yet separate series of a unit investment trust which we have
named the FT Series. The series to which this prospectus relates, FT
754, consists of a single portfolio known as Equity Dividend Covered
Call Portfolio Series.
The Trust was created under the laws of the State of New York by a Trust
Agreement (the "Indenture") dated the Initial Date of Deposit. This
agreement, entered into among First Trust Portfolios L.P., as Sponsor,
JPMorgan Chase Bank as Trustee and First Trust Advisors L.P. as
Portfolio Supervisor and Evaluator, governs the operation of the Trust.
YOU MAY GET MORE SPECIFIC DETAILS CONCERNING THE NATURE, STRUCTURE AND
RISKS OF THIS PRODUCT IN AN "INFORMATION SUPPLEMENT" BY CALLING THE
TRUSTEE AT 1-800-682-7520.
How We Created the Trust.
On the Initial Date of Deposit, we deposited a portfolio of U.S.
Treasury obligations and common stocks (each of which are subject to
Purchase Rights), with the Trustee, and in turn, the Trustee delivered
documents to us representing our ownership of the Trust in the form of
units ("Units"). Because the Equity Securities held by the Trust are
subject to Purchase Rights, the Equity Securities' upside potential will
be limited. The Securities were deposited at prices equal to their
market value as determined by the Evaluator, which value has been
reduced to reflect the Trust's obligation under the Purchase Rights.
After the Initial Date of Deposit, we may deposit additional Securities
in the Trust, or cash (including a letter of credit) with instructions
to buy more Securities, to create new Units for sale. Any additional
Equity Securities deposited will be subject to Purchase Rights with the
same terms as the Purchase Rights initially deposited. If we create
additional Units, we will attempt, to the extent practicable, to
maintain the percentage relationship established among the Securities on
the Initial Date of Deposit (as set forth in the "Schedule of
Investments"), and not the actual percentage relationship existing on
the day we are creating new Units, since the two may differ. This
difference may be due to the sale, redemption or liquidation of any of
the Securities.
Since the prices of the Securities will fluctuate daily, the ratio of
Securities in the Trust, on a market value basis, will also change
daily. The portion of Securities represented by each Unit will not
change as a result of the deposit of additional Securities or cash in
the Trust. If we deposit cash, you and new investors may experience a
dilution of your investment. This is because prices of Securities will
fluctuate between the time of the cash deposit and the purchase of the
Securities, and because the Trust pays the associated brokerage fees. To
reduce this dilution, the Trust will try to buy the Securities as close
to the Evaluation Time and as close to the evaluation price as possible.
In addition, because the Trust pay the brokerage fees associated with
the creation of new Units and with the sale of Securities to meet
redemption and exchange requests, frequent redemption and exchange
activity will likely result in higher brokerage expenses.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may retain and pay us (or our affiliate) to act as agent for the
Trust to buy Securities. If we or an affiliate of ours act as agent to
the Trust, we will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
We cannot guarantee that the Trust will keep its present size and
composition for any length of time. Securities may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. However, Securities will not be sold to take
advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation, or if they no longer meet the criteria by
which they were selected. You will not be able to dispose of or vote any
of the Securities in the Trust. As the holder of the Securities, the
Trustee will vote all of the Equity Securities and will do so based on
our instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in the Trust fails, unless we can
purchase substitute Securities ("Replacement Securities") we will refund
to you that portion of the purchase price and transactional sales charge
resulting from the failed contract on the next Income Distribution Date.
Any Replacement Security the Trust acquires will be identical to those
from the failed contract.
Portfolio
Objectives.
The objective of the Equity Dividend Covered Call Portfolio Series is to
provide investors with the potential for total return (limited capital
appreciation and income).
Page 10
Many income investors find the current environment challenging and are
looking for alternatives for the income portion of their portfolios.
There are many different approaches to developing a portfolio that
provides income potential, and this investment has been developed to
meet this challenge.
For investors considering equity income alternatives, this portfolio is
designed to provide both enhanced income and limited downside
protection. The limited downside protection results from writing call
options on the portfolio's equity securities and using the premiums
received from the call options to purchase U.S. Treasury Notes.
This product may appeal to income investors who are seeking income from
a combination of high dividend-paying stocks and U.S. Treasury Notes.
Each Equity Security is subject to a contractual right (the "Purchase
Right") which gives the holder of the Purchase Right (the "Right
Holder") the right to buy the Equity Security at a predetermined price
(the "Exercise Price") on ________, 20__(the "Right Exercise Date").
Each Purchase Right is a Flexible Exchange(R) Option ("FLEX(R) Option" or
"Covered Call Option") issued by The Options Clearing Corporation ("OCC").
Each FLEX(R) Option will be a European-style option which means that it is
exercisable only on its expiration date which will be the Right Exercise Date.
On the Initial Date of Deposit, the Exercise Price of the Purchase Rights is
equal to approximately ___% of the closing market price on that date of
the Equity Securities deposited in the Trust.
Key Features.
Covered call option writing generates immediate premium income (which
will be invested in U.S. Treasury Notes). The premium income generated
by selling the call options provides a cushion against downturns in the
market; of course, it is limited to the amount of the premium income.
The dividend income generated by the stocks and the interest received by
the U.S. Treasury Notes is designed to provide an income stream to the
investor.
The stocks selected will be companies with long histories of paying
dividends at a greater rate than other companies in the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500 Index"). There is,
however, no assurance that the companies selected for the portfolio will
declare dividends in the future or that, if declared, will either remain
at current levels or increase over time.
Market Scenarios.
This Trust is designed to seek relatively high dividend income plus
interest income from the U.S. Treasury Notes. The Trust also seeks to
provide the potential for capital appreciation, limited to the exercise
price of the call options. Here is how this investment could work under
three scenarios:
- - Stock price increases above the exercise price: The call option is
exercised and the underlying stock shares are sold at the call's stock
price. Profits are limited to the premium received on the call plus the
profit made from the difference between the stock's price at initiation
and the call strike price, as well as dividends received from the
stocks, plus interest received from the U.S. Treasury Notes.
- - Stock price remains stable: The call option expires worthless and the
Trust still owns the stock shares. Profits are limited to the premium
received on the call, plus dividends from the stocks, as well as
interest received from the U.S. Treasury Notes.
- - Stock price decreases: The call option expires worthless and the Trust
still owns the stock shares. The breakeven on the stock is lowered by
the premium received on the call, in addition to the dividends received
from the stocks and, again, interest received from the U.S. Treasury
Notes.
Strategy. The strategy followed by the Trust is a covered call writing
strategy. A writer of a covered call sells call options against stock
currently held by the writer. The writer of a call option receives a
cash premium for selling the call but is obligated to sell the stock at
the Exercise Price on the Right Exercise Date, if the option is
exercised. The payor of the option premium, the Right Holder, has the
right, but not the obligation, to purchase the stock at the Exercise
Price on the Right Exercise Date. The option writer gives up any
increase in the stock above the Exercise Price. This strategy is
appropriate for an investor who is willing to limit the upside potential
on the stock in return for receiving the option premium.
On or before the Initial Date of Deposit, the Sponsor entered into
contracts to buy the Equity Securities. The Sponsor then wrote FLEX(R)
Options on each of the Equity Securities and received an option premium
therefore. Using the option premium proceeds, the Sponsor entered into
contracts to buy the Treasury Obligations. On the Initial Date of
Deposit, the Sponsor deposited the Equity Securities subject to the
Purchase Rights and the Treasury Obligations with the Trustee on behalf
of the Trust. At such time the Sponsor also assigned the FLEX(R) Options
to the Trust giving the Right Holders the right to purchase Equity
Securities from the Trust.
Each Purchase Right will give the Right Holder, on the Right Exercise
Date, the right (but not the obligation) to purchase Equity Securities
Page 11
from the Trust at the Exercise Price. The Exercise Price for an Equity
Security held by the Trust will be adjusted downward (but not below
zero) upon certain extraordinary distributions made by the issuers of
the Equity Securities to Unit holders before the Right Exercise Date
triggered by certain corporate events affecting such Equity Security.
See "Risk Factors-Purchase Right."
In calculating the net asset value of a Unit, the price of each Equity
Security is reduced by the value of its corresponding Purchase Right.
(For example, if a stock has a value of $100 per share and the Purchase
Right is valued at $10 per share the stock will be valued at $90 per
share).
The capital appreciation on the Equity Securities held by the Trust is
limited to a maximum of approximately __% because of the obligation of
the Trust to the Right Holder with respect to each of the Equity
Securities entitling the Right Holder to purchase on the Right Exercise
Date the Equity Securities at the Exercise Price. The Purchase Rights
limit your upside potential in the Equity Securities to an amount equal
to the Exercise Price. However, as the option premium received in return
for issuing the Purchase Rights was used to purchase Treasury
Obligations, you will receive interest from the Treasury Obligations
during the life of the Trust and the your pro rata portion of the
principal from the Treasury Obligations at the Trust's maturity.
If the market price of an Equity Security held by the Trust on the Right
Exercise Date is greater than its Exercise Price, the Trust will not
participate in any appreciation in that Equity Security above the
Exercise Price because it is expected that the holder of the related
Purchase Right will exercise its right to purchase that Equity Security
from the Trust at the Exercise Price. If the market price of an Equity
Security held by the Trust on the Right Exercise Date is less than its
Exercise Price, it is expected that the Purchase Right will terminate
without being exercised, and the Trust, in connection with its
termination, will liquidate or distribute the Equity Security at its
then current market value. To the extent particular Equity Securities
held by the Trust decline in price or fail to appreciate to a price
equal to the related Exercise Price, the Trust will not achieve its
maximum potential appreciation.
The Treasury Obligations included in the Trust are non-callable debt
obligations that are issued by and backed by the full faith and credit
of the U.S. Government, although Units of the Trust are not so backed.
Additionally, the U.S. Government assures the timely payment of
principal and interest on the underlying Treasury Obligations in the
Trust. Of course, this applies only to the payment of principal and
interest on the Treasury Obligations and not the Units themselves.
You should be aware that predictions stated herein may not be realized.
Of course, as with any similar investment, there can be no guarantee
that the objective of the Trust will be achieved. See "Risk Factors" for
a discussion of the risks of investing in the Trust.
Risk Factors
Price Volatility. The Trust invests in Treasury Obligations and Equity
Securities subject to Purchase Rights. The value of the Trust's Units
will fluctuate with changes in the value of the Treasury Obligations,
Equity Securities and Purchase Rights.
Because the Trust is not managed, the Trustee will not sell Securities
in response to or in anticipation of market fluctuations, as is common
in managed investments. As with any investment, we cannot guarantee that
the performance of the Trust will be positive over any period of time or
that you won't lose money. Units of the Trust are not deposits of any
bank and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Common Stocks. Common stock prices fluctuate for several reasons
including changes in investors' perceptions of the financial condition
of an issuer or the general condition of the relevant stock market, such
as the current market volatility, or when political or economic events
affecting the issuers occur. In addition, common stock prices may be
particularly sensitive to rising interest rates, as the cost of capital
rises and borrowing costs increase.
U.S. Treasury Obligations. U.S. Treasury obligations are direct
obligations of the United States which are backed by the full faith and
credit of the United States. The value of the Treasury Obligations will
be adversely affected by decreases in bond prices and increases in
interest rates. Certain Treasury Obligations may have been purchased on
the Initial Date of Deposit at prices of less than their par value at
maturity, indicating a market discount. Other Treasury Obligations may
have been purchased on the Initial Date of Deposit at prices greater
than their par value at maturity, indicating a market premium. The
coupon interest rate of Treasury Obligations purchased at a market
discount was lower than current market interest rates of newly issued
bonds of comparable rating and type and the coupon interest rate of
Treasury Obligations purchased at a market premium was higher than
current market interest rates of newly issued bonds of comparable rating
Page 12
and type. Generally, the value of bonds purchased at a market discount
will increase in value faster than bonds purchased at a market premium
if interest rates decrease. Conversely, if interest rates increase, the
value of bonds purchased at a market discount will decrease faster than
bonds purchased at a market premium.
FLEX(R) Options. The value of the Purchase Rights may be adversely
affected if the market for FLEX(R) Options becomes less liquid or
smaller. If this occurs before the Right Exercise Date, and you sell or
redeem Units before that date or the Trust terminates before that date,
there will likely be a negative impact on the value of your Units.
Although you may redeem your Units at any time, if you redeem before the
Right Exercise Date the value of your Units may be adversely affected by
the value of the FLEX(R) Options. However, if you hold your Units until
the scheduled Termination Date the FLEX(R) Options will have ceased to
exist and the Trust portfolio will consist of only cash or Securities or
a combination of each.
Purchase Rights. If you sell or redeem your Units, or if the Trust
terminates before its scheduled Termination Date, you may not realize
any appreciation in the value of the Equity Securities because even if
the Equity Securities appreciate in value, that appreciation may be more
than fully, fully or partly offset by an increase in value in the
Purchase Rights. The value of the Purchase Rights is deducted from the
value of the Trust assets when determining the value of a Unit. If the
Equity Securities decline in price, your loss may be greater than it
would be if there were no Purchase Rights because the value of the
Purchase Rights is a reduction to the value of the stock when
calculating the value of a Unit. An increase in value of the Purchase
Rights, an obligation of the Trust to sell or deliver the Equity
Securities at the Exercise Price on the Right Exercise Date if the
Purchase Right is exercised by the Right Holder, will reduce the value
of the Equity Securities in the Trust, below the value of the Equity
Securities that would otherwise be realizable if the Equity Securities
were not subject to the Purchase Rights. You should note that even if
the price of an Equity Security does not change, if the value of a
Purchase Right increases (for example, based on increased volatility of
an Equity Security) your Unit will lose value.
The value of the Purchase Rights reduce the value of your Unit. As the
value of the Purchase Rights increase they have a more negative impact
on the value of your Unit. The value of the Purchase Rights will also be
affected by changes in the value and dividend rates of the Equity
Securities, an increase in interest rates, a change in the actual and
perceived volatility of the stock market and the Equity Securities and
the remaining time to expiration. Additionally, the value of a Purchase
Right does not increase or decrease at the same rate as the underlying
stock (although they generally move in the same direction). However, as
a Purchase Right approaches the Right Exercise Date, its value
increasingly moves with the price of the Equity Security subject to the
Purchase Right.
The Exercise Price for each Equity Security held by the Trust may be
adjusted downward before the Right Exercise Date triggered by certain
corporate events affecting that Equity Security. A downward adjustment
to the Exercise Price will have the effect of reducing the equity
appreciation that a Unit holder may receive on the Right Exercise Date.
If the Exercise Price is adjusted downward and the Purchase Right is
exercised at the reduced Exercise Price, a Unit Holder would lose money
if the value of the Equity Security at the time that the Unit is
purchased is greater than the adjusted Exercise Price. Adjustments will
be made to the Exercise Price of an Equity Security based on adjustments
made by the OCC to options on that security. The OCC generally does not
adjust option strike prices to reflect ordinary dividends but may adjust
option strike prices to reflect certain corporate events such as
extraordinary dividends, stock splits, merger or other extraordinary
distributions or events.
Distributions. There is no guarantee that the issuers of the Equity
Securities will declare dividends in the future or that if declared they
will either remain at current levels or increase over time. In addition,
there is no guarantee that U.S. Government will be able to satisfy its
interest payment obligations to the Trust over the life of the Trust.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed in the United States and abroad which may have
a negative impact on certain companies represented in the Trust.
Litigation regarding any of the issuers of the Equity Securities, or the
industries represented in the Trust, may negatively impact the share
prices of these Equity Securities. In addition, litigation may be
initiated on a variety of grounds affecting the Treasury Obligations. We
cannot predict what impact any pending or proposed legislation or
pending or threatened litigation will have on the share prices of the
Securities.
Equity Securities Descriptions
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We have obtained the foregoing descriptions from sources we deem
reliable. We have not independently verified the provided information
either in terms of accuracy or completeness.
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the per Unit price of
which is comprised of the following:
- - The aggregate offering side evaluation of the Treasury Obligations;
- - The aggregate underlying value of the Equity Securities, less the
value of the Purchase Rights;
- - The amount of any cash in the Income and Capital Accounts;
- - Net interest accrued but unpaid on the Treasury Obligations after the
First Settlement Date to the date of settlement;
- - Dividends receivable on Equity Securities; and
- - The maximum sales charge (which combines an initial upfront sales
charge, a deferred sales charge and the creation and development fee).
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the prices of the Securities and Purchase
Rights and changes in the value of the Income and/or Capital Accounts.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
The number of Units available may be insufficient to meet demand. This
may be because of the Sponsor's inability to, or decision not to,
purchase and deposit underlying Securities in amounts sufficient to
maintain the proportionate numbers of shares of each Security as
required to create additional Units or because of its inability to sell
Purchase Rights.
Organization Costs. Securities purchased with the portion of the Public
Offering Price intended to be used to reimburse the Sponsor for the
Trust's organization costs (including costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission ("SEC")
and states, the initial audit of the Trust's statement of net assets,
legal fees and the initial fees and expenses of the Trustee) will be
purchased in the same proportionate relationship as all the Securities
contained in the Trust. Securities will be sold to reimburse the Sponsor
for the Trust's organization costs at the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period (a
significantly shorter time period than the life of the Trust). During
the period ending with the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period, there may be a
decrease in the value of the Securities. To the extent the proceeds from
the sale of these Securities are insufficient to repay the Sponsor for
Trust organization costs, the Trustee will sell additional Securities to
allow the Trust to fully reimburse the Sponsor. In that event, the net
asset value per Unit of the Trust will be reduced by the amount of
additional Securities sold. Although the dollar amount of the
reimbursement due to the Sponsor will remain fixed and will never exceed
the per Unit amount set forth in "Notes to Statements of Net Assets,"
this will result in a greater effective cost per Unit to Unit holders
for the reimbursement to the Sponsor. To the extent actual organization
costs are less than the estimated amount, only the actual organization
Page 14
costs will be deducted from the assets of the Trust. When Securities are
sold to reimburse the Sponsor for organization costs, the Trustee will
sell such Securities, to the extent practicable, which will maintain the
same proportionate relationship among the Securities contained in the
Trust as existed prior to such sale.
Accrued Interest.
Accrued interest represents unpaid interest on a bond from the last day
it paid interest. Interest on the Treasury Obligations generally is paid
semi-annually, although the Trust accrues such interest daily. Because
the Trust always has an amount of interest earned but not yet collected,
the Public Offering Price of Units will have added to it the
proportionate share of accrued interest to the date of settlement. You
will receive the amount, if any, of accrued interest included in your
purchase price on the next distribution date. In addition, if you sell
or redeem your Units you will be entitled to receive your proportionate
share of the accrued interest from the purchaser of your Units.
Minimum Purchase.
The minimum amount you can purchase of the Trust is $1,000 worth of
Units ($500 if you are purchasing Units for your Individual Retirement
Account or any other qualified retirement plan).
Transactional Sales Charge.
The transactional sales charge you will pay has both an initial and a
deferred component. The initial sales charge, which you will pay at the
time of purchase, is equal to the difference between the maximum sales
charge ( % of the Public Offering Price) and the sum of the maximum
remaining deferred sales charge and creation and development fee
(initially equal to $ per Unit). This initial sales charge is
initially equal to approximately % of the Public Offering Price of a
Unit, but will vary from % depending on the purchase price of your
Units and as deferred sales charge and creation and development fee
payments are made. When the Public Offering Price exceeds $ per Unit,
the initial sales charge will exceed % of the Public Offering Price.
After the initial offering period, the initial sales charge will be
reduced by the amount of the creation and development fee.
Monthly Deferred Sales Charge. In addition, ________ monthly deferred
sales charge payments of approximately $ per Unit will be deducted
from the Trust's assets on approximately the twentieth day of each month
from ________, 2004 through ________, 2004. If you buy Units at a price
of less than $ per Unit, the dollar amount of the deferred sales
charge will not change, but the deferred sales charge on a percentage
basis will be more than % of the Public Offering Price.
If you purchase Units after the last deferred sales charge payment has
been assessed, your transactional sales charge will consist of a one-
time initial sales charge of % of the Public Offering Price per Unit
(equivalent to % of the net amount invested). The transactional sales
charge will be reduced by 1/2 of 1% on each subsequent ________,
commencing ________, 2004, to a minimum transactional sales charge of
____%.
Discounts for Certain Persons.
If you invest at least $ (except if you are purchasing for "Fee
Accounts" as described below), the maximum sales charge is reduced as
described below.
If you invest Your maximum
(in thousands):* sales charge will be:
_________________ ________________
%
%
%
%
%
* Breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be
applied on whichever basis is more favorable to the investor. The
breakpoints will be adjusted to take into consideration purchase orders
stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
The reduced sales charge for quantity purchases will apply only to
purchases made by the same person on any one day from any one dealer. To
help you reach the above levels, you can combine the Units you purchase
of the Trust with any other same day purchases of other trusts for which
we are Principal Underwriter and are currently in the initial offering
period. In addition, we will also consider Units you purchase in the
name of your spouse or child under 21 years of age to be purchases by
you. The reduced sales charges will also apply to a trustee or other
fiduciary purchasing Units for a single trust estate or single fiduciary
account. You must inform your dealer of any combined purchases before
the sale in order to be eligible for the reduced sales charge. Any
reduced sales charge is the responsibility of the party making the sale.
You may use termination proceeds from other unit investment trusts with
a similar strategy as the Trust or your redemption or termination
proceeds from any unit investment trust we sponsor to purchase Units of
the Trust during the initial offering period at the Public Offering
Price less 1.00%. However, if you invest redemption or termination
proceeds of $500,000 or more in Units of the Trust, the maximum sales
charge on your Units will be limited to the maximum sales charge for the
Page 15
applicable amount invested in the table set forth above. Please note
that if you purchase Units of the Trust in this manner using redemption
proceeds from trusts which assess the amount of any remaining deferred
sales charge at redemption, you should be aware that any deferred sales
charge remaining on these units will be deducted from those redemption
proceeds.
Investors purchasing Units through registered broker/dealers who charge
periodic fees in lieu of commissions or who charge for financial
planning, investment advisory or asset management services or provide
these or comparable services as part of an investment account where a
comprehensive "wrap fee" or similar charge is imposed ("Fee Accounts")
will not be assessed the transactional sales charge described in this
section on the purchase of Units. Certain Fee Accounts Unit holders may
be assessed transaction or other account fees on the purchase and/or
redemption of such Units by their broker/dealer or other processing
organizations for providing certain transaction or account activities.
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.
Employees, officers and directors (and immediate family members) of the
Sponsor, our related companies, dealers and their affiliates, and
vendors providing services to us may purchase Units at the Public
Offering Price less the applicable dealer concession. Immediate family
members include spouses, children, grandchildren, parents, grandparents,
siblings, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law,
brothers-in-law and sisters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons.
The Sponsor and certain dealers may establish a schedule where
employees, officers and directors of such dealers can purchase Units of
the Trust at the Public Offering Price less the established schedule
amount, which is designed to compensate such dealers for activities
relating to the sale of Units (the "Employee Dealer Concession").
You will be charged the deferred sales charge per Unit regardless of any
discounts. However, if you are eligible to receive a discount such that
the maximum sales charge you must pay is less than the applicable
maximum deferred sales charge, including Fee Accounts Units, you will be
credited the difference between your maximum sales charge and the
maximum deferred sales charge at the time you buy your Units. If you
elect to have distributions reinvested into additional Units of the
Trust, in addition to the reinvestment Units you receive you will also
be credited additional Units with a dollar value at the time of
reinvestment sufficient to cover the amount of any remaining deferred
sales charge to be collected on such reinvestment Units. The dollar
value of these additional credited Units (as with all Units) will
fluctuate over time, and may be less on the dates deferred sales charges
are collected than their value at the time they were issued.
As Sponsor, we will also receive, and the Unit holders will pay, a
creation and development fee. See "Expenses and Charges" for a
description of the services provided for this fee.
The Value of the Securities.
The Evaluator will determine the aggregate underlying value of the
Securities in the Trust as of the Evaluation Time on each business day
and will adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and certain national holidays
on which the NYSE is closed.
The aggregate underlying value of the Treasury Obligations will be
determined on the basis of current offering prices.
The aggregate underlying value of the Equity Securities in the Trust,
and their corresponding Purchase Rights, will be determined as follows:
if the Equity Securities are listed on a securities exchange or The
Nasdaq Stock Market, or the Chicago Board of Options Exchange ("CBOE")
(in the case of Purchase Rights), their value is generally based on the
closing sale prices on that exchange or system (unless it is determined
that these prices are not appropriate as a basis for valuation). For
purposes of valuing Securities traded on The Nasdaq Stock Market,
closing sale price shall mean the Nasdaq Official Closing Sale Price
("NOCP") as determined by Nasdaq. However, if there is no closing sale
price on that exchange or system, they are valued based on the closing
ask prices. If the Equity Securities are not so listed, or, if so listed
and the principal market for them is other than on that exchange or
system, their value will generally be based on the current ask prices
and the offer price of the Purchase Rights on the over-the-counter
market (unless it is determined that these prices are not appropriate as
a basis for valuation). In the event the Evaluator determines that the
Page 16
last quoted CBOE closing price does not reflect the market value of the
Purchase Rights, the Evaluator may determine the fair value by
considering various factors including the range of prices of
transactions effected at the Evaluation Time. If current ask prices are
unavailable, the valuation of the Equity Securities is generally
determined:
a) On the basis of current ask prices for comparable equity securities;
b) By appraising the value of the Equity Securities on the ask side of
the market; or
c) By any combination of the above.
The value of the Equity Securities and the value of the Purchase Rights
have an interrelated effect on the value of a Unit. The value of the
Purchase Rights will be affected by the value of the Equity Securities,
the volatility of the Equity Securities, the remaining time to the
expiration of the Purchase Rights, the level of interest rates and the
dividend yields on the Equity Securities.
After the initial offering period is over, the aggregate underlying
value of the Securities will be determined as set forth above, except
that bid prices are used instead of ask or offer prices when necessary.
Distribution of Units
We intend to qualify Units of the Trust for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
reflect a concession or agency commission of ____% of the Public
Offering Price per Unit (or 65% of the maximum transactional sales
charge for secondary market sales). However, for Units subject to a
transactional sales charge which are purchased using redemption or
termination proceeds, this amount will be reduced to ____% of the sales
price of these Units (____% for purchases of $500,000 but less than
$1,000,000 and ____% for purchases of $1,000,000 or more).
Eligible dealer firms and other selling agents who sell Units of the
Trust during the initial offering period in the dollar amounts shown
below will be entitled to the following additional sales concessions as
a percentage of the Public Offering Price:
Total Sales Additional
(in millions): Concession:
_________________ ___________
%
%
%
Dealers and other selling agents will not receive a concession on the
sale of Units which are not subject to a transactional sales charge, but
such Units will be included in determining whether the above volume
sales levels are met. Eligible dealer firms and other selling agents
include entities that are providing marketing support for First Trust
unit investment trusts by distributing or permitting the distribution of
marketing materials and other product information. Eligible dealer firms
and other selling agents will not include firms that solely provide
clearing services to other broker/dealer firms. In addition, dealers and
other selling agents who, during any consecutive 12-month period, sell
at least $250 million or $500 million worth of primary market units of
unit investment trusts sponsored by us will receive a concession of
$2,500 or $5,000, respectively, in the month following the achievement
of this level. We reserve the right to change the amount of concessions
or agency commissions from time to time. Certain commercial banks may be
making Units of the Trust available to their customers on an agency
basis. A portion of the transactional sales charge paid by these
customers is kept by or given to the banks in the amounts shown above.
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trust. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable transactional sales charge on Units sold by such
persons during such programs. We make these payments out of our own
assets and not out of Trust assets. These programs will not change the
price you pay for your Units.
Advertising and Investment Comparisons.
Advertising materials regarding the Trust may discuss several topics,
including: developing a long-term financial plan; working with your
financial professional; the nature and risks of various investment
Page 17
strategies and unit investment trusts that could help you reach your
financial goals; the importance of discipline; how the Trust operates;
how securities are selected; various unit investment trust features such
as convenience and costs; and options available for certain types of
unit investment trusts. These materials may include descriptions of the
securities represented in the Trust, research analysis of why they were
selected and information relating to the qualifications of the persons
or entities providing the research analysis. In addition, they may
include research opinions on the economy and securities included and a
list of investment products generally appropriate for pursuing those
recommendations.
From time to time we may compare the estimated returns of the Trust
(which may show performance net of the expenses and charges the Trust
would have incurred) and returns over specified periods of other similar
trusts we sponsor in our advertising and sales materials, with (1)
returns on other taxable investments such as the common stocks
comprising various market indexes, corporate or U.S. Government bonds,
bank CDs and money market accounts or funds, (2) performance data from
Morningstar Publications, Inc. or (3) information from publications such
as Money, The New York Times, U.S. News and World Report, BusinessWeek,
Forbes or Fortune. The investment characteristics of the Trust differ
from other comparative investments. You should not assume that these
performance comparisons will be representative of the Trust's future
performance. We may also, from time to time, use advertising which
classifies trusts according to capitalization and/or investment style.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum
transactional sales charge per Unit less any reduction as stated in
"Public Offering." We will also receive the amount of any collected
creation and development fee. Also, any difference between our cost to
purchase the Securities and the price at which we sell them to the Trust
is considered a profit or loss. (See Note 2 of "Notes to Schedule of
Investments.") During the initial offering period, dealers and others
may also realize profits or sustain losses as a result of fluctuations
after the Date of Deposit in the Public Offering Price they receive when
they sell the Units.
In maintaining a market for Units, any difference between the price at
which we purchase Units and the price at which we sell or redeem them
will be a profit or loss to us.
The Secondary Market
Although not obligated, we intend to maintain a market for the Units
after the initial offering period and continuously offer to purchase
Units at prices based on the Redemption Price per Unit. The Sponsor does
not in any way guarantee the enforceability, marketability or price of
any Securities in the Trust or of the Units.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees, Trustee costs to transfer and record the ownership of
Units and costs incurred in annually updating the Trust's registration
statement. We may discontinue purchases of Units at any time. IF YOU
WISH TO DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET
PRICES BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. If you sell
or redeem your Units before you have paid the total deferred sales
charge on your Units, you will have to pay the remainder at that time.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid at that time is equal to or greater than the Redemption Price per
Unit, we may purchase the Units. You will receive your proceeds from the
sale no later than if they were redeemed by the Trustee. We may tender
Units we hold to the Trustee for redemption as any other Units. If we
elect not to purchase Units, the Trustee may sell tendered Units in the
over-the-counter market, if any. However, the amount you will receive is
the same as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trust are listed under "Fee Table."
If actual expenses of the Trust exceed the estimate, that Trust will
bear the excess. The Trustee will pay operating expenses of the Trust
from the Income Account if funds are available, and then from the
Capital Account. The Income and Capital Accounts are noninterest-bearing
to Unit holders, so the Trustee may earn interest on these funds, thus
benefiting from their use.
First Trust Advisors L.P., an affiliate of ours, acts as Portfolio
Supervisor and Evaluator and will be compensated for providing portfolio
supervisory services and evaluation services as well as bookkeeping and
other administrative services to the Trust. In providing portfolio
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supervisory services, the Portfolio Supervisor may purchase research
services from a number of sources, which may include underwriters or
dealers of the Trust. As Sponsor, we will receive brokerage fees when
the Trust uses us (or an affiliate of ours) as agent in buying or
selling Securities. Legal and regulatory filing fees and expenses
associated with updating the Trust's registration statement yearly are
also chargeable to the Trust.
The fees payable to First Trust Advisors L.P. and the Trustee are based
on the largest aggregate number of Units of the Trust outstanding at any
time during the calendar year, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fees paid to us or our
affiliates for providing services to all unit investment trusts be more
than the actual cost of providing such services in such year.
As Sponsor, we will receive a fee from the Trust for creating and
developing the Trust, including determining the Trust's objectives,
policies, composition and size, selecting service providers and
information services and for providing other similar administrative and
ministerial functions. The "creation and development fee" is a charge of
$ per Unit outstanding at the end of the initial offering period. The
Trustee will deduct this amount from the Trust's assets as of the close
of the initial offering period. We do not use this fee to pay
distribution expenses or as compensation for sales efforts. This fee
will not be deducted from your proceeds if you sell or redeem your Units
before the end of the initial offering period.
In addition to the Trust's operating expenses and those fees described
above, the Trust may also incur the following charges:
- - All legal expenses of the Trustee according to its responsibilities
under the Indenture;
- - The expenses and costs incurred by the Trustee to protect the Trust
and your rights and interests;
- - Fees for any extraordinary services the Trustee performed under the
Indenture;
- - Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of the Trust;
- - Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of
the Trust; and/or
- - All taxes and other government charges imposed upon the Securities or
any part of the Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
the respective Trust. We cannot guarantee that the distributions
received by the Trust will be sufficient to meet any or all expenses of
such Trust. If there is not enough cash in the Income or Capital Account
of the Trust, the Trustee has the power to sell Securities in the Trust
to make cash available to pay these charges which may result in capital
gains or losses to you. See "Tax Status."
Tax Status
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trust. This section is current as of
the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a corporation, a non-U.S. person,
a broker/dealer, or other investor with special circumstances. In
addition, this section does not describe your state or foreign taxes. As
with any investment, you should consult your own tax professional about
your particular consequences. 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.
Assets of the Trust.
The Trust will hold one or more of the following: (i) U.S. Treasury
bonds (the "Treasury Obligations") and (ii) stock in domestic and
foreign corporations (the "Equity Securities"). All of the assets held
by the Trust constitute the "Trust Assets." For purposes of this federal
tax discussion, it is assumed that the Equity Securities constitute
equity for federal income tax purposes. Each Equity Security held in the
Trust is subject to a contractual right (the "Call Option") which gives
the holder of the Call Option (the "Right Holder") the right to buy the
Stock from the Trustee at a predetermined price (the "Exercise Price")
on a predetermined date (the "Right Exercise Date"). Upon creation of
the Trust, the Sponsor received a premium in exchange for writing such
Call Option (the "Call Premium").
Trust Status.
The Trust will not be taxed as a corporation for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of the Trust Assets, and as such you will be considered to
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have received a pro rata share of income (e.g., dividends, interest, and
capital gains, if any) from the Trust Assets when such income would be
considered to be received by you if you directly owned the Trust Assets.
This is true even if you elect to have your distributions automatically
reinvested into additional Units. In addition, the income from the Trust
Assets which you must take into account for federal income tax purposes
is not reduced by amounts used to pay Trust expenses (including the
deferred sales charge, if any).
Your Tax Basis and Income or Loss upon Disposition.
If the 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,
subject to the rules discussed under "Call Option" below. You can
generally determine your initial tax basis in each Trust Asset by
apportioning the cost of your Units, generally including sales charges
plus your pro rata portion of the Call Premium (or, if you purchase your
Unit after the Trust's creation, a pro rata portion of the fair market
value of the Call Option), 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 accrual of original
issue discount, as discussed below, or certain dividends that exceed a
corporation's accumulated earnings and profits).
Call Option.
As a Unit owner, you will be treated as having assumed the obligations
under the Call Option with respect to the portion of the Call Option
that relates to your pro rata portion of the Equity Securities. As
consideration for this assumption, you will be deemed to have received a
pro rata portion of the Call Premium (or, if you purchase your Unit
after the Trust's creation, a pro rata portion of the fair market value
of the Call Option). However, your pro rata portion of the Call Premium
or Call Option value is not currently taxable to you. Rather, the tax
treatment of your pro rata portion of the Call Premium or Call Option
value will depend upon whether the Call Option expires, is exercised or
is deemed to be sold.
If the Call Option expires without being exercised, your pro rata
portion of the Call Premium or Call Option value will be taxable to you
as short term capital gain on the Right Exercise Date. Alternatively, if
the Call Option is exercised such that your pro rata portion of the
Equity Securities are sold to the Option Holder, your pro rata portion
of the Call Premium or Call Option value will be added to the amount you
realize on the sale of the Equity Securities for purposes of determining
your gain or loss. If you sell your Unit before the Exercise Date, you
will generally recognize a gain or loss on your pro rata portion of the
Call Option equal to your pro rata portion of the Call Premium or Call
Option value less the fair market value on the sale date of your pro
rata portion of the Call Option. Such gain or loss will be taxable to
you as short term capital gain or loss. In addition, if you sell your
Unit, you will recognize gain or loss on the deemed sale of the Equity
Securities subject to the Call Option equal to the fair market value of
your pro rata portion of the Equity Securities deemed to be sold less
your tax basis in such pro rata portion of the Equity Securities deemed
to be sold.
Taxation of Capital Gains and Dividends.
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.
In addition, it should be noted that certain dividends received by the
Trust may qualify to be taxed at the same new rates that apply to net
capital gain (as discussed above), provided certain holding requirements
are satisfied. Under certain circumstances, the existence of the Call
Option may affect whether this holding period requirement is satisfied.
These special rules relating to the taxation of dividends at capital
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gains rates generally apply to taxable years beginning after December
31, 2002 and beginning before January 1, 2009.
Discount, Accrued Interest and Premium.
Some Treasury Obligations may have been sold with original issue
discount. This generally means that the Treasury Obligations were
originally issued at a price below their face (or par) value. Original
issue discount accrues on a daily basis and generally is treated as
interest income for federal income tax purposes. Your basis of each
Treasury Obligation which was issued with original issue discount must
be increased as original issue discount accrues.
Some Treasury Obligations may have been purchased by you or the Trust at
a market discount. Market discount is generally the excess of the stated
redemption price at maturity for the Treasury Obligation over the
purchase price of the Treasury Obligation (not including unaccrued
original issue discount). Market discount can arise based on the price
the Trust pays for a Treasury Obligation or on the price you pay for
your Units. Market discount is taxed as ordinary income. You will
recognize this income when the Trust receives principal payments on the
Treasury Obligation, when the Treasury Obligation is disposed of or
redeemed, or when you sell or redeem your Units. Alternatively, you may
elect to include market discount in taxable income as it accrues.
Whether or not you make this election will affect how you calculate your
basis and the timing of certain interest expense deductions. "Stripped"
U.S. Treasury obligations are subject to the original issue discount
rules, rather than being treated as having market discount.
Alternatively, some Treasury Obligations may have been purchased by you
or the Trust at a premium. Generally, if the tax basis of your pro rata
portion of any Treasury Obligation exceeds the amount payable at
maturity, such excess is considered premium. You may elect to amortize
bond premium. If you make this election, you may reduce your interest
income received on the Treasury Obligation by the amount of the premium
that is amortized and your tax basis will be reduced.
If the price of your Units includes accrued interest on a Treasury
Obligation, you must include the accrued interest in your tax basis in
that Treasury Obligation. When the Trust receives this accrued interest,
you must treat it as a return of capital and reduce your tax basis in
the Treasury Obligation.
This discussion provides only the general rules with respect to the tax
treatment of original issue discount, market discount and premium. The
rules, however, are complex and special rules apply in certain
circumstances. For example, the accrual of market discount or premium
may differ from the discussion set forth above in the case of Treasury
Obligations that were issued with original issue discount.
In-Kind Distributions.
Under certain circumstances, as described in this prospectus, you may
request a distribution of Trust Assets (an "In-Kind Distribution") at
the Trust's termination. By electing to receive an In-Kind Distribution,
you will receive Trust Assets plus, possibly, cash.
You will not recognize gain or loss if you only receive Trust Assets in
exchange for your pro rata portion of the Trust Assets held by the
Trust. However, if you also receive cash in exchange for a Trust Asset
or a fractional share of a Trust Asset, you will generally recognize
gain or loss based on the difference between the amount of cash you
receive and your tax basis in such Trust Asset or fractional share of
the Trust Asset.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of the Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by the Trust to the same extent as if you directly
paid the expense. You may, however, be required to treat some or all of
the expenses of the Trust as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
State and Local Taxes.
Under the existing income tax laws of the State and City of New York,
the Trust will not be taxed as a corporation, and the income of the
Trust will be treated as the income of the Unit holders in the same
manner as for federal income tax purposes.
Retirement Plans
You may purchase Units of the Trust for:
- - Individual Retirement Accounts
- - Keogh Plans
- - Pension funds, and
- - Other tax-deferred retirement plans.
Generally, the federal income tax on capital gains and income received
in each of the above plans is deferred until you receive distributions.
These distributions are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred rollover
treatment. Before participating in a plan like this, you should review
Page 21
the tax laws regarding these plans and consult your attorney or tax
advisor. Brokerage firms and other financial institutions offer these
plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
you become Record Owner, but normally your broker/dealer provides this
notice. You may elect to hold your Units in either certificated or
uncertificated form. All Fee Accounts Units, however, will be held in
uncertificated form.
Certificated Units. When you purchase your Units, you can request that
they be evidenced by certificates, which will be delivered shortly after
your order. Certificates will be issued in fully registered form,
transferable only on the books of the Trustee in denominations of one
Unit or any multiple thereof. You can transfer or redeem your
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with your
signature guaranteed by an eligible institution. In certain cases the
Trustee may require additional documentation before they will transfer
or redeem your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- - A written initial transaction statement containing a description of
the Trust;
- - The number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of income (if any)
distributed. After the end of each calendar year, the Trustee will
provide you:
- - A summary of transactions in the Trust for the year;
- - A list of any Securities sold during the year and the Securities held
at the end of that year by the Trust;
- - The Redemption Price per Unit, computed on the 31st day of December of
such year (or the last business day before); and
- - Amounts of income and capital distributed during the year.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Income and Capital Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit any dividends or interest
received on the Trust's Securities to the Income Account. All other
receipts, such as return of capital, are credited to the Capital Account.
The Trustee will distribute any net income in the Income Account on or
near the Income Distribution Dates to Unit holders of record on the
preceding Income Distribution Record Date. See "Summary of Essential
Information." No income distribution will be paid if accrued expenses of
the Trust exceed amounts in the Income Account on the Income
Distribution Dates. Distribution amounts will vary with changes in the
Trust's fees and expenses, in dividends and interest received and with
the sale of Securities. The Trustee will distribute amounts in the
Capital Account, net of amounts designated to meet redemptions, pay the
deferred sales charge or pay expenses, on the last day of each month to
Unit holders of record on the fifteenth day of each month provided the
amount equals at least $1.00 per 100 Units. If the Trustee does not have
your TIN it is required to withhold a certain percentage of your
distribution and deliver such amount to the Internal Revenue Service
("IRS"). You may recover this amount by giving your TIN to the Trustee,
Page 22
or when you file a tax return. However, you should check your statements
to make sure the Trustee has your TIN to avoid this "back-up withholding."
We anticipate that there will be enough money in the Capital Account to
pay the deferred sales charge. If not, the Trustee may sell Securities
to meet the shortfall.
Within a reasonable time after the Trust is terminated you will receive
a pro rata share of the money from the sale of the Securities. However,
if you are eligible, you may elect to receive an In-Kind Distribution as
described under "Amending or Terminating the Indenture." You will
receive a pro rata share of any other assets remaining in the Trust,
after deducting any unpaid expenses.
The Trustee may establish reserves (the "Reserve Account") within the
Trust to cover anticipated state and local taxes and any governmental
charges to be paid out of such Trust.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by sending the
certificates representing the Units you want to redeem to the Trustee at
its unit investment trust office. If your Units are uncertificated, you
need only deliver a request for redemption to the Trustee. In either
case, the certificates or the redemption request must be properly
endorsed with proper instruments of transfer and signature guarantees as
explained in "Rights of Unit Holders-Unit Ownership" (or by providing
satisfactory indemnity if the certificates were lost, stolen, or
destroyed). No redemption fee will be charged, but you are responsible
for any governmental charges that apply. Certain broker/dealers may
charge a transaction fee for processing redemption requests. Units
redeemed directly through the Trustee are not subject to such
transaction fees. Three business days after the day you tender your
Units (the "Date of Tender") you will receive cash in an amount for each
Unit equal to the Redemption Price per Unit calculated at the Evaluation
Time on the Date of Tender.
The Date of Tender is considered to be the date on which the Trustee
receives your certificates or redemption request (if such day is a day
the NYSE is open for trading). However, if your certificates or
redemption request are received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing income will be withdrawn
from the Income Account if funds are available for that purpose, or from
the Capital Account. All other amounts paid on redemption will be taken
from the Capital Account. The IRS will require the Trustee to withhold a
portion of your redemption proceeds if the Trustee does not have your
TIN, as generally discussed under "Income and Capital Distributions."
The Trustee may sell Securities to make funds available for redemption.
The Trustee will either sell Securities to a purchaser subject to the
Purchase Right or purchase the Purchase Right which will cancel it and
then sell the underlying Securities. Because of the minimum amounts in
which the Purchase Rights must be traded, the proceeds of Securities
sold subject to their Purchase Rights may exceed the amount required at
the time to redeem Units. These excess proceeds will be distributed to
Unit holders. If Securities are sold, the size and diversification of
such Trust will be reduced. These sales may result in lower prices than
if the Securities were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
If the NYSE is closed (other than customary weekend and holiday closings);
If the SEC determines that trading on the NYSE is restricted or that an
emergency exists making sale or evaluation of the Securities not
reasonably practical; or
For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Income and Capital Accounts not designated to purchase
Securities;
2. the aggregate underlying value of the Securities held in the Trust; and
3. dividends receivable on the Equity Securities trading ex-dividend as
of the date of computation; and
deducting
1. the value of the Purchase Rights;
2. any applicable taxes or governmental charges that need to be paid out
of the Trust;
3. any amounts owed to the Trustee for its advances;
4. estimated accrued expenses of the Trust, if any;
5. cash held for distribution to Unit holders of record of the Trust as
Page 23
of the business day before the evaluation being made; and
6. other liabilities incurred by the Trust; and
Page 17
dividing
1. the result by the number of outstanding Units of the Trust.
Any remaining deferred sales charge on the Units when you redeem them
will be deducted from your redemption proceeds. In addition, until the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period, the Redemption Price per Unit will include
estimated organization costs as set forth under "Fee Table."
Removing Securities from the Trust
The portfolio of the Trust is not managed. However, we may, but are not
required to, direct the Trustee to dispose of an Equity Security in
certain limited circumstances, including situations in which:
- - The issuer of an Equity Security defaults in the payment of a declared
dividend;
- - Any action or proceeding prevents the payment of dividends;
- - There is any legal question or impediment affecting an Equity Security;
- - The issuer of an Equity Security has breached a covenant which would
affect the payment of dividends, the issuer's credit standing, or
otherwise damage the sound investment character of such Equity Security;
- - The issuer has defaulted on the payment on any other of its
outstanding obligations;
- - There has been a public tender offer made for an Equity Security or a
merger or acquisition is announced affecting an Equity Security, and
that in our opinion the sale or tender of the Equity Security is in the
best interest of Unit holders; or
- - The price of the Equity Security has declined to such an extent, or
such other credit factors exist, that in our opinion keeping the Equity
Security would be harmful to the Trust.
Except in the limited instance in which the Trust acquires Replacement
Securities, as described in "The FT Series," the Trust may not acquire
any securities or other property other than the Securities. The Trustee,
on behalf of the Trust, will reject any offer for new or exchanged
securities or property in exchange for a Security, such as those
acquired in a merger or other transaction. If such exchanged securities
or property are nevertheless acquired by the Trust, at our instruction,
they will either be sold or held in the Trust. In making the
determination as to whether to sell or hold the exchanged securities or
property we may get advice from the Portfolio Supervisor. Any proceeds
received from the sale of Securities, exchanged securities or property
will be credited to the Capital Account for distribution to Unit holders
or to meet redemption requests. The Trustee may retain and pay us or an
affiliate of ours to act as agent for the Trust to facilitate selling
Securities, exchanged securities or property from the Trust. If we or
our affiliate act in this capacity, we will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Securities designated by us; or, absent our
direction, at its own discretion, in order to meet redemption requests
or pay expenses. In designating Securities to be sold, we will try to
maintain the proportionate relationship among the Securities. If this is
not possible, the composition and diversification of the Trust may be
changed. To get the best price for the Trust we may specify minimum
amounts (generally 100 shares) in which blocks of Securities are to be
sold. We may consider sales of units of unit investment trusts we
sponsor when we make recommendations to the Trustee as to which
broker/dealers they select to execute the Trust's portfolio
transactions, or when acting as agent for the Trust in acquiring or
selling Securities on behalf of the Trust.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- - To cure ambiguities;
- - To correct or supplement any defective or inconsistent provision;
- - To make any amendment required by any governmental agency; or
- - To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, the Trust will terminate on
the Mandatory Termination Date as stated in the "Summary of Essential
Information." The Trusts may be terminated earlier:
- - Upon the consent of 100% of the Unit holders; or
- - In the event that Units of the Trust not yet sold aggregating more
than 60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
Page 24
Prior to termination, the Trustee will send written notice to all Unit
holders which will specify how you should tender your certificates, if
any, to the Trustee. If the Trust is terminated due to this last reason,
we will refund your entire transactional sales charge; however,
termination of the Trust before the Mandatory Termination Date for any
other stated reason will result in all remaining unpaid deferred sales
charges on your Units being deducted from your termination proceeds.
Unless terminated earlier, the Trustee will begin to sell Equity
Securities in connection with the termination of the Trust during the
period beginning nine business days prior to, and no later than, the
Mandatory Termination Date. We will determine the manner and timing of
the sale of Equity Securities. Because the Trustee must sell the Equity
Securities within a relatively short period of time, the sale of the
Equity Securities as part of the termination process may result in a
lower sales price than might otherwise be realized if such sale were not
required at this time.
The scheduled Mandatory Termination Date will be the same date as the
Right Exercise Date. If the FLEX(R) Options are exercised the Trust will
receive cash; if the FLEX(R) Options are not exercised the Trust will
continue to hold the stock in the Portfolio. If the Trust is terminated
early, the Trustee will either (a) sell the Securities subject to the
FLEX(R) Options; or (b) enter into a closing purchase transaction as a
result of which the FLEX(R) Option will be canceled and then sell the
underlying Securities.
At termination, if you own at least 2,500 Units of the Trust, or such
other amount as required by your broker/dealer, the Trustee will send
the registered account holders a form at least 30 days prior to the
Mandatory Termination Date which will enable you to receive an In-Kind
Distribution (reduced by customary transfer and registration charges and
subject to any additional restrictions imposed on Fee Accounts by "wrap
fee" plans) rather than the typical cash distribution. See "Tax Status"
for additional information. If you elect the In-Kind Distribution option
you will receive your pro rata number of whole shares of the Equity
Securities that make up the portfolio, and cash from the Capital Account
equal to the value of the cash received from the Equity Securities sold
to satisfy the Purchase Rights, the Treasury Obligations and fractional
shares of Equity Securities to which you are entitled. You must notify
the Trustee at least ten business days prior to the Mandatory
Termination Date if you elect this In-Kind Distribution option. If you
do not elect to participate in the In-Kind Distribution option, you will
receive a cash distribution from the sale of the remaining Securities,
along with your interest in the Income and Capital Accounts, within a
reasonable time after the Trust is terminated. Regardless of the
distribution involved, the Trustee will deduct from the Trust any
accrued costs, expenses, advances or indemnities provided for by the
Indenture, including estimated compensation of the Trustee and costs of
liquidation and any amounts required as a reserve to pay any taxes or
other governmental charges.
Information on
the Sponsor, Trustee and Evaluator
The Sponsor.
We, First Trust Portfolios L.P., specialize in the underwriting, trading
and wholesale distribution of unit investment trusts under the "First
Trust" brand name and other securities. An Illinois limited partnership
formed in 1991, we act as Sponsor for successive series of:
- - The First Trust Combined Series
- - FT Series (formerly known as The First Trust Special Situations Trust)
- - The First Trust Insured Corporate Trust
- - The First Trust of Insured Municipal Bonds
- - The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $43 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 2002, the total consolidated
partners' capital of First Trust Portfolios L.P. and subsidiary was
$15,580,362 (audited).
This information refers only to us and not to the Trust or to any series
of the Trust or to any other dealer. We are including this information
only to inform you of our financial responsibility and our ability to
carry out our contractual obligations. We will provide more detailed
financial information on request.
Code of Ethics. The Sponsor and the Trust have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to the Trust.
Page 25
The Trustee.
The Trustee is JPMorgan Chase Bank, with its principal executive office
located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 Chase MetroTech Center, 3rd Floor,
Brooklyn, New York 11245. If you have questions regarding the Trust, you
may call the Customer Service Help Line at 1-800-682-7520. The Trustee
is supervised by the Superintendent of Banks of the State of New York,
the Federal Deposit Insurance Corporation and the Board of Governors of
the Federal Reserve System.
The Trustee has not participated in selecting the Securities; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- - Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC,
- - Terminate the Indenture and liquidate the Trust, or
- - Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler LLP, 111 W. Monroe St., Chicago,
Illinois 60603. They have passed upon the legality of the Units offered
hereby and certain matters relating to federal tax law. Carter, Ledyard
& Milburn LLP acts as the Trustee's counsel, as well as special New York
tax counsel for the Trust.
Experts.
The Trust's statement of net assets, including the schedule of
investments, as of the opening of business on the Initial Date of
Deposit included in this prospectus has been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing
herein, and is included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
Page 26
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Page 27
First Trust(R)
Equity Dividend Covered Call Portfolio Series
FT 754
Sponsor:
FIRST TRUST PORTFOLIOS L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
JPMorgan Chase Bank
4 Chase MetroTech Center, 3rd floor
Brooklyn, New York 11245
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to Equity Dividend Covered
Call Portfolio Series, but does not contain all of the information about
this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- - Securities Act of 1933 (file no. 333-108154) and
- - Investment Company Act of 1940 (file no. 811-05903)
Information about the Trust, including its Code of Ethics, can be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington D.C. Information regarding the operation of
the Commission's Public Reference Room may be obtained by calling the
Commission at 1-202-942-8090.
Information about the Trust is available on the EDGAR Database on the
Commission's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0102
e-mail address: publicinfo@sec.gov
________, 2003
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 28
First Trust(R)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in FT 754 not found in the prospectus for the Trusts. This
Information Supplement is not a prospectus and does not include all of
the information you should consider before investing in the Trusts. This
Information Supplement should be read in conjunction with the prospectus
for the Trust in which you are considering investing.
This Information Supplement is dated ________, 2003. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors
Securities 1
Dividends 1
Risk Factors
Securities. An investment in Units should be made with an understanding
of the risks which an investment in common stocks entails, including the
risk that the financial condition of the issuers of the Securities or
the general condition of the relevant stock market may worsen, and the
value of the Securities and therefore the value of the Units may
decline. Common stocks are especially susceptible to general stock
market movements and to volatile increases and decreases of value, as
market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors, including expectations
regarding government, economic, monetary and fiscal policies, inflation
and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Both U.S. and foreign
markets have experienced substantial volatility and significant declines
recently as a result of certain or all of these factors.
Dividends. Shareholders of common stocks have rights to receive payments
from the issuers of those common stocks that are generally subordinate
to those of creditors of, or holders of debt obligations or preferred
stocks of, such issuers. Common stocks do not represent an obligation of
the issuer and, therefore, do not offer any assurance of income or
provide the same degree of protection of capital as do debt securities.
The issuance of additional debt securities or preferred stock will
create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the issuer
to declare or pay dividends on its common stock or the rights of holders
of common stock with respect to assets of the issuer upon liquidation or
bankruptcy.
Page 1
MEMORANDUM
Re: FT 754
The only difference of consequence (except as described
below) between FT 757, which is the current fund, and FT 754, the
filing of which this memorandum accompanies, is the change in the
series number. The list of securities comprising the Fund, the
evaluation, record and distribution dates and other changes
pertaining specifically to the new series, such as size and
number of Units in the Fund and the statement of condition of the
new Fund, will be filed by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of Templeton Growth and Treasury Trust, Series 1
and subsequent series (File No. 811-05903) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 757 Prospectus relate to the series number and size and
the date and various items of information which will be derived
from and apply specifically to the securities deposited in the
Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
First Trust Portfolios, L.P. is covered by a Broker's
Fidelity Bond, in the total amount of $2,000,000, the
insurer being National Union Fire Insurance Company of
Pittsburgh.
ITEM B This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 754 has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on September 24, 2003.
FT 754
(Registrant)
By: FIRST TRUST PORTFOLIOS, L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
David J. Allen Director )
of The Charger )
Corporation, the ) September 24, 2003
General Partner of )
First Trust )
Portfolios, L.P. )
Judith M. Van Kampen Director )
of The Charger ) Robert M. Porcellino
Corporation, the ) Attorney-in-Fact**
General Partner of )
First Trust )
Portfolios, L.P. )
Karla M. Van Kampen-Pierre Director )
of The Charger )
Corporation, the )
General Partner of )
First Trust )
Portfolios, L.P. )
David G. Wisen Director )
of The Charger )
Corporation, the )
General Partner of )
First Trust )
Portfolios, L.P. )
* The title of the person named herein represents his
or her capacity in and relationship to First Trust
Portfolios, L.P., Depositor.
** An executed copy of the related power of attorney
was filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of FT 597
(File No. 333-76518) and the same is hereby incorporated
herein by this reference.
S-3
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, and 3.3 of the Registration Statement.
CONSENT OF DELOITTE & TOUCHE LLP
The consent of Deloitte & Touche LLP to the use of its name
and to the reference to such firm in the Prospectus included in
this Registration Statement will be filed by amendment.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement is
filed as Exhibit 4.1 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities, L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and Nike
Financial Advisory Services L.P. as Portfolio Supervisor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-43693] filed on behalf of The First Trust
Special Situations Trust, Series 22). Effective June 27,
2002, Nike Securities changed its name to First Trust
Portfolios, L.P.
1.1.1* Form of Trust Agreement for FT 754 among First Trust
Portfolios, L.P., as Depositor, JPMorgan Chase Bank, as
Trustee and First Trust Advisors L.P., as Evaluator and
Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of First Trust
Portfolios, L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of First Trust Portfolios, L.P. (incorporated
by reference to Amendment No. 1 to Form S-6 [File No.
33-42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of The Charger
Corporation, the general partner of First Trust
Portfolios, L.P., Depositor (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
1.5 Copy of By-Laws of The Charger Corporation, the general
partner of First Trust Portfolios, L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by reference).
2.2 Copy of Code of Ethics (incorporated by reference to
Amendment No. 1 to form S-6 [File No. 333-31176] filed on behalf
of FT 415).
3.1* Opinion of counsel as to legality of Securities being
registered.
S-5
3.2* Opinion of counsel as to Federal income tax status of
Securities being registered.
3.3* Opinion of counsel as to New York income tax status of
Securities being registered.
4.1* Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Directors listed on
page S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
333-76518] filed on behalf of FT 597).
___________________________________
* To be filed by amendment.
S-6