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 313
B. Name of Depositor: NIKE SECURITIES 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: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN & CUTLER
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 DECEMBER 31, 1998
Preferred Income Trust Series
The Trust. FT 302 (the "Trust") is a unit investment trust consisting of
a portfolio of preferred securities selected to provide the potential
for a high level of current income and capital preservation.
The objective of the Trust is to provide the potential for a high level
of current income and capital preservation by investing the Trust's
portfolio in the preferred securities. See "Schedule of Investments."
The preferred securities consist of preferred stock issued by
corporations (the "Preferred Stocks") and preferred securities issued by
corporations, generally in the form of interest-bearing notes or
preferred securities issued by corporations, or by business trust affiliates
of corporations, which generally represent beneficial ownership
interests in subordinated debentures issued by the corporation, or
similarly structured securities (the "Trust Preferred Securities").
Collectively, the Preferred Stocks and Trust Preferred Securities may be
referred to as the "Securities"). The Trust has a mandatory termination
date ("Mandatory Termination Date" or "Trust Ending Date") as set forth
under "Summary of Essential Information." There is, of course, no
guarantee that the objective of the Trust will be achieved.
Each Unit of the Trust represents an undivided fractional interest in
all the Securities deposited in the Trust. Although the Preferred Stocks
have no stated maturity date and the Trust Preferred Securities
deposited in the Trust each have fixed maturity dates occurring after
the Mandatory Termination Date, certain of the Securities may be called,
or may be redeemed pursuant to extraordinary redemption provisions,
prior to the Mandatory Termination Date of the Trust. The value of the
Securities will fluctuate with changes in the financial condition of the
issuers, with changes in interest rates and market liquidity and with
changes in the values of preferred securities in general. In particular,
increasing interest rates will reduce the value of the Securities held
in the Trust, as well as the value of the Units. Because certain of the
Securities may be redeemed or called prior to the Mandatory Termination
Date and because Securities at the Mandatory Termination Date will be
trading at their current market value, for investors purchasing on or
about the Initial Date of Deposit you will likely receive redemption or
termination proceeds which are less than the amount you invested. See
"Portfolio-Risk Factors."
The Sponsor may, from time to time during a period of up to
approximately 360 days after the Initial Date of Deposit, deposit
additional Securities or cash (including a letter of credit) with
instructions to purchase additional Securities in the Trust. Such
deposits of additional Securities or cash will be done in such a manner
that the original proportionate relationship among the individual issues
of the Securities shall be maintained. Any deposit by the Sponsor of
additional Securities, or the purchase of additional Securities pursuant
to a cash deposit, will duplicate, as nearly as is practicable, the
original proportionate relationship established on the Initial Date of
Deposit, and not the actual proportionate relationship on the subsequent
Date of Deposit, since the two may differ. Any such difference may be
due to the sale, redemption or liquidation of any Securities deposited
in the Trust on the Initial, or any subsequent, Date of Deposit. See
"What is the FT Series?" and "Rights of Unit Holders-How May Securities
be Removed from the Trust?"
Public Offering Price. The Public Offering Price per Unit of the Trust
during the initial offering period is equal to the aggregate underlying
value of the Securities in the Trust (generally determined by the
closing sale prices of listed Securities and the ask prices of over-the-
counter traded Securities) plus or minus a pro rata share of cash, if
any, in the Capital and Income Accounts of the Trust, plus an initial
sales charge equal to the difference between the maximum sales charge of
4.5% of the Public Offering Price and the maximum remaining deferred
sales charge, initially $.35 per Unit, divided by the number of Units of
the
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
First Trust (registered trademark)
1-800-621-9533
The date of this Prospectus is December 18, 1998
Page 1
Trust outstanding. Commencing on August 20, 1999, and on the twentieth
day of each month thereafter (or if such day is not a business day, on
the preceding business day) through December 20, 1999, a deferred sales
charge of $.07 will be assessed per Unit per month. Units purchased
subsequent to the initial deferred sales charge payment but still during
the initial offering period will be subject to the initial sales charge
and the remaining deferred sales charge payments not yet collected. The
deferred sales charge will be paid from funds in the Capital Account, if
sufficient, or from the periodic sale of Securities. The total maximum
sales charge assessed to Unit holders on a per Unit basis will be 4.5%
of the Public Offering Price (equivalent to 4.545% of the net amount
invested, exclusive of the deferred sales charge.) A pro rata share of
accumulated interest or dividends, if any, in the Income Account is
included in the Public Offering Price. In addition, a portion of the
Public Offering Price on Units purchased prior to the earlier of six
months after the Initial Date of Deposit or the end of the initial
offering period also consists of Securities in an amount sufficient to
pay for all or a portion of the costs incurred in establishing the
Trust. The organizational and offering costs will be deducted from the
assets of the Trust as of the earlier of six months after the Initial
Date of Deposit or the end of the initial offering period. Upon
completion of the deferred sales charge period, the secondary market
Public Offering Price per Unit for the Trust will not include deferred
payments, but will instead include only a one-time initial sales charge
of 4.5% of the Public Offering Price (equivalent to 4.712% of the net
amount invested), which will be reduced by 1/2 of 1% on each December
31, commencing December 31, 1999 to a minimum sales charge of 3.0%. The
minimum amount which an investor may purchase of the Trust is $1,000
($500 for Individual Retirement Accounts or other retirement plans). The
sales charge is reduced on a graduated scale for sales involving at
least $50,000. See "Public Offering-How is the Public Offering Price
Determined?"
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE INVESTMENT RISK
INCLUDING LOSS OF PRINCIPAL.
Estimated Net Annual Distributions. The estimated net annual
distribution to Unit holders (based on the most recent annualized
dividend or interest paid with respect to the Securities in the Trust)
on the Initial Date of Deposit was $.7144 per Unit during the first year
and $.6943 per Unit in subsequent years. The estimated net annual
distribution per Unit during the first year of the Trust is expected to
be greater than during subsequent years because Securities included in
the Trust to pay for organizational and offering costs and the deferred
sales charge will be sold during the first year. The actual net annual
distribution per Unit during the first year and subsequent years will
vary with changes in fees and expenses of the Trust, with changes in
interest or dividends received and with the sale, redemption or
liquidation of Securities; therefore, there is no assurance that the net
annual distribution will be realized in the future.
Distributions. Distributions of dividends, interest and capital, if any,
will be paid on the Income Distribution Date to Unit holders of record
on the preceding Income Distribution Record Date as set forth in the
"Summary of Essential Information." Distributions of funds in the
Capital Account, if any, will be made at least annually in December of
each year. Any distribution of income and/or capital will be net of the
expenses of the Trust. See "What is the Federal Tax Status of Unit
Holders?" Additionally, upon termination of the Trust, the Trustee will
distribute, upon surrender of Units for redemption, to each Unit holder
his or her pro rata share of the Trust's assets, less expenses, in the
manner set forth under "Rights of Unit Holders-How are Income and
Capital Distributed?"
Secondary Market for Units. After the initial offering period, while
under no obligation to do so, the Sponsor intends to maintain a market
for Units of the Trust and offer to repurchase such Units at prices
which are based on the aggregate underlying value of Securities in the
Trust (generally determined by the closing sale prices of listed
Securities and the bid prices of over-the-counter traded Securities)
plus or minus cash, if any, in the Capital and Income Accounts of the
Trust. If a secondary market is maintained during the initial offering
period, the prices at which Units will be repurchased will also be based
upon the aggregate underlying value of the Securities in the Trust
(generally determined by the closing sale prices of listed Securities
and the ask prices of over-the-counter traded Securities) plus or minus
cash, if any, in the Capital and Income Accounts of the Trust. If a
secondary market is not maintained, a Unit holder may redeem Units
through redemption at prices based upon the aggregate underlying value
of the Securities in the Trust (generally determined by the closing sale
prices of listed Securities and either the ask prices (during the
Page 2
initial offering period) or the bid prices (subsequent to the initial
offering period) of over-the-counter traded Securities) plus or minus a
pro rata share of cash, if any, in the Capital and Income Accounts of
the Trust. A Unit holder tendering 1,000 Units or more for redemption
may request a distribution of shares of Securities (reduced by customary
transfer and registration charges) (an "In-Kind Distribution") in lieu
of payment in cash. Any deferred sales charge remaining on Units at the
time of their sale or redemption will be collected at that time. See
"Rights of Unit Holders-How May Units be Redeemed?"
Termination. Commencing no later than the Mandatory Termination Date,
Securities will begin to be sold as prescribed by the Sponsor. The
Trustee shall provide written notice of any termination of the Trust to
Unit holders which will specify when Unit holders may surrender their
certificates for cancellation and will include a form to enable Unit
holders to elect an In-Kind Distribution if such Unit holder owns at
least 1,000 Units of the Trust, rather than to receive payment in cash
for such Unit holder's pro rata share of the amounts realized upon the
disposition by the Trustee of Securities. To be effective, the election
form, together with surrendered certificates and other documentation
required by the Trustee, must be returned to the Trustee at least ten
business days prior to the Mandatory Termination Date. Unit holders not
electing a distribution of shares of Securities will receive a cash
distribution within a reasonable time after the Trust is terminated. See
"Rights of Unit Holders-How are Income and Capital Distributed?" and
"Other Information-How May the Indenture be Amended or Terminated?"
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the possible deterioration of either the financial condition of
the issuers of the Securities or the general condition of the stock
market, market liquidity or an economic recession. Volatility in the
market price of the Securities in the Trust also changes the value of
the Units of the Trusts. Unit holders tendering Units for redemption
during periods of market volatility may receive redemption proceeds
which are more or less than they paid for the Units. Preferred
securities are also sensitive to changes in interest rates. The market
price of preferred securities generally falls with rising interest
rates. In addition, although falling interest rates generally lead to an
increase in the market price of preferred securities, preferred
securities are more likely to be called for redemption in a declining
interest rate environment. In addition, because certain of the
Securities may be redeemed or called prior to the Mandatory Termination
Date and because Securities at the Mandatory Termination Date will be
trading at their current market value, for investors purchasing on or
about the Initial Date of Deposit you will likely receive redemption or
termination proceeds which are less than the amount you
invested. The Trust's portfolio is not managed and Securities will not
be sold by the Trust regardless of market fluctuations, although some
Securities may be sold under certain limited circumstances. See
"Portfolio-Risk Factors."
Page 3
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Securities-December 18, 1998
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
General Information
Initial Number of Units (1) 15,005
Fractional Undivided Interest in the Trust per Unit (1) 1/15,005
Public Offering Price:
Aggregate Offering Price Evaluation of Securities in Portfolio (2) $148,551
Aggregate Offering Price Evaluation of Securities per Unit $ 9.900
Maximum Sales Charge of 4.5% of the Public Offering Price per Unit
(4.545% of the net amount invested, exclusive of the deferred sales charge) (3) $ .450
Less Deferred Sales Charge per Unit $ (.350)
Public Offering Price per Unit (3) $ 10.000
Sponsor's Initial Repurchase Price per Unit (4) $ 9.550
Redemption Price per Unit (based on aggregate underlying value
of Securities less the deferred sales charge) (4) $ 9.550
CUSIP Number 30264S 742
Security Code 56289
First Settlement Date December 23, 1998
Mandatory Termination Date December 31, 2003
Discretionary Liquidation Amount The Trust may be terminated if the value thereof is less than the
lower of $2,000,000 or 20% of the total value of Securities
deposited in the Trust during the initial offering period.
Trustee's Annual Fee $.0096 per Unit outstanding.
Evaluator's Annual Fee $.0030 per Unit outstanding, payable to an affiliate of the
Sponsor. Evaluations for purposes of sale, purchase or redemption
of Units are made as of the close of trading (generally 4:00 p.m.
Eastern time) on the New York Stock Exchange on each day on which
it is open.
Portfolio Supervisor's Annual Fee (5) $.0035 per Unit outstanding, payable to an affiliate of the
Sponsor.
Estimated Organizational and Offering Costs (6) $.0085 per Unit.
Income Distribution Record Date Fifteenth day of each month commencing January 15, 1999.
Income Distribution Date (7) Last day of each month commencing January 31, 1999.
_________________
<FN>
(1) As of the close of business on the Initial Date of Deposit, the
number of Units of the Trust may be adjusted so that the Public Offering
Price per Unit will equal approximately $10.00. Therefore, to the extent
of any such adjustment, the fractional undivided interest per Unit will
increase or decrease accordingly, from the amounts indicated above.
(2) Each listed Security is valued at the last closing sale price, or if
no such price exists or if the Security is not so listed, at the closing
ask price thereof.
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" and "Public Offering" for
additional information regarding these charges. On the Initial Date of
Deposit there will be no accumulated dividends in the Income Account.
Anyone ordering Units after such date will pay a pro rata share of any
accumulated dividends or interest in such Income Account. The Public
Offering Price as shown reflects the value of the Securities at the
opening of business on the Initial Date of Deposit and establishes the
original proportionate relationship amongst the individual Securities.
No sales to investors will be executed at this price. Additional
Securities will be deposited during the day of the Initial Date of
Deposit which will be valued as of 4:00 p.m. Eastern time and sold to
investors at a Public Offering Price per Unit based on this valuation.
(4) The Sponsor's Initial Repurchase Price per Unit and the Redemption
Price per Unit set forth above and until the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period
include estimated organizational and offering costs per Unit. After such
date, the Sponsor's Repurchase Price and Redemption Price per Unit will
not include such estimated organizational and offering costs. See
"Rights of Unit Holders-How May Units be Redeemed?"
(5) In addition, the Sponsor will be reimbursed for bookkeeping and
other administrative expenses currently at a maximum annual rate of
$.0033 per Unit.
(6) Investors will bear all or a portion of the costs incurred in
organizing the Trust (including costs of preparing the registration
statement, the Trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio, legal fees and the initial fees
and expenses of the Trustee but not including the expenses incurred in
the printing of preliminary and final prospectuses, and expenses
incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses). Estimated
organizational and offering costs are included in the Public Offering
Price per Unit and 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. See "Public Offering" and "Statement of Net
Assets."
(7) Distributions from the Capital Account will be made monthly payable
on the last day of the month to Unit holders of record on the fifteenth
day of such month if the amount available for distribution equals at
least $0.01 per Unit. Notwithstanding, distributions of funds in the
Capital Account, if any, will be made in December of each year.
</FN>
Page 4
FEE TABLE
This Fee Table is intended to help you to understand the costs and
expenses that you will bear directly or indirectly. See "Public
Offering" and "What are the Expenses and Charges?" Although the Trust
has a term of approximately five years and is a unit investment trust
rather than a mutual fund, this information is presented to permit a
comparison of fees.
Amount
per Unit
________
UNIT HOLDER TRANSACTION EXPENSES
Initial sales charge imposed on purchase
(as a percentage of public offering price) 1.00%(a) $.100
Deferred sales charge
(as a percentage of public offering price) 3.50%(b) .350
________ ________
4.50% $.450
======== ========
ORGANIZATIONAL AND OFFERING COSTS
Estimated Organizational and Offering Costs
(as a percentage of public offering price) .085%(c) $.0085
======== ========
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(as a percentage of average net assets)
Trustee's fee .098% $.0096
Portfolio supervision, bookkeeping, administrative and evaluation fees .101% .0098
Other operating expenses .049% .0049
________ ________
Total .248% $.0243
======== ========
Example
_______
Cumulative Expenses Paid for Period:
1 Year 3 Years 5 Years
______ _______ _______
An investor would pay the following expenses on a $1,000 investment,
assuming the Preferred Income Trust Series has an estimated operating
expense ratio of .248% and a 5% annual return on the investment
throughout the periods $ 48 $ 53 $ 59
The example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and
Exchange Commission regulations applicable to mutual funds. For purposes
of the example, the deferred sales charge imposed on reinvestment of
dividends and interest is not reflected until the year following payment
of the dividend or interest; the cumulative expenses would be higher if
sales charges on reinvested dividends or interest were reflected in the
year of reinvestment. The example should not be considered a
representation of past or future expenses or annual rate of return; the
actual expenses and annual rate of return may be more or less than those
assumed for purposes of the example.
________________
<FN>
(a) The initial sales charge is actually the difference between the
maximum total sales charge of 4.5% and the maximum remaining deferred
sales charge (initially $.35 per Unit) and would exceed 1% if the Public
Offering Price exceeds $10.00 per Unit.
(b) The actual fee is $.07 per Unit per month, irrespective of purchase
or redemption price deducted monthly commencing August 20, 1999 through
December 20, 1999. If a Unit holder sells or redeems Units before all of
these deductions have been made, the balance of the deferred sales
charge payments remaining will be deducted from the sales or redemption
proceeds. If the Unit price is less than $10.00 per Unit, the deferred
sales charge will exceed 3.5%. Units purchased subsequent to the initial
deferred sales charge payment will be subject to the initial sales
charge and any remaining deferred sales charge payments not yet collected.
(c) Investors will bear all or a portion of the costs incurred in
organizing the Trust (including costs of preparing the registration
statement, the Trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio, legal fees and the initial fees
and expenses of the Trustee). Estimated organizational and offering
costs are included in the Public Offering Price per Unit and 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.
</FN>
Page 5
PREFERRED INCOME TRUST SERIES
FT 302
What is the FT Series?
FT 302 is one of a series of investment companies created by the Sponsor
under the name of the FT Series, all of which are generally similar but
each of which is separate and is designated by a different series
number. The FT Series was formerly known as The First Trust Special
Situations Trust Series. This Series consists of an underlying separate
unit investment trust designated as: Preferred Income Trust Series. The
Trust was created under the laws of the State of New York pursuant to a
Trust Agreement (the "Indenture"), dated the Initial Date of Deposit,
with Nike Securities L.P. as Sponsor, The Chase Manhattan Bank as
Trustee and First Trust Advisors L.P. as Portfolio Supervisor and
Evaluator.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
confirmations of contracts for the purchase of preferred securities,
together with an irrevocable letter or letters of credit of a financial
institution in an amount at least equal to the purchase price of such
Securities. In exchange for the deposit of Securities or contracts to
purchase Securities in the Trust, the Trustee delivered to the Sponsor
documents evidencing the entire ownership of the Trust.
The objective of the Trust is to provide the potential for a high level
of current income and capital preservation by investing the Trust's
portfolio in the Securities. The Securities consist of both Preferred
Stocks and Trust Preferred Securities.
Preferred stocks are unique securities that combine some of the
characteristics of both common stocks and bonds. Preferred stocks
generally pay a fixed rate of return and are sold on the basis of
current yield, like bonds. However, because they are equity securities,
preferred stocks provide equity ownership of a company and the income is
paid in the form of dividends. Preferred stocks typically have a yield
advantage over common stocks as well as comparably rated fixed income
investments.
Trust Preferred Securities are limited-life preferred securities that
are typically issued by corporations, generally in the form of interest-
bearing notes or preferred securities issued by corporations, or by an
affiliated business trust of a corporation, generally in the form of
beneficial interests in subordinated debentures issued by the
corporation, or similarly structured securities. The maturity and
dividend rate of the Trust Preferred Securities are structured to match
the maturity and coupon interest rate of the interest-bearing notes,
preferred securities or subordinated debentures. Trust Preferred
Securities usually mature on the stated maturity date of the interest-
bearing notes, preferred securities or subordinated debentures and may
be redeemed or liquidated prior to the stated maturity date of such
instruments for any reason on or after their stated call date or upon the
occurrence of certain extraordinary circumstances at any time. Trust
Preferred Securities generally have a yield advantage over traditional
preferred stocks, but unlike preferred stocks, distributions on the
Trust Preferred Securities are treated as interest rather than dividends
for Federal income tax purposes.
Each of the Securities included in the Trust have been carefully
selected by a team of experienced financial professionals utilizing
database screening techniques and fundamental analysis and are rated
"BBB-" or better by Standard & Poor's Corporation. There is, however, no
assurance that the objective of the Trust will be achieved. See
"Portfolio-Risk Factors."
With the deposit of the Securities on the Initial Date of Deposit, the
Sponsor established a percentage relationship between the amounts of
individual Securities in the Trust's portfolio. From time to time
following the Initial Date of Deposit, the Sponsor, pursuant to the
Indenture, may deposit additional Securities in the Trust or cash
(including a letter of credit) with instructions to purchase additional
Securities in the Trust, and Units may be continuously offered for sale
to the public by means of this Prospectus, resulting in a potential
increase in the outstanding number of Units of the Trust. Any deposit by
the Sponsor of additional Securities or cash will duplicate, as nearly
as is practicable, the original proportionate relationship and not the
actual proportionate relationship on the subsequent Date of Deposit,
since the two may differ. Any such difference may be due to the sale,
redemption or liquidation of any of the Securities deposited in the
Trust on the Initial, or any subsequent, Date of Deposit. See "Rights of
Unit Holders-How May Securities be Removed from the Trust?" Since the
Page 6
prices of the underlying Securities will fluctuate daily, the ratio, 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 in the Trust. If the Sponsor deposits cash,
however, existing and new investors may experience a dilution of their
investment and a reduction in their anticipated income because of
fluctuations in the price of the Securities and because the Trust will
pay the associated brokerage fees. To minimize this effect, the Trust
will try to purchase the Securities as close to the evaluation time or
as close to the evaluation price as possible. However, the purchase of
Securities may take up to several days to complete. The Trustee may from
time to time retain and pay compensation to the Sponsor (or an affiliate
of the Sponsor) to act as agent for the Trust with respect to acquiring
Securities for the Trust. In acting in such capacity, the Sponsor or its
affiliate will be held subject to the restrictions under the Investment
Company Act of 1940, as amended.
On the Initial Date of Deposit, each Unit of the Trust represented the
undivided fractional interest in the Securities as set forth under
"Summary of Essential Information." To the extent that Units of the
Trust are redeemed, the aggregate value of the Securities in the Trust
will be reduced and the undivided fractional interest represented by
each outstanding Unit of the Trust will increase. However, if additional
Units are issued by the Trust in connection with the deposit of
additional Securities or cash by the Sponsor, the aggregate value of the
Securities in the Trust will be increased by amounts allocable to
additional Units, and the fractional undivided interest represented by
each Unit of the Trust will be decreased proportionately. See "Rights of
Unit Holders-How May Units be Redeemed?"
What are the Expenses and Charges?
With the exception of the brokerage fees discussed above and bookkeeping
and other administrative services provided to the Trust, for which the
Sponsor will be reimbursed in amounts as set forth under "Summary of
Essential Information," the Sponsor will not receive any fees in
connection with its activities relating to the Trust.
First Trust Advisors L.P., an affiliate of the Sponsor, will receive an
annual supervisory fee as set forth under "Summary of Essential
Information" for providing portfolio supervisory services for the Trust.
Such fee is based on the number of Units outstanding in the Trust on
January 1 of each year, except for the year or years in which an initial
offering period occurs, in which case the fee for a month is based on
the number of Units outstanding at the end of such month. In providing
such supervisory services, the Portfolio Supervisor may purchase
research services from a variety of sources which may include dealers of
the Trust.
First Trust Advisors L.P., in its capacity as the Evaluator for the
Trust, will receive an annual evaluation fee as set forth under "Summary
of Essential Information" for providing evaluation services for the
Trust. Such fee is based on the number of Units outstanding in the Trust
on January 1 of each year, except for the year or years in which an
initial offering period occurs in which case the fee for a month is
based on the largest number of Units in the Trust outstanding during the
period for which the compensation is paid.
The Trustee pays certain expenses of the Trust for which it is
reimbursed by the Trust. The Trustee will receive for its ordinary
recurring services to the Trust an annual fee as set forth in "Summary
of Essential Information." Such fee will be based upon the largest
aggregate number of Units of the Trust outstanding during the calendar
year, except during the initial offering period, in which case the fee
is calculated based on the largest number of Units outstanding during
the period for which compensation is paid. For a discussion of the
services performed by the Trustee pursuant to its obligations under the
Indenture, reference is made to the material set forth under "Rights of
Unit Holders."
The fees described above are payable from the Income Account of the
Trust to the extent funds are available, and then from the Capital
Account of the Trust. Since the Trustee has the use of the funds being
held in the Capital and Income Accounts for payment of expenses and
redemptions and since such Accounts are noninterest-bearing to Unit
holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to the Trust is expected to result from
the use of these funds. Because the above fees are generally calculated
based on the largest aggregate number of Units of the Trust outstanding
during a calendar year, the per Unit amounts set forth under "Summary of
Essential Information" will be higher during any year in which
redemptions of Units occur.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
Page 7
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services,
supervisory services and evaluation services, such individual fees may
exceed the actual costs of providing such services for the Trust, but at
no time will the total amount received for such services rendered to all
unit investment trusts of which Nike Securities L.P. is the Sponsor in
any calendar year exceed the actual cost to the Sponsor or its affiliate
of supplying such services in such year.
The following additional charges are or may be incurred by the Trust:
all legal and annual auditing expenses of the Trustee incurred by or in
connection with its responsibilities under the Indenture; the expenses
and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Unit holders; fees of the Trustee
for any extraordinary services performed under the Indenture;
indemnification of the Trustee for any loss, liability or expense
incurred by it without negligence, bad faith or willful misconduct on
its part, arising out of or in connection with its acceptance or
administration of the Trust; any offering costs incurred after the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period; indemnification of the Sponsor for any
loss, liability or expense incurred without gross negligence, bad faith
or willful misconduct in acting as Depositor of the Trust; all taxes and
other government charges imposed upon the Securities or any part of the
Trust (no such taxes or charges are being levied or made or, to the
knowledge of the Sponsor, contemplated). The above expenses and the
Trustee's annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trust. In addition, the Trustee is empowered to sell
Securities in the Trust in order to make funds available to pay all
these amounts if funds are not otherwise available in the Income and
Capital Accounts of the Trust. The Sponsor cannot provide any assurance
that dividends will be sufficient to meet any or all expenses of the
Trust. As described above, if dividends are insufficient to cover
expenses, it is likely that Securities will have to be sold to meet
Trust expenses. These sales may result in capital gains or losses to
Unit holders. See "What is the Federal Tax Status of Unit Holders?"
The Indenture requires the Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. So
long as the Sponsor is making a secondary market for the Units, the
Sponsor is required to bear the cost of such annual audits to the extent
such cost exceeds $.0050 per Unit. Unit holders of the Trust covered by
an audit may obtain a copy of the audited financial statements upon
request.
What is the Federal Tax Status of Unit Holders?
This is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units.
The summary is limited to investors who hold the Units as "capital
assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986 (the "Code"). Unit
holders should consult their tax advisors in determining the Federal,
state, local and any other tax consequences of the purchase, ownership
and disposition of Units in the Trust. The Trust holds (i) preferred
stock (the "Preferred Stock"); (ii) interests in real estate
investment trusts (the "REIT Shares") and, together with the Preferred
Stock, the "Equity Securities"; (iii) undivided beneficial interests
(the "Trust Certificates") in affiliated business trusts that are taxed
as grantor trusts for Federal income tax purposes (the "Grantor Trusts")
and hold corporate debt obligations (the "Grantor Trust Debt
Obligations"); and (iv) corporate debt obligations (the "Corporate Debt
Obligations") and, together with the Grantor Trust Debt Obligations, the
"Debt Securities". The Equity Securities, the Trust Certificates and the
Corporate Debt Obligations held by the Trust are referred to
collectively as the "Securities."
Neither the Sponsor nor Chapman and Cutler has reviewed the assets to be
deposited in the Trust. However, although no opinion is expressed herein
regarding such matters, for purposes of the opinion set forth below, it
is assumed that (i) the Equity Securities qualify as equity for Federal
income tax purposes and that, accordingly, amounts received by the Trust
with respect to the Equity Securities will qualify as dividends as
defined in Section 316 of the Internal Revenue Code of 1986 (the "Code");
(ii) no Grantor Trust is an association taxable as a corporation for
Federal income tax purposes, but rather each Grantor Trust will be
governed by the provisions of subchapter J (relating to trusts) of
Chapter 1, of the Code; (iii) each holder of a Trust Certificate will be
considered the owner of a pro rata share of each asset of the respective
Grantor Trust; (iv) the Debt Securities qualify as debt for
Page 8
Federal income tax purposes; and (v) each REIT Share represents a share
in an entity treated as a real estate investment trust for Federal
income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor,
under existing law:
1. The Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated as the
owner of a pro rata portion of each of the assets of the Trust under the
Code; and the income of the Trust will be treated as income of the Unit
holders thereof under the Code. Each Unit holder will be considered to
have received his pro rata share of the income derived from each
Security when such income is considered to be received by the Trust.
Each Unit holder will also be required to include in taxable income for
Federal income tax purposes, original issue discount with respect to his
or her interest in any Debt Securities held by the Trust at the same
time and in the same manner as though the Unit holder were the direct
owner of such interest.
2. Each Unit holder will be considered to have received all of the
dividends and interest paid on his or her pro rata portion of each
Security when such dividends and interest are received by the Trust
regardless of whether such dividends or interest are used to pay a
portion of the deferred sales charge.
3. Each Unit holder will have a taxable event when the Trust disposes
of a Security (whether by sale, taxable exchange, liquidation,
redemption, or otherwise), an asset held by a Grantor Trust is disposed of
by the particular Grantor Trust, or upon the sale or redemption of Units by
such Unit holder (except to the extent an In-Kind distribution of Securities
is received by such Unit holder as described below). The price a Unit
holder pays for his or her Units, generally including sales charges, is
allocated among his or her pro rata portion of each Security held by the
Trust (in proportion to the fair market values thereof on the valuation
date closest to the date the Unit holder purchases his or her Units) in
order to determine his or her tax basis for his or her pro rata portion
of each Security held by such Trust. Unit holders must reduce the tax
basis of their Units for their share of accrued interest received, if
any, on Debt Securities delivered after the date the Unit holders pay
for their Units to the extent that such interest accrued on such Debt
Securities during the period from the Unit holder's settlement date to
the date such Debt Securities are delivered to the Trust or the Grantor
Trusts, as the case may be and, consequently, such Unit holders may have
an increase in taxable gain or reduction in capital loss upon the
disposition of such Units. Unit holders should consult their own tax
advisors with regard to calculation of basis. For Federal income tax
purposes, a Unit holder's pro rata portion of dividends (other than capital
gains dividends of a REIT, asdescribed below), as defined by Section 316 of
the Code, paid by a corporation with respect to an Equity Security held by
the Trust is taxable as ordinary income to the extent of such corporation's
current and accumulated "earnings and profits." A Unit holder's pro rata
portion of dividends paid on such Equity Security which exceed such current
and accumulated earnings and profits will first reduce a Unit holder's tax
basis in such Equity Security, and to the extent that such dividends
exceed a Unit holder's tax basis in such Equity Security shall generally
be treated as capital gain. In general, the holding period for such
capital gain will be determined by the period of time a Unit holder has
held his or her Units. Certain of the issuers of the Equity Securities
intend to qualify under special Federal income tax rules as "real estate
investment trusts" (a "REIT," shares of such issuer held by the Trust
shall be referred to as the "REIT Shares"). Because Unit holders are
deemed to directly own a pro rata portion of the REIT Shares as
discussed above, Unit holders are advised to consult their tax advisors
for information relating to the tax consequences of owning the REIT
Shares. Provided such issuers qualify as a REIT, certain distributions
by such issuers on the REIT Shares may qualify as "capital gain
dividends," taxable to shareholders (and, accordingly, to the Unit
holders as owners of a pro rata portion of the REIT Shares) as long-term
capital gains, regardless of how long a shareholder has owned such
shares. In addition, distributions of income or capital gains declared
on REIT Shares in October, November or December will be deemed to have
been paid to shareholders (and, accordingly, to the Unit holders as
owners of a pro rata portion of the REIT Shares) on December 31 of the
year they are declared, even when paid by the REIT during the following
Page 9
January and received by shareholders or Unit holders in such following
year.
4. The basis of each Unit and of each Debt Security which was issued
with original issue discount (or which has market discount) must be
increased by the amount of accrued original issue discount (and market
discount, if the Unit holder elects to include market discount in income
as it accrues) and the basis of each Unit and of each Debt Security
which was purchased by the Trust or any Grantor Trust, as the case may be,
at a premium must be reduced by the
annual amortization of Debt Security premium which the Unit holder has
properly elected to amortize under Section 171 of the Code. The tax
basis reduction requirements of the Code relating to amortization of
Debt Security premium may, under some circumstances, result in the Unit
holder realizing a taxable gain when his or her Units are sold or
redeemed for an amount equal to or less than his or her original cost.
Original issue discount is effectively treated as interest for Federal
income tax purposes and the amount of original issue discount in this
case is generally the difference between the Debt Security's purchase
price and its stated redemption price at maturity. A Unit holder will be
required to include in gross income for each taxable year the sum of his
or her daily portions of any original issue discount attributable to the
Debt Securities as such original issue discount
accrues for such year even though the income is not distributed to the
Unit holders during such year unless a Debt Security's original issue
discount is less than a "de minimis" amount as determined under the
Code. To the extent the amount of such discount is less than the
respective "de minimis" amount, such discount shall be treated as zero.
In general, original issue discount accrues daily under a constant
interest rate method which takes into account the semi-annual
compounding of accrued interest. Unit holders should consult their tax
advisors regarding the Federal income tax consequences and accretion of
original issue discount.
5. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust
will generally be considered a capital gain (except in the case of a
dealer or a financial institution). A Unit holder's portion of loss, if
any, upon the sale or redemption of Units or the disposition of
Securities held by the Trust will generally be considered a capital loss
(except in the case of a dealer or a financial institution). Unit
holders should consult their tax advisors regarding the recognition of
such capital gains and losses for Federal income tax purposes. In
addition, special rules, as described below, apply to a Unit holder's
pro rata portion of the REIT Shares.
The Debt Securities-Premium. If a Unit holder's tax basis of his or her
pro rata portion in any Debt Security exceeds the
amount payable by the issuer of the Debt Security with respect to such
pro rata interest upon maturity (or, in certain cases, the call date) of
the Debt Security, such excess would be considered premium which may be
amortized by the Unit holder at the Unit holder's election as provided
in Section 171 of the Code. Unit holders should consult their tax
advisors regarding whether such election should be made and the manner
of amortizing premium.
The Debt Securities-Original Issue Discount. Certain of the Debt
Securities may have been acquired with "original issue
discount." In the case of any Debt Securities acquired with
"original issue discount" that exceeds a "de minimis" amount as
specified in the Code, such discount is includable in taxable income of
the Unit holders on an accrual basis computed daily, without regard to
when payments of interest on such Debt Securities are received. The Code
provides a complex set of rules regarding the accrual of original issue
discount. These rules provide that original issue discount generally
accrues on the basis of a constant compound interest rate over the term
of the Debt Securities. Unit holders should consult their tax advisors
as to the amount of original issue discount which accrues.
Special original issue discount rules apply if the purchase price of the
Debt Security by the Trust or any Grantor Trust, as the case may be,
exceeds its original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price"). Similarly these
special rules would apply to a Unit holder if the tax basis of his or
her pro rata portion of a Debt Security issued with original issue
discount exceeds his or her pro rata portion of its adjusted issue
price. Unit holders should also consult their tax advisors regarding
these special rules.
It is possible that a Debt Security that has been issued at an original
issue discount may be characterized as a "high-yield discount
obligation" within the meaning of Section 163(e)(5) of the Code. To the
Page 10
extent that such an obligation is issued at a yield in excess of six
percentage points over the applicable Federal rate, a portion of the
original issue discount on such obligation will be characterized as a
distribution on stock (e.g., dividends) for purposes of the dividends
received deduction which is available to certain corporations with
respect to certain dividends received by such corporation.
The Debt Securities-Market Discount. If a Unit holder's tax basis in his
or her pro rata portion of Debt Securities is less than the allocable
portion of such Debt Security's stated redemption price at maturity (or,
if issued with original issue discount, the allocable portion of its
"revised issue price"), such difference will constitute market discount
unless the amount of market discount is "de minimis" as specified in the
Code. Market discount accrues daily computed on a straight line basis,
unless the Unit holder elects to calculate accrued market discount under
a constant yield method. Unit holders should consult their tax advisors
as to the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unit holders as ordinary income for Federal tax purposes upon the
receipt of serial principal payments on the Debt Securities, on the
sale, maturity or disposition of such Debt Securities by the Trust, and
on the sale by a Unit holder of Units, unless a Unit holder elects to
include the accrued market discount in taxable income as such discount
accrues. If a Unit holder does not elect to annually include accrued
market discount in taxable income as it accrues, deductions for any
interest expense incurred by the Unit holder which is incurred to
purchase or carry his or her Units will be reduced by such accrued
market discount. In general, the portion of any interest expense which
was not currently deductible would ultimately be deductible when the
accrued market discount is included in income. Unit holders should
consult their tax advisors regarding whether an election should be made
to include market discount in income as it accrues and as to the amount
of interest expense which may not be currently deductible.
The Debt Securities-Basis. The tax basis of a Unit holder with respect
to his or her interest in a Debt Security is increased by the amount of
original issue discount (and market discount, if the Unit holder elects
to include market discount, if any, on the Debt Securities in income as
it accrues) thereon properly included in the Unit
holder's gross income as determined for Federal income tax purposes and
reduced by the amount of any amortized premium which the Unit holder has
properly elected to amortize under Section 171 of the Code. A Unit
holder's tax basis in his or her Units will equal his or her tax basis
in his or her pro rata portion of all of the assets of the Trust.
Deferred Sales Charge. Generally, the tax basis of a Unit holder
includes sales charges, and such charges are not deductible. A portion
of the sales charge for the Trust is deferred. It is possible that for
Federal income tax purposes a portion of the deferred sales charge may
be treated as interest which would be deductible by a Unit holder
subject to limitations on the deduction of investment interest. In such
a case, the non-interest portion of the deferred sales charge would be
added to the Unit holder's tax basis in his or her Units. The deferred
sales charge could cause the Unit holder's Units to be considered to be
debt-financed under Section 246A of the Code which would result in a
small reduction of the dividends-received deduction. In any case, the
income (or proceeds from redemption) a Unit holder must take into
account for Federal income tax purposes is not reduced by amounts
deducted to pay the deferred sales charge. Unit holders should consult
their own tax advisors as to the income tax consequences of the deferred
sales charge.
Dividends Received Deduction. A corporation that owns Units will
generally be entitled to a 70% dividends received deduction with respect
to such Unit holder's pro rata portion of dividends received by the
Trust (to the extent such dividends are taxable as ordinary income, as
discussed above, and are attributable to domestic corporations) in the
same manner as if such corporation directly owned the Equity Securities
paying such dividends (other than corporate Unit holders, such as "S"
corporations, which are not eligible for the deduction because of their
special characteristics and other than for purposes of special taxes
such as the accumulated earnings tax and the personal holding
corporation tax). However, a corporation owning Units should be aware
that Sections 246 and 246A of the Code impose additional limitations on
the eligibility of dividends for the 70% dividends received deduction.
These limitations include a requirement that stock (and therefore Units)
must generally be held at least 46 days (as determined under, and during
the period specified in, Section 246(c) of the Code). Final regulations
have been issued which address special rules that must be considered in
determining whether the 46-day holding period requirement is met.
Page 11
Moreover, the allowable percentage of the deduction will be reduced from
70% if a corporate Unit holder owns certain stock (or Units) the
financing of which is directly attributable to indebtedness incurred by
such corporation. Dividends received on the REIT Shares are not eligible
for the dividends received deduction. Certain special rules may apply
with regard to preferred stock of a public utility. Unit holders should
consult their own tax advisors with regard to these rules.
To the extent dividends received by a Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of
such dividends, since the dividends received deduction is generally
available only with respect to dividends paid by domestic corporations.
It should be noted that various legislative proposals that would affect
the dividends received deduction have been introduced. Unit holders
should consult with their tax advisors with respect to the limitations
on and possible modifications to the dividends received deduction.
Limitations on Deductibility of the Trust's Expenses by Unit Holders.
Each Unit holder's pro rata share of each expense paid by the Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by such Unit holder. It should be noted that as a
result of the Tax Reform Act of 1986, certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to
the extent they exceed 2% of such individual's adjusted gross income.
Unit holders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by
the Trust or Disposition of Units. As discussed above, a Unit holder may
recognize taxable gain (or loss) when a Security is disposed of by the
Trust, an asset held by a Grantor Trust is disposed of by the particular
Grantor Trust or if the Unit holder disposes of a Unit. However, any loss
realized by a Unit holder with respect to the disposition of his or her
pro rata portion of the REIT Shares, to the extent such Unit holder has
owned his Units for less than six months or the Trust has held the REIT
Shares for less than six months, will be treated as long-term capital
loss to the extent of such Unit holder's pro rata portion of any capital
gain dividends received (or deemed to have been received) with respect
to the REIT Shares. The Internal Revenue Service Restructuring and
Reform Act of 1998 (the "1998 Tax Act") provides that for taxpayers
other than corporations, net capital gain (which is defined as net long-
term capital gain over net short-term capital loss for the taxable year)
realized from property (with certain exclusions) is subject to a maximum
marginal stated tax rate of 20% (10% in the case of certain taxpayers in
the lowest tax bracket). However, capital gain realized from assets held
more than one year that is considered unrecaptured Section 1250 gain is taxed
at a maximum stated tax rate of 25%. 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. The date on which
a Unit is acquired (i.e., the "trade date") is excluded for purposes of
determining the holding period of the Unit. Capital gains realized from
assets held for one year or less are taxed at the same rates as ordinary
income. Note, however, that the 1998 Tax Act (and The Taxpayer Relief
Act of 1997 (the "1997 Act")) provide that the application of the rules
described above in the case of pass-through entities such as REITs will
be prescribed in future Treasury Regulations. The Internal Revenue
Service has released preliminary guidance which provides that, in
general, pass-through entities such as REITs may designate their capital
gain dividends as either a 20% rate gain distribution, an unrecaptured
Section 1250 gain distribution, or a 28% rate gain distribution,
depending on the nature of the gain received by the pass-through entity.
Accordingly, Unit holders should consult their own tax advisors as to
the tax rate applicable to capital gain dividends.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
If the Unit holder disposes of a Unit, he or she is deemed thereby to
have disposed of his or her entire pro rata interest in all assets of
the Trust including his or her pro rata portion of all the Securities
represented by the Unit. This may result in a portion of the gain, if any,
on such sale being taxable as ordinary income under the market discount
rules (assuming no election was made by the Unit holder to include market
discount in income as it accrues) as previously discussed. The 1997 Act
includes provisions that treat certain transactions designed to reduce or
eliminate risk of loss and opportunities for gain (e.g., short sales,
offsetting notional principal contracts, futures or forward contracts,
or similar transactions) as constructive sales for
Page 12
purposes of recognition of gain (but not loss) and for purposes of
determining the holding period. Unit holders should consult their own
tax advisors with regard to any such constructive sales rules.
Special Tax Consequences of In-Kind Distributions Upon Redemption of
Units or Termination of the Trust. As discussed in "Rights of Unit
Holders-How are Income and Capital Distributed?", under certain
circumstances a Unit holder who owns at least 1,000 Units of the Trust
may request an In-Kind Distribution upon the redemption of Units or the
termination of the Trust. The Unit holder requesting an In-Kind
Distribution will be liable for expenses related thereto (the
"Distribution Expenses") and the amount of such In-Kind Distribution
will be reduced by the amount of the Distribution Expenses. See "Rights
of Unit Holders-How are Income and Capital Distributed?" As previously
discussed, prior to the redemption of Units or the termination of the
Trust, a Unit holder is considered as owning a pro rata portion of each
of the Trust's assets for Federal income tax purposes. The receipt of an
In-Kind Distribution will result in a Unit holder receiving an undivided
interest in whole Securities plus, possibly, cash.
The potential tax consequences that may occur under an In-Kind
Distribution will depend on whether or not a Unit holder receives cash
in addition to Securities. A Unit holder
will not recognize gain or loss if a Unit holder only receives
Securities in exchange for his or her pro rata portion in the Securities
held by the Trust. However, if a Unit holder also receives cash in
exchange for a fractional share of an Security held by the Trust, such
Unit holder will generally recognize gain or loss based upon the
difference between the amount of cash received by the Unit holder and
his or her tax basis in such fractional share of an Security held by the
Trust.
Because the Trust will own many Securities, a Unit holder who requests
an In-Kind Distribution will have to analyze the tax consequences with
respect to each Security owned by the Trust. The amount of taxable gain
(or loss) recognized upon such exchange will generally equal the sum of
the gain (or loss) recognized under the rules described above by such
Unit holder with respect to each Security owned by the Trust. Unit
holders who request an In-Kind Distribution are advised to consult their
tax advisors in this regard.
Computation of the Unit Holder's Tax Basis. Initially, a Unit holder's
tax basis in his or her Units will generally equal the price paid by
such Unit holder for his or her Units. The cost of the Units is
allocated among the Securities held in the Trust in accordance with the
proportion of the fair market values of such Securities on the valuation
date nearest the date the Units are purchased in order to determine such
Unit holder's tax basis for his or her pro rata portion of each Security.
A Unit holder's tax basis in his or her Units and his or her pro rata
portion of an Equity Security held by the Trust will be reduced to the
extent dividends paid with respect to such Equity Security are received
by the Trust which are not taxable as ordinary income as described
above. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received, if any, on Debt Securities delivered
after the date the Unit holders pay for their Units to the extent that
such interest accrued on such Debt Securities during the period from the
Unit holder's settlement date to the date such Debt Securities are
delivered to the Trust or any Grantor Trust as the case may be, and,
consequently, such Unit holders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units.
Foreign Investors. A Unit holder who is a foreign investor (i.e., an
investor other than a U.S. citizen or resident or a U.S. corporation,
partnership, estate or trust) will generally be subject to United States
Federal income taxes, including withholding taxes, on distributions from
the Trust relating to such investor's share of dividend income paid on
the Equity Securities (other than those that are not treated as United
States source income, if any). However, interest income (including any
original issue discount) on the Debt Securities, or any gain from the
sale or other disposition of, his or her pro rata interest in any
Security or the sale of his or her Units will not be subject to United
States Federal income taxes, including withholding taxes, provided that
all of the following conditions are met: (i) the interest income or gain
is not effectively connected with the conduct by the foreign investor of
a trade or business within the United States, (ii) if the interest is
United States source income and the Debt Security is issued after
July 18, 1984 then the
Page 13
foreign investor does not own, directly or indirectly, 10% or more of
the total combined voting power of all classes of voting stock of the
issuer of the Debt Security and the foreign investor is not a controlled
foreign corporation related (within the meaning of Section 864(d)(4) of
the Code) to the issuer of the Debt Security, (iii) with respect to any
gain, the foreign investor (if an individual) is not present in the
United States for 183 days or more during his or her taxable year and
(iv) the foreign investor provides all certification which may be
required of his or her status (foreign investors may contact the sponsor
to obtain a Form W-8 which must be filed with the Trustee and refiled
every three calendar years thereafter). Foreign investors should consult
their tax advisors with respect to United States tax consequences of
ownership of Units.
It should be noted that the interest exemption from United States
taxation, including withholding taxes, is not available for certain
"contingent interest" received after December 31, 1993. No opinion is
expressed herein regarding the potential applicability of this provision
and whether United States taxation or withholding taxes could be imposed
with respect to income derived from the Units as a result thereof. Unit
holders and prospective investors should consult with their tax advisors
regarding the potential effect of this provision on their investment in
Units.
General. Each Unit holder will be requested to provide the Unit holder's
taxpayer identification number to the Trustee and to certify that the
Unit holder has not been notified that payments to the Unit holder are
subject to back-up withholding. If the proper taxpayer identification
number and appropriate certification are not provided when requested,
distributions by the Trust to such Unit holder (including amounts
received upon the redemption of Units) will be subject to back-up
withholding.
At the termination of the Trust, the Trustee will furnish to each Unit
holder a statement containing information relating to the dividends
received by the Trust on the Equity Securities, the gross proceeds
received by the Trust from the disposition of any Security (resulting
from redemption or the sale of any Security) and the fees and expenses
paid by the Trust. The Trustee will also furnish annual information
returns to Unit holders and to the Internal Revenue Service.
In general, income that is not effectively connected to the conduct of a
trade or business within the United States that is earned by non-U.S.
Unit holders and derived from interest on debt of foreign corporations
and from dividends of foreign corporations will not be subject to U.S.
withholding tax provided (in the case of dividends) that less than 25%
of the gross income of the foreign corporation for a three-year period
ending with the close of its taxable year preceding payment was not
effectively connected to the conduct of a trade or business within the
United States. In addition, such earnings may be exempt from U.S.
withholding pursuant to a specific treaty between the United States and
a foreign country. Non-U.S. Unit holders should consult their own
advisors regarding the imposition of U.S. withholding on distributions
from the Trust.
It should be noted that payments to the Trust of dividends or interest
on Securities that are attributable to foreign corporations may be
subject to foreign withholding taxes and Unit holders should consult
their tax advisors regarding the potential tax consequences relating to
the payment of any such withholding taxes by the Trust. Any dividends or
interest withheld as a result thereof will nevertheless be treated as
income to the Unit holders. Because, under the grantor trust rules, an
investor is deemed to have paid directly his or her share of foreign
taxes that have been paid or accrued, if any, an investor may be
entitled to a foreign tax credit or deduction for U.S. income tax
purposes with respect to such taxes. A required holding period is
imposed for such credits. Investors should consult their tax advisors
with respect to foreign withholding taxes and foreign tax credits.
Unit holders desiring to purchase Units for tax-deferred plans and IRAs
should consult their broker for details on establishing such accounts.
Units may also be purchased by persons who already have self-directed
plans established. See "Are Investments in the Trust Eligible for
Retirement Plans?"
Except as specifically provided above, the foregoing discussion relates
only to the tax treatment of United States Unit holders with regard to
United States Federal income taxes; Unit holders may be subject to
foreign, state and local taxation. As used herein, the term "U.S. Unit
holder" means an owner of a Unit in the Trust that (a) is (i) for United
States Federal income tax purposes a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
Page 14
subdivision thereof, or (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its
source or (b) does not qualify as a U.S. Unit holder in paragraph (a)
but whose income from a Unit is effectively connected with such Unit
holder's conduct of a United States trade or business. The term also
includes certain former citizens of the United States whose income and
gain on the Units will be taxable. Unit holders should consult their tax
advisors regarding potential foreign, state or local taxation with
respect to the Units.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trust for New York tax matters, under the existing income tax laws of
the State of New York, the Trust is not an association taxable as a
corporation and the income of such Trust will be treated as the income
of the Unit holders thereof.
Are Investments in the Trust Eligible for Retirement Plans?
Units of the Trust are eligible for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other tax-deferred retirement
plans. Generally, the Federal income tax relating to capital gains and
income received in each of the foregoing plans is deferred until
distributions are received. Distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for
special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisors
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
PORTFOLIO
What are the Securities?
The Trust consists of different issues of Securities which are listed on
a securities exchange or The Nasdaq Stock Market or traded in the over-
the-counter market. See "Schedule of Investments" for a general
description of the Securities.
Risk Factors
An investment in Units of the Trust should be made with an understanding
of the problems and risks such an investment may entail. The Trust
consists of such of the Securities listed under "Schedule of
Investments" as may continue to be held from time to time in the Trust
and any additional Securities acquired and held by the Trust pursuant to
the provisions of the Indenture, together with cash held in the Income
and Capital Accounts. Neither the Sponsor nor the Trustee shall be
liable in any way for any failure in any of the Securities. However,
should any contract for the purchase of any of the Securities initially
deposited hereunder fail, the Sponsor will, unless substantially all of
the moneys held in the Trust to cover such purchase are reinvested in
substitute Securities in accordance with the Indenture, refund the cash
and sales charge attributable to such failed contract to all Unit
holders on the next distribution date.
Because certain of the Securities from time to time may be sold under
certain circumstances described herein, and because the proceeds from
such events will be distributed to Unit holders and will not be
reinvested, no assurance can be given that the Trust will retain for any
length of time its present size and composition. Although the Portfolio
is not managed, the Sponsor may instruct the Trustee to sell Securities
under certain limited circumstances. Pursuant to the Indenture and with
limited exceptions, the Trustee may sell or keep any securities or other
property acquired in exchange for Securities such as those acquired in
connection with a merger or other transaction. See "Rights of Unit
Holders-How May Securities be Removed from the Trust?" Securities,
however, will not be sold by the Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation or
depreciation.
Whether or not the Securities are listed on a securities exchange, the
principal trading market for the Securities may be in the over-the-
counter market. As a result, the existence of a liquid trading market
for the Securities may depend on whether dealers will make a market in
the Securities. There can be no assurance that a market will be made for
any of the Securities, that any market for the Securities will be
maintained or of the liquidity of the Securities in any markets made. In
addition, the Trust may be restricted under the Investment Company Act
of 1940 from selling Securities to the Sponsor. The price at which the
Page 15
Securities may be sold to meet redemptions and the value of the Trust
will be adversely affected if trading markets for the Securities are
limited or absent.
Holders of preferred stocks of the type held in the Trust have the right
to receive dividends, when and as declared by the issuer's Board of
Directors but do not participate in other amounts available for
distribution by the issuing corporation. Issues of preferred stock
generally provide that the preferred stock may be liquidated, either by
a partial scheduled redemption pursuant to a sinking fund or by a
refunding redemption pursuant to which, at the option of the issuer, all
or part of the issue can be retired from any available funds, at prices
which may or may not include a premium over the involuntary liquidation
preference, which generally is the same as the par or stated value of
the preferred stock. In general, optional redemption provisions are more
likely to be exercised when the preferred stocks are valued at a premium
over par or stated value than when they are valued at a discount from
par or stated value.
An investment in Units should be made with an understanding of the risks
which an investment in preferred stocks entails, including the risk that
the financial condition of the issuers of the Securities or the general
condition of the preferred stock market may worsen, and the value of the
preferred stocks and therefore the value of the Units may decline.
Preferred stocks may be susceptible to general stock market movements
and to volatile increases and decreases of value as market confidence in
and perceptions of the issuers change. These perceptions are based on
unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates,
economic expansion or contraction, market liquidity, and global or
regional political, economic or banking crises. Preferred stocks are
also vulnerable to Congressional reductions in the dividends-received
deduction which would adversely affect the after-tax return to the
investors who can take advantage of the deduction. Such a reduction
might adversely affect the value of preferred stocks in general. Holders
of preferred stocks, as owners of the entity, have rights to receive
payments from the issuers of those preferred stocks that are generally
subordinate to those of creditors of, or holders of debt obligations or,
in some cases, other senior preferred stocks of, such issuers. Preferred
stocks do not represent an obligation of the issuer and, therefore, do
not offer any assurance of income or provide the same degree of
protection of capital as do debt securities. The issuance of additional
debt securities or senior preferred stocks will create prior claims for
payment of principal and interest and senior dividends which could
adversely affect the ability and inclination of the issuer to declare or
pay dividends on its preferred stock or the rights of holders of
preferred stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of preferred stocks is subject to market
fluctuations for as long as the preferred stocks remain outstanding, and
thus the value of the Securities may be expected to fluctuate over the
life of the Trust to values higher or lower than those prevailing on the
Initial Date of Deposit.
Holders of Trust Preferred Securities incur risks in addition to or
slightly different than the typical risks of holding preferred stocks.
As previously discussed, Trust Preferred Securities are limited-life
preferred securities that are typically issued by corporations,
generally in the form of interest-bearing notes or preferred securities
issued by corporations, or by an affiliated business trust of a
corporation, generally in the form of beneficial interests in
subordinated debentures issued by the corporation, or similarly
structured securities. The maturity and dividend rate of the Trust
Preferred Securities are structured to match the maturity and coupon
interest rate of the interest-bearing notes, preferred securities or
subordinated debentures. Trust Preferred Securities usually mature on
the stated maturity date of the interest-bearing notes, preferred
securities or subordinated debentures and may be redeemed or liquidated
prior to the stated maturity date of such instruments for any reason on or
after their stated call date or upon the occurrence of certain extraordinary
circumstances at any time. Trust Preferred Securities generally have a
yield advantage over traditional preferred stocks, but unlike preferred
stocks, distributions on the Trust Preferred Securities are treated as
interest rather than dividends for Federal income tax purposes. Unlike
most preferred stocks, distributions received from Trust Preferred
Securities are not eligible for the dividends-received deduction.
Certain of the risks unique to Trust Preferred Securities include: (i)
distributions on Trust Preferred Securities will be made only if
interest payments on the interest-bearing notes, preferred securities or
subordinated debentures are made; (ii) a corporation issuing the
interest-bearing notes, preferred securities or subordinated debentures
may defer interest payments on these instruments for up to 20
consecutive quarters and if such election is made, distributions will
not be made on the Trust Preferred Securities during the deferral
Page 16
period; (iii) certain tax or regulatory events may trigger the
redemption of the interest-bearing notes, preferred securities or
subordinated debentures by the issuing corporation and result in
prepayment of the Trust Preferred Securities prior to their stated
maturity date; (iv) future legislation may be proposed or enacted that
may prohibit the corporation from deducting its interest payments on the
interest-bearing notes, preferred securities or subordinated debentures
for tax purposes, making redemption of these instruments likely; (v) a
corporation may redeem the interest-bearing notes, preferred securities
or subordinated debentures in whole at any time or in part from time to
time on or after a stated call date; (vi) Trust Preferred Securities
holders have very limited voting rights; and (vii) payment of interest
on the interest-bearing notes, preferred securities or subordinated
debentures, and therefore distributions on the Trust Preferred Securities,
is dependent on the financial condition of the issuing corporation.
The Trust is considered to be concentrated in securities issued by banks
and financial service providers, and as such, an investment in Units of
the Trust should be made with an understanding of the problems and risks
associated with an investment in the bank and financial services
industries in general.
Banks, thrifts and their holding companies are especially subject to the
adverse effects of economic recession, volatile interest rates,
portfolio concentrations in geographic markets and in commercial and
residential real estate loans, and competition from new entrants in
their fields of business. Banks and thrifts are highly dependent on net
interest margin. Recently, bank profits have come under pressure as net
interest margins have contracted, but volume gains have been strong in
both commercial and consumer products. There is no certainty that such
conditions will continue. Bank and thrift institutions had received
significant consumer mortgage fee income as a result of activity in
mortgage and refinance markets. As initial home purchasing and
refinancing activity subsided, this income diminished. Economic
conditions in the real estate markets, which have been weak in the past,
can have a substantial effect upon banks and thrifts because they
generally have a portion of their assets invested in loans secured by
real estate. Banks, thrifts and their holding companies are subject to
extensive federal regulation and, when such institutions are state-
chartered, to state regulation as well. Such regulations impose strict
capital requirements and limitations on the nature and extent of
business activities that banks and thrifts may pursue. Furthermore, bank
regulators have a wide range of discretion in connection with their
supervisory and enforcement authority and may substantially restrict the
permissible activities of a particular institution if deemed to pose
significant risks to the soundness of such institution or the safety of
the federal deposit insurance fund. Regulatory actions, such as
increases in the minimum capital requirements applicable to banks and
thrifts and increases in deposit insurance premiums required to be paid
by banks and thrifts to the Federal Deposit Insurance Corporation
("FDIC"), can negatively impact earnings and the ability of a company to
pay dividends. Neither federal insurance of deposits nor governmental
regulations, however, insures the solvency or profitability of banks or
their holding companies, or insures against any risk of investment in
the securities issued by such institutions.
The statutory requirements applicable to and regulatory supervision of
banks, thrifts and their holding companies have increased significantly
and have undergone substantial change in recent years. To a great
extent, these changes are embodied in the Financial Institutions Reform,
Recovery and Enforcement Act; enacted in August 1989, the Federal
Deposit Insurance Corporation Improvement Act of 1991, the Resolution
Trust Corporation Refinancing, Restructuring, and Improvement Act of
1991 and the regulations promulgated under these laws. Many of the
regulations promulgated pursuant to these laws have only recently been
finalized and their impact on the business, financial condition and
prospects of the Securities in the Trust's portfolio cannot be predicted
with certainty. Periodic efforts by recent Administrations to introduce
legislation broadening the ability of banks to compete with new products
have not been successful, but if enacted could lead to more failures as
a result of increased competition and added risks. Failure to enact such
legislation, on the other hand, may lead to declining earnings and an
inability to compete with unregulated financial institutions. Efforts to
expand the ability of federal thrifts to branch on an interstate basis
have been initially successful through promulgation of regulations, and
legislation to liberalize interstate banking has recently been signed
into law. Under the legislation, banks will be able to purchase or
establish subsidiary banks in any state, one year after the
legislation's enactment. Since mid-1997, banks have been allowed to turn
existing banks into branches. Consolidation is likely to continue. The
Securities and Exchange Commission and the Financial Accounting
Page 17
Standards Board require the expanded use of market value accounting by
banks and have imposed rules requiring market accounting for investment
securities held in trading accounts or available for sale. Adoption of
additional such rules may result in increased volatility in the reported
health of the industry, and mandated regulatory intervention to correct
such problems. Additional legislative and regulatory changes may be
forthcoming. For example, the bank regulatory authorities have proposed
substantial changes to the Community Reinvestment Act and fair lending
laws, rules and regulations, and there can be no certainty as to the
effect, if any, that such changes would have on the Securities in the
Trust's portfolio. In addition, from time to time the deposit insurance
system is reviewed by Congress and federal regulators, and proposed
reforms of that system could, among other things, further restrict the
ways in which deposited moneys can be used by banks or reduce the dollar
amount or number of deposits insured for any depositor. Such reforms
could reduce profitability as investment opportunities available to bank
institutions become more limited and as consumers look for savings
vehicles other than bank deposits. Banks and thrifts face significant
competition from other financial institutions such as mutual funds,
credit unions, mortgage banking companies and insurance companies, and
increased competition may result from legislative broadening of regional
and national interstate banking powers as has been recently enacted.
Among other benefits, the legislation allows banks and bank holding
companies to acquire across previously prohibited state lines and to
consolidate their various bank subsidiaries into one unit. The Sponsor
makes no prediction as to what, if any, manner of bank and thrift
regulatory actions might ultimately be adopted or what ultimate effect
such actions might have on the Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5%
of the outstanding shares of any class of voting securities of a bank or
bank holding company, (2) acquiring control of a bank or another bank
holding company, (3) acquiring all or substantially all the assets of a
bank, or (4) merging or consolidating with another bank holding company,
without first obtaining Federal Reserve Board ("FRB") approval. In
considering an application with respect to any such transaction, the FRB
is required to consider a variety of factors, including the potential
anti-competitive effects of the transaction, the financial condition and
future prospects of the combining and resulting institutions, the
managerial resources of the resulting institution, the convenience and
needs of the communities the combined organization would serve, the
record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the
prospective availability to the FRB of information appropriate to
determine ongoing regulatory compliance with applicable banking laws. In
addition, the federal Change In Bank Control Act and various state laws
impose limitations on the ability of one or more individuals or other
entities to acquire control of banks or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends
by bank holding companies. In the policy statement, the FRB expressed
its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends which exceed its net income or which could
only be funded in ways that would weaken its financial health, such as
by borrowing. The FRB also may impose limitations on the payment of
dividends as a condition to its approval of certain applications,
including applications for approval of mergers and acquisitions. The
Sponsor makes no prediction as to the effect, if any, such laws will
have on the Securities or whether such approvals, if necessary, will be
obtained.
Companies engaged in investment banking/brokerage and investment
management include brokerage firms, broker/dealers, investment banks,
finance companies and mutual fund companies. Earnings and share prices
of companies in this industry are quite volatile, and often exceed the
volatility levels of the market as a whole. Recently, ongoing
consolidation in the industry and the strong stock market has benefited
stocks which investors believe will benefit from greater investor and
issuer activity. Major determinants of future earnings of these
companies are the direction of the stock market, investor confidence,
equity transaction volume, the level and direction of long-term and
short-term interest rates, and the outlook for emerging markets.
Negative trends in any of these earnings determinants could have a
serious adverse effect on the financial stability, as well as the stock
prices, of these companies. Furthermore, there can be no assurance that
the issuers of the Securities included in the Trust will be able to
respond in a timely manner to compete in the rapidly developing
marketplace. In addition to the foregoing, profit margins of these
companies continue to shrink due to the commoditization of traditional
Page 18
businesses, new competitors, capital expenditures on new technology and
the pressures to compete globally.
The Trust is also considered to be concentrated in securities issued by
public utility companies, and as such, an investment in Units of the
Trust should be made with an understanding of the problems and risks
associated with an investment in the public utility industry in general.
General problems of the public utility industry include the difficulty
in obtaining an adequate return on invested capital despite frequent
increases in rates which have been granted by the public service
commissions having jurisdiction, the difficulty in financing large
construction programs during an inflationary period, the restrictions on
operations and increased cost and delays attributable to environmental
and other regulatory considerations, the difficulty to the capital
markets in absorbing utility debt and equity securities, the difficulty
in obtaining fuel for electric generation at reasonable prices, and the
effects of energy conservation. There is no assurance that such public
service commissions will grant rate increases in the future or that any
such increases will be adequate to cover operating and other expenses
and debt service requirements. All of the public utilities which are
issuers of the Securities in the Trust's portfolio have been
experiencing many of these problems in varying degrees. Furthermore,
utility stocks are particularly susceptible to interest rate risk,
generally exhibiting an inverse relationship to interest rates. As a
result, electric utility stock prices may be adversely affected as
interest rates rise. The Sponsor makes no prediction as to whether
interest rates will rise or fall or the effect, if any, interest rates
may have on the Securities in the Trust's portfolio. In addition,
federal, state and municipal governmental authorities may from time to
time review existing, and impose additional, regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of certain of the Securities
in the Trust's portfolio to make interest or dividend payments on their
Securities.
Utilities are generally subject to extensive regulation by state utility
commissions which, for example, establish the rates which may be charged
and the appropriate rate of return on an approved asset base, which must
be approved by the state commissions. Certain utilities have had
difficulty from time to time in persuading regulators, who are subject
to political pressures, to grant rate increases necessary to maintain an
adequate return on investment and voters in many states have the ability
to impose limits on rate adjustments (for example, by initiative or
referendum). Any unexpected limitations could negatively affect the
profitability of utilities whose budgets are planned far in advance. In
addition, gas pipeline and distribution companies have had difficulties
in adjusting to short and surplus energy supplies, enforcing or being
required to comply with long-term contracts and avoiding litigation from
their customers, on the one hand, or suppliers, on the other.
Recently, the California Public Utility Commission ("CPUC") announced
its intention to deregulate the electric utility industry in California.
This change will eventually result in full competition between electric
utilities and independent power producers in the generation and sale of
power to all customers in California by the year 2002. The legislation
restructures the California electrical industry by promoting competition
and allowing customers a right to choose their electrical supplier.
Preliminary assessments suggest that the deregulation of the electric
utility industry in California could have a significant adverse effect
on electric utility stocks of California issuers. Furthermore, the move
toward full competition in California could indicate that similar
changes may be made in other states in the future which could negatively
impact the profitability of electric utilities. Further deregulation
could adversely affect the issuers of certain of the Securities in the
Trust's portfolio. In view of the uncertainties regarding the CPUC
deregulation plan, it is unclear what effect, if any, that full
competition will have on electric utilities in California or whether
similar changes will be adopted in other states.
Certain of the issuers of the Securities in the Trust may own or operate
nuclear generating facilities. Governmental authorities may from time to
time review existing, and impose additional, requirements governing the
licensing, construction and operation of nuclear power plants. Nuclear
generating projects in the electric utility industry have experienced
substantial cost increases, construction delays and licensing
difficulties. These have been caused by various factors, including
inflation, high financing costs, required design changes and rework,
allegedly faulty construction, objections by groups and governmental
officials, limits on the ability to finance, reduced forecasts of energy
requirements and economic conditions. This experience indicates that the
risk of significant cost increases, delays and licensing difficulties
remain present until completion and achievement of commercial operation
of any nuclear project. Also, nuclear generating units in service have
Page 19
experienced unplanned outages or extensions of scheduled outages due to
equipment problems or new regulatory requirements sometimes followed by
a significant delay in obtaining regulatory approval to return to
service. A major accident at a nuclear plant anywhere, such as the
accident at a plant in Chernobyl, could cause the imposition of limits
or prohibitions on the operation, construction or licensing of nuclear
units in the United States.
In view of the uncertainties discussed above, there can be no assurance
that any company's share of the full cost of nuclear units under
construction ultimately will be recovered in rates or the extent to
which a company could earn an adequate return on its investment in such
units. The likelihood of a significantly adverse event occurring in any
of the areas of concern described above varies, as does the potential
severity of any adverse impact. It should be recognized, however, that
one or more of such adverse events could occur and individually or
collectively could have a material adverse impact on a company's
financial condition, the results of its operations, its ability to make
interest and principal payments on its outstanding debt or to pay
dividends.
Other general problems of the gas, water, telephone and electric utility
industries (including state and local joint action power agencies)
include difficulty in obtaining timely and adequate rate increases,
difficulty in financing large construction programs to provide new or
replacement facilities during an inflationary period, rising costs of
rail transportation to transport fossil fuels, the uncertainty of
transmission service costs for both interstate and intrastate
transactions, changes in tax laws which adversely affect a utility's
ability to operate profitably, increased competition in service costs,
recent reductions in estimates of future demand for electricity and gas
in certain areas of the country, restrictions on operations and
increased cost and delays attributable to environmental considerations,
uncertain availability and increased cost of capital, unavailability of
fuel for electric generation at reasonable prices, including the steady
rise in fuel costs and the costs associated with conversion to alternate
fuel sources such as coal, availability and cost of natural gas for
resale, technical and cost factors and other problems associated with
construction, licensing, regulation and operation of nuclear facilities
for electric generation, including, among other considerations, the
problems associated with the use of radioactive materials and the
disposal of radioactive wastes, and the effects of energy conservation.
Each of the problems referred to could adversely affect the ability of
the issuers of any Securities in the Trust to make interest or dividend
payments.
Certain of the Securities in the Trust are of foreign issuers, and
therefore, an investment in the Trust involves some investment risks
that differ in some respects from an investment in a trust that invests
entirely in securities of domestic issuers. Those investment risks
include future political and governmental restrictions which might
adversely affect the payment or receipt of payment of dividends on the
relevant Securities, currency exchange rate fluctuations, exchange
control policies, and the limited liquidity and small market
capitalization of such foreign countries' securities markets. In
addition, for foreign issuers that are not subject to the reporting
requirements of the Securities Exchange Act of 1934, there may be less
publicly available information than is available from a domestic issuer.
Also, foreign issuers are not necessarily subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. However, due to the
nature of the issuers of the Securities included in the Trust, the
Sponsor believes that adequate information will be available to allow
the Portfolio Supervisor to provide portfolio surveillance.
Unit holders will be unable to dispose of any of the Securities in the
Portfolio, as such, and will not be able to vote the Securities. As the
holder of the Securities, the Trustee will have the right to vote all of
the voting stocks in the Trust and will vote such stocks in accordance
with the instructions of the Sponsor.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before making
a decision to invest in the Trust.
The value of the Securities will fluctuate over the life of the Trust
and may be more or less than the price at which they were deposited in
the Trust. The Securities may appreciate or depreciate in value (or pay
dividends), depending on the full range of economic and market
influences affecting these securities.
The Sponsor and the Trustee shall not be liable in any way for any
default, failure or defect in any Security. In the event of a notice
that any Security will not be delivered ("Failed Contract Obligations")
Page 20
to the Trust, the Sponsor is authorized under the Indenture to direct
the Trustee to acquire other Securities ("Replacement Securities"). Any
Replacement Security will be identical to those which were the subject
of the failed contract. The Replacement Securities must be purchased
within 20 days after delivery of the notice of a failed contract, and
the purchase price may not exceed the amount of funds reserved for the
purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraphs is not utilized to acquire Replacement Securities in the
event of a failed contract, the Sponsor will refund the sales charge
attributable to such Failed Contract Obligations to all Unit holders of
the Trust, and the Trustee will distribute the principal attributable to
such Failed Contract Obligations not more than 120 days after the date
on which the Trustee received a notice from the Sponsor that a
Replacement Security would not be deposited in the Trust. In addition,
Unit holders should be aware that, at the time of receipt of such
principal, they may not be able to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such
proceeds would have earned for Unit holders of the Trust.
The Indenture also authorizes the Sponsor to increase the size of the
Trust and the number of Units thereof by the deposit of additional
Securities or cash (including a letter of credit) with instructions to
purchase additional Securities in the Trust and the issuance of a
corresponding number of additional Units. If the Sponsor deposits cash,
however, existing and new investors may experience a dilution of their
investment and a reduction in their anticipated income because of
fluctuations in the prices of the Securities between the time of the
cash deposit and the purchase of the Securities and because the Trust
will pay the associated brokerage fees.
The Trust consists of the Securities listed under "Schedule of
Investments" (or contracts to purchase such Securities) as may continue
to be held from time to time in the Trust and any additional Securities
acquired and held by the Trust pursuant to the provisions of the
Indenture (including provisions with respect to deposits into the Trust
of Securities or cash in connection with the issuance of additional
Units).
Once all of the Securities in the Trust are acquired, the Trustee will
have no power to vary the investments of the Trust, i.e., the Trustee
will have no managerial power to take advantage of market variations to
improve a Unit holder's investment, and may dispose of Securities only
under limited circumstances. See "Rights of Unit Holders-How May
Securities be Removed from the Trust?"
Like other investment companies, financial and business organizations
and individuals around the world, the Trust could be adversely affected
if the computer systems used by the Sponsor, Evaluator, Portfolio
Supervisor or Trustee or other service providers to the Trust do not
properly process and calculate date-related information and data
involving dates of January 1, 2000 and thereafter. This is commonly
known as the "Year 2000 Problem." The Sponsor, Evaluator, Portfolio
Supervisor and Trustee are taking steps that they believe are reasonably
designed to address the Year 2000 Problem with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by the Trust's other service providers.
At this time, however, there can be no assurance that these steps will
be sufficient to avoid any adverse impact to the Trust.
The Year 2000 Problem is expected to impact corporations, which may
include issuers of the Securities contained in the Trust, to varying
degrees based upon various factors, including, but not limited to, their
industry sector and degree of technological sophistication. The Sponsor
is unable to predict what impact, if any, the Year 2000 Problem will
have on issuers of the Securities contained in the Trust.
To the best of the Sponsor's knowledge, there is no litigation pending
as of the Initial Date of Deposit in respect of any Security which might
reasonably be expected to have a material adverse effect on the Trust.
At any time after the Initial Date of Deposit, litigation may be
instituted on a variety of grounds with respect to the Securities. The
Sponsor is unable to predict whether any such litigation will be
instituted, or if instituted, whether such litigation might have a
material adverse effect on the Trust.
Legislation. From time to time Congress considers proposals to reduce
the rate of the dividends-received deductions. Enactment into law of a
proposal to reduce the rate would adversely affect the after-tax return
to investors who can take advantage of the deduction. Unit holders are
urged to consult their own tax advisors. Further, at any time after the
Initial Date of Deposit, legislation may be enacted that could
negatively affect the Securities in the Trust or the issuers of the
Securities. Changing approaches to regulation, particularly with respect
to any of the industries represented in the portfolio of the Trust, may
have a negative impact on certain companies represented in the Trust.
Page 21
There can be no assurance that future legislation, regulation or
deregulation will not have a material adverse effect on the Trust or
will not impair the ability of the issuers of the Securities to achieve
their business goals.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, the Public Offering Price is based on the aggregate
underlying value of the Securities in the Trust (generally determined by
the closing sale prices of listed Securities and the ask prices of over-
the-counter traded Securities), plus or minus cash, if any, in the
Income and Capital Accounts of the Trust, plus an initial sales charge
equal to the difference between the maximum sales charge of 4.5% of the
Public Offering Price and the maximum remaining deferred sales charge,
initially $.35 per Unit, divided by the number of Units of the Trust
outstanding. Subsequent to the Initial Date of Deposit, the amount of
the initial sales charge will vary with changes in the aggregate value
of the Securities. Commencing on August 20, 1999, and on the twentieth
day of each month thereafter (or if such day is not a business day, on
the preceding business day) through December 20, 1999, a deferred sales
charge of $.07 will be assessed per Unit per month. Units purchased
subsequent to the initial deferred sales charge payment but still during
the initial offering period will be subject to the initial sales charge
and the remaining deferred sales charge payments not yet collected. The
deferred sales charge will be paid from funds in the Capital Account, if
sufficient, or from the periodic sale of Securities. The total maximum
sales charge assessed to Unit holders on a per Unit basis will be 4.5%
of the Public Offering Price (equivalent to 4.545% of the net amount
invested, exclusive of the deferred sales charge). In addition, a
portion of the Public Offering Price on Units purchased prior to the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period also consists of Securities in an amount
sufficient to pay for all or a portion of the costs incurred in
establishing the Trust, including the costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission and
states, the initial audit of the Trust portfolio, legal fees and the
initial fees and expenses of the Trustee. The organizational and
offering costs will be deducted from the assets of the Trust as of the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period. Upon completion of the deferred sales
charge period, the secondary market Public Offering Price per Unit for
the Trust will not include deferred payments, but will instead include
only a one-time initial sales charge of 4.5% of the Public Offering
Price (equivalent to 4.712% of the net amount invested), which will be
reduced by 1/2 of 1% on each December 31, commencing December 31, 1999
to a minimum sales charge of 3.0%.
During the initial offering period, the Sponsor's Repurchase Price is
based on the aggregate underlying value of the Securities in the Trust
(generally determined by the closing sale prices of listed Securities
and the ask prices of over-the-counter traded Securities), plus or minus
cash, if any, in the Income and Capital Accounts of the Trust, plus,
until the earlier of six months after the Initial Date of Deposit or the
end of the initial offering period, estimated organizational and
offering costs, divided by the number of Units of the Trust outstanding
and reduced by the deferred sales charge not yet paid. During the
secondary market, the Sponsor's Repurchase Price is also based on the
aggregate underlying value of the Securities in the Trust (generally
determined by the closing sale prices of listed Securities and the bid
prices of over-the-counter traded Securities), plus or minus cash, if
any, in the Income and Capital Accounts of the Trust, divided by the
number of outstanding Units of the Trust.
The minimum amount which an investor may purchase of the Trust is $1,000
($500 for Individual Retirement Accounts or other retirement plans). The
Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units. The applicable sales charge for both primary and
secondary market sales is reduced by a discount as indicated below for
volume purchases as a percentage of the Public Offering Price (except
for sales made pursuant to a "wrap fee account" or similar arrangements
as set forth below):
Page 22
Primary and Secondary
_____________________
Percent of Percent of
Dollar Amount of Transaction Offering Net Amount
at Public Offering Price* Price Invested
____________________________ __________ __________
$ 50,000 but less than $100,000 0.25% 0.2506%
$100,000 but less than $250,000 0.50% 0.5025%
$250,000 but less than $500,000 1.00% 1.0101%
$500,000 or more 2.00% 2.0408%
___________
<FN>
* The 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.
</FN>
Any such reduced sales charge shall be the responsibility of the selling
broker/dealer, bank or other selling agent. The reduced sales charge
structure will apply on all purchases of Units in the Trust by the same
person on any one day from any one broker/dealer, bank or other selling
agent. An investor may aggregate purchases of Units of the Trust and
units of other unit investment trusts containing equity securities of
which the Sponsor acts as Principal Underwriter and which are currently
in the initial offering period for purposes of qualifying for the volume
purchase discounts listed above. Investors who have executed a letter of
intent indicating their intention to purchase a specified dollar amount
of Units of any unit investment trust containing equity securities of
which the Sponsor acts as Principal Underwriter from any broker/dealer
during the initial offering period are eligible to receive a volume
discount as set forth in the above table based on the amount of intended
aggregate purchases. The letter of intent will specify the amount of
intended aggregate purchases which must be purchased over a 13-month
period. The initial purchase made pursuant to a letter of intent must
equal at least 5% of the amount of intended aggregate purchases. Units
purchased with rollover proceeds, reinvested dividends, redemption or
termination proceeds from other unit investment trusts or other similar
transactions will not be counted to reach the amount of intended
aggregate purchases. In the event that total purchases by an investor
pursuant to a letter of intent over the 13-month period are less than
the amount specified in the letter of intent, the selling broker/dealer
shall take such action as is necessary to receive from the investor the
difference between the amounts the investor paid for units pursuant to
the letter of intent and the amounts which the investor would have paid
if the higher sales charge had been applied. It is the responsibility of
the selling broker/dealer to notify the Sponsor of each sale made
pursuant to a letter of intent. Additionally, Units purchased in the
name of the spouse of a purchaser or in the name of a child of such
purchaser under 21 years of age will be deemed, for the purposes of
calculating the applicable sales charge, to be additional purchases by
the purchaser. The reduced sales charges will also be applicable to a
trustee or other fiduciary purchasing securities for a single trust
estate or single fiduciary account. The purchaser must inform the
broker/dealer, bank or other selling agent of any such combined purchase
prior to the sale, in order to obtain the indicated discount. In
addition, investors may utilize their redemption or termination proceeds
received from trusts sponsored by the Sponsor to purchase Units of the
Trust subject only to any remaining deferred sales charge payments on
such Units, deferred as provided herein. Unit holders who redeem units
of trusts sponsored by the Sponsor should note that they will be
assessed the amount of any remaining deferred sales charge on such units
at the time of redemption. Employees, officers and directors (including
their immediate family members, defined as spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law and daughters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons) of the Sponsor,
broker/dealers, banks or other selling agents and their subsidiaries and
vendors providing services to the Sponsor will be able to purchase Units
of the Trust at the Public Offering Price, less the applicable
broker/dealer concession during the initial offering period.
Units may be purchased in the primary or secondary market at the Public
Offering Price less the concession the Sponsor typically allows to
dealers and other selling agents (see "Public Offering-How are Units
Distributed?") for purchases by investors who purchase Units through
registered investment advisors, certified financial planners or
registered broker/dealers who in each case either charge periodic fees
for financial planning, investment advisory or asset management
Page 23
services, or provide such services in connection with the establishment
of an investment account for which a comprehensive "wrap fee" charge is
imposed.
Had the Units of the Trust been available for sale on the business day
prior to the Initial Date of Deposit, the Public Offering Price would
have been as indicated in "Summary of Essential Information." The Public
Offering Price of Units on the date of the prospectus or during the
initial offering period may vary from the amount stated under "Summary
of Essential Information" in accordance with fluctuations in the prices
of the underlying Securities. During the initial offering period, the
aggregate value of the Units of the Trust shall be determined on the
basis of the aggregate underlying value of the Securities therein plus
or minus cash, if any, in the Income and Capital Accounts of the Trust.
The aggregate underlying value of the Securities will be determined in
the following manner: if the Securities are listed, this evaluation is
generally based on the closing sale prices on that exchange or that
system (unless it is determined that these prices are inappropriate as a
basis for valuation) or, if there is no closing sale price on that
exchange or system, at the closing ask prices. If the Securities are not
so listed or, if so listed and the principal market therefor is other
than on the exchange, the evaluation shall generally be based on the
current ask prices on the over-the-counter market (unless it is
determined that these prices are inappropriate as a basis for
evaluation). If current ask prices are unavailable, the evaluation is
generally determined (a) on the basis of current ask prices for
comparable securities, (b) by appraising the value of the Securities on
the ask side of the market or (c) by any combination of the above.
The Evaluator on each business day will appraise or cause to be
appraised the value of the underlying Securities in the Trust as of the
Evaluation Time and will adjust the Public Offering Price of the Units
commensurate with such valuation. Such Public Offering Price will be
effective for all orders received prior to the Evaluation Time on each
such day. Orders received by the Trustee or Sponsor for purchases, sales
or redemptions after that time, or on a day which is not a business day,
will be held until the next determination of price. The term "business
day," as used herein and under "Rights of Unit Holders-How May Units be
Redeemed?", shall exclude Saturdays, Sundays and the following holidays
as observed by the New York Stock Exchange, Inc.: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the aggregate underlying
value of the Securities therein, plus or minus cash, if any, in the
Income and Capital Accounts of the Trust plus the applicable sales
charge. The aggregate underlying value of the Securities for secondary
market sales is calculated in the same manner as described above for
sales made during the initial offering period with the exception that
bid prices are used instead of ask prices.
Although payment is normally made three business days following the
order for purchase (the "date of settlement"), payment may be made prior
thereto. A person will become owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available to the
Sponsor prior to the date of settlement for the purchase of Units may be
used in the Sponsor's business and may be deemed to be a benefit to the
Sponsor, subject to the limitations of the Securities Exchange Act of
1934. Delivery of Certificates representing Units so ordered will be
made three business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are the Units Distributed?
During the initial offering period (i) for Units issued on the Initial
Date of Deposit and (ii) for additional Units issued after such date as
additional Securities are deposited by the Sponsor, Units will be
distributed to the public at the then current Public Offering Price. The
initial offering period may be up to approximately 360 days. Units
reacquired by the Sponsor during the initial offering period may be
resold at the then current Public Offering Price.
Upon completion of the initial offering period, Units repurchased in the
secondary market (see "Public Offering-Will There be a Secondary
Market?") may be offered by this prospectus at the secondary market
Public Offering Price determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Trust for
sale in a number of states. Sales initially will be made to dealers and
other selling agents at prices which represent a concession or agency
commission of 3.2% of the Public Offering Price, and, for secondary
Page 24
market sales, 3.2% of the Public Offering Price (or 65% of the then
current maximum sales charge after December 31, 1999). Dealers and other
selling agents will be allowed a concession or agency commission on the
sale of Units sold subject only to any remaining deferred sales charge
payments on such Units equal to (i) $.22 per Unit on Units sold subject
to a deferred sales charge of $.35 per Unit or (ii) 63% of the then
current maximum remaining deferred sales charge on Units sold subject to
a deferred sales charge of less than $.35 per Unit. Volume concessions
or agency commissions of an additional .30% of the Public Offering Price
on all purchases of Units of the Trust will be given to any
broker/dealer or bank who has aggregate purchases of Trust Units from
the Sponsor on the Initial Date of Deposit of at least $100,000 of the
Trust or purchases $250,000 of the Trust on any day thereafter or who
was eligible to receive a similar concession in connection with sales of
units of unit investment trusts sponsored by the Sponsor which have
substantially the same sales load and maturity structure as the Trust
and are currently in the initial offering period. In addition, dealers
and other selling agents will receive an additional volume concession or
agency commission with respect to sales of Units of the Trust in the
amounts set forth below:
Additional
Total Sales per Trust Concession
_____________________ __________
$1,000,000 but less than $2,000,000 .10%
$2,000,000 but less than $3,000,000 .15%
$3,000,000 but less than $10,000,000 .20%
$10,000,000 or more .30%
The Sponsor reserves the right to change the amount of the concession or
agency commission 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 sales charge paid by these customers is retained
by or remitted to the banks in the amounts indicated above. Under the
Glass-Steagall Act, banks are prohibited from underwriting Trust Units;
however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act. In Texas and in
certain other states, any banks making Units available must be
registered as broker/dealers under state law.
From time to time the Sponsor may implement programs under which
broker/dealers, banks or other selling agents of the Trust may receive
nominal awards from the Sponsor for each of their registered
representatives who have sold a minimum number of UIT Units during a
specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales force of a broker/dealer,
bank or other selling agent may be eligible to win other nominal awards
for certain sales efforts, or under which the Sponsor will reallow to
any such dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Sponsor, or participates in
sales programs sponsored by the Sponsor, an amount not exceeding the
total applicable sales charges on the sales generated by such person at
the public offering price during such programs. Also, the Sponsor in its
discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying dealers for certain
services or activities which are primarily intended to result in sales
of Units of the Trust. Such payments are made by the Sponsor out of its
own assets, and not out of the assets of the Trust. These programs will
not change the price Unit holders pay for their Units or the amount that
the Trust will receive from the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns on the Trust and returns over
specified periods on other similar trusts sponsored by Nike Securities
L.P. with returns on other taxable investments such as corporate or U.S.
Government bonds, bank CDs and money market accounts or money market
funds, each of which has investment characteristics that may differ
from those of the Trust. U.S. Government bonds, for example, are
backed by the full faith and credit of the U.S. Government and bank
CDs and money market accounts are insured by an agency of the federal
government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the
condition of the short-term debt market. The investment characteristics
of the Trust are described more fully elsewhere in this Prospectus.
Page 25
Information on percentage changes in the dollar value of Units, on the
basis of changes in Unit price may be included from time to time in
advertisements, sales literature, reports and other information
furnished to current or prospective Unit holders. Total return figures
are not averaged, and may not reflect deduction of the sales charge,
which would decrease the return. Average annualized return figures
reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance may not be indicative of future results. The Trust's
portfolio is not managed. Unit price and return fluctuate with the value
of the common stocks in the Trust's portfolio, so there may be a gain or
loss when Units are sold.
The Trust's performance may be compared to performance on a total return
basis with the Dow Jones Industrial Average, the S&P 500 Composite Stock
Price Index, or performance data from Lipper Analytical Services, Inc.
and Morningstar Publications, Inc. or from publications such as Money,
The New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. As with other performance data, performance comparisons should
not be considered representative of the Trust's relative performance for
any future period.
What are the Sponsor's Profits?
The Sponsor of the Trust will receive a gross sales commission equal to
4.5% of the Public Offering Price of the Units (equivalent to 4.545% of
the net amount invested, exclusive of the deferred sales charge), less
any reduced sales charge as described under "Public Offering-How is the
Public Offering Price Determined?" See "Public Offering-How are Units
Distributed?" for information regarding additional concessions available
to dealers and others. In addition, the Sponsor may be considered to
have realized a profit or to have sustained a loss, as the case may be,
in the amount of any difference between the cost of the Securities to
the Trust and the cost of such Securities to the Sponsor. See Note (2)
of "Schedule of Investments." During the initial offering period, the
dealers and other selling agents also may realize profits or sustain
losses as a result of fluctuations after the Initial Date of Deposit in
the Public Offering Price received by the dealers and other selling
agents upon the sale of Units.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between the
price at which Units are purchased and the price at which Units are
resold (which price includes a sales charge of 4.5%, subject to
reduction beginning December 31, 1999) or redeemed. The secondary market
public offering price of Units may be greater or less than the cost of
such Units to the Sponsor.
Will There be a Secondary Market?
After the initial offering period, although not obligated to do so, the
Sponsor intends to maintain a market for the Units and continuously
offer to purchase Units at prices, subject to change at any time, based
upon the aggregate underlying value of the Securities in the Trust plus
or minus cash, if any, in the Income and Capital Accounts of the Trust.
All expenses incurred in maintaining a secondary market, other than the
fees of the Evaluator and the costs of the Trustee in transferring and
recording the ownership of Units, will be borne by the Sponsor. If the
supply of Units exceeds demand, or for some other business reason, the
Sponsor may discontinue purchases of Units at such prices. IF A UNIT
HOLDER WISHES TO DISPOSE OF HIS OR HER UNITS, HE OR SHE SHOULD INQUIRE
OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR TO MAKING A TENDER FOR
REDEMPTION TO THE TRUSTEE. Units subject to a deferred sales charge
which are sold or tendered for redemption prior to such time as the
entire deferred sales charge on such Units has been collected will be
assessed the amount of the remaining deferred sales charge at the time
of sale or redemption. See "Rights of Unit Holders-How May Units be
Redeemed?"
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units may be evidenced by registered certificates executed
by the Trustee and the Sponsor. Delivery of certificates representing
Units ordered for purchase is normally made three business days
Page 26
following such order or shortly thereafter. Certificates are
transferable by presentation and surrender to the Trustee properly
endorsed or accompanied by a written instrument or instruments of
transfer. Certificates to be redeemed must be properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unit
holder must sign exactly as his or her name appears on the face of the
certificate with the signature guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guaranty program in addition to, or in substitution for,
STAMP, as may be accepted by the Trustee. In certain instances, the
Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority.
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, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form. The
Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of the Trust; the number of Units issued or transferred; the
name, address and taxpayer identification number, if any, of the new
registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such Units are or may be subject or a
statement that there are no such liens, restrictions or adverse claims;
and the date the transfer was registered. Uncertificated Units are
transferable through the same procedures applicable to Units evidenced
by certificates (described above), except that no certificate need be
presented to the Trustee and no certificate will be issued upon the
transfer unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income received with respect to any
of the Securities in the Trust on or about the Income Distribution Dates
to Unit holders of record on the preceding Income Distribution Record
Date. See "Summary of Essential Information." Persons who purchase Units
will commence receiving distributions only after such person becomes a
record owner. Notification to the Trustee of the transfer of Units is
the responsibility of the purchaser, but in the normal course of
business such notice is provided by the selling broker/dealer. The pro
rata share of cash in the Capital Account of the Trust will be computed
as of the fifteenth day of each month. Proceeds received on the sale of
any Securities in the Trust, to the extent not used to meet redemptions
of Units or pay expenses, will, however, be distributed 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 $0.01 per
Unit. The Trustee is not required to pay interest on funds held in the
Capital Account of the Trust (but may itself earn interest thereon and
therefore benefit from the use of such funds). Notwithstanding,
distributions of funds in the Capital Account, if any, will be made on
the last day of each December to Unit holders of record as of December
15. See "What is the Federal Tax Status of Unit Holders?"
It is anticipated that the deferred sales charge will be collected from
the Capital Account and that amounts in the Capital Account will be
sufficient to cover the cost of the deferred sales charge. However, to
the extent that amounts in the Capital Account are insufficient to
satisfy the then current deferred sales charge obligation, Securities
may be sold to meet such shortfall. Distributions of amounts necessary
to pay the deferred portion of the sales charge will be made to an
account designated by the Sponsor for purposes of satisfying Unit
holders' deferred sales charge obligations.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
Page 27
the Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder only when filing a tax return. Under
normal circumstances the Trustee obtains the Unit holder's tax
identification number from the selling broker. However, a Unit holder
should examine his or her statements from the Trustee to make sure that
the Trustee has been provided a certified tax identification number in
order to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should be
provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit holder
will, upon surrender of his or her Units for redemption, receive: (i)
the pro rata share of the amounts realized upon the disposition of
Securities, unless he or she elects an In-Kind Distribution as described
under "Other Information-How May the Indenture be Amended or
Terminated?" and (ii) a pro rata share of any other assets of the Trust,
less expenses of the Trust.
The Trustee will credit to the Income Account of the Trust any interest
or dividends received on the Securities therein. All other receipts
(e.g. return of capital, etc.) are credited to the Capital Account of
the Trust.
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any governmental charges
payable out of the Trust.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and the amount
of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable period of
time after the end of each calendar year, the Trustee shall furnish to
each person who at any time during the calendar year was a Unit holder
of the Trust the following information in reasonable detail: (1) a
summary of transactions in the Trust for such year; (2) any Securities
sold during the year and the Securities held at the end of such year by
the Trust; (3) the redemption price per Unit based upon a computation
thereof on the 31st day of December of such year (or the last business
day prior thereto); and (4) amounts of income and capital distributed
during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his or her Units by
tendering to the Trustee, at its unit investment trust office in the
City of New York, the certificates representing the Units to be
redeemed, or in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments of
transfer with signature guaranteed as explained above (or by providing
satisfactory indemnity, as in connection with lost, stolen or destroyed
certificates), and payment of applicable governmental charges, if any.
No redemption fee will be charged. On the third business day following
such tender, the Unit holder will be entitled to receive in cash an
amount for each Unit equal to the Redemption Price per Unit next
computed after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received by the
Trustee (if such day is a day in which the New York Stock Exchange is
open for trading), except that as regards Units received after 4:00 p.m.
Eastern time (or as of any earlier closing time on a day on which the
New York Stock Exchange is scheduled in advance to close at such earlier
time), the date of tender is the next day on which the New York Stock
Exchange is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units so redeemed shall be cancelled. Units
tendered for redemption prior to such time as the entire deferred sales
charge on such Units has been collected will be assessed the amount of
remaining deferred sales charge at the time of redemption.
Any Unit holder tendering 1,000 Units or more of the Trust for
redemption may request by written notice submitted at the time of tender
from the Trustee, in lieu of a cash redemption, a distribution of shares
Page 28
of Securities in an amount and value of Securities per Unit equal to the
Redemption Price Per Unit as determined as of the evaluation next
following tender. However, no In-Kind Distribution requests submitted
during the nine business days prior to the Mandatory Termination Date
will be honored. To the extent possible, In-Kind Distributions shall be
made by the Trustee through the distribution of each of the Securities
in book-entry form to the account of the Unit holder's bank or
broker/dealer at the Depository Trust Company. An In-Kind Distribution
will be reduced by customary transfer and registration charges. The
tendering Unit holder will receive his or her pro rata number of whole
shares of each of the Securities comprising the portfolio and cash from
the Capital Account equal to the fractional shares to which the
tendering Unit holder is entitled. The Trustee may adjust the number of
shares of any issue of Securities included in a Unit holder's In-Kind
Distribution to facilitate the distribution of whole shares, such
adjustment to be made on the basis of the value of Securities on the
date of tender. See "What is the Federal Tax Status of Unit Holders?" If
funds in the Capital Account are insufficient to cover the required cash
distribution to the tendering Unit holder, the Trustee may sell
Securities in the manner described above.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unit
holder's tax identification number in the manner required by such
regulations. For further information regarding this withholding, see
"Rights of Unit Holders-How are Income and Capital Distributed?" In the
event the Trustee has not been previously provided such number, one must
be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds are
available for such purpose, or from the Capital Account. All other
amounts paid on redemption shall be withdrawn from the Capital Account
of the Trust.
The Trustee is empowered to sell Securities of the Trust in order to
make funds available for redemption. To the extent that Securities are
sold, the size and diversity of the Trust will be reduced. Such sales
may be required at a time when Securities would not otherwise be sold
and might result in lower prices than might otherwise be realized.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the aggregate
underlying value of the Securities in the Trust plus or minus cash, if
any, in the Income and Capital Accounts of the Trust. The Redemption
Price per Unit is the pro rata share of each Unit determined by the
Trustee by adding: (1) the cash on hand in the Trust other than cash
deposited in the Trust to purchase Securities not applied to the
purchase of such Securities; (2) the aggregate value of the Securities
held in the Trust, as determined by the Evaluator on the basis of the
aggregate underlying value of the Securities in the Trust next computed;
and (3) dividends receivable on the Securities trading ex-dividend as of
the date of computation; and deducting therefrom: (1) amounts
representing any applicable taxes or governmental charges payable out of
the Trust; (2) any amounts owing to the Trustee for its advances; (3) an
amount representing estimated accrued expenses of the Trust, including
but not limited to fees and expenses of the Trustee (including legal and
auditing fees), the Evaluator and supervisory fees, if any; (4) cash
held for distribution to Unit holders of record of the Trust as of the
business day prior to the evaluation being made; and (5) other
liabilities incurred by the Trust; and finally dividing the results of
such computation by the number of Units of the Trust outstanding as of
the date thereof. The redemption price per Unit will be assessed the
amount of the remaining deferred sales charge, if any, at the time of
redemption. 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 organizational and offering costs as set
forth under "Summary of Essential Information."
The aggregate value of the Securities will be determined in the
following manner: if the Securities are listed on a national securities
exchange or The Nasdaq Stock Market, this evaluation is generally based
on the closing sale prices on that exchange or that system (unless it is
determined that these prices are inappropriate as a basis for valuation)
or, if there is no closing sale price on that exchange or system, either
at the closing ask prices (during the initial offering period) or the
closing bid prices (subsequent to the initial offering period). If the
Page 29
Securities are not so listed or, if so listed and the principal market
therefor is other than on the exchange, the evaluation shall generally
be based on the current ask or bid prices (as appropriate) on the over-
the-counter market (unless these prices are inappropriate as a basis for
evaluation). If current ask or bid prices (as appropriate) are
unavailable, the evaluation is generally determined (a) on the basis of
current ask or bid prices (as appropriate) for comparable securities,
(b) by appraising the value of the Securities on the ask or bid side of
the market (as appropriate) or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on the New
York Stock Exchange is restricted or any emergency exists, as a result
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances, the
Sponsor may apply to the Securities and Exchange Commission for an order
permitting a full or partial suspension of the right of Unit holders to
redeem their Units. The Trustee is not liable to any person in any way
for any loss or damage which may result from any such suspension or
postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before 1:00 p.m. Eastern time on the same
business day and by making payment therefor to the Unit holder not later
than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units. In the event the Sponsor does not
purchase Units, the Trustee may sell Units tendered for redemption in
the over-the-counter market, if any, as long as the amount to be
received by the Unit holder is equal to the amount he or she would have
received on redemption of the Units.
The offering price of any Units acquired by the Sponsor will be in
accord with the Public Offering Price described in the then effective
prospectus describing such Units. Any profit or loss resulting from the
resale or redemption of such Units will belong to the Sponsor.
How May Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of a Security in the event
that an issuer defaults in the payment of a dividend that has been
declared, that any action or proceeding has been instituted restraining
the payment of dividends or there exists any legal question or
impediment affecting such Security, that the issuer of the Security has
breached a covenant which would affect the payments of dividends, the
credit standing of the issuer or otherwise impair the sound investment
character of the Security, that the issuer has defaulted on the payment
on any other of its outstanding obligations, or that the price of the
Security has declined to such an extent or other such credit factors
exist so that in the opinion of the Sponsor, the retention of such
Securities would be detrimental to the Trust. Except as stated under
"Portfolio-What are Some Additional Considerations for Investors?" for
Failed Contract Obligations, the acquisition by the Trust of any
securities or other property other than the Securities is prohibited.
Pursuant to the Indenture and with limited exceptions, the Trustee may
sell any securities or other property acquired in exchange for
Securities such as those acquired in connection with a merger or other
transaction. If offered such new or exchanged securities or property,
the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by the Trust, they may
be accepted for deposit in the Trust and either sold by the Trustee or
held in the Trust pursuant to the direction of the Sponsor (who may rely
on the advice of the Portfolio Supervisor). Proceeds from the sale of
Securities (or any securities or other property received by the Trust in
exchange for Securities) by the Trustee are credited to the Capital
Account of the Trust for distribution to Unit holders or to meet
redemptions. The Trustee may from time to time retain and pay
compensation to the Sponsor (or an affiliate of the Sponsor) to act as
agent for the Trust with respect to selling Securities from the Trust.
In acting in such capacity the Sponsor or its affiliate will be held
subject to the restrictions under the Investment Company Act of 1940, as
amended.
The Trustee may also sell Securities designated by the Sponsor, or if
not so directed, in its own discretion, for the purpose of redeeming
Units of the Trust tendered for redemption and the payment of expenses.
Page 30
The Sponsor, in designating Securities to be sold by the Trustee, will
generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares
of individual issues of Securities. To the extent this is not
practicable, the composition and diversity of the Securities may be
altered. In order to obtain the best price for the Trust, it may be
necessary for the Sponsor to specify minimum amounts (generally 100
shares) in which blocks of Securities are to be sold. The Sponsor may
consider sales of Units of unit investment trusts which it sponsors in
making recommendations to the Trustee as to the selection of
broker/dealers to execute the Trust's portfolio transactions.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts 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 and The First Trust GNMA. First Trust introduced
the first insured unit investment trust in 1974 and to date more than
$20 billion in First Trust unit investment trusts have been deposited.
The Sponsor's employees include a team of professionals with many years
of experience in the unit investment trust industry. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and
Securities Investor Protection Corporation and has its principal offices
at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number (630)
241-4141. As of December 31, 1997, the total partners' capital of Nike
Securities L.P. was $11,724,071 (audited). This paragraph relates only
to the Sponsor and not to the Trust or to any series thereof or to the
Underwriter. The information is included herein only for the purpose of
informing investors as to the financial responsibility of the Sponsor
and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trust may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
subject to supervision 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, whose duties are ministerial in nature, has not
participated in the selection of the Securities. For information
relating to the responsibilities of the Trustee under the Indenture,
reference is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Page 31
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Securities. In the event of the failure of the
Sponsor to act under the Indenture, the Trustee may act thereunder and
shall not be liable for any action taken by it in good faith under the
Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of the Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is 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
Evaluator may resign or may be removed by the Sponsor or the Trustee, in
which event the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor
Evaluator. If upon resignation of the Evaluator no successor has
accepted appointment within 30 days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the Mandatory
Termination Date indicated herein under "Summary of Essential
Information." The Trust may be liquidated at any time by consent of 100%
of the Unit holders of the Trust or by the Trustee when the value of the
Securities owned by the Trust as shown by any evaluation, is less than
the lower of $2,000,000 or 20% of the total value of Securities
deposited in the Trust during the initial offering period, or in the
event that Units of the Trust not yet sold aggregating more than 60% of
the Units of the Trust are tendered for redemption by underwriters,
including the Sponsor. If the Trust is liquidated because of the
redemption of unsold Units of the Trust by underwriters, the Sponsor
will refund to each purchaser of Units of the Trust the entire sales
charge and the transaction fees paid by such purchaser. In the event of
termination, written notice thereof will be sent by the Trustee to all
Unit holders of the Trust. Within a reasonable period after termination,
Page 32
the Trustee will follow the procedures set forth under "Rights of Unit
Holders-How are Income and Capital Distributed?"
Commencing during the period beginning nine business days prior to and
no later than the Mandatory Termination Date, Securities will begin to
be sold in connection with the termination of the Trust. The Sponsor
will determine the manner, timing and execution of the sale of the
Securities. Written notice of any termination of the Trust specifying
the time or times at which Unit holders may surrender their certificates
for cancellation shall be given by the Trustee to each Unit holder at
his or her address appearing on the registration books of the Trust
maintained by the Trustee. At least 60 days prior to the Maturity Date
of the Trust, the Trustee will provide written notice thereof to all
Unit holders and will include with such notice a form to enable Unit
holders to elect a distribution of shares of Securities (reduced by
customary transfer and registration charges), if such Unit holder owns
at least 1,000 Units of the Trust, rather than to receive payment in
cash for such Unit holder's pro rata share of the amounts realized upon
the disposition by the Trustee of Securities. To be effective, the
election form, together with surrendered certificates and other
documentation required by the Trustee, must be returned to the Trustee
at least ten business days prior to the Mandatory Termination Date of
the Trust. Unit holders not electing a distribution of shares of
Securities will receive a cash distribution from the sale of the
remaining Securities within a reasonable time after the Trust is
terminated. Regardless of the distribution involved, the Trustee will
deduct from the funds of the Trust any accrued costs, expenses, advances
or indemnities provided by the Indenture, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to provide for payment of any applicable taxes or
other governmental charges. Any sale of Securities in the Trust upon
termination may result in a lower amount than might otherwise be
realized if such sale were not required at such time. In addition, to
the extent that Securities are sold prior to the Mandatory Termination
Date, Unit holders will not benefit from any stock appreciation they
would have received had the Securities not been sold at such time. The
Trustee will then distribute to each Unit holder his or her pro rata
share of the balance of the Income and Capital Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn, will act as counsel for the Trustee and as
special New York tax counsel for the Trust.
Experts
The statement of net assets, including the schedule of investments, of
the Trust at the opening of business on the Initial Date of Deposit
appearing in this Prospectus and Registration Statement has been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement,
and is included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
Page 33
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
FT 302
We have audited the accompanying statement of net assets, including the
schedule of investments, of FT 302, comprised of Preferred Income Trust
Series, as of the opening of business on December 18, 1998. 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 generally accepted auditing
standards. 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 letter of
credit held by the Trustee and deposited in the Trust on December 18,
1998. An audit also includes assessing the accounting principles used
and significant estimates made by the 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 302,
comprised of Preferred Income Trust Series, at the opening of business
on December 18, 1998 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 18, 1998
Page 34
Statement of Net Assets
PREFERRED INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-December 18, 1998
NET ASSETS
Investment in Securities represented by purchase contracts (1) (2) $148,551
Less accrued organizational and offering costs (3) (128)
Less liability for deferred sales charge (4) (5,252)
__________
Net assets $143,171
==========
Units outstanding 15,005
ANALYSIS OF NET ASSETS
Cost to investors (5) $150,051
Less sales charge (5) (6,752)
Less estimated organizational and offering costs (3) (128)
__________
Net assets $143,171
==========
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $200,000 issued by The
Chase Manhattan Bank has been deposited with the Trustee as collateral,
which is sufficient to cover the monies necessary for the purchase of
the Securities pursuant to contracts for the purchase of such Securities.
(3) A portion of the Public Offering Price on Units purchased prior to
the earlier of six months after the Initial Date of Deposit or the end
of the initial offering period consists of Securities in an amount
sufficient to pay for all or a portion of the costs incurred in
establishing the Trust. These costs have been estimated at $.0085 per
Unit, based upon the expected number of Units of the Trust to be
created. A distribution will be made at the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period to
an account maintained by the Trustee from which the organizational and
offering cost obligations of the investors to the Sponsor will be
satisfied. To the extent the number of Units of the Trust is larger or
smaller than the estimate, the actual distribution per Unit may differ
from that set forth above.
(4) Represents the amount of mandatory distributions from the Trust
($.35 per Unit), payable to the Sponsor in five equal monthly
installments beginning on August 20, 1999, and on the twentieth day of
each month thereafter (or if such day is not a business day, on the
preceding business day) through December 20, 1999. If Units are redeemed
prior to December 20, 1999, the remaining amount of the deferred sales
charge applicable to such Units will be payable at the time of redemption.
(5) The aggregate cost to investors includes a sales charge computed at
the rate of 4.5% of the Public Offering Price (equivalent to 4.545% of
the net amount invested, exclusive of the deferred sales charge),
assuming no reduction of sales charge as set forth under "Public
Offering-How is the Public Offering Price Determined?"
Page 35
Schedule of Investments
PREFERRED INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-December 18, 1998
Percentage
Number of Aggregate Market Cost of
of Offering Redemption Value per Securities
Shares Name of Issuer of Preferred Securities (1) Rating (2) Price Provisions (3) Share to Trust (4)
____ __________________________________________ _________ ____________ _____________ _________ ____________
147 AMBAC Financial Group, AA 2.5% 03/31/03 @ 25 $25.188 $3,703
7.08%, Due 03/31/2098
178 AT&T Capital Corp., BBB 3.0% 12/15/03 @ 25 25.000 4,450
8.125%, Due 12/15/2028
180 Agrium Inc., 8.00%, BBB- 3.0% 04/22/03 @ 25 24.688 4,444
Due 06/30/2047 (5)
118 Alabama Power Co., A 2.0% 04/23/03 @ 25 25.125 2,965
7.00%, Due 03/31/2048
118 American Express Company Capital A 2.0% 07/16/03 @ 25 25.188 2,972
Trust I, 7.00%, Due 07/16/2028
116 BGE Capital Trust I, A 2.0% 06/15/03 @ 25 25.625 2,972
7.16%, Due 06/30/2038
117 BankAmerica Capital IV, A- 2.0% 02/24/03 @ 25 25.375 2,969
7.00%, Due 03/31/2028
169 Barclays Bank Plc, Series E, A+ 3.0% 04/30/03 @ 25 26.375 4,457
8.00% (5)
116 Chase Capital Trust V, A- 2.0% 03/31/03 @ 25 25.625 2,972
7.03%, Due 03/31/2028
116 Citicorp Capital III, A 2.0% 08/15/03 @ 25 25.625 2,972
7.10%, Due 08/15/2028
189 Developers Diversified Realty, Series C, BBB- 3.0% 07/07/03 @ 25 23.625 4,465
8.375%
175 Dillards Capital Trust, Series I, BBB- 3.0% 08/12/03 @ 25 25.438 4,452
7.50%, Due 08/01/2038
147 Duke Capital Financing, A- 2.5% 09/30/03 @ 25 25.250 3,712
7.375%, Due 06/30/2038
147 Duquesne Light Co., BBB+ 2.5% 05/01/03 @ 25 25.313 3,721
7.375%, Due 04/15/2038
145 Enterprise Capital Trust I, BBB- 2.5% 03/31/03 @ 25 25.563 3,707
7.44%, Due 03/31/2047
146 Equitable Resources Capital Trust, A- 2.5% 04/23/03 @ 25 25.438 3,714
7.35%, Due 04/15/2038
203 First Industrial Realty, Series D, 7.95% BBB- 3.0% 02/04/03 @ 25 22.000 4,466
Page 36
Schedule of Investments (cont'd.)
PREFERRED INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-December 18, 1998
Percentage
Number of Aggregate Market Cost of
of Offering Redemption Value per Securities
Shares Name of Issuer of Preferred Securities (1) Rating (2) Price Provisions (3) Share to Trust (4)
____ __________________________________________ _________ ____________ _____________ _________ ____________
201 First Industrial Realty, Series E, 7.90% BBB- 3.0% 03/18/03 @ 25 $22.188 $4,460
116 Fleet Capital Trust IV, BBB+ 2.0% 03/31/03 @ 25 25.563 2,965
7.17%, Due 03/31/2028
118 Gulf Power Capital Trust II, A 2.0% 01/20/03 @ 25 25.125 2,965
7.00%, Due 12/31/2037
177 Harris Preferred Capital, Series A, A 3.0% 03/30/03 @ 25 25.125 4,447
7.375%
146 Hartford Life Capital I, A- 2.5% 06/30/03 @ 25 25.500 3,723
7.20%, Due 06/30/2038
187 Highwoods Properties, Inc., Series D, BBB- 3.0% 04/23/03 @ 25 23.813 4,453
8.00%
146 Household Capital Trust IV, A- 2.5% 03/19/03 @ 25 25.438 3,714
7.25%, Due 12/31/2037
142 Indiana Michigan Power, BBB 2.5% 05/07/03 @ 25 26.125 3,710
7.60%, Due 06/30/2038
173 International Paper Capital Trust III, BBB 3.0% 09/24/03 @ 25 25.688 4,444
7.875%, Due 12/01/2038
117 ML Capital Trust IV, 7.12% A 2.0% 06/30/08 @ 25 25.438 2,976
149 MSDW Capital Trust I, A- 2.5% 03/12/03 @ 25 25.000 3,725
7.10%, Due 02/28/2038
146 National Rural Utility, A+ 2.5% 09/15/03 @ 25 25.438 3,714
7.375%, Due 09/15/2047
167 National Westminster Bank A+ 3.0% 11/04/03 @ 25 26.625 4,446
Series A, 7.875% (5)
145 Ohio Power Company, BBB+ 2.5% 04/29/03 @ 25 25.688 3,725
7.375%, Due 06/30/2038
183 ProLogis Trust, Series D, 7.92% BBB 3.0% 04/13/03 @ 25 24.313 4,449
147 SSBH Capital Trust, BBB+ 2.5% 01/28/03 @ 25 25.313 3,721
7.20%, Due 01/28/2038
Page 37
Schedule of Investments (cont'd.)
PREFERRED INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-December 18, 1998
Percentage
Number of Aggregate Market Cost of
of Offering Redemption Value per Securities
Shares Name of Issuer of Preferred Securities (1) Rating (2) Price Provisions (3) Share to Trust (4)
_____ __________________________________________ __________ ____________ ______________ ______ ____________
118 Sears Roebuck Acceptance, A- 2.0% 03/01/03 @ 25 $25.250 $ 2,980
7.00%, Due 03/01/2038
180 Shaw Communications Inc., BBB 3.0% 09/30/03 @ 25 24.750 4,455
8.50%, Due 09/30/2097 (5)
147 Southern Company Capital Trust IV, A- 2.5% 06/30/03 @ 25 25.313 3,721
7.125%, Due 06/30/2028
188 Spieker Properties, Inc., 8.00% BBB- 3.0% 06/30/03 @ 25 23.750 4,465
146 U.S. Bancorp Capital II, BBB+ 2.5% 04/01/03 @ 25 25.438 3,714
7.20%, Due 04/01/2028
176 Weingarten Realty Investment, 7.44% A- 3.0% 03/31/03 @ 25 25.375 4,466
_____ ________
Total Investments 100% $148,551
===== ========
____________
<FN>
(1) Shown under this heading is the stated dividend rate of each of the
Securities, expressed as a percentage of par or stated value. Also shown
is the stated maturity date of the Trust Preferred Securities; the
Preferred Stocks have no stated maturity date. All Securities are
represented by regular way contracts to purchase such Securities for the
performance of which an irrevocable letter of credit has been deposited
with the Trustee. The contracts to purchase Securities were entered into
by the Sponsor on December 18, 1998. Each Security was originally issued
with a par or stated value per share equal to $25.
(2) The ratings are by Standard & Poor's. For a brief description of the
rating symbols and their related meanings, see "Description of Preferred
Stock Ratings." Such ratings were obtained from an information reporting
service.
(3) The Securities are first redeemable on such date and at
such price as listed above. Optional redemption provisions, which may be
exercised in whole or in part, are at prices of par or stated value.
Optional redemption provisions generally will occur at times when the
redeemed Securities have an offering side evaluation which represents a
premium over par or stated value. To the extent that the Securities were
acquired at a price higher than the redemption price, this will
represent a loss of capital when compared with the Public Offering Price
of the Units when acquired. Distributions will generally be reduced by
the amount of the dividends which otherwise would have been paid with
respect to redeemed Securities, and any principal amount received on
such redemption after satisfying any redemption requests for Units
received by the Trust will be distributed to Unit holders. Certain of
the Securities have provisions which would allow for their redemption
prior to the earliest stated call date pursuant to the occurrence of
certain extraordinary events.
(4) The cost of the Securities to the Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the last sale prices of the listed Securities and the ask
prices of the over-the-counter traded Securities on the business day
preceding the Initial Date of Deposit). The valuation of the Securities
has been determined by the Evaluator, an affiliate of the Sponsor. The
aggregate underlying value of the Securities on the Initial Date of
Deposit was $148,551. Cost and loss to Sponsor relating to the
Securities sold to the Trust were $149,026 and $475, respectively.
(5) This Security represents the preferred stock of a foreign company
which trades directly on a United States national securities exchange.
</FN>
Page 38
DESCRIPTION OF PREFERRED STOCK RATINGS*
Standard & Poor's. A Standard & Poor's preferred stock rating is an
assessment of the capacity and willingness of an issuer to pay preferred
stock dividends and any applicable sinking fund obligations. A preferred
stock rating differs from a bond rating inasmuch as it is assigned to an
equity issue, which issue is intrinsically different from, and
subordinated to, a debt issue. Therefore, to reflect this difference,
the preferred stock rating symbol will normally not be higher than the
bond rating symbol assigned to, or that would be assigned to, the senior
debt of the same issuer.
The preferred stock ratings are based on the following considerations:
I. Likelihood of payment-capacity and willingness of the issuer to
meet the timely payment of preferred stock dividends and any applicable
sinking fund requirements in accordance with the terms of the obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
"AAA" This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated AAA.
"A" An issued rated A is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions.
"BBB" An issue rated BBB is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the A
category.
"BB," "B," "CCC" Preferred stock issues rated BB, B and CCC are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the
lowest degree of speculation and CCC the highest degree of speculation.
While such issues will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
________________
As published by Standard & Poor's.
Page 39
CONTENTS:
Summary of Essential Information 4
Preferred Income Trust Series
FT 302:
What is the FT Series? 6
What are the Expenses and Charges? 7
What is the Federal Tax Status of Unit Holders? 8
Are Investments in the Trust Eligible for
Retirement Plans? 15
Portfolio:
What are the Securities? 15
Risk Factors 15
What are Some Additional Considerations
for Investors? 20
Public Offering:
How is the Public Offering Price Determined? 21
How are the Units Distributed? 24
What are the Sponsor's Profits? 26
Will There be a Secondary Market? 26
Rights of Unit Holders:
How is Evidence of Ownership Issued
and Transferred? 26
How are Income and Capital Distributed? 27
What Reports will Unit Holders Receive? 28
How May Units be Redeemed? 28
How May Units be Purchased by the Sponsor? 30
How May Securities be Removed from the Trust? 30
Information as to Sponsor, Trustee
and Evaluator:
Who is the Sponsor? 31
Who is the Trustee? 31
Limitations on Liabilities of Sponsor and Trustee 32
Who is the Evaluator? 32
Other Information:
How May the Indenture be Amended or Terminated? 32
Legal Opinions 33
Experts 33
Report of Independent Auditors 34
Statement of Net Assets 35
Notes to Statement of Net Assets 35
Schedule of Investments 36
Description of Preferred Stock Ratings 39
____________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
PREFERRED INCOME TRUST SERIES
Nike Securities, L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
December 18, 1998
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 40
MEMORANDUM
Re: FT 313
As indicated in our cover letter transmitting the
Registration Statement on Form S-6 and other related material
under the Securities Act of 1933 to the Commission, the only
difference of consequence (except as described below) between FT
273, which is the current fund, and FT 313, 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 273 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 bonds deposited in the Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Broker's Fidelity
Bond, in the total amount of $1,000,000, 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 313 has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on December 31, 1998.
FT 300
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
Robert D. Van Kampen Director of
Nike Securities December 31, 1998
Corporation, the
General Partner of
Nike Securities L.P. Robert M. Porcellino
Attorney-in-Fact**
David J. Allen Director of
Nike Securiites
Corporation, the
General Partner of
Nike Securities L.P.
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to form S-6 of The First Trust Combined
Series 258 (File No. 33-63483) and the same is hereby
incorporated by this reference.
S-2
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, 3.3 and 3.4 of the Registration Statement.
CONSENT OF ERNST & YOUNG LLP
The consent of Ernst & Young 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-3
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).
1.1.1* Form of Trust Agreement for Series 300 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank,
as Trustee and First Trust Advisors L.P., as Evaluator
and Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities 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 Nike Securities 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 Nike Securities
Corporation, the general partner of Nike Securities 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 Nike Securities Corporation, the
general partner of Nike Securities 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).
3.1* Opinion of counsel as to legality of Securities being
registered.
3.2* Opinion of counsel as to Federal income tax status of
Securities being registered.
S-4
3.3* Opinion of counsel as to New York income tax status of
Securities being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
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 Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-63483] filed on behalf of The First Trust Combined
Series 258).
___________________________________
* To be filed by amendment.
S-5