Registration No. 333-53357
1940 Act No. 811-05903
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 261
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 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 public:
As soon as practicable after the effective date of the
Registration Statement.
|XXX|Check box if it is proposed that this filing will become
effective on July 1, 1998 at 2:00 p.m. pursuant to Rule
487.
________________________________
FT 261
Cross-Reference Sheet
(Form N-8B-2 Items required by Instructions as
to the Prospectus in Form S-6)
Form N-8B-2 Item Number Form S-6 Heading in Prospectus
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust Prospectus front cover
(b) Title of securities issued Summary of Essential
Information
2. Name and address of each depositor Information as to
Sponsor, Trustee and
Evaluator
3. Name and address of trustee Information as to
Sponsor, Trustee and
Evaluator
4. Name and address of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
5. State of organization of trust The FT Series
6. Execution and termination of Other Information
trust agreement
7. Changes of name *
8. Fiscal year *
9. Litigation *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer Public Offering
securities
(b) Cumulative or distributive The FT Series
securities
(c) Redemption Rights of Unitholders
(d) Conversion, transfer, etc. Rights of Unitholders
(e) Periodic payment plan *
(f) Voting rights Rights of Unitholders
(g) Notice of certificateholders Other Information
(h) Consents required Rights of Unitholders;
Other Information
(i) Other provisions The FT Series
11. Types of securities comprising The FT Series
units Schedule of
Investments
12. Certain information regarding
periodic payment certificates *
13. (a) Load, fees, expenses, etc. Summary of Essential
Information; Public
Offering; The FT
Series
(b) Certain information regarding
periodic payment certificates *
(c) Certain percentages Summary of Essential
Information; The FT
Series; Public
Offering
(d) Certain other fees, etc.
payable by holders Rights of Units
Holders
(e) Certain profits receivable
by depositor, principal,
underwriters, trustee or The FT Series
affiliated persons
(f) Ratio of annual charges *
to income
14. Issuance of trust's securities Rights of Unit Holders
15. Receipt and handling of payments
from purchasers *
16. Acquisition and disposition of
underlying securities The FT Series; Rights
of Unit Holders;
17. Withdrawal or redemption The FT Series; Public
Offering; Rights of
Unit Holders
18. (a) Receipt, custody and Rights of Unit Holders
disposition of income
(b) Reinvestment of distributions Rights of Unit Holders
(c) Reserves or special funds Information as to
Sponsor, Trustee and
Evaluator
(d) Schedule of distributions *
19. Records, accounts and reports Rights of Unit Holders
20. Certain miscellaneous provisions
of trust agreement
(a) Amendment Other Information
(b) Termination Other Information
(c) and (d) Trustee, removal Information as
and successor to Sponsor, Trustee
and Evaluator
(e) and (f) Depositor, removal Information as
and successor to Sponsor, Trustee
and Evaluator
21. Loans to security holders *
22. Limitations on liability The FT Series;
Information as to
Sponsor, Trustee
and Evaluator
23. Bonding arrangements Contents of
Registration
Statement
24. Other material provisions *
of trust agreement
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor Information as to
Sponsor, Trustee and
Evaluator
26. Fees received by depositor *
27. Business of depositor Information as to
Sponsor, Trustee and
Evaluator
28. Certain information as to
officials and affiliated *
persons of depositor
29. Voting securities of depositor *
30. Persons controlling depositor *
31. Payment by depositor for certain
services rendered to trust *
32. Payment by depositor for certain
other services rendered to trust *
33. Remuneration of employees of
depositor for certain services
rendered to trust *
34. Remuneration of other persons
for certain services rendered *
to trust
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of trust's Public Offering
securities by states
36. Suspension of sales of trust's
securities *
37. Revocation of authority to *
distribute
38. (a) Method of distribution Public Offering
(b) Underwriting agreements Public Offering
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as
underwriters to Sponsor, Trustee
and Evaluator
(b) N.A.S.D. membership of
principal underwriters Information as to
Sponsor, Trustee and
Evaluator
40. Certain fees received by See Items 13(a) and
principal underwriters 13(e)
41. (a) Business of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) Branch offices of
principal underwriters *
(c) Salesmen of principal *
underwriters
42. Ownership of trust's securities
by certain persons *
43. Certain brokerage commissions
received by principal *
underwriters
44. (a) Method of valuation Summary of Essential
Information; The FT
Series, Public
Offering
(b) Schedule as to offering *
price
(c) Variation in offering Public Offering
price to certain persons
45. Suspension of redemption rights *
46. (a) Redemption valuation Rights of Unit Holders
(b) Schedule as to redemption *
price
47. Maintenance of position in Public Offering;
underlying securities Rights
of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of Information as
trustee to Sponsor, Trustee
and Evaluator
49. Fees and expenses of trustee The FT Series
50. Trustee's lien The FT Series
VI. INFORMATION CONCERNING THE INSURANCE OF HOLDERS OF
SECURITIES
51. Insurance of holders of
trust's securities *
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust The FT Series;
agreement with respect to Rights of Unit Holders
selection or elimination of
underlying securities
(b) Transactions involving
elimination of underlying *
securities
(c) Policy regarding substitution The FT Series;
or elimination of underlying Rights of Unit Holders
securities
(d) Fundamental policy not
otherwise covered *
53. Tax status of Trust The FT Series
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during *
last ten years
55.
56.
57. Certain information regarding
periodic payment certificates *
58.
59. Financial statements Report of Independent
(Instruction 1(c) to Form S-6) Auditors
Statement of Net
Assets
* Inapplicable, answer negative or not required.
Lehman Brothers
10 Uncommon Values (tm) Trust 1998 Portfolio
The Trust. FT 261 (Lehman Brothers 10 Uncommon Values Trust, 1998
Portfolio) is a unit investment trust consisting of shares of ten
different common stocks (the "Equity Securities").
The objective of the Trust is to provide the potential for above-average
capital appreciation by investing the Trust's portfolio in the Equity
Securities. See "Schedule of Investments." The Trust has a mandatory
termination date (the "Mandatory Termination Date" or "Trust Ending
Date") of approximately one year from the date of this Prospectus 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 Equity Securities deposited in the Trust. The Equity Securities
deposited in the Trust's portfolio have no fixed maturity date and the
value of these underlying Equity Securities will fluctuate with changes
in the values of stocks in general but may decline more than or not
increase as much as stocks in general. See "Portfolio."
The Sponsor may, from time to time after the Initial Date of Deposit,
deposit additional Equity Securities in the Trust or cash (including a
letter of credit) with instructions to purchase additional Equity
Securities in the Trust. Such deposits of additional Equity Securities
or cash will, therefore, be done in such a manner that the original
proportionate relationship among the number of shares of the individual
issues of the Equity Securities shall be maintained. Any deposit by the
Sponsor of additional Equity Securities, or the purchase of additional
Equity Securities pursuant to a cash deposit, will duplicate, as nearly
as is practicable, the original proportionate share relationship
established on the Initial Date of Deposit, and not the actual
proportionate share relationship on the subsequent date of deposit,
because the two may differ. Any such difference may be due to the sale,
redemption or liquidation of any of the Equity Securities deposited in
the Trust on the Initial, or any subsequent, Date of Deposit. Moreover,
because of fluctuations in the price of the Equity Securities, the
proportionate value relationship among the Equity Securities on any
subsequent date of deposit will probably be different from that
established on the Initial Date of Deposit. See "What is the FT Series?"
and "Rights of Unit Holders-How May Equity Securities be Removed from
the Trust?"
Public Offering Price. The Public Offering Price per Unit of the Trust
is equal to the aggregate underlying value of the Equity Securities in
the Trust (generally determined by the closing sale prices of listed
Equity Securities and the ask prices of over-the-counter traded Equity
Securities) plus or minus a pro rata share of cash, if any, in the
Capital and Income Accounts of the Trust, plus a maximum sales charge of
2.0% (equivalent to 2.041% of the net amount invested). A pro rata share
of accumulated dividends, if any, in the Income Account is included in
the Public Offering Price. In addition, a portion of the Public Offering
Price during the initial offering period also consists of Equity
Securities in an amount sufficient to pay for all or a portion of the
costs incurred in establishing the Trust. The estimated organizational
and offering costs will be deducted from the assets of the Trust as of
the close of the initial offering period. The minimum amount which an
investor may purchase in the Trust is 1,000 Units (500 Units for
Individual Retirement Accounts and other tax-deferred accounts).
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.
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.
Lehman Brothers Inc.
The date of this Prospectus is July 1, 1998
Page 1
Dividend and Capital Distributions. Cash dividends received by the Trust
will be paid on December 31, 1998 to Unit holders of record on December
15, 1998, and again as part of the final liquidation distribution.
Distributions of funds in the Capital Account, if any, will be made as
part of the final liquidation distribution, and in certain
circumstances, earlier. Any distribution of income and/or capital will
be net of expenses of the Trust. See "What is the Federal Tax Status of
Unit Holders?" Distributions of income or capital on a Unit holder's
Units, other than the final liquidating distribution, will be
automatically reinvested into additional Units of the Trust without a
sales charge unless the Unit holder elects otherwise. See "Rights of
Unit Holders-How are Income and Capital Distributed?" Additionally, upon
termination of the Trust, the Trustee will distribute, upon surrender of
Units, to each remaining Unit holder (other than a Rollover Unit holder
as defined below) 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?" For distributions to Rollover Unit
holders, see "Rights of Unit Holders-Special Redemption, Liquidation and
Investment in a New Trust."
Secondary Market for Units. 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 Equity Securities in the Trust (generally determined
by the closing sale prices of listed Equity Securities and the bid
prices of over-the-counter traded Equity 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
Equity Securities in the Trust (generally determined by the closing sale
prices of listed Equity Securities and either the ask prices (during the
initial offering period) or the bid prices (subsequent to the initial
offering period) of over-the-counter traded Equity 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 2,500 Units or more of
the Trust for redemption may request a distribution of shares of Equity
Securities (reduced by customary transfer and registration charges) in
lieu of payment in cash. See "Rights of Unit Holders-How May Units be
Redeemed?"
Special Redemption, Liquidation and Investment in a New Trust. The
Sponsor intends to create a separate 1999 series of the Lehman Brothers
10 Uncommon Values Trust (the "1999 Trust") in conjunction with the
termination of this series of the Trust. The portfolio of the 1999 Trust
will contain equity securities of companies which the Sponsor believes
have the potential to provide above-average capital appreciation during
the term of the 1999 Trust. Unit holders who wish to have the proceeds
from their Units invested in the 1999 Trust must specify by June 1, 1999
(the "Rollover Notification Date") their intention to become "Rollover
Unit holders." Rollover Unit holders' Units will be redeemed in-kind on
the Rollover Notification Date and the distributed Equity Securities
sold by the Trustee, in its capacity as Distribution Agent, during the
Special Redemption and Liquidation Period. The proceeds of the
redemption will then be invested in Units of the 1999 Trust, if such
Trust is offered. The Sponsor may stop creating new Units of the 1999
Trust at any time in its sole discretion without regard to whether all
the proceeds to be invested have been invested. Cash which has not been
invested on behalf of the Rollover Unit holders in the 1999 Trust will
be distributed at the end of the Special Redemption and Liquidation
Period. The Sponsor, however, anticipates that sufficient Units can be
created, although moneys in the Trust may not be fully invested on the
next business day. Rollover Unit holders will receive credit for the
amount of dividends in the Income Account of the Trust which will be
included in the reinvestment in Units of the 1999 Trust. No Unit holder
of the Trust, including Rollover Unit holders, will be entitled under
the Taxpayer Relief Act of 1997 to the 20% maximum Federal tax rate for
capital gains derived from the Trust's portfolio. The exchange option
described above is subject to modification, termination or suspension.
Termination. The Trust will terminate approximately one year after the
Initial Date of Deposit regardless of market conditions at that time.
Commencing no later than the Mandatory Termination Date, Equity
Securities will begin to be sold as prescribed by the Sponsor. 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 Equity Securities (reduced by customary
transfer and registration charges) if such Unit holder owns at least
2,500 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 Equity Securities. To be effective, the
Page 2
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 the "Rollover Option" or a
distribution of shares of the Equity 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?"
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 Equity Securities or the general condition of the
stock market, changes in interest rates or an economic recession. The
Trust's portfolio is not managed and Equity Securities will not be sold
by the Trust regardless of market fluctuations, although some Equity
Securities may be sold under certain limited circumstances. Finally, the
results of ownership of Units will differ from the results of ownership
of the underlying Equity Securities of the Trust for various reasons,
including the timing of the purchase and sale (or redemption) of Units
of the Trust, sales charges and expenses of the Trust and taxes. See
"Portfolio-What are Equity Securities?-Risk Factors."
Page 3
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Equity Securities-July 1, 1998
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
General Information
<S> <C>
Initial Number of Units (1) 14,993
Fractional Undivided Interest in the Trust per Unit (1) 1/14,993
Public Offering Price:
Aggregate Offering Price Evaluation of Equity Securities in Portfolio (2) $146,935
Aggregate Offering Price Evaluation of Equity Securities per Unit $ 9.80
Maximum Sales Charge 2.0% of the Public Offering Price per Unit
(2.041% of the net amount invested) (3) $ .20
Public Offering Price per Unit (3) $ 10.00
Sponsor's Initial Repurchase Price per Unit (4) $ 9.80
Redemption Price per Unit (based on aggregate underlying value of Equity Securities) (4) $ 9.80
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Cash CUSIP Number 30264Q 787
Reinvestment CUSIP Number 30264Q 795
Security Code 55720
First Settlement Date July 7, 1998
Rollover Notification Date June 1, 1999
Special Redemption and Liquidation Period During the period from June 15, 1999 to July 30, 1999.
Mandatory Termination Date July 30, 1999
Discretionary Liquidation Amount The Trust may be terminated if the value of the Equity Securities
is less than the lower of $2,000,000 or 20% of the total value of
Equity 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. 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. (2)
Supervisory Fee (5) Maximum of $.0035 per Unit outstanding annually payable to an
affiliate of the Sponsor.
Estimated Organizational and Offering Costs (6) $.018 per Unit.
Income Distribution Record Date December 15, 1998
Income Distribution Date (7) December 31, 1998
______________
<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 Equity Security is valued at the last closing sale price
or if no such price exists or the Equity Security is not so listed, at
the closing ask price thereof.
(3) 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 in such Income
Account. The Public Offering Price as shown reflects the value of the
Equity Securities at the opening of business on the Initial Date of
Deposit and establishes the original proportionate share relationship
among the individual Equity Securities. No sales to investors will be
executed at this price. Additional Equity 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 during the initial offering period
include estimated organizational and offering costs per Unit. After the
initial offering period, 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
$.0010 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) as is common for
mutual funds. 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 end of the initial offering period
(approximately one month). See "Public Offering" and "Statement of
Net Assets."
(7) If the 1999 Trust is offered, at the Rollover Notification Date for
Rollover Unit holders or upon termination of the Trust for other Unit
holders, amounts in the Income Account (which consist of dividends on
the Equity Securities) will be included in amounts distributed to or on
behalf of Unit holders. 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 as
part of the final liquidation distribution.
</FN>
</TABLE>
Page 4
LEHMAN BROTHERS 10 UNCOMMON VALUES TRUST, 1998 PORTFOLIO
FT 261
What is the FT Series?
FT 261 (Lehman Brothers 10 Uncommon Values Trust, 1998 Portfolio) 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
"Trust"). The FT Series was previously known as The First Trust Special
Situations Trust Series. The Trust is a unit investment trust 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 common stocks (the
"Equity 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 Equity 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 above-average
capital appreciation by investing the Trust's portfolio in the common
stock of companies that comprise the "10 Uncommon Values" portfolio for
1998. The "10 Uncommon Values" are an annual compilation of the ten
common stocks selected by the Investment Policy Committee of Lehman
Brothers Inc. with the assistance of the Research Department of Lehman
Brothers Inc. which, in the opinion of Lehman Brothers Inc., have the
greatest potential for capital appreciation during the next year. This
selection was based upon a determination by Lehman Brothers Inc. that
the selected stocks are deemed to have an above-average appreciation
potential against the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500 Index") over the 12 months following the selection of the
portfolio. Lehman Brothers Inc. is one of the leading global investment
banks serving institutional, corporate, government and high net worth
individual clients and customers. Lehman Brothers' business includes
capital raising for clients through securities underwriting and direct
placements; corporate finance and strategic advisory services; merchant
banking; securities sales and trading; research; and the trading of
foreign exchange, derivative products and certain commodities. The Trust
is not sponsored, or created by Lehman Brothers Inc. Lehman Brothers
Inc.'s only relationship to the Sponsor is the licensing of certain
trademarks and tradenames of Lehman Brothers Inc. and of the "10
Uncommon Values" and the sale to the Sponsor of research which is
determined, composed and calculated by Lehman Brothers Inc. without
regard to the Sponsor or the Trust. In addition, Lehman Brothers Inc.
may sell Units of the Trust in its capacity as a broker/dealer. Lehman
Brothers Inc. also receives fees for brokerage services provided to this
Trust and other trusts sponsored by Nike Securities L.P. Lehman Brothers
Inc. in its general securities business acts as agent or principal in
connection with the purchase and sale of equity securities, including
the Equity Securities in the Trust and may act as a market maker in
certain of the Equity Securities. There is, of course, no guarantee that
the objective of the Trust will be achieved. See "Schedule of
Investments" and "Portfolio-What are Equity Securities?-Risk Factors."
With the deposit of the Equity Securities on the Initial Date of
Deposit, the Sponsor established a percentage relationship between the
number of shares of Equity Securities in the Trust's portfolio. See
"Portfolio-What are the Equity Securities Selected for the Lehman
Brothers 10 Uncommon Values Trust, 1998 Portfolio?" From time to time
following the Initial Date of Deposit, the Sponsor, pursuant to the
Indenture, may deposit additional Equity Securities in the Trust or cash
(including a letter of credit) with instructions to purchase additional
Equity 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 Equity Securities or cash will
duplicate, as nearly as is practicable, the original proportionate share
relationship (subject to appropriate adjustment in the event of stock
splits, stock dividends and the like) and not the actual proportionate
share relationship on the subsequent date of deposit, since the two may
differ. Any such difference may be due to the sale, redemption or
Page 5
liquidation of any of the Equity Securities deposited in the Trust on
the Initial, or any subsequent, Date of Deposit. Moreover, because of
fluctuations in the price of the Equity Securities, the proportionate
value relationship among the Equity Securities on any subsequent Date of
Deposit will probably be different from that established on the Initial
Date of Deposit. See "Rights of Unit Holders-How May Equity Securities
be Removed from the Trust?" Since the prices of the underlying Equity
Securities will fluctuate daily, the ratio, on a market value basis,
will also change daily. The portion of Equity Securities represented by
each Unit will not change as a result of the deposit of additional
Equity 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 Equity Securities between the time of the cash deposit
and the purchase of the Equity Securities and because the Trust will pay
the associated brokerage fees. To minimize this effect, the Trust will
try to purchase the Equity Securities as close to the evaluation time or
as close to the evaluation price as possible. 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
Equity 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 Equity Securities deposited in the
Trust set forth under "Summary of Essential Information." To the extent
that Units of the Trust are redeemed, the aggregate value of the Equity
Securities in the Trust will be reduced and the undivided fractional
interest represented by each outstanding Unit of the Trust will be
increased proportionately. However, if additional Units are issued by
the Trust in connection with the deposit of additional Equity Securities
or cash by the Sponsor, the aggregate value of the Equity Securities in
the Trust will be increased by amounts allocable to additional Units,
and the undivided fractional interest represented by each outstanding
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 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, which is not to exceed the amount 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 Lehman Brothers Inc. or other dealers of the Trust.
Subsequent to the initial offering period, First Trust Advisors L.P., in
its capacity as Evaluator for the Trust, will receive a fee as indicated
in the "Summary of Essential Information."
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 the
"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 the 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 Trustee's and the above described fees 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.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
Page 6
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 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;
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 Equity 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. Since the Equity Securities are all common stocks and the income
stream produced by dividend payments, if any, is unpredictable, 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 Equity
Securities will have to be sold to meet Trust expenses. These sales may
result in capital gains or losses to Unit holders and may tend to reduce
gains or increase the losses which are ultimately received by the Unit
holders from investing in the Trust. See "What is the Federal Tax Status
of Unit Holders?"
What is the Federal Tax Status of Unit Holders?
The following 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, as amended
(the "Code"). Unit holders should consult their tax advisers in
determining the Federal, state, local and any other tax consequences of
the purchase, ownership and disposition of Units in the Trust. For
purposes of the following discussion and opinions, it is assumed that
each Equity Security is equity 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 or her pro rata share of the income derived from each
Equity Security when such income is considered to be received by the
Trust.
2. Each Unit holder will be considered to have received all of the
dividends paid on his or her pro rata portion of each Equity Security
when such dividends are received by the Trust. Unit holders will be
taxed in this manner regardless of whether distribution from the Trust
are actually received by the Unit holder or are automatically reinvested.
3. Each Unit holder will have a taxable event when the Trust disposes
of an Equity Security (whether by sale, taxable exchange, liquidation,
redemption, or otherwise) or upon the sale or redemption of Units by
such Unit holder (except to the extent an in-kind distribution of stocks
is received by such Unit holder as described below). The price a Unit
holder pays for his or her Units is allocated among his or her pro rata
portion of each Equity Security held by the Trust (in proportion to the
Page 7
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 Equity Security held
by the Trust. Unit holders should consult their own tax advisers with
regard to the calculation of basis. For Federal income tax purposes, a
Unit holder's pro rata portion of dividends, 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.
4. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Equity 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
Equity 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 advisers regarding
the recognition of such capital gains and losses for Federal income tax
purposes. In particular, a Rollover Unit holder should be aware that a
Rollover Unit holder's loss, if any, incurred in connection with the
exchange of Units for units in a new series of the Trust (the "1999
Trust") will generally be disallowed with respect to the disposition of
any Equity Securities pursuant to such exchange to the extent that such
Unit holder is considered the owner of substantially identical
securities under the wash sale provisions of the Code taking into
account such Unit holder's deemed ownership of the securities underlying
the Units in the 1999 Trust in the manner described above, if such
substantially identical securities were acquired within a period
beginning 30 days before and ending 30 days after such disposition.
However, any gains incurred in connection with such an exchange by a
Rollover Unit holder would be recognized. Unit holders should consult
their tax advisers regarding the recognition of gains and losses for
Federal income tax purposes.
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 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. 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.
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 advisers with respect to the limitations
on and possible modifications to the dividends received deduction.
Limitations on Deductibility of Trust 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.
Page 8
Unit holders should consult with their tax advisors regarding the
limitations on the deductibility of Trust expenses.
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 an Equity Security is disposed of
by the Trust or if the Unit holder disposes of a Unit (although losses
incurred by Rollover Unit holders may be subject to disallowance, as
discussed above). The Taxpayer Relief Act of 1997 (the "1997 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) is subject to a maximum marginal
stated tax rate of either 28% or 20%, depending upon the holding periods
of the capital assets. 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. Generally, capital gains
realized from assets held for more than one year but not more than 18
months are taxed at a maximum marginal stated tax rate of 28% and
capital gains realized from assets (with certain exclusions) held for
more than 18 months are taxed at a maximum marginal stated tax rate of
20% (10% in the case of certain taxpayers in the lowest tax bracket).
Further, capital gains realized from assets held for one year or less
are taxed at the same rates as ordinary income. Legislation is currently
pending that provides the appropriate methodology that should be applied
in netting the realized capital gains and losses. Such legislation is
proposed to be effective retroactively for tax years ending after May 6,
1997. It should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed.
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 advisers 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 involved including his or her pro rata portion of all the
Equity Securities represented by the Unit.
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
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 2,500 Units 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 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 shares
of stock 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 Equity Securities. An "Equity Security" for this purpose
is a particular class of stock issued by a particular corporation. A
Unit holder will not recognize gain or loss if a Unit holder only
receives Equity Securities in exchange for his or her pro rata portion
in the Equity Securities held by the Trust. However, if a Unit holder
also receives cash in exchange for a fractional share of an Equity
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 Equity Security held by the Trust.
Because the Trust will own many Equity Securities, a Unit holder who
requests an In-Kind Distribution will have to analyze the tax
consequences with respect to each Equity Security owned by the Trust.
The amount of taxable gain (or loss) recognized upon such exchange will
Page 9
generally equal the sum of the gain (or loss) recognized under the rules
described above by such Unit holder with respect to each Equity Security
owned by the Trust. Unit holders who request an In-Kind Distribution are
advised to consult their tax advisers in this regard.
As discussed in "Rights of Unit Holders-Special Redemption, Liquidation
and Investment in a New Trust," a Unit holder may elect to become a
Rollover Unit holder. To the extent a Rollover Unit holder exchanges his
or her Units for Units of the 1999 Trust in a taxable transaction, such
Unit holder will recognize gains, if any, but generally will not be
entitled to a deduction for any losses recognized upon the disposition
of any Equity Securities pursuant to such exchange to the extent that
such Unit holder is considered the owner of substantially identical
securities under the wash sale provisions of the Code taking into
account such Unit holder's deemed ownership of the securities underlying
the Units in the 1999 Trust in the manner described above, if such
substantially identical securities were acquired within a period
beginning 30 days before and ending 30 days after such disposition under
the wash sale provisions contained in Section 1091 of the Code. In the
event a loss is disallowed under the wash sale provisions, special rules
contained in Section 1091 (d) of the Code apply to determine the Unit
holder's tax basis in the securities acquired. Rollover Unit holders are
advised to consult their tax advisers.
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 Equity Securities held in the Trust in accordance
with the proportion of the fair market values of such Equity 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 Equity 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.
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. Distributions by the Trust (other than those that are not
treated as United States source income, if any) will generally be
subject to United States income taxation and withholding in the case of
Units held by non-resident alien individuals, foreign corporations or
other non-United States persons. Such persons should consult their tax
advisers.
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 dividends of foreign corporations will not
be subject to U.S. withholding tax provided that less than 25 percent 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 tax
advisers regarding the imposition of U.S. withholding on distributions
from the Trust.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject
to foreign withholding taxes and Unit holders should consult their tax
advisers regarding the potential tax consequences relating to the
payment of any such withholding taxes by the Trust. Any dividends
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 United States income tax purposes with
respect to such taxes. The 1997 Act imposes a required holding period
for such credits. Investors should consult their tax advisers with
respect to foreign withholding taxes and foreign tax credits.
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 such Trust from the disposition of any Equity Security
(resulting from redemption or the sale of any Equity Security) and the
fees and expenses paid by the Trust. The Trustee will also furnish
annual information returns to Unit holders and the Internal Revenue
Service.
Page 10
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?"
The foregoing discussion relates only to the tax treatment of U.S. Unit
holders ("U.S. Unit holders") with regard to federal and certain aspects
of New York State and City income taxes. Unit holders may be subject to
taxation in New York or in other jurisdictions and should consult their
own advisers in this regard. 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 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 with their tax advisors regarding
potential 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 the 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 advisers
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. Accordingly,
investors considering investing through a retirement plan should
consider doing so with funds already in such plan.
PORTFOLIO
What are Equity Securities?
The Trust consists of different issues of Equity Securities which are
listed on a national securities exchange or The Nasdaq Stock Market or
traded in the over-the-counter market. See "Portfolio-What are the
Equity Securities Selected for the Lehman Brothers 10 Uncommon Values
Trust, 1998 Portfolio?" for a general description of the companies. The
Equity Securities selected for the Trust are those common stocks which
comprise the "10 Uncommon Values" as selected by Lehman Brothers Inc.
Each year since 1949, a portfolio of "10 Uncommon Values" in common
stocks has been selected by Lehman Brothers Inc.'s Investment Policy
Committee, with the assistance of the Research Department of Lehman
Brothers Inc. (or a predecessor firm). The Research Department currently
follows approximately 1,000 companies. Months before the Investment
Policy Committee makes the final determination for the annual "10
Uncommon Values" portfolio, Lehman Brothers Inc.'s equity analysts begin
recommending stocks to the Investment Policy Committee that they believe
will provide greater appreciation potential than the S&P 500 Index
during the 12 months following the portfolio selection. These stocks
were selected based on an examination of the fundamentals for each
company. In making its final decision, the Investment Policy Committee
conducted extensive economic analyses and considered investment
strategies, global economic trends, social and political developments
and special regional factors identified by Lehman Brothers Inc.'s
economists and strategists. The S&P 500 Index is a market value-weighted
index showing the change in aggregate market value of 500 stocks traded
on the New York Stock Exchange, the AMEX and over-the-counter markets.
Performance Record of the "10 Uncommon Values" Portfolios Generally
Lehman Brothers Inc. has calculated the aggregate results of an
investment in the "10 Uncommon Values" portfolios over several periods
Page 11
of time assuming (1) purchase of approximately equal dollar amounts of
each of the "10 Uncommon Values" stock selections in a given year at the
closing sale prices immediately prior to the announcement of the
choices; (2) all ten stocks are held for approximately one year
(generally ending on June 30); (3) the portfolio is sold at the closing
sale prices immediately prior to the announcement of the new "10
Uncommon Values" stock selections; and (4) all sales proceeds are used
to buy approximately equal amounts of each of the ten common stocks
selected for the new "10 Uncommon Values" portfolio. If no closing sale
price exists, securities are generally valued at the mean between the
closing bid and asked prices. These calculations do not include
accumulation or reinvestment of dividends and do not take into account
capital gains taxes and brokerage commissions.
Since 1949, of the 490 stocks recommended, 333 advanced, 154 declined
and 3 remained unchanged in the year of the recommendation. During this
period, the "10 Uncommon Values" portfolio has outperformed the S&P 500
in 36 of 49 years. The "10 Uncommon Values" portfolio has declined in
value in 11 of 49 years. The charts below set forth (i) the value of an
initial investment of $1,000 (divided equally among each of the ten
stocks in the "10 Uncommon Values" portfolio) on April 21, 1949 and
reinvested annually in the new "10 Uncommon Values" portfolio through
June 30, 1998, and (ii) the compound average annual return, through June
30, 1998, of (A) the 1988 through 1997 "10 Uncommon Values" portfolios,
(B) the 1993 through 1997 "10 Uncommon Values" portfolios and (C) the
1997 "10 Uncommon Values" portfolio in each case based on the
assumptions above and compared to an investment in, or the performance
of, the S&P 500 Index for the comparable periods.
Page 12
<TABLE>
<CAPTION>
COMPARISON OF PRICE RETURNS*
Record of Portfolio Performance Data
S & P 500 10 Uncommon S & P 500 10 Uncommon
Year Index+ Values** Year Index+ Values**
____ _________ ___________ ____ _________ ___________
<S> <C> <C> <C> <C> <C>
1949 23.03% 46.49% 1976 -3.64% 3.41%
1950 17.78% 40.85% 1977 -4.93% 19.62%
1951 17.44% 14.54% 1978 7.73% 5.00%
1952 -3.63% -4.67% 1979 11.01% 22.23%
1953 21.00% 33.64% 1980 14.85% 24.72%
1954 40.47% 51.49% 1981 -16.46% -9.85%
1955 14.48% -1.78% 1982 53.37% 124.90%
1956 0.62% 11.80% 1983 -8.88% -15.33%
1957 -4.99% -4.65% 1984 25.24% 39.62%
1958 29.13% 62.49% 1985 30.75% 29.13%
1959 -1.79% -7.48% 1986 21.19% 3.06%
1960 13.44% 34.40% 1987 -10.03% -8.15%
1961 -12.54% -9.51% 1988 16.26% 13.99%
1962 24.36% 45.05% 1989 12.59% 15.98%
1963 15.15% 25.69% 1990 3.67% 7.02%
1964 2.68% 5.12% 1991 9.96% 9.41%
1965 2.17% 18.89% 1992 10.39% 35.37%
1966 7.07% 17.72% 1993 -1.39% 22.33%
1967 9.60% 22.97% 1994 22.62% 13.01%
1968 -2.26% 28.00% 1995 23.11% 31.41%
1969 -24.51% -38.47% 1996 31.99% 36.54%
1970 33.37% 52.48% 1997 28.10% 48.60%
1971 9.34% 10.08%
1972 -2.69% -23.73%
1973 -17.51% -11.91%
1974 10.69% 30.82%
1975 9.55% 11.22%
___________
<FN>
* Price Return represents the sum of stock's appreciation and does not
include reinvestment of dividends or does not take into consideration
any sales charges, commissions, expenses or taxes.
** These returns represent the "10 Uncommon Values," but not the Trust
or any prior series. It is assumed that the securities are purchased in
equal dollar amounts at the closing price on the last trade date before
being recommended by Lehman Brothers Inc. (generally ending June 30th)
and sold at the closing price on the last trade date before the
subsequent "10 Uncommon Values" are selected.
+ The S&P 500 Index is the property of Standard & Poor's Inc., which is
not affiliated with the Sponsor and has not participated in any way with
the creation of the Trust.
</FN>
</TABLE>
Page 13
Please refer to the APPENDIX following the last page of this document
for details on the charts included at this point.
The preceding data has been provided by Lehman Brothers Inc.
This past record does not guarantee that such a record will continue in
the future. The performance information and the charts above represent
past performance of the "10 Uncommon Values" portfolios and not the
performance of the Trust. The Trust has no performance history.
In selecting the "10 Uncommon Values" common stocks, Lehman Brothers
Inc. has not expressed any belief as to the potential of these
underlying stocks for capital appreciation over a period longer than one
year. There is, of course, no assurance that the Units of the Trust will
appreciate in value. See "Portfolio-What are Some Additional
Considerations for Investors?"
Page 14
What are the Equity Securities Selected for the Lehman Brothers 10
Uncommon Values Trust, 1998 Portfolio?
Applied Materials, Inc., headquartered in Santa Clara, California,
develops, makes, sells and services semiconductor wafer fabrication
equipment and related spare parts for the worldwide semiconductor
industry.
Clear Channel Communications, Inc., headquartered in San Antonio, Texas,
owns or programs radio and television stations in 43 domestic markets.
The company also operates one of the largest outdoor advertising
concerns in the United States; and owns a 50% equity interest in the
Australian Radio Network Pty. Ltd.
Comverse Technology, Inc., headquartered in Woodbury, New York,
develops, makes and sells special purpose computer and
telecommunications systems for multimedia communications and information
processing applications, which are used by government agencies,
telecommunications service providers and industrial and commercial
organizations. The company's systems are marketed worldwide through
direct sales force and through leading international telecommunications
equipment vendors.
Danaher Corporation, headquartered in Washington, D.C., produces and
distributes general purpose mechanics' hand tools and automotive
specialty tools. The company also produces and sells temperature, level
and position sensing devices; and makes and distributes wheel service
equipment and diesel engine retarders.
Illinova Corporation, headquartered in Decatur, Illinois, supplies
electric energy and natural gas in Illinois; invests in energy-related
projects worldwide; buys and sells wholesale electricity; and insures
the risks of the company's subsidiaries and their related business
enterprises.
Office Depot, Inc., headquartered in Delray Beach, Florida, operates the
largest chain of high-volume retail office supply stores in North
America; provides delivery service to small- and medium-size businesses;
and is a full-service contract stationer serving medium- and large-size
businesses throughout the United States.
The Progressive Corporation, headquartered in Mayfield Heights, Ohio,
through subsidiaries, provides personal automobile insurance and other
specialty property-casualty insurance and related services throughout
the United States and Canada. The company also processes business for
involuntary plans and provides claim services to fleet owners and other
insurance companies.
Star Banc Corporation, headquartered in Cincinnati, Ohio, through
subsidiaries, conducts a general commercial banking and trust business
through banking offices throughout Ohio, northern Kentucky and eastern
Indiana. The company also provides credit life and health, accident and
health insurance products.
Tyco International Ltd., headquartered in Exeter, New Hampshire, makes
and distributes disposable medical supplies, specialty and flow control
products and electrical and electronic components. The company conducts
vehicle auctions; and installs fire detection and suppression systems,
electronic security systems and undersea cable communication systems.
WorldCom, Inc. (Class A), headquartered in Jackson, Mississippi, through
subsidiaries, provides long distance and local products, 800 services,
calling cards, domestic and international private lines, broadband data
services, debit cards, conference calling, fax and data connections and
interconnection to Internet service providers.
The Sponsor has obtained the foregoing company descriptions from sources
it deems reliable. The Sponsor has not independently verified the
provided information either in terms of accuracy or completeness.
Risk Factors. An investment of Units of the 10 Uncommon Values Trust
should be made with an understanding of the risks such an investment may
entail. Some of the common stocks selected to be "10 Uncommon Values"
may be small-cap company stocks. While historically small-cap company
stocks have outperformed the stocks of large companies, the former have
customarily involved more investment risk as well. Small-cap company
stocks may have limited product lines, markets or financial resources;
may lack management depth or experience; and may be more vulnerable to
adverse general market or economic developments than large companies.
Some of the companies in which the 10 Uncommon Values Trust may invest
may distribute, sell or produce products which have recently been
brought to market and may be dependent on key personnel.
The prices of small company securities are often more volatile than
prices associated with large company issues, and can display abrupt or
Page 15
erratic movements at times, due to limited trading volumes and less
publicly available information. Also, because small cap companies
normally have fewer shares outstanding and these shares trade less
frequently than large companies, it may be more difficult for the 10
Uncommon Values Trust to buy and sell significant amounts of such shares
without an unfavorable impact on prevailing market prices. The
securities of small companies are often traded over-the-counter and may
not be traded in the volumes typical on a national securities exchange.
The Trust consists of such Equity Securities listed under the "Schedule
of Investments" as may continue to be held from time to time in the
Trust and any additional Equity 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
Equity Securities. However, should any contract for the purchase of any
of the Equity 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 Equity 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 Equity 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 Equity
Securities under certain limited circumstances. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Equity Securities
such as those acquired in connection with a merger or other transaction.
See "Rights of Unit Holders-How May Equity Securities be Removed from
the Trust?" Equity Securities, however, will not be sold by the Trust to
take advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation. In fact, no Equity Security will be sold
prior to termination of the Trust (except to satisfy redemption requests
or to pay expenses and in certain other limited circumstances) even if
the Sponsor or Lehman Brothers Inc. comes to believe that such Equity
Security no longer has the potential for capital appreciation, or issues
a "sell" recommendation with respect to such Equity Security.
Whether or not the Equity Securities are listed on a national securities
exchange, the principal trading market for the Equity Securities may be
in the over-the-counter market. As a result, the existence of a liquid
trading market for the Equity Securities may depend on whether dealers
will make a market in the Equity Securities. There can be no assurance
that a market will be made for any of the Equity Securities, that any
market for the Equity Securities will be maintained or of the liquidity
of the Equity Securities in any markets made. In addition, the Trust may
be restricted under the Investment Company Act of 1940 from selling
Equity Securities to the Sponsor. The price at which the Equity
Securities may be sold to meet redemptions, and the value of the Trust,
will be adversely affected if trading markets for the Equity Securities
are limited or absent.
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails, including the risk that
the financial condition of the issuers of the Equity Securities or the
general condition of the common stock market may worsen and the value of
the Equity Securities and therefore the value of the Units may decline.
Common stocks are especially susceptible to general stock market
movements and to volatile increases and decreases of value as market
confidence in and perceptions of the issuers change. These perceptions
are based on unpredictable factors including expectations regarding
government, economic, monetary and fiscal policies, inflation and
interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Shareholders of common
stocks have rights to receive payments from the issuers of those common
stocks that are generally subordinate to those of creditors of, or
holders of debt obligations or preferred stocks of, such issuers.
Shareholders of common stocks of the type held by the Trust have a right
to receive dividends only when and if, and in the amounts, declared by
the issuer's board of directors and have a right to participate in
amounts available for distribution by the issuer only after all other
claims on the issuer have been paid or provided for. Common stocks do
not represent an obligation of the issuer and, therefore, do not offer
any assurance of income or provide the same degree of protection of
capital as do debt securities. The issuance of additional debt
Page 16
securities or preferred stock will create prior claims for payment of
principal, interest and dividends which could adversely affect the
ability and inclination of the issuer to declare or pay dividends on its
common stock or the rights of holders of common stock with respect to
assets of the issuer upon liquidation or bankruptcy. The value of common
stocks is subject to market fluctuations for as long as the common
stocks remain outstanding, and thus the value of the Equity Securities
in the Portfolio 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 common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners of
the entity, have generally inferior rights to receive payments from the
issuer in comparison with the rights of creditors of, or holders of debt
obligations or preferred stocks issued by, the issuer. Cumulative
preferred stock dividends must be paid before common stock dividends and
any cumulative preferred stock dividend omitted is added to future
dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights on
liquidation which are senior to those of common stockholders.
Unit holders will be unable to dispose of any of the Equity Securities
in the Portfolio, as such, and will not be able to vote the Equity
Securities. As the holder of the Equity 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 Equity Securities will fluctuate over the life of the
Trust and may be more or less than the value at the time they were
deposited in the Trust. The Equity Securities may appreciate or
depreciate in value (or pay dividends) depending on the full range of
economic and market influences affecting these securities, including the
impact of the Sponsor's purchase and sale of the Equity Securities
(especially during the primary offering period of Units of the Trust and
during the Special Redemption and Liquidation Period) and other factors.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any Equity Security. In the event of a
notice that any Equity Security will not be delivered ("Failed Contract
Obligations") to the Trust, the Sponsor is authorized under the
Indenture to direct the Trustee to acquire other Equity 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
Equity Securities or cash (including a letter of credit) with
instructions to purchase additional Equity 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 Equity
Securities between the time of the cash deposit and the purchase of the
Equity Securities and because the Trust will pay the associated
brokerage fees.
The Trust consists of the Equity 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 Equity
Page 17
Securities acquired and held by the Trust pursuant to the provisions of
the Indenture (including provisions with respect to deposits into the
Trust of Equity Securities or cash in connection with the issuance of
additional Units).
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 Equity 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 Equity 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 Equity 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 Equity
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 advisers. Further, at any time after the
Initial Date of Deposit, legislation may be enacted that could
negatively affect the Equity Securities in the Trust or the issuers of
the Equity Securities. 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
Equity Securities to achieve their business goals.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price, which is based on the
aggregate underlying value of the Equity Securities in the Trust
(generally determined by the closing sale prices of listed Equity
Securities and the ask prices of over-the-counter traded Equity
Securities) plus or minus cash, if any, in the Income and Capital
Accounts of such Trust, plus a sales charge of 2.0% (equivalent to
2.041% of the net amount invested). For secondary market sales after the
completion of the initial offering period, the Public Offering Price is
also based on the aggregate underlying value of the Equity Securities in
the Trust (generally determined by the closing sale prices of listed
Equity Securities and the bid prices of over-the-counter traded Equity
Securities), plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, plus a maximum sales charge of 2.0% of the Public
Offering Price, divided by the number of outstanding Units of the Trust.
In addition, a portion of the Public Offering Price during the initial
offering period also consists of Equity Securities in an amount
sufficient to pay for all or a portion of the costs incurred in
establishing 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. The estimated organizational and offering
costs will be deducted from the assets of the Trust as of the close of
the initial offering period.
During the initial offering period, the Sponsor's Repurchase Price is
based on the aggregate underlying value of the Equity Securities in the
Trust (generally determined by the closing sale prices of listed Equity
Securities and the ask prices of over-the-counter traded Equity
Securities), plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, plus estimated organizational and offering costs,
divided by the number of Units of the Trust outstanding. For secondary
market sales after the completion of the initial offering period, the
Sponsor's Repurchase Price is also based on the aggregate underlying
Page 18
value of the Equity Securities in the Trust (generally determined by the
closing sale prices of listed Equity Securities and the bid prices of
over-the-counter traded Equity 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. Rollover Unit holders of prior series
of the Trust may purchase Units of the Trust at the Public Offering
Price, plus a maximum sales charge of 1.5% of the Public Offering Price.
The minimum amount an investor may purchase in the Trust is 1,000 Units
(500 Units for Individual Retirement Accounts and other tax-deferred
accounts). The applicable sales charge for primary and secondary market
sales of the Trust is reduced by 1.0% for purchases of $1,000,000 or more.
Any such reduced sales charge shall be the responsibility of the selling
broker/dealer, bank or other selling agent. The reduced sales charge is
also applied on a Unit basis utilizing a breakpoint equivalent of $10
per Unit and will be applied on whichever basis is more favorable to the
investor. The breakpoint will be adjusted to take into consideration
purchase orders stated in dollars which cannot be completely fulfilled
due to the requirement that only whole Units be issued. The reduced
sales charge structure will apply on all purchases of Units in the Trust
by the same person on any one day from the broker/dealer, bank or other
selling agent. Additionally, Units of the Trust 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 on purchases of Units of the Trust
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.
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 Equity 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 Equity Securities therein
plus or minus cash, if any, in the Income and Capital Accounts of the
Trust. The aggregate underlying value of the Equity Securities will be
determined in the following manner: if the Equity Securities are listed,
this evaluation is generally based on the closing sale prices on that
exchange (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, at the closing ask prices. If the Equity Securities are not so
listed or, if so listed and the principal market therefor is other than
on an 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 Equity Securities on the ask side of the
market or (c) by any combination of the above.
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the aggregate underlying
value of the Equity Securities therein, plus or minus cash, if any, in
the Income and Capital Accounts of the Trust plus the applicable sales
charge. The calculation of the aggregate underlying value of the Equity
Securities for secondary market sales is determined 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.
Page 19
How are 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 Equity Securities or cash are deposited by the Sponsor, Units
will be distributed to the public at the then current Public Offering
Price. During such period, the Sponsor may deposit additional Equity
Securities or cash in the Trust and create additional Units. Units
reacquired by the Sponsor during the initial offering period (at prices
based upon the aggregate underlying value of the Equity Securities in
the Trust plus or minus a pro rata share of cash, if any in the Income
and Capital Accounts of the Trust) may be resold at the then current
Public Offering Price. Upon the termination of the initial offering
period, unsold Units created or reacquired during the initial offering
period will be sold or resold at the then current Public Offering Price.
Upon completion of the initial offering, 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 will be made to dealers and others at
prices which represent a concession or agency commission of 1.5% of the
Public Offering Price for primary and secondary market sales (.50% on
purchases of $1,000,000 or more). Dealers and others will receive a
concession or agency commission of 1.0% of the Public Offering Price on
purchases by Rollover Unit holders (.25% on purchases by Rollover Unit
holders of $1,000,000 or more).
However, resales of Units of the Trust by such dealers and others to the
public will be made at the Public Offering Price described in the
prospectus. The Sponsor reserves the right to change the amount of the
concession or agency commission from time to time. In the event the
Sponsor reacquires, or the Trustee redeems, Units from brokers, dealers
and others while a market is being maintained for such Units, such
entities agree to repay immediately to the Sponsor any such concession
or agency commission relating to such reacquired Units. Certain
commercial banks may be making Units of the Trusts 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 the
dealers 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 the dealers 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 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 the 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 the common stocks
comprising the Dow Jones Industrial Average, other investment indices,
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
Page 20
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.
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.
Trust performance may be compared to performance on a total return basis
of the Dow Jones Industrial Average, the S&P 500 Composite Price Stock
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
2.0% of the Public Offering Price of the Units (equivalent to 2.041% of
the net amount invested) less any reduced sales charge as described
under "Public Offering-How is the Public Offering Price Determined?" 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 Equity Securities to the Trust (which
is based on the Evaluator's determination of the aggregate offering
price of the underlying Equity Securities of such Trust on the Initial
Date of Deposit as well as subsequent deposits) and the cost of such
Equity Securities to the Sponsor. See Note (2) of "Schedule of
Investments." During the initial offering period, 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 2.0%) 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 it is 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 Equity 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.
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
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
Page 21
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 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. Record ownership may occur before
settlement.
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 (book
entry) form. ONLY UNIT HOLDERS WHO ELECT TO HOLD UNITS IN UNCERTIFICATED
(BOOK ENTRY) FORM ARE ELIGIBLE TO PARTICIPATE AS A ROLLOVER UNIT HOLDER.
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 (book entry)
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 Equity Securities in the Trust on or about the Income
Distribution Date to Unit holders of record on the Income Distribution
Record Date and again as part of the final liquidation distribution. 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. Proceeds received
on the sale of any Equity 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 each 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 as part of the final liquidation distribution, and
in certain circumstances, earlier. See "What is the Federal Tax Status
of Unit Holders?"
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
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 under certain circumstances by
contacting the Trustee, otherwise the amount may be recoverable 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.
Page 22
Within a reasonable time after the Trust is terminated, each Unit holder
who is not a Rollover 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 Equity 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 such Trust.
The Trustee will credit to the Income Account of the Trust any dividends
received on the Equity 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.
Distribution Reinvestment Option. Distributions of income or capital on
a Unit holder's Units will be automatically reinvested at net asset
value in additional Units of the Trust unless the Unit holder elects
otherwise. Each person who purchases Units of the Trust may elect not to
participate in the Distribution Reinvestment Option by notifying the
Trustee of his or her election. The Distribution Reinvestment Option may
not be available in all states. A Unit holder must notify the Trustee of
their election at least 10 days prior to the Record Date for such
distribution. Each subsequent distribution of income or capital on the
participant's Units will be automatically applied by the Trustee to
purchase additional Units of the Trust. IT SHOULD BE REMEMBERED THAT
EVEN IF DISTRIBUTIONS ARE REINVESTED, THEY ARE STILL TREATED AS
DISTRIBUTIONS FOR INCOME TAX PURPOSES.
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 Equity
Securities sold during the year and the Equity Securities held at the
end of such year by such 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 tender
to the Trustee at its unit investment trust office in the City of New
York of 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.
Any Unit holder tendering 2,500 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
of Equity Securities in an amount and value of Equity 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
Page 23
distributions ("In-Kind Distributions") shall be made by the Trustee
through the distribution of each of the Equity 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
Equity Securities comprising a 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 Equity 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 Equity Securities on
the date of tender. If funds in the Capital Account are insufficient to
cover the required cash distribution to the tendering Unit holder, the
Trustee may sell Equity 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 Equity Securities of the Trust in order
to make funds available for redemption. To the extent that Equity
Securities are sold, the size of the Trust will be and the diversity of
the Trust may be reduced. Such sales may be required at a time when
Equity Securities would not otherwise be sold and might result in lower
prices than might otherwise be realized.
The Redemption Price per Unit will be determined on the basis of the
aggregate underlying value of the Equity 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 Equity Securities not applied to
the purchase of such Equity Securities; (2) the aggregate value of the
Equity Securities (including "when issued" contracts, if any) held in
the Trust, as determined by the Evaluator on the basis of the aggregate
underlying value of the Equity Securities in the Trust next computed;
and (3) dividends receivable on the Equity 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 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. During 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 Equity Securities will be determined in the
following manner: if the Equity Securities are listed, this evaluation
is generally based on the closing sale prices on that exchange (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 either
at the closing ask prices (during the initial offering period) or at the
closing bid prices (subsequent to the initial offering period). If the
Equity Securities are not so listed or, if so listed and the principal
market therefore is other than on an 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 Equity 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
Page 24
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.
Special Redemption, Liquidation and Investment in a New Trust
If the 1999 Trust is offered to investors, a special redemption and
liquidation will be made of all Units of the Trust held by any Unit
holder (a "Rollover Unit holder") who affirmatively notifies the Trustee
in writing that he or she desires to participate as a Rollover Unit
holder by the Rollover Notification Date specified in the "Summary of
Essential Information."
All Units of Rollover Unit holders will be redeemed In-Kind during the
Special Redemption and Liquidation Period and the underlying Equity
Securities will be distributed to the Distribution Agent on behalf of
the Rollover Unit holders. During the Special Redemption and Liquidation
Period (as set forth in "Summary of Essential Information"), the
Distribution Agent will be required to sell all of the underlying Equity
Securities on behalf of Rollover Unit holders. The sales proceeds will
be net of brokerage fees, governmental charges or any expenses involved
in the sales.
The Distribution Agent may engage the Sponsor, as its agent, or other
brokers to sell the distributed Equity Securities. The Equity Securities
will be sold as quickly as is practicable during the Special Redemption
and Liquidation Period, subject to the Sponsor's sensitivity to the fact
that the concentrated sale of large volumes of Equity Securities may
affect market prices in a manner adverse to the interests of investors.
The Sponsor does not anticipate that the period will be longer than ten
business days, and it could be as short as one day, given that the
Equity Securities are usually highly liquid. The liquidity of any Equity
Security depends on the daily trading volume of the Equity Security and
the amount that the Sponsor has available for sale on any particular day.
It is expected (but not required) that the Sponsor will generally follow
the following guidelines in selling the Equity Securities: for highly
liquid Equity Securities, the Sponsor will generally sell Equity
Securities on the first day of the Special Redemption and Liquidation
Period; for less liquid Equity Securities, on each of the first two days
of the Special Redemption and Liquidation Period, the Sponsor will
generally sell any amount of any underlying Equity Securities at a price
no less than 1/2 of one point under the closing sale price of those
Equity Securities on the preceding day. Thereafter, the Sponsor intends
to sell without any price restrictions at least a portion of the
remaining underlying Equity Securities, the numerator of which is one
and the denominator of which is the total number of days remaining
(including that day) in the Special Redemption and Liquidation Period.
The Rollover Unit holders' proceeds will be invested in the 1999 Trust,
if it is registered and offered for sale. The proceeds of redemption
available on each day will be used to buy 1999 Trust Units as the
proceeds become available at the Public Offering Price of the 1999
Trust, including the applicable maximum sales charge (expected to be
1.5% of the Public Offering Price per unit).
The Sponsor intends to create 1999 Trust Units as quickly as possible,
dependent upon the availability and reasonably favorable prices of the
equity securities included in the 1999 Trust portfolio, and it is
intended that Rollover Unit holders will be given first priority to
purchase the 1999 Trust Units. There can be no assurance, however, that
the 1999 Trust will be created, or if created, as to the exact timing of
the creation of the 1999 Trust Units or the aggregate number of 1999
Trust Units which the Sponsor will create. The Sponsor may, in its sole
discretion, stop creating new Units (whether permanently or temporarily)
at any time it chooses, regardless of whether all proceeds of the
Special Redemption and Liquidation have been invested on behalf of
Rollover Unit holders. Cash which has not been invested on behalf of the
Rollover Unit holders in 1999 Trust Units will be distributed within a
reasonable time after such occurrence. However, since the Sponsor can
create Units, the Sponsor anticipates that sufficient Units can be
created, although moneys in the 1999 Trust may not be fully invested on
the next business day.
Any Rollover Unit holder may thus be redeemed out of the Trust and
become a holder of an entirely different Trust, the 1999 Trust, with a
Page 25
different portfolio of equity securities. The Rollover Unit holders'
Units will be redeemed In-Kind and the distributed Equity Securities
shall be sold during the Special Redemption and Liquidation Period. In
accordance with the Rollover Unit holders' offer to purchase the 1999
Trust Units, the proceeds of the sales (and any other cash distributed
upon redemption) will be invested in the 1999 Trust, at the public
offering price.
This process of redemption, liquidation, and investment in a new Trust
is intended to allow for the fact that the portfolios selected are
chosen on the basis of growth and income potential only for a year, at
which point a new portfolio is chosen. It is contemplated that a similar
process of redemption, liquidation and investment in a new trust will be
available for the 1999 Trust and each subsequent series of the Trust,
approximately a year after that Series' creation. However, there is no
assurance that any such subsequent series of the Trust will be offered.
Investors should note that to the extent they held their Units for more
than one year they will be subject to a maximum stated marginal tax rate
of 28% but will not be entitled to the reduced maximum stated marginal
tax rate for certain capital gains for investments held for more than 18
months of 20% (10% in the case of certain taxpayers in the lowest tax
bracket) as adopted under the Taxpayer Relief Act of 1997.
The Sponsor believes that the gradual redemption, liquidation and
investment in the Trust will help mitigate any negative market price
consequences stemming from the trading of large volumes of securities
and of the underlying Equity Securities in the Trust in a short,
publicized period of time. The above procedures may, however, be
insufficient or unsuccessful in avoiding such price consequences. In
fact, market price trends may make it advantageous to sell or buy more
quickly or more slowly than permitted by these procedures. Rollover Unit
holders could then receive a less favorable average Unit price than if
they bought all their Units of the Trust on any given day of the period.
It should also be noted that Rollover Unit holders may realize taxable
capital gains on the Special Redemption and Liquidation but, in certain
unlikely circumstances, will not be entitled to a deduction for certain
capital losses and, due to the procedures for investing in the 1999
Trust, no cash would be distributed at that time to pay any taxes.
Included in the cash for the Special Redemption and Liquidation may be
an amount of cash attributable to the distribution of dividend income;
accordingly, Rollover Unit holders also will not have cash distributed
to pay any taxes. See "What is the Federal Tax Status of Unit holders?"
In addition, during this period a Unit holder will be at risk to the
extent that Equity Securities are not sold and will not have the benefit
of any stock appreciation to the extent that moneys have not been
invested; for this reason, the Sponsor will be inclined to sell and
purchase the Equity Securities in as short a period as they can without
materially adversely affecting the price of the Equity Securities.
Unit holders who do not inform the Distribution Agent that they wish to
have their Units so redeemed and liquidated ("Remaining Unit holders")
will continue to hold Units of the Trust as described in this Prospectus
until the Trust is terminated or until the Mandatory Termination Date
listed in the Summary of Essential Information, whichever occurs first.
These Remaining Unit holders will not realize capital gains or losses
due to the Special Redemption and Liquidation, and will not be charged
any additional sales charge. If a large percentage of Unit holders
become Rollover Unit holders, the aggregate size of the Trust will be
sharply reduced. As a consequence, expenses, if any, in excess of the
amount to be borne by the Trustee would constitute a higher percentage
amount per Unit than prior to the Special Redemption, Liquidation and
Investment in the 1999 Trust. The Trust might also be reduced below the
Discretionary Liquidation Amount listed in the Summary of Essential
Information because of the lesser number of Units in the Trust, and
possibly also due to a value reduction, however temporary, in Units
caused by the Sponsor's sales of Equity Securities; if so, the Sponsor
could then choose to liquidate the Trust without the consent of the
remaining Unit holders. See "Other Information-How May the Indenture be
Amended or Terminated?" The Equity Securities remaining in the Trust
after the Special Redemption and Liquidation Period will be sold by the
Sponsor as quickly as possible without, in its judgment, materially
adversely affecting the market price of the Equity Securities.
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor the 1999 Trust or any subsequent series of the Trust, without
penalty or incurring liability to any Unit holder. If the Sponsor so
decides, the Sponsor shall notify the Unit holders before the Special
Redemption and Liquidation Period would have commenced. All Unit holders
will then be remaining Unit holders, with rights to ordinary redemption
Page 26
as before. See "Rights of Unit Holders-How May Units be Redeemed?" The
Sponsor may modify the terms of the 1999 Trust or any subsequent series
of the Trust. The Sponsor may also modify, suspend or terminate the
Rollover Option upon notice to the Unit holders of such amendment at
least 60 days prior to the effective date of such amendment.
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 Equity Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or the
Trustee. Their respective 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 an
Equity 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 Equity Security, that the
issuer of the Equity 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 Equity Security,
that the issuer has defaulted on the payment on any other of its
outstanding obligations, that the price of the Equity 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 Equity Securities
would be detrimental to the Trust. Except as stated under "Portfolio-
What are Some Additional Considerations for Investors?" for Failed
Obligations, the acquisition by the Trust of any securities or other
property other than the Equity Securities is prohibited. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Equity 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 Equity 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 Equity 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 Equity Securities designated by the Sponsor,
or if not so directed, in its own discretion, for the purpose of
redeeming Units of a Trust tendered for redemption and the payment of
expenses.
The Sponsor, in designating Equity 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 Equity Securities. To the extent this is not
practicable, the composition and diversity of the Equity 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 Equity 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.
Page 27
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, the FT Series (formerly known as The First Trust Special
Situations Trust), The First Trust Insured Corporate Trust, The First
Trust of Insured Municipal Bonds, The First Trust GNMA, Templeton Growth
and Treasury Trust, Templeton Foreign Fund & U.S. Treasury Securities
Trust and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974 and to
date more than $9 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. 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 Equity 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.
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 Equity Securities. In the event of the failure of
the Sponsor to act under the Indenture, the Trustee may act thereunder
Page 28
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 Equity Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of a 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 and 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
Equity Securities owned by such Trust as shown by any evaluation, is
less than the lower of $2,000,000 or 20% of the total value of Equity
Securities deposited in the Trust during the primary 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 a
broker/dealer, including the Sponsor. If the Trust is liquidated because
of the redemption of unsold Units of the Trust by a broker/dealer, the
Sponsor will refund to each purchaser of Units of the Trust the entire
sales charge 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, the Trustee
will follow the procedures set forth under "Rights of Unit Holders-How
are Income and Capital Distributed?" Also, because of the Special
Redemption and Liquidation in a New Trust, there is a possibility that
the Trust may be reduced below the Discretionary Liquidation Amount and
that the Trust could therefore be terminated at that time before the
Mandatory Termination Date of the Trust.
Commencing during the period beginning nine business days prior to, and
no later than, the Mandatory Termination Date, Equity 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 Equity Securities. Written notice of any termination of the Trust
specifying the time or times at which Unit holders may surrender their
Page 29
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 30 days prior to the Mandatory
Termination 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 Equity
Securities (reduced by customary transfer and registration charges), if
such Unit holder owns at least 2,500 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 Equity
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. Qualifying Unit
holders requesting an In-Kind Distribution will receive cash in lieu of
fractional shares of the Equity Securities. A Unit holder receiving an
In-Kind Distribution may, of course, at any time after the Equity
Securities are distributed to him or her by the Trust, sell all or a
portion of the Equity Securities. Unit holders not electing a
distribution of shares of Equity Securities and who do not elect the
Rollover Option will receive a cash distribution from the sale of the
remaining Equity 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 Equity 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 Equity Securities are sold prior to the Mandatory
Termination Date, Unit holders will not benefit from any stock
appreciation they would have received had the Equity 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 30
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
FT 261
We have audited the accompanying statement of net assets, including the
schedule of investments, of The First Trust Special Situations Trust,
Series 261, comprised of Lehman Brothers 10 Uncommon Values Trust, 1998
Portfolio, as of the opening of business on July 1, 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 July 1, 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 The First
Trust Special Situations Trust, Series 261, comprised of Lehman Brothers
10 Uncommon Values Trust, 1998 Portfolio, at the opening of business on
July 1, 1998 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
July 1, 1998
Page 31
Statement of Net Assets
LEHMAN BROTHERS 10 UNCOMMON VALUES TRUST, 1998 PORTFOLIO
FT 261
At the Opening of Business on the Initial Date of Deposit
July 1, 1998
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Equity Securities represented by purchase contracts (1) (2) $146,935
Less accrued organizational and offering costs (3) (270)
_________
Net assets $146,665
=========
Units outstanding 14,993
ANALYSIS OF NET ASSETS
Cost to investors (4) $149,934
Less sales charge (4) (2,999)
Less estimated organizational and offering costs (3) (270)
_________
Net assets $146,665
=========
</TABLE>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Equity 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,
covering the monies necessary for the purchase of the Equity Securities
pursuant to purchase contracts for such Equity Securities.
(3) A portion of the Public Offering Price consists of Equity 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
$.018 per Unit, based upon the expected number of Units of the Trust to
be created. A distribution will be made at the end of the initial
offering period to an account maintained by the Trustee from which the
organizational and offering cost obligation of the investors to the
Sponsor will be satisfied. To the extent the number of Units issued is
larger or smaller than the estimate, the actual distribution per Unit at
the end of the initial offering period may differ from that set forth
above.
(4) The aggregate cost to investors includes a maximum total sales
charge computed at the rate of 2.0% of the Public Offering Price
(equivalent to 2.041% of the net amount invested) as described under
"Public Offering-How is the Public Offering Price Determined?"
Page 32
Schedule of Investments
LEHMAN BROTHERS 10 UNCOMMON VALUES TRUST, 1998 PORTFOLIO
FT 261
At the Opening of Business on the Initial Date of Deposit
July 1, 1998
<TABLE>
<CAPTION>
Number Percentage Market Cost of Equity
of Ticker Symbol and of Aggregate Value per Securities
Shares Name of Issuer of Equity Securities (1) Offering Price Share to Trust (2)
______ _______________________________________ ______________ ________ __________
<C> <S> <C> <C> <C>
498 AMAT Applied Materials, Inc. 10% $ 29.500 $ 14,691
135 CCU Clear Channel Communications, Inc. 10% 109.125 14,732
283 CMVT Comverse Technology, Inc. 10% 51.875 14,681
401 DHR Danaher Corporation 10% 36.688 14,712
490 ILN Illinova Corporation 10% 30.000 14,700
466 ODP Office Depot, Inc. 10% 31.563 14,708
104 PGR The Progressive Corporation 10% 141.000 14,664
230 STB Star Banc Corporation 10% 63.875 14,691
233 TYC Tyco International Ltd. 10% 63.000 14,679
303 WCOM WorldCom, Inc. (Class A) 10% 48.438 14,677
_______ _________
Total Investments 100% $146,935
======= =========
______________
<FN>
(1) All Equity Securities are represented by regular way contracts to
purchase such Equity Securities for the performance of which an
irrevocable letter of credit has been deposited with the Trustee. The
purchase contracts for the Equity Securities were entered into by the
Sponsor on July 1, 1998. The Trust has a mandatory termination date of
July 30, 1999.
(2) The cost of the Equity Securities to the Trust represents the
aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of listed
Equity Securities and the ask prices of over-the-counter traded Equity
Securities on the business day preceding the Initial Date of Deposit).
The valuation of the Equity Securities has been determined by the
Evaluator, an affiliate of the Sponsor. The aggregate underlying value
of the Equity Securities on the Initial Date of Deposit was $146,935.
Cost and loss to Sponsor relating to the Equity Securities sold to the
Trust were $151,376 and $4,441, respectively.
</FN>
</TABLE>
Page 33
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Page 34
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Page 35
CONTENTS:
Summary of Essential Information:
Lehman Brothers 10 Uncommon Values Trust, 1998
Portfolio 4
FT 261:
What is the FT Series? 5
What are the Expenses and Charges? 6
What is the Federal Tax Status of Unit Holders? 7
Are Investments in the Trust Eligible for
Retirement Plans? 11
Portfolio:
What are Equity Securities? 11
Performance Record of the "10 Uncommon Values"
Portfolios Generally 11
Comparison of Price Returns 13
What are the Equity Securities Selected for the
Lehman Brothers 10 Uncommon Values Trust, 1998
Portfolio? 15
Risk Factors 15
What are Some Additional Considerations for
Investors? 17
Public Offering:
How is the Public Offering Price Determined? 18
How are Units Distributed? 19
What are the Sponsor's Profits? 21
Will There be a Secondary Market? 21
Rights of Unit Holders:
How is Evidence of Ownership Issued
and Transferred? 21
How are Income and Capital Distributed? 22
What Reports will Unit Holders Receive? 23
How May Units be Redeemed? 23
Special Redemption, Liquidation and Investment
in a New Trust 25
How May Units be Purchased by the Sponsor? 27
How May Equity Securities be
Removed from the Trust? 27
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 28
Who is the Trustee? 28
Limitations on Liabilities of Sponsor and Trustee 28
Who is the Evaluator? 29
Other Information:
How May the Indenture be Amended or Terminated? 29
Legal Opinions 30
Experts 30
Report of Independent Auditors 31
Statement of Net Assets 32
Schedule of Investments 33
___________
When Units of the Trusts are no longer available, or for investors who
will reinvest into subsequent series of the Trusts, this Prospectus may
be used as a preliminary prospectus for a future series; in which case
investors should note the following:
INFORMATION CONTAINED HEREIN IS SUBJECT TO AMENDMENT. A REGISTRATION
STATEMENT RELATING TO SECURITIES OF A FUTURE SERIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
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.
Lehman Brothers Inc.
LEHMAN BROTHERS 10 UNCOMMON
VALUES TRUST, 1998 PORTFOLIO
Lehman Brothers Inc.
Three World Financial Center
New York, NY 10285
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
July 1, 1998
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 36
-APPENDIX-
The charts appearing on page 14 of the prospectus offer a comparison of
the "10 Uncommon Values" portfolio with the performance of the S&P 500
over the same period of time. The first chart displays the value as of
June 30, 1998 of an initial investment of $1,000 in both the "10
Uncommon Values" portfolio and the S&P 500 on April 21, 1949. As
displayed in the first chart, a $1,000 investment on April 21, 1949 in
the "10 Uncommon Values" portfolio would, as of June 30, 1998, have
appreciated to $1,667,648 as compared to $77,061 if the same amount had
been invested in the S&P 500 over the same time period. The second chart
shows the 10-year compound average annual return of both the "10
Uncommon Values" portfolio and the S&P 500 from 1988 through June 30,
1998. As displayed in the second chart, the "10 Uncommon Values"
portfolio has appreciated 22.68% as compared to the S&P 500 appreciation
of 15.28% over the stated period. The third chart shows the 5-year
compound average annual return of both the "10 Uncommon Values"
portfolio and the S&P 500 from 1993 through June 30, 1998. As displayed
in the third chart, the "10 Uncommon Values" portfolio has appreciated
29.81% as compared to the S&P 500, which has appreciated 20.27% over the
stated period. The fourth chart shows the performance of the 1997 "10
Uncommon Values" portfolio as compared to the S&P 500 from July 1, 1997
through June 30, 1998. As displayed in the fourth chart, the "10 Uncommon
Values" portfolio for 1997 has appreciated 48.60% as compared to the S&P
500, which has appreciated 28.10% over the stated period.
Page 36
CONTENTS OF REGISTRATION STATEMENT
A. BONDING ARRANGEMENTS OF DEPOSITOR:
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being
National Union Fire Insurance Company of Pittsburgh.
B. THIS REGISTRATION STATEMENT ON FORM S-6 COMPRISES
THE FOLLOWING PAPERS AND DOCUMENTS:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
Exhibits
Financial Data Schedule
S-1
SIGNATURES
The Registrant, FT 261, hereby identifies The First Trust
Special Situations Trust, Series 4 Great Lakes Growth and
Treasury Trust, Series 1; The First Trust Special Situations
Trust, Series 18 Wisconsin Growth and Treasury Securities Trust,
Series 1; The First Trust Special Situations Trust, Series 69
Target Equity Trust Value Ten Series; The First Trust Special
Situations Trust, Series 108; The First Trust Special Situations
Trust, Series 119 Target 5 Trust, Series 2 and Target 10 Trust,
Series 8; and The First Trust Special Situations Trust, Series
190 Biotechnology Growth Trust, Series 3 for purposes of the
representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from
those deposited in such previous series;
(2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide
essential financial information for, the series with respect to
the securities of which this Registration Statement is being
filed, this Registration Statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities
Act of 1933.
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 261 has duly caused this Amendment 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 July 1, 1998.
FT 261
By NIKE SECURITIES L.P.
Depositor
By Robert M. Porcellino
Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
Robert D. Van Kampen Director )
of Nike Securities )
Corporation, the ) July 1, 1998
General Partner of )
Nike Securities L.P. )
)
David J. Allen Director of )
Nike Securities ) Robert M. Porcellino
Corporation, the ) Attorney-in-Fact**
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.,
Depositor.
** An executed copy of the related power of attorney
was filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of The
First Trust Combined Series 258 (File No. 33-63483) and
the same is hereby incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated July 1, 1998 in
Amendment No. 2 to the Registration Statement (Form S-6) (File
No. 333-53357) and related Prospectus of FT 261.
ERNST & YOUNG LLP
Chicago, Illinois
July 1, 1998
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 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
will be filed as Exhibit 4.1 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 18 and
subsequent Series effective October 15, 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 18) and 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 261 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank,
as Trustee, First Trust Advisors L.P., as Evaluator, and
First Trust Advisors L.P., as 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).
S-5
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42755] filed on
behalf of The First Trust Special Situations Trust,
Series 19).
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.
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).
S-6
FT 261
TRUST AGREEMENT
Dated: July 1, 1998
The Trust Agreement among Nike Securities L.P., as Depositor, The
Chase Manhattan Bank, as Trustee and First Trust Advisors L.P.,
as Evaluator and Portfolio Supervisor, sets forth certain
provisions in full and incorporates other provisions by reference
to the document entitled "Standard Terms and Conditions of Trust
for The First Trust Special Situations Trust, Series 22 and
certain subsequent Series, Effective November 20, 1991" (herein
called the "Standard Terms and Conditions of Trust"), and such
provisions as are incorporated by reference constitute a single
instrument. All references herein to Articles and Sections are
to Articles and Sections of the Standard Terms and Conditions of
Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and the Portfolio Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II and Part III hereof,
all the provisions contained in the Standard Terms and Conditions
of Trust are herein incorporated by reference in their entirety
and shall be deemed to be a part of this instrument as fully and
to the same extent as though said provisions had been set forth
in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR LEHMAN BROTHERS 10 UNCOMMON VALUES TRUST, 1998 PORTFOLIO
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
for the sale of Units dated the date hereof (the "Prospectus")
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee as set forth in the Prospectus under "Summary of
Essential Information," calculated based on the largest number of
Units outstanding during each period in respect of which a
payment is made pursuant to Section 3.05, payable on a
Distribution Date. Such fee may exceed the actual cost of
providing such evaluation services for the Trust, but at no time
will the total amount received for evaluation services rendered
to unit investment trusts of which Nike Securities L.P. is the
sponsor in any calendar year exceed the aggregate cost to the
Evaluator of supplying such services in such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee as set forth in the Prospectus under "Summary of
Essential Information," calculated based on the largest number of
Units outstanding during the calendar year except during the
initial offering period as determined in Section 4.01 of this
Indenture, in which case the fee is calculated based on the
largest number of units outstanding during the period for which
the compensation is paid (such annual fee to be pro rated for any
calendar year in which the Trustee provides services during less
than the whole of such year). However, in no event, except as
may otherwise be provided in the Standard Terms and Conditions of
Trust, shall the Trustee receive compensation in any one year
from any Trust of less than $2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is July 1,
1998.
J. The minimum amount of Equity Securities to be sold by
the Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
PART III
A. Notwithstanding anything to the contrary in the
Standard Terms and Conditions of Trust, references to subsequent
Series established after the date of effectiveness of the First
Trust Special Situations Trust, Series 24 shall include FT 261.
B. The term "Principal Account" as set forth in the
Standard Terms and Conditions of Trust shall be replaced with the
term "Capital Account."
C. Section 1.01(2) shall be amended to read as follows:
"(2) "Trustee" shall mean The Chase Manhattan Bank, or
any successor trustee appointed as hereinafter provided."
All references to United States Trust Company of New York in
the Standard Terms and Conditions of Trust shall be amended to
refer to The Chase Manhattan Bank.
D. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean First Trust Advisors L.P.
and its successors in interest, or any successor evaluator
appointed as hereinafter provided."
E. Section 1.01(4) shall be amended to read as follows:
"(4) "Portfolio Supervisor" shall mean First Trust
Advisors L.P. and its successors in interest, or any
successor portfolio supervisor appointed as hereinafter
provided."
F. Section 1.01(26) shall be added to read as follows:
"(26) The term "Rollover Unit holder" shall be defined
as set forth in Section 5.05, herein."
G. Section 1.01(27) shall be added to read as follows:
"(27) The "Rollover Notification Date" shall be
defined as set forth in the Prospectus under "Summary of
Essential Information."
H. Section 1.01(28) shall be added to read as follows:
"(28) The term "Rollover Distribution" shall be
defined as set forth in Section 5.05, herein."
I. Section 1.01(29) shall be added to read as follows:
"(29) The term "Distribution Agent" shall refer to the
Trustee acting in its capacity as distribution agent
pursuant to Section 5.02 herein."
J. Section 1.01(30) shall be added to read as follows:
"(30) The term "Special Redemption and Liquidation
Period" shall be as set forth in the Prospectus under
"Summary of Essential Information."
K. Paragraph (b) of Section 2.01 shall be restated in its
entirety as follows:
(b)(1)From time to time following the Initial Date of
Deposit, the Depositor is hereby authorized, in its
discretion, to assign, convey to and deposit with the
Trustee (i) additional Securities, duly endorsed in blank or
accompanied by all necessary instruments of assignment and
transfer in proper form, (ii) Contract Obligations relating
to such additional Securities, accompanied by cash and/or
Letter(s) of Credit as specified in paragraph (c) of this
Section 2.01, and/or (iii) cash (or a Letter of Credit in
lieu of cash) with instructions to purchase additional
Securities, in an amount equal to the portion of the Unit
Value of the Units created by such deposit attributable to
the Securities to be purchased pursuant to such
instructions. Except as provided in the following
subparagraphs (2), (3) and (4) the Depositor, in each case,
shall ensure that each deposit of additional Securities
pursuant to this Section shall maintain, as nearly as
practicable, the Percentage Ratio. Each such deposit of
additional Securities shall be made pursuant to a Notice of
Deposit of Additional Securities delivered by the Depositor
to the Trustee. Instructions to purchase additional
Securities shall be in writing, and shall specify the name
of the Security, CUSIP number, if any, aggregate amount,
price or price range and date to be purchased. When
requested by the Trustee, the Depositor shall act as broker
to execute purchases in accordance with such instructions;
the Depositor shall be entitled to compensation therefor in
accordance with applicable law and regulations. The Trustee
shall have no liability for any loss or depreciation
resulting from any purchase made pursuant to the Depositor's
instructions or made by the Depositor as broker.
(2) Additional Securities (or Contract Obligations
therefor) may, at the Depositor's discretion, be deposited
or purchased in round lots. If the amount of the deposit is
insufficient to acquire round lots of each Security to be
acquired, the additional Securities shall be deposited or
purchased in the order of the Security in the Trust most
under-represented immediately before the deposit with
respect to the Percentage Ratio.
(3) If at the time of a deposit of additional
Securities, Securities of an issue deposited on the Initial
Date of Deposit (or of an issue of Replacement Securities
acquired to replace an issue deposited on the Initial Date
of Deposit) are unavailable, cannot be purchased at
reasonable prices or their purchase is prohibited or
restricted by applicable law, regulation or policies, the
Depositor may (i) deposit, or instruct the Trustee to
purchase, in lieu thereof, another issue of Securities or
Replacement Securities or (ii) deposit cash or a letter of
credit in an amount equal to the valuation of the issue of
Securities whose acquisition is not feasible with
instructions to acquire such Securities of such issue when
they become available.
(4) Any contrary authorization in the preceding
subparagraphs (1) through (3) notwithstanding, deposits of
additional Securities made after the 90-day period
immediately following the Initial Date of Deposit (except
for deposits made to replace Failed Contract Obligations if
such deposits occur within 20 days from the date of a
failure occurring within such initial 90-day period) shall
maintain exactly the Percentage Ratio existing immediately
prior to such deposit.
(5) In connection with and at the time of any deposit
of additional Securities pursuant to this Section 2.01(b),
the Depositor shall exactly replicate Cash (as defined
below) received or receivable by the Trust as of the date of
such deposit. For purposes of this paragraph, "Cash" means,
as to the Capital Account, cash or other property (other
than Securities) on hand in the Capital Account or
receivable and to be credited to the Capital Account as of
the date of the deposit (other than amounts to be
distributed solely to persons other than holders of Units
created by the deposit) and, as to the Income Account, cash
or other property (other than Securities) received by the
Trust as of the date of the deposit or receivable by the
Trust in respect of a record date for a payment on a
Security which has occurred or will occur before the Trust
will be the holder of record of a Security, reduced by the
amount of any cash or other property received or receivable
on any Security allocable (in accordance with the Trustee's
calculations of distributions from the Income Account
pursuant to Section 3.05) to a distribution made or to be
made in respect of a Record Date occurring prior to the
deposit. Such replication will be made on the basis of a
fraction, the numerator of which is the number of Units
created by the deposit and the denominator of which is the
number of Units which are outstanding immediately prior to
the deposit.
L. The following shall be added immediately following the
first sentence of paragraph (c) of Section 2.01:
"The Trustee may allow the Depositor to substitute for any
Letter(s) of Credit deposited with the Trustee in connection with
the deposits described in Section 2.01(a) and (b) cash in an
amount sufficient to satisfy the obligations to which the
Letter(s) of Credit relates. Any substituted Letter(s) of Credit
shall be released by the Trustee."
M. Section 2.03(a) of the Standard Terms and Conditions of
Trust shall be amended by adding the following sentence after the
first sentence of such section:
"The number of Units may be increased through a split
of the Units or decreased through a reverse split thereof,
as directed in writing by the Depositor, at any time when
the Depositor is the only beneficial holder of Units, which
revised number of Units shall be recorded by the Trustee on
its books. The Trustee shall be entitled to rely on the
Depositor's direction as certification that no person other
than the Depositor has a beneficial interest in the Units
and the Trustee shall have no liability to any person for
action taken pursuant to such direction."
N. Section 3.01 of the Standard Terms and Conditions of
Trust shall be replaced in its entirety with the following:
"Section 3.01. Initial Cost. Subject to reimbursement
as hereinafter provided, the cost of organizing the Trust
and the sale of the Trust Units shall be borne by the
Depositor, provided, however, that the liability on the part
of the Depositor under this section shall not include any
fees or other expenses incurred in connection with the
administration of the Trust subsequent to the deposit
referred to in Section 2.01. Upon notification from the
Depositor that the primary offering period is concluded, the
Trustee shall withdraw from the Account or Accounts
specified in the Prospectus or, if no Account is therein
specified, from the Capital Account, and pay to the
Depositor the Depositor's reimbursable expenses of
organizing the Trust and sale of the Trust Units in an
amount certified to the Trustee by the Depositor. If the
balance of the Capital Account is insufficient to make such
withdrawal, the Trustee shall, as directed by the Depositor,
sell Securities identified by the Depositor, or distribute
to the Depositor Securities having a value, as determined
under Section 4.01 as of the date of distribution,
sufficient for such reimbursement. The reimbursement
provided for in this section shall be for the account of the
Unit holders of record at the conclusion of the primary
offering period. If a Unit holder redeems Units prior to
the end of the primary offering period, the Trustee shall,
on the Redemption Date, add to the Redemption Value the esti-
mated per Unit cost of organizing the Trust and
the sale of Trust Units. As used herein,
the Depositor's reimbursable expenses of organizing the
Trust and sale of the Trust Units shall include the cost of
the initial preparation and typesetting of the registration
statement, prospectuses (including preliminary
prospectuses), the indenture, and other documents relating
to the Trust, SEC and state blue sky registration fees, the
cost of the initial valuation of the portfolio and audit of
the Trust, the initial fees and expenses of the Trustee, and
legal and other out-of-pocket expenses related thereto, but
not including the expenses incurred in the printing of
preliminary prospectuses and prospectuses, expenses incurred
in the preparation and printing of brochures and other
advertising materials and any other selling expenses. Any
cash which the Depositor has identified as to be used for
reimbursement of expenses pursuant to this Section shall be
reserved by the Trustee for such purpose and shall not be
subject to distribution or, unless the Depositor otherwise
directs, used for payment of redemptions in excess of the
per-Unit amount allocable to Units tendered for redemption.
O. The second paragraph of Section 3.02 of the Standard
Terms and Conditions is hereby deleted and replaced with the
following sentence:
"Any non-cash distributions (other than a non-taxable
distribution of the shares of the distributing corporation
which shall be retained by a Trust) received by a Trust
shall be dealt with in the manner described at Section 3.11,
herein, and shall be retained or disposed of by such Trust
according to those provisions. The proceeds of any
disposition shall be credited to the Income Account of a
Trust. Neither the Trustee nor the Depositor shall be
liable or responsible in any way for depreciation or loss
incurred by reason of any such sale."
P. Section 3.05.II(a) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as follows:
"II. (a) On each Distribution Date, the Trustee shall
distribute to each Unit holder of record at the close of
business on the Record Date immediately preceding such
Distribution Date an amount per Unit equal to such Unit
holder's Income Distribution (as defined below), plus such
Unit holder's pro rata share of the balance of the Capital
Account (except for monies on deposit therein required to
purchase Contract Obligations) computed as of the close of
business on such Record Date after deduction of any amounts
provided in Subsection I, provided, however, that the
Trustee shall not be required to make a distribution from
the Capital Account unless the amount available for
distribution shall equal $1.00 per 100 Units.
Each Trust shall provide the following distribution
elections: (1) distributions to be made by check mailed to
the post office address of the Unit holder as it appears on
the registration books of the Trustee, or (2) if provided
for in the Prospectus, the following reinvestment option:
The Trustee will, for any Unit holder who provides
the Trustee written instruction, properly executed and
in form satisfactory to the Trustee, received by the
Trustee no later than its close of business 10 business
days prior to a Record Date (the "Reinvestment Notice
Date"), reinvest such Unit holder's distribution from
the Income and Capital Accounts in Units of the Trust,
purchased from the Depositor, to the extent the
Depositor shall make Units available for such purchase,
at the Depositor's offering price as of the third
business day prior to the following Distribution Date,
and at such reduced sales charge as may be described in
the prospectus for the Trusts. If, for any reason, the
Depositor does not have Units of the Trust available
for purchase, the Trustee shall distribute such Unit
holder's distribution from the Income and Capital
Accounts in the manner provided in clause (1) of the
preceding paragraph. The Trustee shall be entitled to
rely on a written instruction received as of the
Reinvestment Notice Date and shall not be affected by
any subsequent notice to the contrary. The Trustee
shall have no responsibility for any loss or
depreciation resulting from any reinvestment made in
accordance with this paragraph, or for any failure to
make such reinvestment in the event the Depositor does
not make Units available for purchase.
Any Unit holder who does not effectively elect
reinvestment in Units of their respective Trust pursuant to
the preceding paragraph shall receive a cash distribution in
the manner provided in clause (1) of the second preceding
paragraph."
Q. Section 3.05.II(b) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as follows:
"II. (b) For purposes of this Section 3.05, the Unit
holder's Income Distribution shall be equal to such Unit
holder's pro rata share of the cash balance in the Income
Account computed as of the close of business on the Record
Date immediately preceding such Income Distribution after
deduction of (i) the fees and expenses then deductible
pursuant to Section 3.05.I. and (ii) the Trustee's estimate
of other expenses properly chargeable to the Income Account
pursuant to the Indenture which have accrued, as of such
Record Date, or are otherwise properly attributable to the
period to which such Income Distribution relates."
R. Paragraph (c) of Subsection II of Section 3.05 of the
Standard Terms and Conditions of Trust is hereby amended to read
as follows:
"On each Distribution Date the Trustee shall distribute
to each Unit holder of record at the close of business on
the Record Date immediately preceding such Distribution Date
an amount per Unit equal to such Unit holder's pro rata
share of the balance of the Capital Account (except for
monies on deposit therein required to purchase Contract
Obligations) computed as of the close of business on such
Record Date after deduction of any amounts provided in
Subsection I."
S. Section 3.05 of Article III of the Standard Terms and
Conditions of Trust is hereby amended to include the following
subsection:
"Section 3.05.I.(e) deduct from the Interest Account
or, to the extent funds are not available in such Account,
from the Capital Account and pay to the Depositor the amount
that it is entitled to receive pursuant to Section 3.14.
T. Section 3.11 of the Standard Terms and Conditions of
Trust is hereby deleted in its entirety and replaced with the
following language:
"Section 3.11. Notice to Depositor.
In the event that the Trustee shall have been notified
at any time of any action to be taken or proposed to be
taken by at least a legally required number of holders of
any Securities deposited in a Trust, the Trustee shall take
such action or omit from taking any action, as appropriate,
so as to insure that the Securities are voted as closely as
possible in the same manner and the same general proportion
as are the Securities held by owners other than such Trust.
In the event that an offer by the issuer of any of the
Securities or any other party shall be made to issue new
securities, or to exchange securities, for Trust Securities,
the Trustee shall reject such offer. However, should any
issuance, exchange or substitution be effected
notwithstanding such rejection or without an initial offer,
any securities, cash and/or property received shall be
deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee pursuant to the
Depositor's direction, unless the Depositor advises the
Trustee to keep such securities or property. The Depositor
may rely on the Portfolio Supervisor in so advising the
Trustee. The cash received in such exchange and cash
proceeds of any such sales shall be distributed to Unit
holders on the next distribution date in the manner set
forth in Section 3.05 regarding distributions from the
Capital Account. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by
reason of any such sale.
Neither the Depositor nor the Trustee shall be liable
to any person for any action or failure to take action
pursuant to the terms of this Section 3.11.
Whenever new securities or property is received and
retained by a Trust pursuant to this Section 3.11, the
Trustee shall, within five days thereafter, mail to all Unit
holders of such Trust notices of such acquisition unless
legal counsel for such Trust determines that such notice is
not required by The Investment Company Act of 1940, as
amended."
U. The first sentence of Section 3.13. shall be amended to
read as follows:
"As compensation for providing supervisory portfolio
services under this Indenture, the Portfolio Supervisor
shall receive, in arrears, against a statement or statements
therefor submitted to the Trustee monthly or annually an
aggregate annual fee in an amount which shall not exceed
$0.0035 per Unit outstanding as of January 1 of such year
except for a Trust during the year or years in which an
initial offering period as determined in Section 4.01 of
this Indenture occurs, in which case the fee for a month is
based on the number of Units outstanding at the end of such
month (such annual fee to be pro rated for any calendar year
in which the Portfolio Supervisor provides services during
less than the whole of such year), but in no event shall
such compensation when combined with all compensation
received from other series of the Trust for providing such
supervisory services in any calendar year exceed the
aggregate cost to the Portfolio Supervisor for the cost of
providing such services."
V. Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraphs
which shall be entitled Section 3.14.:
"Section 3.14. Bookkeeping and Administrative Expenses.
As compensation for providing bookkeeping and other
administrative services of a character described in Section
26(a)(2)(C) of the Investment Company Act of 1940 to the
extent such services are in addition to, and do not
duplicate, the services to be provided hereunder by the
Trustee or the Portfolio Supervisor, the Depositor shall
receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee
in an amount as set forth in the Prospectus times the number
of Units outstanding as of January 1 of such year except for
a year or years in which an initial offering period as
determined by Section 4.01 of this Indenture occurs, in
which case the fee for a month is based on the number of
Units outstanding at the end of such month (such annual fee
to be pro rated for any calendar year in which the Depositor
provides service during less than the whole of such year),
but in no event shall such compensation when combined with
all compensation received from other unit investment trusts
for which the Depositor hereunder is acting as Depositor for
providing such bookkeeping and administrative services in
any calendar year exceed the aggregate cost to the Depositor
providing services to such unit investment trusts. Such
compensation may, from time to time, be adjusted provided
that the total adjustment upward does not, at the time of
such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for
services as measured by the United States Department of
Labor Consumer Price Index entitled "All Services Less Rent
of Shelter" or similar index, if such index should no longer
be published. The consent or concurrence of any Unit holder
hereunder shall not be required for any such adjustment or
increase. Such compensation shall be paid by the Trustee,
upon receipt of an invoice therefor from the Depositor, upon
which, as to the cost incurred by the Depositor of providing
services hereunder the Trustee may rely, and shall be
charged against the Income and Capital Accounts on or before
the Distribution Date following the Monthly Record Date on
which such period terminates. The Trustee shall have no
liability to any Certificateholder or other person for any
payment made in good faith pursuant to this Section.
If the cash balance in the Income and Capital Accounts
shall be insufficient to provide for amounts payable
pursuant to this Section 3.14, the Trustee shall have the
power to sell (i) Securities from the current list of
Securities designated to be sold pursuant to Section 5.02
hereof, or (ii) if no such Securities have been so
designated, such Securities as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds of any
such sale in payment of the amounts payable pursuant to this
Section 3.14.
Any moneys payable to the Depositor pursuant to this
Section 3.14 shall be secured by a prior lien on the Trust
Fund except that no such lien shall be prior to any lien in
favor of the Trustee under the provisions of Section 6.04
herein.
W. Notwithstanding anything to the contrary in Sections
3.15 and 4.05 of the Standard Terms and Conditions of Trust, so
long as Nike Securities L.P. is acting as Depositor, the Trustee
shall have no power to remove the Portfolio Supervisor.
X. Section 5.01 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The second sentence of the first paragraph of
Section 5.01 shall be amended by deleting the phrase
"and (iii) " and adding the following "(iii) " amounts
representing accrued organizational and offering costs,
and (iv)"
Y. Section 5.02 of the Standard Terms and Conditions of
Trust is amended by adding the following after the second
paragraph of such section:
"Notwithstanding anything herein to the contrary, in
the event that any tender of Units pursuant to this Section
5.02 would result in the disposition by the Trustee of less
than a whole Security, the Trustee shall distribute cash in
lieu thereof and sell such Securities as directed by the
Sponsors as required to make such cash available.
Subject to the restrictions set forth in the
Prospectus, Unit holders may redeem 2,500 Units or more of a
Trust and request a distribution in kind of (i) such Unit
holder's pro rata portion of each of the Securities in such
Trust, in whole shares, and (ii) cash equal to such Unit
holder's pro rata portion of the Income and Capital Accounts
as follows: (x) a pro rata portion of the net proceeds of
sale of the Securities representing any fractional shares
included in such Unit holder's pro rata share of the
Securities and (y) such other cash as may properly be
included in such Unit holder's pro rata share of the sum of
the cash balances of the Income and Capital Accounts in an
amount equal to the Unit Value determined on the basis of a
Trust Fund Evaluation made in accordance with Section 5.01
determined by the Trustee on the date of tender less amounts
determined in clauses (i) and (ii)(x) of this Section.
Subject to Section 5.05 with respect to Rollover Unit
holders, if applicable, to the extent possible,
distributions of Securities pursuant to an in kind
redemption of Units 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. Any distribution in kind will
be reduced by customary transfer and registration charges."
Z. The following Section 5.05 shall be added:
"Section 5.05. Rollover of Units. (a) If the
Depositor shall offer a subsequent series of the Trust (the
"New Series"), the Trustee shall, at the Depositor's sole
cost and expense, include in the notice sent to Unit holders
specified in Section 8.02 a form of election whereby Unit
holders, whose redemption distribution would be in an amount
sufficient to purchase at least one Unit of the New Series,
may elect to have their Unit(s) redeemed in kind in the
manner provided in Section 5.02, the Securities included in
the redemption distribution sold, and the cash proceeds
applied by the Distribution Agent to purchase Units of a New
Series, all as hereinafter provided. The Trustee shall
honor properly completed election forms returned to the
Trustee, accompanied by any Certificate evidencing Units
tendered for redemption or a properly completed redemption
request with respect to uncertificated Units, by its close
of business on the Rollover Notification Date. The notice
and form of election to be sent to Unit holders in respect
of any redemption and purchase of Units of a New Series as
provided in this section shall be in such form and shall be
sent at such time or times as the Depositor shall direct the
Trustee in writing and the Trustee shall have no
responsibility therefor. The Distribution Agent acts solely
as disbursing agent in connection with purchases of Units
pursuant to this Section and nothing herein shall be deemed
to constitute the Distribution Agent a broker in such
transactions.
All Units so tendered by a Unit holder (a "Rollover
Unit holder") shall be redeemed and cancelled during the
Special Redemption and Liquidation Period on such date or
dates specified by the Depositor. Subject to payment by
such Rollover Unit holder of any tax or other governmental
charges which may be imposed thereon, such redemption is to
be made in kind pursuant to Section 5.02 by distribution of
cash and/or Securities to the Distribution Agent on the
redemption date equal to the net asset value (determined on
the basis of the Trust Fund Evaluation as of the redemption
date in accordance with Section 4.01) multiplied by the
number of Units being redeemed (herein called the "Rollover
Distribution"). Any Securities that are made part of the
Rollover Distribution shall be valued for purposes of the
redemption distribution as of the redemption date.
All Securities included in a Unit holder's Rollover
Distribution shall be sold by the Distribution Agent during
the Special Redemption and Liquidation Period specified in
the Prospectus pursuant to the Depositor's direction, and
the Distribution Agent shall, unless directed otherwise by
the Depositor, employ the Depositor as broker in connection
with such sales. For such brokerage services, the Depositor
shall be entitled to compensation at its customary rates,
provided however, that its compensation shall not exceed the
amount authorized by applicable securities laws and
regulations. The Depositor shall direct that sales be made
in accordance with the guidelines set forth in the
Prospectus under the heading "Special Redemption,
Liquidation and Investment in a New Trust." Should the
Depositor fail to provide direction, the Distribution Agent
shall sell the Securities in the manner provided in the
prospectus. The Distribution Agent shall have no
responsibility for any loss or depreciation incurred by
reason of any sale made pursuant to this Section.
Upon completion of all sales of Securities included in
the Rollover Unit holder's Rollover Distribution, the
Distribution Agent shall, as agent for such Rollover Unit
holder, enter into a contract with the Depositor to purchase
from the Depositor Units of a New Series (if any), at the
Depositor's public offering price for such Units on such
day, and at such reduced sales charge as shall be described
in the prospectus for such Trust. Such contract shall
provide for purchase of the maximum number of Units of a New
Series whose purchase price is equal to or less than the
cash proceeds held by the Distribution Agent for the Unit
holder on such day (including therein the proceeds
anticipated to be received in respect of Securities traded
on such day net of all brokerage fees, governmental charges
and any other expenses incurred in connection with such
sale), to the extent Units are available for purchase from
the Depositor. In the event a sale of Securities included
in the Rollover Unit holder's redemption distribution shall
not be consummated in accordance with its terms, the
Distribution Agent shall apply the cash proceeds held for
such Unit holder as of the settlement date for the purchase
of Units of a New Series to purchase the maximum number of
units which such cash balance will permit, and the Depositor
agrees that the settlement date for Units whose purchase was
not consummated as a result of insufficient funds will be
extended until cash proceeds from the Rollover Distribution
are available in a sufficient amount to settle such
purchase. If the Unit holder's Rollover Distribution will
produce insufficient cash proceeds to purchase all of the
Units of a New Series contracted for, the Depositor agrees
that the contract shall be rescinded with respect to the
Units as to which there was a cash shortfall without any
liability to the Rollover Unit holder or the Distribution
Agent. Any cash balance remaining after such purchase shall
be distributed within a reasonable time to the Rollover Unit
holder by check mailed to the address of such Unit holder on
the registration books of the Trustee. Units of a New Series
will be uncertificated unless and until the Rollover Unit
holder requests a certificate. Any cash held by the
Distribution Agent shall be held in a non-interest bearing
account which will be of benefit to the Distribution Agent
in accordance with normal banking procedures. Neither the
Trustee nor the Distribution Agent shall have any
responsibility or liability for loss or depreciation
resulting from any reinvestment made in accordance with this
paragraph, or for any failure to make such reinvestment in
the event the Depositor does not make Units available for
purchase.
(b) Notwithstanding the foregoing, the Depositor may,
in its discretion at any time, decide not to offer any new
Trust Series in the future, and if so, this Section 5.05
concerning the Rollover of Units shall be inoperative.
(c) The Distribution Agent shall receive no fees for
performing its duties hereunder. The Distribution Agent
shall, however, be entitled to receive indemnification and
reimbursement from the Trust for any and all expenses and
disbursements to the same extent as the Trustee is permitted
reimbursement hereunder."
AA. Paragraph (g) of Section 6.01 of the Standard Terms and
Conditions of Trust is hereby amended by inserting the following
after the first word thereof:
"(i) the value of any Trust as shown by an evaluation
by the Trustee pursuant to Section 5.01 hereof shall be less
than the lower of $2,000,000 or 20% of the total value of
Securities deposited in such Trust during the initial
offering period, or (ii)"
BB. Section 8.02 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The fourth sentence of the second paragraph shall
be deleted and replaced with the following:
"The Trustee will honor duly executed requests for in-
kind distributions received (accompanied by the electing
Unit holder's Certificate, if issued) by the close of
business ten business days prior to the Mandatory
Termination Date."
(ii) The first sentence of the fourth paragraph shall
be deleted and replaced with the following:
"Commencing no earlier than the business day following
that date on which Unit holders must submit to the Trustee
notice of their request to receive an in-kind distribution
of Securities at termination, the Trustee will liquidate the
Securities not segregated for in-kind distributions during
such period and in such daily amounts as the Depositor shall
direct."
IN WITNESS WHEREOF, Nike Securities L.P., The Chase
Manhattan Bank and First Trust Advisors L.P. have each caused
this Trust Agreement to be executed and the respective corporate
seal to be hereto affixed and attested (if applicable) by
authorized officers; all as of the day, month and year first
above written.
NIKE SECURITIES L.P.,
Depositor
By Robert M. Porcellino
Vice President
THE CHASE MANHATTAN BANK,
Trustee
By Rosalia A. Raviele
Vice President
[SEAL]
ATTEST:
John Koopman
Assistant Treasurer
FIRST TRUST ADVISORS L.P.,
Evaluator
By Robert M. Porcellino
Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Robert M. Porcellino
Vice President
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
FT 261
(Note: Incorporated herein and made a part hereof for the
Trust is the "Schedule of Investments" for the Trust as set forth
in the Prospectus.)
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
July 1, 1998
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: FT 261
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of FT 261 in connection with the
preparation, execution and delivery of a Trust Agreement dated
July 1, 1998 among Nike Securities L.P., as Depositor, The Chase
Manhattan Bank , as Trustee, First Trust Advisors L.P., as
Evaluator, and First Trust Advisors L.P., as Portfolio
Supervisor, pursuant to which the Depositor has delivered to and
deposited the Securities listed in Schedule A to the Trust
Agreement with the Trustee and pursuant to which the Trustee has
issued to or on the order of the Depositor a certificate or
certificates representing units of fractional undivided interest
in and ownership of the Fund created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. the certificates evidencing the Units in the Fund when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-53357)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF:erg
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
July 1, 1998
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Re: FT 261
Gentlemen:
We have acted as counsel for Nike Securities L.P., Depositor
of FT 261 (the "Fund"), in connection with the issuance of units
of fractional undivided interest in the Trust of said Fund (the
"Trust"), under a Trust Agreement, dated July 1, 1998 (the
"Indenture"), among Nike Securities L.P., as Depositor, The Chase
Manhattan Bank, as Trustee and Muller Data Corporation, as
Evaluator, and First Trust Advisors L.P., as Portfolio
Supervisor.
In this connection, we have examined the Registration
Statement, the form of Prospectus proposed to be filed with the
Securities and Exchange Commission, the Indenture and such other
instruments and documents we have deemed pertinent. The opinions
expressed herein assume that the Trust will be administered, and
investments by the Trust from proceeds of subsequent deposits, if
any, will be made, in accordance with the terms of the Indenture.
The Trust holds Equity Securities as such term is defined in the
Prospectus. For purposes of the following discussion and
opinion, it is assumed that each Equity Security is equity for
Federal income tax purposes.
Based upon the foregoing and upon an investigation of such
matters of law as we consider to be applicable, we are of the
opinion that, under existing United States Federal income tax
law:
I. The Trust is not an association taxable as a
corporation for Federal income tax purposes, but will be governed
by the provisions of subchapter J (relating to trusts) of Chapter
1, Internal Revenue Code of 1986 (the "Code"); each Unit holder
will be treated as the owner of a pro rata portion of each of the
assets of the Trust, in the proportion that the number of Units
held by him bears to the total number of Units outstanding; under
Subpart E, Subchapter J of Chapter 1 of the Code, income of the
Trust will be treated as income of the Unit holders in the
proportion described above; and an item of Trust income will have
the same character in the hands of a Unit holder as it would have
in the hands of the Trustee. Each Unit holder will be considered
to have received his pro rata share of income derived from the
Trust asset when such income is considered to be received by the
Trust.
II. The price a Unit holder pays for his Units, generally
including sales charges, is allocated among his pro rata portion
of each Equity 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 Units) in order to determine
his tax basis for his pro rata portion of each Equity Security
held by the Trust. For Federal income tax purposes, a Unit
holder's pro rata portion of distributions of cash or property by
a corporation with respect to an Equity Security ("dividends" as
defined by Section 316 of the Code) 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 exceeds 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 be treated as gain from the sale or
exchange of property.
III. Gain or loss will be recognized to a Unit holder
(subject to various nonrecognition provisions under the Code)
upon redemption or sale of his Units, except to the extent an in
kind distribution of stock is received by such Unit holder from
the Trust as discussed below. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the
adjusted basis of his Units. Before adjustment, such basis would
normally be cost if the Unit holder had acquired his Units by
purchase. Such basis will be reduced, but not below zero, by the
Unit holder's pro rata portion of dividends with respect to each
Equity Security which is not taxable as ordinary income.
IV. If the Trustee disposes of a Trust asset (whether by
sale, exchange, liquidation, redemption or otherwise) gain or
loss will be recognized to a Unit holder (subject to various
nonrecognition provisions under the Code) and the amount thereof
will be measured by comparing the Unit holders aliquot share of
the total proceeds from the transaction with his basis for his
fractional interest in the asset disposed of. Such basis is
ascertained by apportioning the tax basis for his Units (as of
the date on which the Units were acquired) among each of the
Trusts assets (as of the date on which his Units were acquired)
ratably according to their values as of the valuation date
nearest the date on which he purchased the Units. A Unit
holders basis in his Units and his fractional interest in each
of the Trust assets must be reduced, but not below zero, by the
Unit holders pro rata portion of dividends with respect to each
Equity Security which are not taxable as ordinary income.
V. Under the Indenture, under certain circumstances, a
Unit holder tendering Units for redemption may request an in kind
distribution of Equity Securities upon the redemption of Units or
upon the termination of the Trust. 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. The receipt of an in kind distribution
will result in a Unit holder receiving an undivided interest in
whole shares of stock and possibly cash. The potential federal
income tax consequences which may occur under an in kind
distribution with respect to each Equity Security owned by the
Trust will depend upon whether or not a Unit holder receives cash
in addition to Equity Securities. An "Equity Security" for this
purpose is a particular class of stock issued by a particular
corporation. A Unit holder will not recognize gain or loss if a
Unit holder only receives Equity Securities in exchange for his
or her pro rata portion of the Equity Securities held by the
Trust. However, if a Unit holder also receives cash in exchange
for a fractional share of an Equity 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 tax basis in such fractional share of an Equity
Security held by the Trust. The total amount of taxable gains
(or losses) recognized upon such redemption will generally equal
the sum of the gain (or loss) recognized under the rules
described above by the redeeming Unit holder with respect to each
Equity Security owned by the Trust.
A domestic corporation owning Units in the Trust may be
eligible for the 70% dividends received deduction pursuant to
Section 243(a) of the Code with respect to such Unit holders' 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), subject to
the limitations imposed by Sections 246 and 246A of the Code.
Section 67 of the Code provides that 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.
A Unit holder will recognize taxable gain (or loss)when all
or part of the pro rata interest in an Equity Security is either
sold by the Trust or redeemed or when a Unit holder disposes of
his Units in a taxable transaction, in each case for an amount
greater (or less) than his tax basis therefor; subject to various
nonrecognition provisions of the Code.
Any gain or loss recognized on a sale or exchange will,
under current law, generally be capital gain or loss.
The scope of this opinion is expressly limited to the
matters set forth herein, and, except as expressly set forth
above, we express no opinion with respect to any other taxes,
including foreign, state or local taxes or collateral tax
consequences with respect to the purchase, ownership and
disposition of Units.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-53357)
relating to the Units referred to above and to the use of our
name and to the reference to our firm in said Registration
Statement and in the related Prospectus.
Very truly yours,
CHAPMAN AND CUTLER
EFF/erg
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
July 1, 1998
The Chase Manhattan Bank, as Trustee of
FT 261
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Attention: Mr. Thomas Porrazzo
Vice President
Re: FT 261
Dear Sirs:
We are acting as special counsel with respect to New York
tax matters for the unit investment trust or trusts contained in
FT 261 (each, a "Trust"), which will be established under certain
Standard Terms and Conditions of Trust dated November 20, 1991,
and a related Trust Agreement dated as of today (collectively,
the "Indenture") among Nike Securities L.P., as Depositor (the
"Depositor"), First Trust Advisors L.P., as Evaluator, First
Trust Advisors L.P., as Portfolio Supervisor, and The Chase
Manhattan Bank, as Trustee (the "Trustee"). Pursuant to the
terms of the Indenture, units of fractional undivided interest in
the Trust (the "Units") will be issued in the aggregate number
set forth in the Indenture.
We have examined and are familiar with originals or
certified copies, or copies otherwise identified to our
satisfaction, of such documents as we have deemed necessary or
appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each dated today
and addressed to the Trustee, of Chapman and Cutler, counsel for
the Depositor, with respect to the matters of law set forth
therein.
Based upon the foregoing, we are of the opinion that:
1. The Trust will not constitute an association taxable as
a corporation under New York law, and accordingly will not be
subject to the New York State franchise tax or the New York City
general corporation tax.
2. Under the income tax laws of the State and City of New
York, the income of the Trust will be considered the income of
the holders of the Units.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 333-53357) filed with the
Securities and Exchange Commission with respect to the
registration of the sale of the Units and to the references to
our name under the captions "What is the Federal Tax Status of
Unit-holders?" and "Legal Opinions" in such Registration
Statement and the preliminary prospectus included therein.
Very truly yours,
CARTER, LEDYARD & MILBURN
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
July 1, 1998
The Chase Manhattan Bank, as Trustee of
FT 261
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Attention: Mr. Thomas Porrazzo
Vice President
Re: FT 261
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank
("Chase") in connection with the execution and delivery of a
Trust Agreement ("the Trust Agreement") dated today's date (which
Trust Agreement incorporates by reference certain Standard Terms
and Conditions of Trust dated November 20, 1991, and the same are
collectively referred to herein as the "Indenture") among Nike
Securities L.P., as Depositor (the "Depositor"), First Trust
Advisors L.P., as Evaluator; First Trust Advisors L.P., as
Portfolio Supervisor; and Chase, as Trustee (the "Trustee"),
establishing the unit investment trust or trusts included in FT
261 (each, a "Trust"), and the confirmation by Chase, as Trustee
under the Indenture, that it has registered on the registration
books of the Trust the ownership by the Depositor of a number of
units constituting the entire interest in the Trust (such
aggregate units being herein called "Units"), each of which
represents an undivided interest in the respective Trust which
consists of common stocks (including, confirmations of contracts
for the purchase of certain stocks not delivered and cash, cash
equivalents or an irrevocable letter of credit or a combination
thereof, in the amount required for such purchase upon the
receipt of such stocks), such stocks being defined in the
Indenture as Securities and referenced in the Schedule to the
Indenture.
We have examined the Indenture, a specimen of the
certificates to be issued hereunder (the "Certificates"), the
Closing Memorandum dated todays date, and such other documents
as we have deemed necessary in order to render this opinion.
Based on the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing corporation
having the powers of a Trust Company under the laws of the State
of New York.
2. The Trust Agreement has been duly executed and
delivered by Chase and, assuming due execution and delivery by
the other parties thereto, constitutes the valid and legally
binding obligation of Chase.
3. The Certificates are in proper form for execution and
delivery by Chase, as Trustee.
4. Chase, as Trustee, has registered on the registration
books of the Trust the ownership of the Units by the Depositor.
Upon receipt of confirmation of the effectiveness of the
registration statement for the sale of the Units filed with the
Securities and Exchange Commission under the Securities Act of
1933, the Trustee may deliver Certificates for such Units, in
such names and denominations as the Depositor may request, to or
upon the order of the Depositor as provided in the Closing
Memorandum.
5. Chase, as Trustee, may lawfully advance to the Trust
amounts as may be necessary to provide periodic interest
distributions of approximately equal amounts, and be reimbursed,
without interest, for any such advances from funds in the
interest account, as provided in the Indenture.
In rendering the foregoing opinion, we have not considered,
among other things, whether the Securities have been duly
authorized and delivered.
Very truly yours,
CARTER, LEDYARD & MILBURN
First Trust Advisors L.P.
1001 Warrenville Road
Lisle, Illinois 60532
July 1, 1998
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: FT 261
Gentlemen:
We have examined the Registration Statement File No.
333-53357 for the above captioned fund. We hereby consent to the
use in the Registration Statement of the references to First
Trust Advisors L.P. as evaluator.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
First Trust Advisors L.P.
Robert M. Porcellino
Vice President
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