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 302
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN & CUTLER
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60606
E. Title of Securities
Being Registered: An indefinite number of
Units pursuant to Rule
24f-2 promulgated under
the Investment Company Act
of 1940, as amended.
F. Approximate Date of Proposed
Sale to the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED DECEMBER 7, 1998
Preferred Dividend Income Trust Series
The Trust. FT 302 (the "Trust") is a unit investment trust consisting of
a portfolio of preferred stocks issued by companies selected to provide
the potential for a high level of dividend income and capital
preservation (the "Securities").
The objective of the Trust is to provide the potential for a high level
of dividend income and capital preservation by investing the Trust's
portfolio in the Securities. See "Schedule of Investments." The Trust
has a mandatory termination date ("Mandatory Termination Date" or "Trust
Ending Date") as set forth under "Summary of Essential Information."
There is, of course, no guarantee that the objective of the Trust will
be achieved.
Each Unit of the Trust represents an undivided fractional interest in
all the Securities deposited in the Trust. The Securities deposited in
the Trust's portfolio have fixed maturity dates after the Mandatory
Termination Date and the value of these underlying Securities may
fluctuate with changes in the financial condition of the issuers and
with changes in the values of preferred stocks in general. See
"Portfolio."
The Sponsor may, from time to time during a period of up to
approximately 360 days after the Initial Date of Deposit, deposit
additional Securities or cash (including a letter of credit) with
instructions to purchase additional Securities in the Trust. Such
deposits of additional Securities or cash will be done in such a manner
that the original proportionate relationship among the individual issues
of the Securities shall be maintained. Any deposit by the Sponsor of
additional Securities, or the purchase of additional Securities pursuant
to a cash deposit, will duplicate, as nearly as is practicable, the
original proportionate relationship established on the Initial Date of
Deposit, and not the actual proportionate relationship on the subsequent
Date of Deposit, since the two may differ. Any such difference may be
due to the sale, redemption or liquidation of any Securities deposited
in the Trust on the Initial, or any subsequent, Date of Deposit. See
"What is the FT Series?" and "Rights of Unit Holders-How May Securities
be Removed from the Trust?"
Public Offering Price. The Public Offering Price per Unit of the Trust
during the initial offering period is equal to the aggregate underlying
value of the Securities in the Trust (generally determined by the
closing sale prices of listed Securities and the ask prices of over-the-
counter traded Securities) plus or minus a pro rata share of cash, if
any, in the Capital and Income Accounts of the Trust, plus an initial
sales charge equal to the difference between the maximum sales charge of
___% of the Public Offering Price and the maximum remaining deferred
sales charge, initially $___ per Unit, divided by the number of Units of
the Trust outstanding. Commencing on ____________, 1999, and on the
twentieth day of each month thereafter (or if such day is not a business
day, on the preceding business day) through ____________, 1999, a
deferred sales charge of $____ will be assessed per Unit per month.
Units purchased subsequent to the initial deferred sales charge payment
but still during the initial offering period will be subject to the
initial sales charge and the remaining deferred sales charge payments
not yet collected. The deferred sales charge will be paid from funds in
the Capital Account, if sufficient, or from the periodic sale of
Securities. The total maximum sales charge assessed to Unit holders on a
per Unit basis will be ___% of the Public Offering Price (equivalent to
___% of the net amount invested, exclusive of the deferred sales charge.)
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.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES 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 SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
First Trust (registered trademark)
1-800-621-9533
The date of this Prospectus is ____________, 1998
Page 1
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 on Units purchased prior to the earlier of six
months after the Initial Date of Deposit or the end of the initial
offering period also consists of Securities in an amount sufficient to
pay for all or a portion of the costs incurred in establishing the
Trust. The organizational and offering costs will be deducted from the
assets of the Trust as of the earlier of six months after the Initial
Date of Deposit or the end of the initial offering period. Upon
completion of the deferred sales charge period, the secondary market
Public Offering Price per Unit for the Trust will not include deferred
payments, but will instead include only a one-time initial sales charge
of ___% of the Public Offering Price (equivalent to ___% of the net
amount invested), which will be reduced by 1/2 of 1% on each _____,
commencing _____, 1999 to a minimum sales charge of 3.0%. The minimum
amount which an investor may purchase of the Trust is $1,000 ($250 for
Individual Retirement Accounts or other retirement plans). The sales
charge is reduced on a graduated scale for sales involving at least
$50,000. See "Public Offering-How is the Public Offering Price
Determined?"
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE INVESTMENT RISK
INCLUDING LOSS OF PRINCIPAL.
Estimated Net Annual Distributions. The estimated net annual dividend
distribution to Unit holders (based on the most recent annualized
ordinary dividend paid with respect to the Securities in the Trust) on
the Initial Date of Deposit was $____ per Unit. The actual net annual
dividend distribution per Unit will vary with changes in fees and
expenses of the Trust, with changes in dividends received and with the
sale or liquidation of Securities; therefore, there is no assurance that
the net annual dividend distribution will be realized in the future.
Dividend and Capital Distributions. Distributions of dividends and
capital, if any, will be paid on the Income Distribution Date to Unit
holders of record on the preceding Income Distribution Record Date as
set forth in the "Summary of Essential Information." Distributions of
funds in the Capital Account, if any, will be made at least annually in
December of each year. Any distribution of income and/or capital will be
net of the expenses of the Trust. See "What is the Federal Tax Status of
Unit Holders?" Additionally, upon termination of the Trust, the Trustee
will distribute, upon surrender of Units for redemption, to each Unit
holder his or her pro rata share of the Trust's assets, less expenses,
in the manner set forth under "Rights of Unit Holders-How are Income and
Capital Distributed?"
Secondary Market for Units. After the initial offering period, while
under no obligation to do so, the Sponsor intends to maintain a market
for Units of the Trust and offer to repurchase such Units at prices
which are based on the aggregate underlying value of Securities in the
Trust (generally determined by the closing sale prices of listed
Securities and the bid prices of over-the-counter traded Securities)
plus or minus cash, if any, in the Capital and Income Accounts of the
Trust. If a secondary market is maintained during the initial offering
period, the prices at which Units will be repurchased will also be based
upon the aggregate underlying value of the Securities in the Trust
(generally determined by the closing sale prices of listed Securities
and the ask prices of over-the-counter traded Securities) plus or minus
cash, if any, in the Capital and Income Accounts of the Trust. If a
secondary market is not maintained, a Unit holder may redeem Units
through redemption at prices based upon the aggregate underlying value
of the Securities in the Trust (generally determined by the closing sale
prices of listed Securities and either the ask prices (during the
initial offering period) or the bid prices (subsequent to the initial
offering period) of over-the-counter traded Securities) plus or minus a
pro rata share of cash, if any, in the Capital and Income Accounts of
the Trust. A Unit holder tendering 1,000 Units or more for redemption
may request a distribution of shares of Securities (reduced by customary
transfer and registration charges) (an "In-Kind Distribution") in lieu
of payment in cash. Any deferred sales charge remaining on Units at the
time of their sale or redemption will be collected at that time. See
"Rights of Unit Holders-How May Units be Redeemed?"
Termination. Commencing no later than the Mandatory Termination Date,
Securities will begin to be sold as prescribed by the Sponsor. The
Trustee shall provide written notice of any termination of the Trust to
Unit holders which will specify when Unit holders may surrender their
certificates for cancellation and will include a form to enable Unit
holders to elect an In-Kind Distribution if such Unit holder owns at
least 1,000 Units of the Trust, rather than to receive payment in cash
for such Unit holder's pro rata share of the amounts realized upon the
Page 2
disposition by the Trustee of Securities. To be effective, the election
form, together with surrendered certificates and other documentation
required by the Trustee, must be returned to the Trustee at least ten
business days prior to the Mandatory Termination Date. Unit holders not
electing a distribution of shares of Securities will receive a cash
distribution within a reasonable time after the Trust is terminated. See
"Rights of Unit Holders-How are Income and Capital Distributed?" and
"Other Information-How May the Indenture be Amended or Terminated?"
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the possible deterioration of either the financial condition of
the issuers of the Securities or the general condition of the stock
market, volatile interest rates or an economic recession. Volatility in
the market price of the Securities in the Trust also changes the value
of the Units of the Trusts. Unit holders tendering Units for redemption
during periods of market volatility may receive redemption proceeds
which are more or less than they paid for the Units. The Trust's
portfolio is not managed and Securities will not be sold by the Trust
regardless of market fluctuations, although some Securities may be sold
under certain limited circumstances. See "Portfolio-What are the
Securities Selected for the Dividend Income Trust Series?-Risk Factors."
Page 3
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Securities-____________, 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)
Fractional Undivided Interest in the Trust per Unit (1) 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities in Portfolio (2) $
Aggregate Offering Price Evaluation of Securities per Unit $
Maximum Sales Charge of ___% of the Public Offering Price per Unit
(___% of the net amount invested, exclusive of the deferred sales charge) (3) $
Less Deferred Sales Charge per Unit $(___)
Public Offering Price per Unit (3) $
Sponsor's Initial Repurchase Price per Unit (4) $
Redemption Price per Unit (based on aggregate underlying value
of Securities less the deferred sales charge) (4) $
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
CUSIP Number
Security Code
First Settlement Date _____, 1998
Mandatory Termination Date _____, 2001
Discretionary Liquidation Amount The Trust may be terminated if the value thereof is less than the
lower of $2,000,000 or 20% of the total value of Securities
deposited in the Trust during the initial offering period.
Trustee's Annual Fee $___ per Unit outstanding.
Evaluator's Annual Fee $___ per Unit outstanding, payable to an affiliate of the
Sponsor. Evaluations for purposes of sale, purchase or redemption
of Units are made as of the close of trading (generally 4:00 p.m.
Eastern time) on the New York Stock Exchange on each day on which
it is open.
Portfolio Supervisor's Annual Fee (5) $___ per Unit outstanding, payable to an affiliate of the Sponsor.
Estimated Organizational and Offering Costs (6) $___ per Unit.
Income Distribution Record Date Fifteenth day of each month commencing _____, 1999.
Income Distribution Date (7) Last day of each month commencing _____, 1999.
_________________
<FN>
(1) As of the close of business on the Initial Date of Deposit, the
number of Units of the Trust may be adjusted so that the Public Offering
Price per Unit will equal approximately $10.00. Therefore, to the extent
of any such adjustment, the fractional undivided interest per Unit will
increase or decrease accordingly, from the amounts indicated above.
(2) Each listed Security is valued at the last closing sale price, or if
no such price exists or if the Security is not so listed, at the closing
ask price thereof.
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" and "Public Offering" for
additional information regarding these charges. On the Initial Date of
Deposit there will be no accumulated dividends in the Income Account.
Anyone ordering Units after such date will pay a pro rata share of any
accumulated dividends in such Income Account. The Public Offering Price
as shown reflects the value of the Securities at the opening of business
on the Initial Date of Deposit and establishes the original
proportionate relationship amongst the individual Securities. No sales
to investors will be executed at this price. Additional Securities will
be deposited during the day of the Initial Date of Deposit which will be
valued as of 4:00 p.m. Eastern time and sold to investors at a Public
Offering Price per Unit based on this valuation.
(4) The Sponsor's Initial Repurchase Price per Unit and the Redemption
Price per Unit set forth above and until the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period
include estimated organizational and offering costs per Unit. After such
date, the Sponsor's Repurchase Price and Redemption Price per Unit will
not include such estimated organizational and offering costs. See
"Rights of Unit Holders-How May Units be Redeemed?"
(5) In addition, the Sponsor will be reimbursed for bookkeeping and
other administrative expenses currently at a maximum annual rate of
$.0033 per Unit.
(6) Investors will bear all or a portion of the costs incurred in
organizing the Trust (including costs of preparing the registration
statement, the Trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio, legal fees and the initial fees
and expenses of the Trustee but not including the expenses incurred in
the printing of preliminary and final prospectuses, and expenses
incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses). Estimated
organizational and offering costs are included in the Public Offering
Price per Unit and will be deducted from the assets of the Trust at the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period. See "Public Offering" and "Statement of Net
Assets."
(7) Distributions from the Capital Account will be made monthly payable
on the last day of the month to Unit holders of record on the fifteenth
day of such month if the amount available for distribution equals at
least $0.01 per Unit. Notwithstanding, distributions of funds in the
Capital Account, if any, will be made in December of each year.
</FN>
</TABLE>
Page 4
FEE TABLE
This Fee Table is intended to help you to understand the costs and
expenses that you will bear directly or indirectly. See "Public
Offering" and "What are the Expenses and Charges?" Although the Trust
has a term of approximately _____ years and is a unit investment trust
rather than a mutual fund, this information is presented to permit a
comparison of fees.
<TABLE>
<CAPTION>
Amount
per Unit
________
<S> <C> <C>
UNIT HOLDER TRANSACTION EXPENSES
Initial sales charge imposed on purchase
(as a percentage of public offering price) %(a) $
Deferred sales charge
(as a percentage of public offering price) %(b)
________ ________
% $
======== ========
ORGANIZATIONAL AND OFFERING COSTS
Estimated Organizational and Offering Costs
(as a percentage of public offering price) %(c) $
======== ========
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(as a percentage of average net assets)
Trustee's fee % $
Portfolio supervision, bookkeeping, administrative and evaluation fees %
Other operating expenses %
________ ________
Total % $
======== ========
</TABLE>
<TABLE>
<CAPTION>
Example
_______
Cumulative Expenses Paid for Period:
1 Year 3 Years 5 Years
______ _______ _______
<S> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment,
assuming the Preferred Dividend Income Trust Series has an estimated
operating expense ratio of % and a 5% annual return on the
investment throughout the periods $ $ $
The example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and
Exchange Commission regulations applicable to mutual funds. For purposes
of the example, the deferred sales charge imposed on reinvestment of
dividends is not reflected until the year following payment of the
dividend; the cumulative expenses would be higher if sales charges on
reinvested dividends were reflected in the year of reinvestment. The
example should not be considered a representation of past or future
expenses or annual rate of return; the actual expenses and annual rate
of return may be more or less than those assumed for purposes of the
example.
________________
<FN>
(a) The initial sales charge is actually the difference between the
maximum total sales charge of ___% and the maximum remaining deferred
sales charge (initially $___ per Unit) and would exceed 1% if the Public
Offering Price exceeds $10.00 per Unit.
(b) The actual fee is $____ per Unit per month, irrespective of purchase
or redemption price deducted monthly commencing ____________, 1999
through ____________, 1999. If a Unit holder sells or redeems Units
before all of these deductions have been made, the balance of the
deferred sales charge payments remaining will be deducted from the sales
or redemption proceeds. If the Unit price is less than $10.00 per Unit,
the deferred sales charge will exceed ____%. Units purchased subsequent
to the initial deferred sales charge payment will be subject to the
initial sales charge and any remaining deferred sales charge payments
not yet collected.
(c) Investors will bear all or a portion of the costs incurred in
organizing the Trust (including costs of preparing the registration
statement, the Trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio, legal fees and the initial fees
and expenses of the Trustee). Estimated organizational and offering
costs are included in the Public Offering Price per Unit and will be
deducted from the assets of the Trust at the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period.
</FN>
</TABLE>
Page 5
PREFERRED DIVIDEND INCOME TRUST SERIES
FT 302
What is the FT Series?
FT 302 is one of a series of investment companies created by the Sponsor
under the name of The FT Series, all of which are generally similar but
each of which is separate and is designated by a different series
number. The FT Series was formerly known as The First Trust Special
Situations Trust Series. This Series consists of an underlying separate
unit investment trust designated as: Preferred Dividend Income Trust
Series. The Trust was created under the laws of the State of New York
pursuant to a Trust Agreement (the "Indenture"), dated the Initial Date
of Deposit, with Nike Securities L.P. as Sponsor, The Chase Manhattan
Bank as Trustee and First Trust Advisors L.P. as Portfolio Supervisor
and Evaluator.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
confirmations of contracts for the purchase of preferred stocks (the
"Securities"), together with an irrevocable letter or letters of credit
of a financial institution in an amount at least equal to the purchase
price of such Securities. In exchange for the deposit of Securities or
contracts to purchase Securities in the Trust, the Trustee delivered to
the Sponsor documents evidencing the entire ownership of the Trust.
The objective of the Trust is to provide the potential for a high level
of dividend income and capital preservation by investing the Trust's
portfolio in the Securities.
Preferred stocks are unique securities that combine some of the
characteristics of both common stocks and bonds. Preferred stocks
generally pay a fixed rate of return and are sold on the basis of
current yield, like bonds. However, because they are equity securities,
preferred stocks provide equity ownership of a company and the income is
paid in the form of dividends. Preferred stocks typically have a yield
advantage over common stocks as well as comparably rated fixed income
investments. Each of the Securities included in the Trust have been
carefully selected by a team of experienced financial professionals
utilizing database screening techniques and fundamental analysis and are
rated "BBB" or better by Standard & Poor's Corporation. There is,
however, no assurance that the objective of the Trust will be achieved.
See "What are the Securities Selected for the Preferred Dividend Income
Trust Series?-Risk Factors."
With the deposit of the Securities on the Initial Date of Deposit, the
Sponsor established a percentage relationship between the amounts of
individual Securities in the Trust's portfolio. From time to time
following the Initial Date of Deposit, the Sponsor, pursuant to the
Indenture, may deposit additional Securities in the Trust or cash
(including a letter of credit) with instructions to purchase additional
Securities in the Trust, and Units may be continuously offered for sale
to the public by means of this Prospectus, resulting in a potential
increase in the outstanding number of Units of the Trust. Any deposit by
the Sponsor of additional Securities or cash will duplicate, as nearly
as is practicable, the original proportionate relationship and not the
actual proportionate relationship on the subsequent Date of Deposit,
since the two may differ. Any such difference may be due to the sale,
redemption or liquidation of any of the Securities deposited in the
Trust on the Initial, or any subsequent, Date of Deposit. See "Rights of
Unit Holders-How May Securities be Removed from the Trust?" Since the
prices of the underlying Securities will fluctuate daily, the ratio, on
a market value basis, will also change daily. The portion of Securities
represented by each Unit will not change as a result of the deposit of
additional Securities in the Trust. If the Sponsor deposits cash,
however, existing and new investors may experience a dilution of their
investment and a reduction in their anticipated income because of
fluctuations in the price of the Securities and because the Trust will
pay the associated brokerage fees. To minimize this effect, the Trust
will try to purchase the Securities as close to the evaluation time or
as close to the evaluation price as possible. The Trustee may from time
to time retain and pay compensation to the Sponsor (or an affiliate of
the Sponsor) to act as agent for the Trust with respect to acquiring
Securities for the Trust. In acting in such capacity, the Sponsor or its
affiliate will be held subject to the restrictions under the Investment
Company Act of 1940, as amended.
On the Initial Date of Deposit, each Unit of the Trust represented the
undivided fractional interest in the Securities as set forth under
"Summary of Essential Information." To the extent that Units of the
Page 6
Trust are redeemed, the aggregate value of the Securities in the Trust
will be reduced and the undivided fractional interest represented by
each outstanding Unit of the Trust will increase. However, if additional
Units are issued by the Trust in connection with the deposit of
additional Securities or cash by the Sponsor, the aggregate value of the
Securities in the Trust will be increased by amounts allocable to
additional Units, and the fractional undivided interest represented by
each Unit of the Trust will be decreased proportionately. See "Rights of
Unit Holders-How May Units be Redeemed?"
What are the Expenses and Charges?
With the exception of the brokerage fees discussed above and bookkeeping
and other administrative services provided to the Trust, for which the
Sponsor will be reimbursed in amounts as set forth under "Summary of
Essential Information," the Sponsor will not receive any fees in
connection with its activities relating to the Trust.
First Trust Advisors L.P., an affiliate of the Sponsor, will receive an
annual supervisory fee as set forth under "Summary of Essential
Information" for providing portfolio supervisory services for the Trust.
Such fee is based on the number of Units outstanding in the Trust on
January 1 of each year, except for the year or years in which an initial
offering period occurs, in which case the fee for a month is based on
the number of Units outstanding at the end of such month. In providing
such supervisory services, the Portfolio Supervisor may purchase
research services from a variety of sources which may include dealers of
the Trust.
First Trust Advisors L.P., in its capacity as the Evaluator for the
Trust, will receive an annual evaluation fee as set forth under "Summary
of Essential Information" for providing evaluation services for the
Trust. Such fee is based on the number of Units outstanding in the Trust
on January 1 of each year, except for the year or years in which an
initial offering period occurs in which case the fee for a month is
based on the largest number of Units in the Trust outstanding during the
period for which the compensation is paid.
The Trustee pays certain expenses of the Trust for which it is
reimbursed by the Trust. The Trustee will receive for its ordinary
recurring services to the Trust an annual fee as set forth in "Summary
of Essential Information." Such fee will be based upon the largest
aggregate number of Units of the Trust outstanding during the calendar
year, except during the initial offering period, in which case the fee
is calculated based on the largest number of Units outstanding during
the period for which compensation is paid. For a discussion of the
services performed by the Trustee pursuant to its obligations under the
Indenture, reference is made to the material set forth under "Rights of
Unit Holders."
The fees described above are payable from the Income Account of the
Trust to the extent funds are available, and then from the Capital
Account of the Trust. Since the Trustee has the use of the funds being
held in the Capital and Income Accounts for payment of expenses and
redemptions and since such Accounts are noninterest-bearing to Unit
holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to the Trust is expected to result from
the use of these funds. Because the above fees are generally calculated
based on the largest aggregate number of Units of the Trust outstanding
during a calendar year, the per Unit amounts set forth under "Summary of
Essential Information" will be higher during any year in which
redemptions of Units occur.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services,
supervisory services and evaluation services, such individual fees may
exceed the actual costs of providing such services for the Trust, but at
no time will the total amount received for such services rendered to all
unit investment trusts of which Nike Securities L.P. is the Sponsor in
any calendar year exceed the actual cost to the Sponsor or its affiliate
of supplying such services in such year.
The following additional charges are or may be incurred by the Trust:
all legal and annual auditing expenses of the Trustee incurred by or in
connection with its responsibilities under the Indenture; the expenses
and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Unit holders; fees of the Trustee
for any extraordinary services performed under the Indenture;
Page 7
indemnification of the Trustee for any loss, liability or expense
incurred by it without negligence, bad faith or willful misconduct on
its part, arising out of or in connection with its acceptance or
administration of the Trust; any offering costs incurred after the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period; indemnification of the Sponsor for any
loss, liability or expense incurred without gross negligence, bad faith
or willful misconduct in acting as Depositor of the Trust; all taxes and
other government charges imposed upon the Securities or any part of the
Trust (no such taxes or charges are being levied or made or, to the
knowledge of the Sponsor, contemplated). The above expenses and the
Trustee's annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trust. In addition, the Trustee is empowered to sell
Securities in the Trust in order to make funds available to pay all
these amounts if funds are not otherwise available in the Income and
Capital Accounts of the Trust. The Sponsor cannot provide any assurance
that dividends will be sufficient to meet any or all expenses of the
Trust. As described above, if dividends are insufficient to cover
expenses, it is likely that Securities will have to be sold to meet
Trust expenses. These sales may result in capital gains or losses to
Unit holders. See "What is the Federal Tax Status of Unit Holders?"
The Indenture requires the Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. So
long as the Sponsor is making a secondary market for the Units, the
Sponsor is required to bear the cost of such annual audits to the extent
such cost exceeds $.0050 per Unit. Unit holders of the Trust covered by
an audit may obtain a copy of the audited financial statements upon
request.
What is the Federal Tax Status of Unit Holders?
This is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units.
The summary is limited to investors who hold the Units as "capital
assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986 (the "Code"). Unit
holders should consult their tax advisors in determining the Federal,
state, local and any other tax consequences of the purchase, ownership
and disposition of Units in the Trust. For purposes of the following
discussion and opinions, it is assumed that each 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
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 Security when such
dividends are considered to be received by the Trust regardless of
whether such dividends are used to pay a portion of the deferred sales
charge. Unit holders will be taxed in this manner regardless of whether
distributions from such Trust are actually received by the Unit holder.
3. Each Unit holder will have a taxable event when the Trust disposes
of a Security (whether by sale, taxable exchange, liquidation,
redemption, or otherwise) 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, generally including sales charges, is
allocated among his or her pro rata portion of each Security held by the
Trust (in proportion to the fair market values thereof on the valuation
date nearest the date the Unit holder purchases his or her Units) in
order to determine his or her initial tax basis for his or her pro rata
portion of each Security held by the Trust. Unit holders should consult
their own tax advisors 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 a 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 Security which exceed such current and accumulated earnings
and profits will first reduce a Unit holder's tax basis in such
Security, and to the extent that such dividends exceed a Unit holder's
Page 8
tax basis in such 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 Securities held by the Trust
will generally be considered a capital gain (except in the case of a
dealer or a financial institution). A Unit holder's portion of loss, if
any, upon the sale or redemption of Units or the disposition of
Securities held by the Trust will generally be considered a capital loss
(except in the case of a dealer or a financial institution). Unit
holders should consult their tax advisors regarding the recognition of
such capital gains and losses for Federal income tax purposes.
Deferred Sales Charge. Generally, the tax basis of a Unit holder
includes sales charges, and such charges are not deductible. A portion
of the sales charge for the Trust is deferred. It is possible that for
Federal income tax purposes, a portion of the deferred sales charge may
be treated as interest which would be deductible by a Unit holder
subject to limitations on the deduction of investment interest. In such
a case, the non-interest portion of the deferred sales charge would be
added to the Unit holder's tax basis in his or her Units. The deferred
sales charge could cause the Unit holder's Units to be considered to be
debt-financed under Section 246A of the Code which would result in a
small reduction of the dividends-received deduction. In any case, the
income (or proceeds from redemption) a Unit holder must take into
account for Federal income tax purposes is not reduced by amounts
deducted to pay the deferred sales charge. Unit holders should consult
their own tax advisors as to the income tax consequences of the deferred
sales charge.
Dividends Received Deduction. A corporation that owns Units will
generally be entitled to a 70% dividends received deduction with respect
to such Unit holder's pro rata portion of dividends on Securities that
are 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 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.
A Unit holder will be considered to have received all of the dividends
paid on his or her pro rata portion of each Security when such dividends
are considered to be received by the Trust.
To the extent dividends received by the Trust are attributable to
foreign corporations, a corporation that owns Units will not be entitled
to the dividends received deduction with respect to its pro rata portion
of such dividends, since the dividends received deduction is generally
available only with respect to dividends paid by domestic corporations.
It should be noted that various legislative proposals that would affect
the dividends received deduction have been introduced. Unit holders
should consult with their tax advisors with respect to the limitations
on and possible modifications to the dividends received deduction.
Limitations on Deductibility of the Trust's Expenses by Unit Holders.
Each Unit holder's pro rata share of each expense paid by the Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by such Unit holder. It should be noted that as a
result of the Tax Reform Act of 1986, certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to
the extent they exceed 2% of such individual's adjusted gross income.
Unit holders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
Unit holders should consult 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 a Security is disposed of by the
Trust or if the Unit holder disposes of a Unit. The Internal Revenue
Service Restructuring and Reform Act of 1998 (the "1998 Tax Act")
provides that for taxpayers other than corporations, net capital gain
Page 9
(which is defined as net long-term capital gain over net short-term
capital loss for the taxable year) realized from property (with certain
exclusions) is subject to a maximum marginal stated tax rate of 20% (10%
in the case of certain taxpayers in the lowest tax bracket). 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. The legislation is generally effective retroactively for amounts
properly taken into account on or after January 1, 1998. Capital gains
realized from assets held for one year or less are taxed at the same
rates as ordinary income. If the Unit holder disposes of a Unit, he or
she is deemed thereby to have disposed of his or her entire pro rata
interest in all assets of the Trust, including his or her pro rata
portion of all the Securities represented by the Unit.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after
April 30, 1993. Unit holders and prospective investors should consult
with their tax advisors regarding the potential effect of this provision
on their investment in Units.
The 1997 Tax Act includes provisions that treat certain transactions
designed to reduce or eliminate risk of loss and opportunities for gain
(e.g., short sales, off-setting 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 1,000 Units of the Trust
may request an In-Kind Distribution upon the redemption of Units or the
termination of the Trust. The Unit holder requesting an In-Kind
Distribution will be liable for expenses related thereto (the
"Distribution Expenses") and the amount of such In-Kind Distribution
will be reduced by the amount of the Distribution Expenses. See "Rights
of Unit Holders-How are Income and Capital Distributed?" As previously
discussed, prior to the redemption of Units or the termination of the
Trust, a Unit holder is considered as owning a pro rata portion of each
of the Trust's assets for Federal income tax purposes. The receipt of an
In-Kind Distribution will result in a Unit holder receiving an undivided
interest in whole shares of stock plus, possibly, cash.
The potential tax consequences that may occur under an In-Kind
Distribution with respect to each Security owned by the Trust will
depend on whether or not a Unit holder receives cash in addition to
Securities. A Unit holder will not recognize gain or loss if a Unit
holder only receives Securities in exchange for his or her pro rata
portion in the Securities held by the Trust. However, if a Unit holder
also receives cash in exchange for a fractional share of a 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 a
Security held by the Trust.
Because the Trust will own many Securities, a Unit holder who requests
an In-Kind Distribution will have to analyze the tax consequences with
respect to each Security owned by the Trust. The amount of taxable gain
(or loss) recognized upon such exchange will generally equal the sum of
the gain (or loss) recognized under the rules described above by such
Unit holder with respect to each Security owned by the Trust. Unit
holders who request an In-Kind Distribution are advised to consult their
tax advisors in this regard.
Computation of the Unit Holder's Tax Basis. Initially, a Unit holder's
tax basis in his or her Units will generally equal the price paid by
such Unit holder for his or her Units. The cost of the Units is
allocated among the Securities held in the Trust in accordance with the
proportion of the fair market values of such Securities as of the
valuation date nearest the date the Units are purchased in order to
determine such Unit holder's tax basis for his or her pro rata portion
of each Security.
A Unit holder's tax basis in his or her Units and his or her pro rata
portion of a Security held by the Trust will be reduced to the extent
dividends paid with respect to such 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
Page 10
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
advisors.
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 Securities, the gross proceeds received by
the Trust from the disposition of any Security (resulting from
redemption or the sale of any Security) and the fees and expenses paid
by the Trust. The Trustee will also furnish annual information returns
to Unit holders and to the Internal Revenue Service.
In general, income that is not effectively connected to the conduct of a
trade or business within the United States that is earned by non-U.S.
Unit holders and derived from dividends of foreign corporations will not
be subject to U.S. withholding tax provided that less than 25% of the
gross income of the foreign corporation for a three-year period ending
with the close of its taxable year preceding payment was not effectively
connected to the conduct of a trade or business within the United
States. In addition, such earnings may be exempt from U.S. withholding
pursuant to a specific treaty between the United States and a foreign
country. Non-U.S. Unit holders should consult their own advisors
regarding the imposition of U.S. withholding on distributions from the
Trust.
It should be noted that payments to the Trust of dividends on Securities
that are attributable to foreign corporations may be subject to foreign
withholding taxes and Unit holders should consult their advisors
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 tax purposes with respect to such taxes.
Investors should consult their tax advisors with respect to foreign
withholding taxes and foreign tax credits. Legislative proposals have
been made which would impose a required holding period for such credits.
Unit holders desiring to purchase Units for tax-deferred plans and IRAs
should consult their broker for details on establishing such accounts.
Units may also be purchased by persons who already have self-directed
plans established. See "Are Investments in the Trust Eligible for
Retirement Plans?"
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, each Trust is not an association taxable as a
corporation and the income of such Trusts will be treated as the income
of the Unit holders thereof.
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 tax advisors 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 their tax
advisors regarding potential state or local taxation with respect to the
Units.
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
Page 11
distributions are received. Distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for
special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisors
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
PORTFOLIO
What are the Securities?
The Trust consists of different issues of Securities which are listed on
a securities exchange or The Nasdaq Stock Market or traded in the over-
the-counter market. See "What are the Securities Selected for the
Preferred Dividend Income Trust Series?" for a general description of
the companies.
Who are the Preferred Stock Insurers?
AMBAC Financial Group, Inc., headquartered in
Agrium Inc., headquartered in
American Electric Power Company, Inc., headquartered in
American Express Company, headquartered in
Australia & New Zealand Banking Group Ltd. , headquartered in
Baltimore Gas and Electric Company, headquartered in
BankAmerica Corp., headquartered in
Barclays Bank Plc, headquartered in
Chase Manhattan Corp., headquartered in
Citigroup Inc., headquartered in
DQE, Inc., headquartered in
DTE Energy Company, headquartered in
Developers Diversified Realty Corporation, headquartered in
Dillard's, Inc. (Class A), headquartered in
Dominion Resources, Inc., headquartered in
Duke Energy Corporation, headquartered in
Equitable Resources, Inc., headquartered in
First Industrial Realty Trust, Inc., headquartered in
Fleet Financial Group, Inc., headquartered in
Harris Financial, Inc., headquartered in
Hartford Life, Inc., headquartered in
Highwoods Properties, Inc., headquartered in
Household Finance Corporation, headquartered in
International Paper Company, headquartered in
Merrill Lynch & Co., Inc., headquartered in
Morgan Stanley Dean Witter & Co., headquartered in
National Rural Utilities Cooperative Finance Corporation, headquartered in
National Westminster Bank Plc, headquartered in
Post Properties, Inc., headquartered in
Potomac Electric Power Company, headquartered in
ProLogis Trust, headquartered in
Public Service Enterprise Group Incorporated, headquartered in
Public Storage, Inc., headquartered in
SBC Communications Inc., headquartered in
Sears, Roebuck & Co., headquartered in
Shaw Communications Inc. (Class A), headquartered in
The Southern Company, headquartered in
U.S. Bancorp, headquartered in
Weingarten Realty Investors, headquartered in
Page 12
The Sponsor has obtained the foregoing 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 in Units of the Trust should be made with an
understanding of the problems and risks such an investment may entail.
The Trust consists of such of the Securities listed under "Schedule of
Investments" as may continue to be held from time to time in the Trust
and any additional Securities acquired and held by the Trust pursuant to
the provisions of the Indenture, together with cash held in the Income
and Capital Accounts. Neither the Sponsor nor the Trustee shall be
liable in any way for any failure in any of the Securities. However,
should any contract for the purchase of any of the Securities initially
deposited hereunder fail, the Sponsor will, unless substantially all of
the moneys held in the Trust to cover such purchase are reinvested in
substitute Securities in accordance with the Indenture, refund the cash
and sales charge attributable to such failed contract to all Unit
holders on the next distribution date.
Because certain of the Securities from time to time may be sold under
certain circumstances described herein, and because the proceeds from
such events will be distributed to Unit holders and will not be
reinvested, no assurance can be given that the Trust will retain for any
length of time its present size and composition. Although the Portfolio
is not managed, the Sponsor may instruct the Trustee to sell Securities
under certain limited circumstances. Pursuant to the Indenture and with
limited exceptions, the Trustee may sell or keep any securities or other
property acquired in exchange for Securities such as those acquired in
connection with a merger or other transaction. See "Rights of Unit
Holders-How May Securities be Removed from the Trust?" Securities,
however, will not be sold by the Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation or
depreciation.
Whether or not the Securities are listed on a securities exchange, the
principal trading market for the Securities may be in the over-the-
counter market. As a result, the existence of a liquid trading market
for the Securities may depend on whether dealers will make a market in
the Securities. There can be no assurance that a market will be made for
any of the Securities, that any market for the Securities will be
maintained or of the liquidity of the Securities in any markets made. In
addition, the Trust may be restricted under the Investment Company Act
of 1940 from selling Securities to the Sponsor. The price at which the
Securities may be sold to meet redemptions and the value of the Trust
will be adversely affected if trading markets for the Securities are
limited or absent.
Holders of preferred stocks of the type held in the Trust have the right
to receive dividends, when and as declared by the issuer's Board of
Directors but do not participate in other amounts available for
distributions by the issuing corporation. Issues of preferred stock
generally provide that the preferred stock may be liquidated, either by
a partial scheduled redemption pursuant to a sinking fund or by a
refunding redemption pursuant to which, at the option of the issuer, all
or part of the issue can be retired from any available funds, at prices
which may or may not include a premium over the involuntary liquidation
preference, which generally is the same as the par or stated value of
the preferred stock. In general, optional redemption provisions are more
likely to be exercised when the Securities are valued at a premium over
par or stated value than when they are valued at a discount from par or
stated value.
An investment in Units should be made with an understanding of the risks
which an investment in preferred stocks entails, including the risk that
the financial condition of the issuers of the Securities or the general
condition of the preferred stock market may worsen, and the value of the
Securities and therefore the value of the Units may decline. Preferred
stocks may be susceptible to general stock market movements and to
volatile increases and decreases of value as market confidence in and
perceptions of the issuers change. These perceptions are based on
unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates,
economic expansion or contraction, and global or regional political,
economic or banking crises. Preferred stocks are also vulnerable to
Congressional reductions in the dividends-received deduction which would
adversely affect the after-tax return to the investors who can take
advantage of the deduction. Such a reduction might adversely affect the
value of preferred stocks in general. Holders of preferred stocks, as
owners of the entity, have rights to receive payments from the issuers
of those preferred stocks that are generally subordinate to those of
creditors of, or holders of debt obligations or, in some cases, other
senior preferred stocks of, such issuers. Preferred stocks do not
represent an obligation of the issuer and, therefore, do not offer any
assurance of income or provide the same degree of protection of capital
as do debt securities. The issuance of additional debt securities or
Page 13
senior preferred stocks will create prior claims for payment of
principal and interest and senior dividends which could adversely affect
the ability and inclination of the issuer to declare or pay dividends on
its preferred stock or the rights of holders of preferred stock with
respect to assets of the issuer upon liquidation or bankruptcy. The
value of preferred stocks is subject to market fluctuations for as long
as the preferred stocks remain outstanding, and thus the value of the
Securities may be expected to fluctuate over the life of the Trust to
values higher or lower than those prevailing on the Initial Date of
Deposit.
Certain of the Securities in the Trust are of foreign issuers, and
therefore, an investment in the Trust involves some investment risks
that differ in some respects from an investment in a trust that invests
entirely in securities of domestic issuers. Those investment risks
include future political and governmental restrictions which might
adversely affect the payment or receipt of payment of dividends on the
relevant Securities, currency exchange rate fluctuations, exchange
control policies, and the limited liquidity and small market
capitalization of such foreign countries' securities markets. In
addition, for foreign issuers that are not subject to the reporting
requirements of the Securities Exchange Act of 1934, there may be less
publicly available information than is available from a domestic issuer.
Also, foreign issuers are not necessarily subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. However, due to the
nature of the issuers of the Securities included in the Trust, the
Sponsor believes that adequate information will be available to allow
the Portfolio Supervisor to provide portfolio surveillance.
Unit holders will be unable to dispose of any of the Securities in the
Portfolio, as such, and will not be able to vote the Securities. As the
holder of the Securities, the Trustee will have the right to vote all of
the voting stocks in the Trust and will vote such stocks in accordance
with the instructions of the Sponsor.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before making
a decision to invest in the Trust.
The value of the Securities will fluctuate over the life of the Trust
and may be more or less than the price at which they were deposited in
the Trust. The Securities may appreciate or depreciate in value (or pay
dividends), depending on the full range of economic and market
influences affecting these securities.
The Sponsor and the Trustee shall not be liable in any way for any
default, failure or defect in any Security. In the event of a notice
that any Security will not be delivered ("Failed Contract Obligations")
to the Trust, the Sponsor is authorized under the Indenture to direct
the Trustee to acquire other Securities ("Replacement Securities"). Any
Replacement Security will be identical to those which were the subject
of the failed contract. The Replacement Securities must be purchased
within 20 days after delivery of the notice of a failed contract, and
the purchase price may not exceed the amount of funds reserved for the
purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraphs is not utilized to acquire Replacement Securities in the
event of a failed contract, the Sponsor will refund the sales charge
attributable to such Failed Contract Obligations to all Unit holders of
the Trust, and the Trustee will distribute the principal attributable to
such Failed Contract Obligations not more than 120 days after the date
on which the Trustee received a notice from the Sponsor that a
Replacement Security would not be deposited in the Trust. In addition,
Unit holders should be aware that, at the time of receipt of such
principal, they may not be able to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such
proceeds would have earned for Unit holders of the Trust.
The Indenture also authorizes the Sponsor to increase the size of the
Trust and the number of Units thereof by the deposit of additional
Securities or cash (including a letter of credit) with instructions to
purchase additional Securities in the Trust and the issuance of a
corresponding number of additional Units. If the Sponsor deposits cash,
however, existing and new investors may experience a dilution of their
investment and a reduction in their anticipated income because of
fluctuations in the prices of the Securities between the time of the
cash deposit and the purchase of the Securities and because the Trust
will pay the associated brokerage fees.
The Trust consists of the Securities listed under "Schedule of
Page 14
Investments" (or contracts to purchase such Securities) as may continue
to be held from time to time in the Trust and any additional Securities
acquired and held by the Trust pursuant to the provisions of the
Indenture (including provisions with respect to deposits into the Trust
of Securities or cash in connection with the issuance of additional
Units).
Once all of the Securities in the Trust are acquired, the Trustee will
have no power to vary the investments of the Trust, i.e., the Trustee
will have no managerial power to take advantage of market variations to
improve a Unit holder's investment, and may dispose of Securities only
under limited circumstances. See "Rights of Unit Holders-How May
Securities be Removed from the Trust?"
Like other investment companies, financial and business organizations
and individuals around the world, the Trust could be adversely affected
if the computer systems used by the Sponsor, Evaluator, Portfolio
Supervisor or Trustee or other service providers to the Trust do not
properly process and calculate date-related information and data
involving dates of January 1, 2000 and thereafter. This is commonly
known as the "Year 2000 Problem." The Sponsor, Evaluator, Portfolio
Supervisor and Trustee are taking steps that they believe are reasonably
designed to address the Year 2000 Problem with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by the Trust's other service providers.
At this time, however, there can be no assurance that these steps will
be sufficient to avoid any adverse impact to the Trust.
The Year 2000 Problem is expected to impact corporations, which may
include issuers of the Securities contained in the Trust, to varying
degrees based upon various factors, including, but not limited to, their
industry sector and degree of technological sophistication. The Sponsor
is unable to predict what impact, if any, the Year 2000 Problem will
have on issuers of the Securities contained in the Trust.
To the best of the Sponsor's knowledge, there is no litigation pending
as of the Initial Date of Deposit in respect of any Security which might
reasonably be expected to have a material adverse effect on the Trust.
At any time after the Initial Date of Deposit, litigation may be
instituted on a variety of grounds with respect to the Securities. The
Sponsor is unable to predict whether any such litigation will be
instituted, or if instituted, whether such litigation might have a
material adverse effect on the Trust.
Legislation. From time to time Congress considers proposals to reduce
the rate of the dividends-received deductions. Enactment into law of a
proposal to reduce the rate would adversely affect the after-tax return
to investors who can take advantage of the deduction. Unit holders are
urged to consult their own tax advisors. Further, at any time after the
Initial Date of Deposit, legislation may be enacted that could
negatively affect the Securities in the Trust or the issuers of the
Securities. Changing approaches to regulation, particularly with respect
to any of the industries represented in the portfolio of the Trust, may
have a negative impact on certain companies represented in the Trust.
There can be no assurance that future legislation, regulation or
deregulation will not have a material adverse effect on the Trust or
will not impair the ability of the issuers of the Securities to achieve
their business goals.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, the Public Offering Price is based on the aggregate
underlying value of the Securities in the Trust (generally determined by
the closing sale prices of listed Securities and the ask prices of over-
the-counter traded Securities), plus or minus cash, if any, in the
Income and Capital Accounts of the Trust, plus an initial sales charge
equal to the difference between the maximum sales charge of ___% of the
Public Offering Price and the maximum remaining deferred sales charge,
initially $___ per Unit, divided by the number of Units of the Trust
outstanding. Subsequent to the Initial Date of Deposit, the amount of
the initial sales charge will vary with changes in the aggregate value
of the Securities. Commencing on ____________, 1999, and on the
twentieth day of each month thereafter (or if such day is not a business
day, on the preceding business day) through ____________, 1999, a
deferred sales charge of $____ will be assessed per Unit per month.
Units purchased subsequent to the initial deferred sales charge payment
but still during the initial offering period will be subject to the
initial sales charge and the remaining deferred sales charge payments
not yet collected. The deferred sales charge will be paid from funds in
the Capital Account, if sufficient, or from the periodic sale of
Securities. The total maximum sales charge assessed to Unit holders on a
Page 15
per Unit basis will be ___% of the Public Offering Price (equivalent to
___% of the net amount invested, exclusive of the deferred sales
charge). In addition, a portion of the Public Offering Price on Units
purchased prior to the earlier of six months after the Initial Date of
Deposit or the end of the initial offering period also consists of
Securities in an amount sufficient to pay for all or a portion of the
costs incurred in establishing the Trust, including the costs of
preparing the registration statement, the Indenture and other closing
documents, registering Units with the Securities and Exchange Commission
and states, the initial audit of the Trust portfolio, legal fees and the
initial fees and expenses of the Trustee. The organizational and
offering costs will be deducted from the assets of the Trust as of the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period. Upon completion of the deferred sales
charge period, the secondary market Public Offering Price per Unit for
the Trust will not include deferred payments, but will instead include
only a one-time initial sales charge of ___% of the Public Offering
Price (equivalent to ___% of the net amount invested), which will be
reduced by 1/2 of 1% on each _____, commencing _____, 1999 to a minimum
sales charge of 3.0%.
During the initial offering period, the Sponsor's Repurchase Price is
based on the aggregate underlying value of the Securities in the Trust
(generally determined by the closing sale prices of listed Securities
and the ask prices of over-the-counter traded Securities), plus or minus
cash, if any, in the Income and Capital Accounts of the Trust, plus,
until the earlier of six months after the Initial Date of Deposit or the
end of the initial offering period, estimated organizational and
offering costs, divided by the number of Units of the Trust outstanding
and reduced by the deferred sales charge not yet paid. During the
secondary market, the Sponsor's Repurchase Price is also based on the
aggregate underlying value of the Securities in the Trust (generally
determined by the closing sale prices of listed Securities and the bid
prices of over-the-counter traded Securities), plus or minus cash, if
any, in the Income and Capital Accounts of the Trust, divided by the
number of outstanding Units of the Trust.
The minimum amount which an investor may purchase of the Trust is $1,000
($250 for Individual Retirement Accounts or other retirement plans). The
Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units. The applicable sales charge for both primary and
secondary market sales is reduced by a discount as indicated below for
volume purchases as a percentage of the Public Offering Price (except
for sales made pursuant to a "wrap fee account" or similar arrangements
as set forth below):
<TABLE>
<CAPTION>
Primary and Secondary
_____________________
Percent of Percent of
Dollar Amount of Transaction Offering Net Amount
at Public Offering Price* Price Invested
____________________________ __________ __________
<S> <C> <C>
$ 50,000 but less than $100,000 0.25% 0.2506%
$100,000 but less than $250,000 0.50% 0.5025%
$250,000 but less than $500,000 1.00% 1.0101%
$500,000 or more 2.00% 2.0408%
___________
<FN>
* The breakpoint sales charges are also applied on a Unit basis
utilizing a breakpoint equivalent in the above table of $10 per Unit and
will be applied on whichever basis is more favorable to the investor.
The breakpoints will be adjusted to take into consideration purchase
orders stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
</FN>
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
broker/dealer, bank or other selling agent. The reduced sales charge
structure will apply on all purchases of Units in the Trust by the same
person on any one day from any one broker/dealer, bank or other selling
agent. An investor may aggregate purchases of Units of the Trust and
units of other unit investment trusts containing equity securities of
which the Sponsor acts as Principal Underwriter and which are currently
in the initial offering period for purposes of qualifying for the volume
purchase discounts listed above. Investors who have executed a letter of
intent indicating their intention to purchase a specified dollar amount
of Units of any unit investment trust containing equity securities of
which the Sponsor acts as Principal Underwriter from any broker/dealer
during the initial offering period are eligible to receive a volume
discount as set forth in the above table based on the amount of intended
aggregate purchases. The letter of intent will specify the amount of
intended aggregate purchases which must be purchased over a 13-month
Page 16
period. The initial purchase made pursuant to a letter of intent must
equal at least 5% of the amount of intended aggregate purchases. Units
purchased with rollover proceeds, reinvested dividends, redemption or
termination proceeds from other unit investment trusts or other similar
transactions will not be counted to reach the amount of intended
aggregate purchases. In the event that total purchases by an investor
pursuant to a letter of intent over the 13-month period are less than
the amount specified in the letter of intent, the selling broker/dealer
shall take such action as is necessary to receive from the investor the
difference between the amounts the investor paid for units pursuant to
the letter of intent and the amounts which the investor would have paid
if the higher sales charge had been applied. It is the responsibility of
the selling broker/dealer to notify the Sponsor of each sale made
pursuant to a letter of intent. Additionally, Units purchased in the
name of the spouse of a purchaser or in the name of a child of such
purchaser under 21 years of age will be deemed, for the purposes of
calculating the applicable sales charge, to be additional purchases by
the purchaser. The reduced sales charges will also be applicable to a
trustee or other fiduciary purchasing securities for a single trust
estate or single fiduciary account. The purchaser must inform the
Underwriter, broker/dealer, bank or other selling agent of any such
combined purchase prior to the sale, in order to obtain the indicated
discount. In addition, investors may utilize their redemption or
termination proceeds received from trusts sponsored by the Sponsor to
purchase Units of the Trust subject only to any remaining deferred sales
charge payments on such Units, deferred as provided herein. Unit holders
who redeem units of trusts sponsored by the Sponsor should note that
they will be assessed the amount of any remaining deferred sales charge
on such units at the time of redemption. Employees, officers and
directors (including their immediate family members, defined as spouses,
children, grandchildren, parents, grandparents, siblings, mothers-in-
law, fathers-in-law, sons-in-law and daughters-in-law, and trustees,
custodians or fiduciaries for the benefit of such persons) of the
Sponsor, broker/dealers, banks or other selling agents and their
subsidiaries and vendors providing services to the Sponsor will be able
to purchase Units of the Trust at the Public Offering Price, less the
applicable broker/dealer concession during the initial offering period.
Units may be purchased in the primary or secondary market at the Public
Offering Price less the concession the Sponsor typically allows to
dealers and other selling agents (see "Public Offering-How are Units
Distributed?") for purchases by investors who purchase Units through
registered investment advisors, certified financial planners or
registered broker/dealers who in each case either charge periodic fees
for financial planning, investment advisory or asset management
services, or provide such services in connection with the establishment
of an investment account for which a comprehensive "wrap fee" charge is
imposed.
Had the Units of the Trust been available for sale on the business day
prior to the Initial Date of Deposit, the Public Offering Price would
have been as indicated in "Summary of Essential Information." The Public
Offering Price of Units on the date of the prospectus or during the
initial offering period may vary from the amount stated under "Summary
of Essential Information" in accordance with fluctuations in the prices
of the underlying Securities. During the initial offering period, the
aggregate value of the Units of the Trust shall be determined on the
basis of the aggregate underlying value of the Securities therein plus
or minus cash, if any, in the Income and Capital Accounts of the Trust.
The aggregate underlying value of the Securities will be determined in
the following manner: if the Securities are listed, this evaluation is
generally based on the closing sale prices on that exchange or that
system (unless it is determined that these prices are inappropriate as a
basis for valuation) or, if there is no closing sale price on that
exchange or system, at the closing ask prices. If the Securities are not
so listed or, if so listed and the principal market therefor is other
than on the exchange, the evaluation shall generally be based on the
current ask prices on the over-the-counter market (unless it is
determined that these prices are inappropriate as a basis for
evaluation). If current ask prices are unavailable, the evaluation is
generally determined (a) on the basis of current ask prices for
comparable securities, (b) by appraising the value of the Securities on
the ask side of the market or (c) by any combination of the above.
The Evaluator on each business day will appraise or cause to be
appraised the value of the underlying Securities in the Trust as of the
Evaluation Time and will adjust the Public Offering Price of the Units
commensurate with such valuation. Such Public Offering Price will be
effective for all orders received prior to the Evaluation Time on each
Page 17
]such day. Orders received by the Trustee or Sponsor for purchases, sales
or redemptions after that time, or on a day which is not a business day,
will be held until the next determination of price. The term "business
day," as used herein and under "Rights of Unit Holders-How May Units be
Redeemed?", shall exclude Saturdays, Sundays and the following holidays
as observed by the New York Stock Exchange, Inc.: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the aggregate underlying
value of the Securities therein, plus or minus cash, if any, in the
Income and Capital Accounts of the Trust plus the applicable sales
charge. The aggregate underlying value of the Securities for secondary
market sales is calculated in the same manner as described above for
sales made during the initial offering period with the exception that
bid prices are used instead of ask prices.
Although payment is normally made three business days following the
order for purchase (the "date of settlement"), payment may be made prior
thereto. A person will become owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available to the
Sponsor prior to the date of settlement for the purchase of Units may be
used in the Sponsor's business and may be deemed to be a benefit to the
Sponsor, subject to the limitations of the Securities Exchange Act of
1934. Delivery of Certificates representing Units so ordered will be
made three business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are the Units Distributed?
During the initial offering period (i) for Units issued on the Initial
Date of Deposit and (ii) for additional Units issued after such date as
additional Securities are deposited by the Sponsor, Units will be
distributed to the public at the then current Public Offering Price. The
initial offering period may be up to approximately 360 days. Units
reacquired by the Sponsor during the initial offering period may be
resold at the then current Public Offering Price.
Upon completion of the initial offering period, Units repurchased in the
secondary market (see "Public Offering-Will There be a Secondary
Market?") may be offered by this prospectus at the secondary market
Public Offering Price determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Trust for
sale in a number of states. Sales initially will be made to dealers and
other selling agents at prices which represent a concession or agency
commission of 3.2% of the Public Offering Price, and, for secondary
market sales, 3.2% of the Public Offering Price (or 65% of the then
current maximum sales charge after _____, 1999). Dealers and other
selling agents will be allowed a concession or agency commission on the
sale of Units sold subject only to any remaining deferred sales charge
payments on such Units equal to (i) $.22 per Unit on Units sold subject
to a deferred sales charge of $___ per Unit or (ii) 63% of the then
current maximum remaining deferred sales charge on Units sold subject to
a deferred sales charge of less than $___ per Unit. Volume concessions
or agency commissions of an additional .30% of the Public Offering Price
on all purchases of Units of the Trust will be given to any
broker/dealer or bank who has aggregate purchases of Trust Units from
the Sponsor on the Initial Date of Deposit of at least $100,000 of the
Trust or purchases $250,000 of the Trust on any day thereafter. In
addition, dealers and other selling agents will receive an additional
volume concession or agency commission with respect to sales of Units of
the Trust in the amounts set forth below:
Additional
Total Sales per Trust Concession
_____________________ __________
$1,000,000 but less than $2,000,000 .10%
$2,000,000 but less than $3,000,000 .15%
$3,000,000 but less than $10,000,000 .20%
$10,000,000 or more .30%
The Sponsor reserves the right to change the amount of the concession or
agency commission from time to time. Certain commercial banks may be
making Units of the Trust available to their customers on an agency
basis. A portion of the sales charge paid by these customers is retained
Page 18
by or remitted to the banks in the amounts indicated above. Under the
Glass-Steagall Act, banks are prohibited from underwriting Trust Units;
however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act. In Texas and in
certain other states, any banks making Units available must be
registered as broker/dealers under state law.
From time to time the Sponsor may implement programs under which
broker/dealers, banks or other selling agents of the Trust may receive
nominal awards from the Sponsor for each of their registered
representatives who have sold a minimum number of UIT Units during a
specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales force of a broker/dealer,
bank or other selling agent may be eligible to win other nominal awards
for certain sales efforts, or under which the Sponsor will reallow to
any such dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Sponsor, or participates in
sales programs sponsored by the Sponsor, an amount not exceeding the
total applicable sales charges on the sales generated by such person at
the public offering price during such programs. Also, the Sponsor in its
discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying dealers for certain
services or activities which are primarily intended to result in sales
of Units of the Trust. Such payments are made by the Sponsor out of its
own assets, and not out of the assets of the Trust. These programs will
not change the price Unit holders pay for their Units or the amount that
the Trust will receive from the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns on the Trust and returns over
specified periods on other similar trusts sponsored by Nike Securities
L.P. with returns on other taxable investments such as corporate or U.S.
Government bonds, bank CDs and money market accounts or money market
funds, each of which has investment characteristics that may differ
from those of the Trust. U.S. Government bonds, for example, are
backed by the full faith and credit of the U.S. Government and bank
CDs and money market accounts are insured by an agency of the federal
government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the
condition of the short-term debt market. The investment characteristics
of the Trust are described more fully elsewhere in this Prospectus.
Information on percentage changes in the dollar value of Units, on the
basis of changes in Unit price may be included from time to time in
advertisements, sales literature, reports and other information
furnished to current or prospective Unit holders. Total return figures
are not averaged, and may not reflect deduction of the sales charge,
which would decrease the return. Average annualized return figures
reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance may not be indicative of future results. The Trust's
portfolio is not managed. Unit price and return fluctuate with the value
of the common stocks in the Trust's portfolio, so there may be a gain or
loss when Units are sold.
The Trust's performance may be compared to performance on a total return
basis with the Dow Jones Industrial Average, the S&P 500 Composite Stock
Price Index, or performance data from Lipper Analytical Services, Inc.
and Morningstar Publications, Inc. or from publications such as Money,
The New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. As with other performance data, performance comparisons should
not be considered representative of the Trust's relative performance for
any future period.
What are the Sponsor's Profits?
The Sponsor of the Trust will receive a gross sales commission equal to
___% of the Public Offering Price of the Units (equivalent to ___% of
the net amount invested, exclusive of the deferred sales charge), less
any reduced sales charge as described under "Public Offering-How is the
Public Offering Price Determined?" See "Public Offering-How are Units
Distributed?" for information regarding additional concessions available
to dealers and others. In addition, the Sponsor may be considered to
have realized a profit or to have sustained a loss, as the case may be,
in the amount of any difference between the cost of the Securities to
the Trust and the cost of such Securities to the Sponsor. See Note (2)
of "Schedule of Investments." During the initial offering period, the
Page 19
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 ___%, subject to
reduction beginning _____, 1999) or redeemed. The secondary market
public offering price of Units may be greater or less than the cost of
such Units to the Sponsor.
Will There be a Secondary Market?
After the initial offering period, although not obligated to do so, the
Sponsor intends to maintain a market for the Units and continuously
offer to purchase Units at prices, subject to change at any time, based
upon the aggregate underlying value of the Securities in the Trust plus
or minus cash, if any, in the Income and Capital Accounts of the Trust.
All expenses incurred in maintaining a secondary market, other than the
fees of the Evaluator and the costs of the Trustee in transferring and
recording the ownership of Units, will be borne by the Sponsor. If the
supply of Units exceeds demand, or for some other business reason, the
Sponsor may discontinue purchases of Units at such prices. IF A UNIT
HOLDER WISHES TO DISPOSE OF HIS OR HER UNITS, HE OR SHE SHOULD INQUIRE
OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR TO MAKING A TENDER FOR
REDEMPTION TO THE TRUSTEE. Units subject to a deferred sales charge
which are sold or tendered for redemption prior to such time as the
entire deferred sales charge on such Units has been collected will be
assessed the amount of the remaining deferred sales charge at the time
of sale or redemption. See "Rights of Unit Holders-How May Units be
Redeemed?"
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units may be evidenced by registered certificates executed
by the Trustee and the Sponsor. Delivery of certificates representing
Units ordered for purchase is normally made three business days
following such order or shortly thereafter. Certificates are
transferable by presentation and surrender to the Trustee properly
endorsed or accompanied by a written instrument or instruments of
transfer. Certificates to be redeemed must be properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unit
holder must sign exactly as his or her name appears on the face of the
certificate with the signature guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guaranty program in addition to, or in substitution for,
STAMP, as may be accepted by the Trustee. In certain instances, the
Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form. The
Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of the Trust; the number of Units issued or transferred; the
name, address and taxpayer identification number, if any, of the new
registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such Units are or may be subject or a
statement that there are no such liens, restrictions or adverse claims;
and the date the transfer was registered. Uncertificated Units are
transferable through the same procedures applicable to Units evidenced
by certificates (described above), except that no certificate need be
presented to the Trustee and no certificate will be issued upon the
transfer unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
Page 20
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income received with respect to any
of the Securities in the Trust on or about the Income Distribution Dates
to Unit holders of record on the preceding Income Distribution Record
Date. See "Summary of Essential Information." Persons who purchase Units
will commence receiving distributions only after such person becomes a
record owner. Notification to the Trustee of the transfer of Units is
the responsibility of the purchaser, but in the normal course of
business such notice is provided by the selling broker/dealer. The pro
rata share of cash in the Capital Account of the Trust will be computed
as of the fifteenth day of each month. Proceeds received on the sale of
any Securities in the Trust, to the extent not used to meet redemptions
of Units or pay expenses, will, however, be distributed on the last day
of each month to Unit holders of record on the fifteenth day of such
month if the amount available for distribution equals at least $0.01 per
Unit. The Trustee is not required to pay interest on funds held in the
Capital Account of the Trust (but may itself earn interest thereon and
therefore benefit from the use of such funds). Notwithstanding,
distributions of funds in the Capital Account, if any, will be made on
the last day of each December to Unit holders of record as of December
15. See "What is the Federal Tax Status of Unit Holders?"
It is anticipated that the deferred sales charge will be collected from
the Capital Account and that amounts in the Capital Account will be
sufficient to cover the cost of the deferred sales charge. However, to
the extent that amounts in the Capital Account are insufficient to
satisfy the then current deferred sales charge obligation, Securities
may be sold to meet such shortfall. Distributions of amounts necessary
to pay the deferred portion of the sales charge will be made to an
account designated by the Sponsor for purposes of satisfying Unit
holders' deferred sales charge obligations.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
the Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder only when filing a tax return. Under
normal circumstances the Trustee obtains the Unit holder's tax
identification number from the selling broker. However, a Unit holder
should examine his or her statements from the Trustee to make sure that
the Trustee has been provided a certified tax identification number in
order to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should be
provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit holder
will, upon surrender of his or her Units for redemption, receive: (i)
the pro rata share of the amounts realized upon the disposition of
Securities, unless he or she elects an In-Kind Distribution as described
under "Other Information-How May the Indenture be Amended or
Terminated?" and (ii) a pro rata share of any other assets of the Trust,
less expenses of the Trust.
The Trustee will credit to the Income Account of the Trust any dividends
received on the Securities therein. All other receipts (e.g. return of
capital, etc.) are credited to the Capital Account of the Trust.
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any governmental charges
payable out of the Trust.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and the amount
of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable period of
time after the end of each calendar year, the Trustee shall furnish to
each person who at any time during the calendar year was a Unit holder
of the Trust the following information in reasonable detail: (1) a
Page 21
summary of transactions in the Trust for such year; (2) any Securities
sold during the year and the Securities held at the end of such year by
the Trust; (3) the redemption price per Unit based upon a computation
thereof on the 31st day of December of such year (or the last business
day prior thereto); and (4) amounts of income and capital distributed
during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his or her Units by
tendering to the Trustee, at its unit investment trust office in the
City of New York, the certificates representing the Units to be
redeemed, or in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments of
transfer with signature guaranteed as explained above (or by providing
satisfactory indemnity, as in connection with lost, stolen or destroyed
certificates), and payment of applicable governmental charges, if any.
No redemption fee will be charged. On the third business day following
such tender, the Unit holder will be entitled to receive in cash an
amount for each Unit equal to the Redemption Price per Unit next
computed after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received by the
Trustee (if such day is a day in which the New York Stock Exchange is
open for trading), except that as regards Units received after 4:00 p.m.
Eastern time (or as of any earlier closing time on a day on which the
New York Stock Exchange is scheduled in advance to close at such earlier
time), the date of tender is the next day on which the New York Stock
Exchange is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units so redeemed shall be cancelled. Units
tendered for redemption prior to such time as the entire deferred sales
charge on such Units has been collected will be assessed the amount of
remaining deferred sales charge at the time of redemption.
Any Unit holder tendering 1,000 Units or more of the Trust for
redemption may request by written notice submitted at the time of tender
from the Trustee, in lieu of a cash redemption, a distribution of shares
of Securities in an amount and value of Securities per Unit equal to the
Redemption Price Per Unit as determined as of the evaluation next
following tender. However, no In-Kind Distribution requests submitted
during the nine business days prior to the Mandatory Termination Date
will be honored. To the extent possible, In-Kind Distributions shall be
made by the Trustee through the distribution of each of the Securities
in book-entry form to the account of the Unit holder's bank or
broker/dealer at the Depository Trust Company. An In-Kind Distribution
will be reduced by customary transfer and registration charges. The
tendering Unit holder will receive his or her pro rata number of whole
shares of each of the Securities comprising the portfolio and cash from
the Capital Account equal to the fractional shares to which the
tendering Unit holder is entitled. The Trustee may adjust the number of
shares of any issue of Securities included in a Unit holder's In-Kind
Distribution to facilitate the distribution of whole shares, such
adjustment to be made on the basis of the value of Securities on the
date of tender. See "What is the Federal Tax Status of Unit Holders?" If
funds in the Capital Account are insufficient to cover the required cash
distribution to the tendering Unit holder, the Trustee may sell
Securities in the manner described above.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unit
holder's tax identification number in the manner required by such
regulations. For further information regarding this withholding, see
"Rights of Unit Holders-How are Income and Capital Distributed?" In the
event the Trustee has not been previously provided such number, one must
be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds are
available for such purpose, or from the Capital Account. All other
amounts paid on redemption shall be withdrawn from the Capital Account
of the Trust.
The Trustee is empowered to sell Securities of the Trust in order to
make funds available for redemption. To the extent that Securities are
sold, the size and diversity of the Trust will be reduced. Such sales
may be required at a time when Securities would not otherwise be sold
and might result in lower prices than might otherwise be realized.
Page 22
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the aggregate
underlying value of the Securities in the Trust plus or minus cash, if
any, in the Income and Capital Accounts of the Trust. The Redemption
Price per Unit is the pro rata share of each Unit determined by the
Trustee by adding: (1) the cash on hand in the Trust other than cash
deposited in the Trust to purchase Securities not applied to the
purchase of such Securities; (2) the aggregate value of the Securities
held in the Trust, as determined by the Evaluator on the basis of the
aggregate underlying value of the Securities in the Trust next computed;
and (3) dividends receivable on the Securities trading ex-dividend as of
the date of computation; and deducting therefrom: (1) amounts
representing any applicable taxes or governmental charges payable out of
the Trust; (2) any amounts owing to the Trustee for its advances; (3) an
amount representing estimated accrued expenses of the Trust, including
but not limited to fees and expenses of the Trustee (including legal and
auditing fees), the Evaluator and supervisory fees, if any; (4) cash
held for distribution to Unit holders of record of the Trust as of the
business day prior to the evaluation being made; and (5) other
liabilities incurred by the Trust; and finally dividing the results of
such computation by the number of Units of the Trust outstanding as of
the date thereof. The redemption price per Unit will be assessed the
amount of the remaining deferred sales charge, if any, at the time of
redemption. Until the earlier of six months after the Initial Date of
Deposit or the end of the initial offering period, the Redemption Price
per Unit will include estimated organizational and offering costs as set
forth under "Summary of Essential Information."
The aggregate value of the Securities will be determined in the
following manner: if the Securities are listed on a national securities
exchange or The Nasdaq Stock Market, this evaluation is generally based
on the closing sale prices on that exchange or that system (unless it is
determined that these prices are inappropriate as a basis for valuation)
or, if there is no closing sale price on that exchange or system, either
at the closing ask prices (during the initial offering period) or the
closing bid prices (subsequent to the initial offering period). If the
Securities are not so listed or, if so listed and the principal market
therefor is other than on the exchange, the evaluation shall generally
be based on the current ask or bid prices (as appropriate) on the over-
the-counter market (unless these prices are inappropriate as a basis for
evaluation). If current ask or bid prices (as appropriate) are
unavailable, the evaluation is generally determined (a) on the basis of
current ask or bid prices (as appropriate) for comparable securities,
(b) by appraising the value of the Securities on the ask or bid side of
the market (as appropriate) or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on the New
York Stock Exchange is restricted or any emergency exists, as a result
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances, the
Sponsor may apply to the Securities and Exchange Commission for an order
permitting a full or partial suspension of the right of Unit holders to
redeem their Units. The Trustee is not liable to any person in any way
for any loss or damage which may result from any such suspension or
postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before 1:00 p.m. Eastern time on the same
business day and by making payment therefor to the Unit holder not later
than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units. In the event the Sponsor does not
purchase Units, the Trustee may sell Units tendered for redemption in
the over-the-counter market, if any, as long as the amount to be
received by the Unit holder is equal to the amount he or she would have
received on redemption of the Units.
The offering price of any Units acquired by the Sponsor will be in
accord with the Public Offering Price described in the then effective
prospectus describing such Units. Any profit or loss resulting from the
resale or redemption of such Units will belong to the Sponsor.
Page 23
How May Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of a Security in the event
that an issuer defaults in the payment of a dividend that has been
declared, that any action or proceeding has been instituted restraining
the payment of dividends or there exists any legal question or
impediment affecting such Security, that the issuer of the Security has
breached a covenant which would affect the payments of dividends, the
credit standing of the issuer or otherwise impair the sound investment
character of the Security, that the issuer has defaulted on the payment
on any other of its outstanding obligations, or that the price of the
Security has declined to such an extent or other such credit factors
exist so that in the opinion of the Sponsor, the retention of such
Securities would be detrimental to the Trust. Except as stated under
"Portfolio-What are Some Additional Considerations for Investors?" for
Failed Contract Obligations, the acquisition by the Trust of any
securities or other property other than the Securities is prohibited.
Pursuant to the Indenture and with limited exceptions, the Trustee may
sell any securities or other property acquired in exchange for
Securities such as those acquired in connection with a merger or other
transaction. If offered such new or exchanged securities or property,
the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by the Trust, they may
be accepted for deposit in the Trust and either sold by the Trustee or
held in the Trust pursuant to the direction of the Sponsor (who may rely
on the advice of the Portfolio Supervisor). Proceeds from the sale of
Securities (or any securities or other property received by the Trust in
exchange for Securities) by the Trustee are credited to the Capital
Account of the Trust for distribution to Unit holders or to meet
redemptions. The Trustee may from time to time retain and pay
compensation to the Sponsor (or an affiliate of the Sponsor) to act as
agent for the Trust with respect to selling Securities from the Trust.
In acting in such capacity the Sponsor or its affiliate will be held
subject to the restrictions under the Investment Company Act of 1940, as
amended.
The Trustee may also sell Securities designated by the Sponsor, or if
not so directed, in its own discretion, for the purpose of redeeming
Units of the Trust tendered for redemption and the payment of expenses.
The Sponsor, in designating Securities to be sold by the Trustee, will
generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares
of individual issues of Securities. To the extent this is not
practicable, the composition and diversity of the Securities may be
altered. In order to obtain the best price for the Trust, it may be
necessary for the Sponsor to specify minimum amounts (generally 100
shares) in which blocks of Securities are to be sold. The Sponsor may
consider sales of Units of unit investment trusts which it sponsors in
making recommendations to the Trustee as to the selection of
broker/dealers to execute the Trust's portfolio transactions.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, FT Series (formerly known as The First Trust Special Situations
Trust), The First Trust Insured Corporate Trust, The First Trust of
Insured Municipal Bonds and The First Trust GNMA. First Trust introduced
the first insured unit investment trust in 1974 and to date more than
$20 billion in First Trust unit investment trusts have been deposited.
The Sponsor's employees include a team of professionals with many years
of experience in the unit investment trust industry. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and
Securities Investor Protection Corporation and has its principal offices
at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number (630)
241-4141. As of December 31, 1997, the total partners' capital of Nike
Securities L.P. was $11,724,071 (audited). This paragraph relates only
to the Sponsor and not to the Trust or to any series thereof or to the
Underwriter. The information is included herein only for the purpose of
informing investors as to the financial responsibility of the Sponsor
and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.
Page 24
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trust may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the Securities. For information
relating to the responsibilities of the Trustee under the Indenture,
reference is made to the material set forth under "Rights of Unit
Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Securities. In the event of the failure of the
Sponsor to act under the Indenture, the Trustee may act thereunder and
shall not be liable for any action taken by it in good faith under the
Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of the Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532. The
Evaluator may resign or may be removed by the Sponsor or the Trustee, in
which event the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor
Evaluator. If upon resignation of the Evaluator no successor has
accepted appointment within 30 days after notice of resignation, the
Page 25
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the Mandatory
Termination Date indicated herein under "Summary of Essential
Information." The Trust may be liquidated at any time by consent of 100%
of the Unit holders of the Trust or by the Trustee when the value of the
Securities owned by the Trust as shown by any evaluation, is less than
the lower of $2,000,000 or 20% of the total value of Securities
deposited in such Trust during the initial offering period, or in the
event that Units of the Trust not yet sold aggregating more than 60% of
the Units of the Trust are tendered for redemption by underwriters,
including the Sponsor. If the Trust is liquidated because of the
redemption of unsold Units of the Trust by underwriters, the Sponsor
will refund to each purchaser of Units of the Trust the entire sales
charge and the transaction fees paid by such purchaser. In the event of
termination, written notice thereof will be sent by the Trustee to all
Unit holders of the Trust. Within a reasonable period after termination,
the Trustee will follow the procedures set forth under "Rights of Unit
Holders-How are Income and Capital Distributed?"
Commencing during the period beginning nine business days prior to and
no later than the Mandatory Termination Date, Securities will begin to
be sold in connection with the termination of the Trust. The Sponsor
will determine the manner, timing and execution of the sale of the
Securities. Written notice of any termination of the Trust specifying
the time or times at which Unit holders may surrender their certificates
for cancellation shall be given by the Trustee to each Unit holder at
his or her address appearing on the registration books of the Trust
maintained by the Trustee. At least 60 days prior to the Maturity Date
of the Trust, the Trustee will provide written notice thereof to all
Unit holders and will include with such notice a form to enable Unit
holders to elect a distribution of shares of Securities (reduced by
customary transfer and registration charges), if such Unit holder owns
at least 1,000 Units of the Trust, rather than to receive payment in
cash for such Unit holder's pro rata share of the amounts realized upon
the disposition by the Trustee of Securities. To be effective, the
election form, together with surrendered certificates and other
documentation required by the Trustee, must be returned to the Trustee
at least ten business days prior to the Mandatory Termination Date of
the Trust. Unit holders not electing a distribution of shares of
Securities will receive a cash distribution from the sale of the
remaining Securities within a reasonable time after the Trust is
terminated. Regardless of the distribution involved, the Trustee will
deduct from the funds of the Trust any accrued costs, expenses, advances
or indemnities provided by the Indenture, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to provide for payment of any applicable taxes or
other governmental charges. Any sale of Securities in the Trust upon
termination may result in a lower amount than might otherwise be
realized if such sale were not required at such time. In addition, to
the extent that Securities are sold prior to the Mandatory Termination
Date, Unit holders will not benefit from any stock appreciation they
would have received had the Securities not been sold at such time. The
Trustee will then distribute to each Unit holder his or her pro rata
share of the balance of the Income and Capital Accounts.
Page 26
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 27
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
FT 302
We have audited the accompanying statement of net assets, including the
schedule of investments, of FT 302, comprised of Preferred Dividend
Income Trust Series, as of the opening of business on ____________,
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 ____________,
1998. An audit also includes assessing the accounting principles used
and significant estimates made by the Sponsor, as well as evaluating the
overall presentation of the statement of net assets. We believe that our
audit of the statement of net assets provides a reasonable basis for our
opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of FT 302,
comprised of Preferred Dividend Income Trust Series, at the opening of
business on ____________, 1998 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
____________, 1998
Page 28
Statement of Net Assets
PREFERRED DIVIDEND INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-____________, 1998
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Securities represented by purchase contracts (1) (2) $
Less accrued organizational and offering costs (3) ( )
Less liability for deferred sales charge (4) ( )
__________
Net assets $
==========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $
Less sales charge (5) ( )
Less estimated organizational and offering costs (3) ( )
__________
Net assets $
==========
</TABLE>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $ issued by The
Chase Manhattan Bank has been deposited with the Trustee as collateral,
which is sufficient to cover the monies necessary for the purchase of
the Securities pursuant to contracts for the purchase of such Securities.
(3) A portion of the Public Offering Price on Units purchased prior to
the earlier of six months after the Initial Date of Deposit or the end
of the initial offering period consists of Securities in an amount
sufficient to pay for all or a portion of the costs incurred in
establishing the Trust. These costs have been estimated at $___ per
Unit, based upon the expected number of Units of the Trust to be
created. A distribution will be made at the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period to
an account maintained by the Trustee from which the organizational and
offering cost obligations of the investors to the Sponsor will be
satisfied. To the extent the number of Units of the Trust is larger or
smaller than the estimate, the actual distribution per Unit may differ
from that set forth above.
(4) Represents the amount of mandatory distributions from the Trust
($___ per Unit), payable to the Sponsor in five equal monthly
installments beginning on ____________, 1999, and on the twentieth day
of each month thereafter (or if such day is not a business day, on the
preceding business day) through ____________, 1999. If Units are
redeemed prior to ____________, 1999, the remaining amount of the
deferred sales charge applicable to such Units will be payable at the
time of redemption.
(5) The aggregate cost to investors includes a sales charge computed at
the rate of ___% of the Public Offering Price (equivalent to ___% of the
net amount invested, exclusive of the deferred sales charge), assuming
no reduction of sales charge as set forth under "Public Offering-How is
the Public Offering Price Determined?"
Page 29
Schedule of Investments
PREFERRED DIVIDEND INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-____________, 1998
<TABLE>
<CAPTION>
Moody's
Standard & Investors Approximate Par or
Poor's Service, Inc. Percentage Stated
Number Preferred Preferred of Aggregate Optional Value Cost of
of Stock Stock Offering Redemption per Securities
Shares Name of Issue of Preferred Securities (1) Ratings (2) Ratings (2) Price (6) Provisions (3) Share to Trust (4)
______ _________________________________________ __________ ____________ ____________ ______________ _______ ____________
<C> <S> <C> <C> <C> <C> <C> <C>
AMBAC Financial Group % $ $
Agrium Inc. (5) %
Alabama Power Co. %
American Express Company %
Capital Trust I
Australia & New Zealand Banking %
Group Ltd. (5)
BGE Capital Trust I %
BankAmerica Capital IV %
Barclays Bank Plc (5) %
Chase Capital Trust V %
Citicorp Capital III %
Developers Diversified Realty %
Dillards Capital Trust %
Duke Capital Financing %
Duquesne Light Co. %
Enterprise Capital Trust I %
Enterprise Capital Trust III %
Equitable Resources Capital Trust %
First Industrial Realty %
Fleet Capital Trust III %
Fleet Capital Trust IV %
Georgia Power %
Gulf Power Capital Trust II %
Harris Preferred Capital %
Hartford Life Capital I %
Highwoods Properties, Inc. %
Household Capital Trust IV %
Indiana Michigan Power %
International Paper Capital Trust II %
ML Capital Trust IV (Merrill) %
MSDW Capital Trust I %
</TABLE>
Page 30
Schedule of Investments (cont'd.)
PREFERRED DIVIDEND INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-____________, 1998
<TABLE>
<CAPTION>
Moody's
Standard & Investors Approximate Par or
Poor's Service, Inc. Percentage Stated
Number Preferred Preferred of Aggregate Optional Value Cost of
of Stock Stock Offering Redemption per Securities
Shares Name of Issue of Preferred Securities (1) Ratings (2) Ratings (2) Price (6) Provisions (3) Share to Trust (4)
_______ _________________________________________ _________ ___________ ___________ _____________ ______ ___________
<C> <S> <C> <C> <C> <C> <C> <C>
National Rural Utility % $ $ $
National Westminster Bank (5) %
Ohio Power Company %
Post Properties Inc. %
Potomac Electric Power Trust I %
ProLogis Trust %
Public Storage, Inc. %
SSBH Capital Trust %
Sears Roebuck Acceptance %
Shaw Communications Inc. %
Southern Company Capital Trust IV %
Southwestern Bell Telephone %
U.S. Bancorp Capital II %
Weingarten Realty Investment %
_______ ________
Total Investments 100% $
======= ========
____________
<FN>
(1) All Securities are represented by regular way contracts to purchase
such Securities for the performance of which an irrevocable letter of
credit has been deposited with the Trustee. The contracts to purchase
Securities were entered into by the Sponsor on _____, 1998.
(2) For a brief description of the rating symbols and their related
meanings, see "Description of Preferred Stock Ratings."
(3) The Preferred Securities are first redeemable on such date and at
such price as listed above. Optional redemption provisions, which may be
exercised in whole or in part, are initially at prices of par or stated
value plus a premium, then subsequently at prices declining to par or
stated value. Optional redemption provisions generally will occur at
times when the redeemed securities have an offering side evaluation
which represents a premium over par or stated value. To the extent that
the securities were acquired at a price higher than the redemption
price, this will represent a loss of capital when compared with the
Public Offering Price of the Units when acquired. Distributions will
generally be reduced by the amount of the dividends which would
otherwise have been paid with respect to redeemed securities and there
will be distributed to Unit holders any principal amount and premium
received on such redemption after satisfying any redemption requests for
Units received by the Trust.
(4) The cost of the Securities to the Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the last sale prices of the listed Securities and the ask
prices of the over-the-counter traded Securities on the business day
preceding the Initial Date of Deposit). The valuation of the Securities
has been determined by the Evaluator, an affiliate of the Sponsor. The
aggregate underlying value of the Securities on the Initial Date of
Deposit was $ . Cost and loss to Sponsor relating to the Securities
sold to the Trust were $ and $ , respectively.
(5) This Security represents the preferred stock of a foreign company
which trades directly on a United States national securities exchange.
(6) The portfolio may contain additional Securities each of which will
not exceed approximately % of the Aggregate Offering Price.
Although it is not the Sponsor's intention, certain of the Securities
listed above may not be included in the final portfolio. Also, the
percentages of the Aggregate Offering Price for the Securities are
approximate amounts and may vary in the final portfolio.
</FN>
</TABLE>
Page 31
DESCRIPTION OF PREFERRED STOCK RATINGS*
Standard & Poor's. A Standard & Poor's preferred stock rating is an
assessment of the capacity and willingness of an issuer to pay preferred
stock dividends and any applicable sinking fund obligations. A preferred
stock rating differs from a bond rating inasmuch as it is assigned to an
equity issue, which issue is intrinsically different from, and
subordinated to, a debt issue. Therefore, to reflect this difference,
the preferred stock rating symbol will normally not be higher than the
bond rating symbol assigned to, or that would be assigned to, the senior
debt of the same issuer.
The preferred stock ratings are based on the following considerations:
I. Likelihood of payment-capacity and willingness of the issuer to
meet the timely payment of preferred stock dividends and any applicable
sinking fund requirements in accordance with the terms of the obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
"AAA" This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated AAA.
"A" An issued rated A is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions.
"BBB" An issue rated BBB is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the A
category.
"BB," "B," "CCC" Preferred stock issues rated BB, B and CCC are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the
lowest degree of speculation and CCC the highest degree of speculation.
While such issues will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
Moody's. Moody's Rating Policy Review Board extended its rating services
to include quality designations on preferred stock on October 1, 1973.
The decision to rate preferred stock, which Moody's had done prior to
1935, was prompted by evidence of investor interest. Moody's believes
that its rating of preferred stock is especially appropriate in view of
the ever-increasing amount of these securities outstanding, and the fact
that continuing inflation and its ramifications have resulted generally
in the dilution of some of the protection afforded them as well as other
fixed-income securities.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
Preferred stock rating symbols and their definitions are as follows:
"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred stocks.
"aa" An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that
earnings and asset protection will remain relatively well-maintained in
the foreseeable future.
_____________
As published by Standard & Poor's and Moody's, respectively.
Page 32
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classification, earnings and asset protection
are, nevertheless, expected to be maintained at adequate levels.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
*"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
"b" An issue which is rated "b" generally lacks the characteristics of
a desirable investment. Assurance of dividend payments and maintenance
of other terms of the issue over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate
the future status of payments.
"ca" An issue which is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little likelihood of
eventual payments.
"c" This is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Page 33
This page is intentionally left blank.
Page 34
This page is intentionally left blank.
Page 35
CONTENTS:
Summary of Essential Information 4
Preferred Dividend Income Trust Series
FT 302:
What is the FT Series? 6
What are the Expenses and Charges? 7
What is the Federal Tax Status of Unit Holders? 8
Are Investments in the Trust Eligible for
Retirement Plans? 11
Portfolio:
What are the Securities? 12
Who are the Preferred Stock Insurers? 12
Risk Factors 13
What are Some Additional Considerations
for Investors? 14
Public Offering:
How is the Public Offering Price Determined? 15
How are the Units Distributed? 18
What are the Sponsor's Profits? 19
Will There be a Secondary Market? 20
Rights of Unit Holders:
How is Evidence of Ownership Issued
and Transferred? 20
How are Income and Capital Distributed? 21
What Reports will Unit Holders Receive? 21
How May Units be Redeemed? 22
How May Units be Purchased by the Sponsor? 23
How May Securities be Removed from the Trust? 24
Information as to Sponsor, Trustee
and Evaluator:
Who is the Sponsor? 24
Who is the Trustee? 25
Limitations on Liabilities of Sponsor and Trustee 25
Who is the Evaluator? 25
Other Information:
How May the Indenture be Amended or Terminated? 26
Legal Opinions 27
Experts 27
Report of Independent Auditors 28
Statement of Net Assets 29
Notes to Statement of Net Assets 29
Schedule of Investments 30
Description of Preferred Stock Ratings 32
____________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
PREFERRED DIVIDEND INCOME TRUST SERIES
Nike Securities, L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
____________, 1998
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 36
MEMORANDUM
Re: FT 302
As indicated in our cover letter transmitting the
Registration Statement on Form S-6 and other related material
under the Securities Act of 1933 to the Commission, the only
difference of consequence (except as described below) between FT
273, which is the current fund, and FT 302, the filing of which
this memorandum accompanies, is the change in the series number.
The list of securities comprising the Fund, the evaluation,
record and distribution dates and other changes pertaining
specifically to the new series, such as size and number of Units
in the Fund and the statement of condition of the new Fund, will
be filed by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of Templeton Growth and Treasury Trust, Series 1
and subsequent series (File No. 811-05903) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 273 Prospectus relate to the series number and size and
the date and various items of information which will be derived
from and apply specifically to the bonds deposited in the Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Broker's Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
ITEM B This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 302 has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on December 7, 1998.
FT 302
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
Robert D. Van Kampen Director of
Nike Securities December 7, 1998
Corporation, the
General Partner of
Nike Securities L.P. Robert M. Porcellino
Attorney-in-Fact**
David J. Allen Director of
Nike Securiites
Corporation, the
General Partner of
Nike Securities L.P.
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to form S-6 of The First Trust Combined
Series 258 (File No. 33-63483) and the same is hereby
incorporated by this reference.
S-2
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF ERNST & YOUNG LLP
The consent of Ernst & Young LLP to the use of its name and
to the reference to such firm in the Prospectus included in this
Registration Statement will be filed by amendment.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement is
filed as Exhibit 4.1 to the Registration Statement.
S-3
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and Nike
Financial Advisory Services L.P. as Portfolio Supervisor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-43693] filed on behalf of The First Trust
Special Situations Trust, Series 22).
1.1.1* Form of Trust Agreement for Series 302 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank,
as Trustee and First Trust Advisors L.P., as Evaluator
and Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42683] filed on behalf of The
First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
3.1* Opinion of counsel as to legality of Securities being
registered.
3.2* Opinion of counsel as to Federal income tax status of
Securities being registered.
S-4
3.3* Opinion of counsel as to New York income tax status of
Securities being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
4.1* Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-63483] filed on behalf of The First Trust Combined
Series 258).
___________________________________
* To be filed by amendment.
S-5
