Registration No. 333-64587
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to Form S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
FT 302
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
E. Title of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as
amended
F. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
|XXX|Check box if it is proposed that this filing will become
effective on December 18, 1998 at 2:00 p.m. pursuant to Rule
487.
________________________________
Preferred Income Trust Series
The Trust. FT 302 (the "Trust") is a unit investment trust consisting of
a portfolio of preferred securities selected to provide the potential
for a high level of current income and capital preservation.
The objective of the Trust is to provide the potential for a high level
of current income and capital preservation by investing the Trust's
portfolio in the preferred securities. See "Schedule of Investments."
The preferred securities consist of preferred stock issued by
corporations (the "Preferred Stocks") and preferred securities issued by
corporations, generally in the form of interest-bearing notes or
preferred securities issued by corporations, or by business trust affiliates
of corporations, which generally represent beneficial ownership
interests in subordinated debentures issued by the corporation, or
similarly structured securities (the "Trust Preferred Securities").
Collectively, the Preferred Stocks and Trust Preferred Securities may be
referred to as the "Securities"). The Trust has a mandatory termination
date ("Mandatory Termination Date" or "Trust Ending Date") as set forth
under "Summary of Essential Information." There is, of course, no
guarantee that the objective of the Trust will be achieved.
Each Unit of the Trust represents an undivided fractional interest in
all the Securities deposited in the Trust. Although the Preferred Stocks
have no stated maturity date and the Trust Preferred Securities
deposited in the Trust each have fixed maturity dates occurring after
the Mandatory Termination Date, certain of the Securities may be called,
or may be redeemed pursuant to extraordinary redemption provisions,
prior to the Mandatory Termination Date of the Trust. The value of the
Securities will fluctuate with changes in the financial condition of the
issuers, with changes in interest rates and market liquidity and with
changes in the values of preferred securities in general. In particular,
increasing interest rates will reduce the value of the Securities held
in the Trust, as well as the value of the Units. Because certain of the
Securities may be redeemed or called prior to the Mandatory Termination
Date and because Securities at the Mandatory Termination Date will be
trading at their current market value, for investors purchasing on or
about the Initial Date of Deposit you will likely receive redemption or
termination proceeds which are less than the amount you invested. See
"Portfolio-Risk Factors."
The Sponsor may, from time to time during a period of up to
approximately 360 days after the Initial Date of Deposit, deposit
additional Securities or cash (including a letter of credit) with
instructions to purchase additional Securities in the Trust. Such
deposits of additional Securities or cash will be done in such a manner
that the original proportionate relationship among the individual issues
of the Securities shall be maintained. Any deposit by the Sponsor of
additional Securities, or the purchase of additional Securities pursuant
to a cash deposit, will duplicate, as nearly as is practicable, the
original proportionate relationship established on the Initial Date of
Deposit, and not the actual proportionate relationship on the subsequent
Date of Deposit, since the two may differ. Any such difference may be
due to the sale, redemption or liquidation of any Securities deposited
in the Trust on the Initial, or any subsequent, Date of Deposit. See
"What is the FT Series?" and "Rights of Unit Holders-How May Securities
be Removed from the Trust?"
Public Offering Price. The Public Offering Price per Unit of the Trust
during the initial offering period is equal to the aggregate underlying
value of the Securities in the Trust (generally determined by the
closing sale prices of listed Securities and the ask prices of over-the-
counter traded Securities) plus or minus a pro rata share of cash, if
any, in the Capital and Income Accounts of the Trust, plus an initial
sales charge equal to the difference between the maximum sales charge of
4.5% of the Public Offering Price and the maximum remaining deferred
sales charge, initially $.35 per Unit, divided by the number of Units of
the
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
First Trust (registered trademark)
1-800-621-9533
The date of this Prospectus is December 18, 1998
Page 1
Trust outstanding. Commencing on August 20, 1999, and on the twentieth
day of each month thereafter (or if such day is not a business day, on
the preceding business day) through December 20, 1999, a deferred sales
charge of $.07 will be assessed per Unit per month. Units purchased
subsequent to the initial deferred sales charge payment but still during
the initial offering period will be subject to the initial sales charge
and the remaining deferred sales charge payments not yet collected. The
deferred sales charge will be paid from funds in the Capital Account, if
sufficient, or from the periodic sale of Securities. The total maximum
sales charge assessed to Unit holders on a per Unit basis will be 4.5%
of the Public Offering Price (equivalent to 4.545% of the net amount
invested, exclusive of the deferred sales charge.) A pro rata share of
accumulated interest or dividends, if any, in the Income Account is
included in the Public Offering Price. In addition, a portion of the
Public Offering Price on Units purchased prior to the earlier of six
months after the Initial Date of Deposit or the end of the initial
offering period also consists of Securities in an amount sufficient to
pay for all or a portion of the costs incurred in establishing the
Trust. The organizational and offering costs will be deducted from the
assets of the Trust as of the earlier of six months after the Initial
Date of Deposit or the end of the initial offering period. Upon
completion of the deferred sales charge period, the secondary market
Public Offering Price per Unit for the Trust will not include deferred
payments, but will instead include only a one-time initial sales charge
of 4.5% of the Public Offering Price (equivalent to 4.712% of the net
amount invested), which will be reduced by 1/2 of 1% on each December
31, commencing December 31, 1999 to a minimum sales charge of 3.0%. The
minimum amount which an investor may purchase of the Trust is $1,000
($500 for Individual Retirement Accounts or other retirement plans). The
sales charge is reduced on a graduated scale for sales involving at
least $50,000. See "Public Offering-How is the Public Offering Price
Determined?"
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE INVESTMENT RISK
INCLUDING LOSS OF PRINCIPAL.
Estimated Net Annual Distributions. The estimated net annual
distribution to Unit holders (based on the most recent annualized
dividend or interest paid with respect to the Securities in the Trust)
on the Initial Date of Deposit was $.7144 per Unit during the first year
and $.6943 per Unit in subsequent years. The estimated net annual
distribution per Unit during the first year of the Trust is expected to
be greater than during subsequent years because Securities included in
the Trust to pay for organizational and offering costs and the deferred
sales charge will be sold during the first year. The actual net annual
distribution per Unit during the first year and subsequent years will
vary with changes in fees and expenses of the Trust, with changes in
interest or dividends received and with the sale, redemption or
liquidation of Securities; therefore, there is no assurance that the net
annual distribution will be realized in the future.
Distributions. Distributions of dividends, interest and capital, if any,
will be paid on the Income Distribution Date to Unit holders of record
on the preceding Income Distribution Record Date as set forth in the
"Summary of Essential Information." Distributions of funds in the
Capital Account, if any, will be made at least annually in December of
each year. Any distribution of income and/or capital will be net of the
expenses of the Trust. See "What is the Federal Tax Status of Unit
Holders?" Additionally, upon termination of the Trust, the Trustee will
distribute, upon surrender of Units for redemption, to each Unit holder
his or her pro rata share of the Trust's assets, less expenses, in the
manner set forth under "Rights of Unit Holders-How are Income and
Capital Distributed?"
Secondary Market for Units. After the initial offering period, while
under no obligation to do so, the Sponsor intends to maintain a market
for Units of the Trust and offer to repurchase such Units at prices
which are based on the aggregate underlying value of Securities in the
Trust (generally determined by the closing sale prices of listed
Securities and the bid prices of over-the-counter traded Securities)
plus or minus cash, if any, in the Capital and Income Accounts of the
Trust. If a secondary market is maintained during the initial offering
period, the prices at which Units will be repurchased will also be based
upon the aggregate underlying value of the Securities in the Trust
(generally determined by the closing sale prices of listed Securities
and the ask prices of over-the-counter traded Securities) plus or minus
cash, if any, in the Capital and Income Accounts of the Trust. If a
secondary market is not maintained, a Unit holder may redeem Units
through redemption at prices based upon the aggregate underlying value
of the Securities in the Trust (generally determined by the closing sale
prices of listed Securities and either the ask prices (during the
Page 2
initial offering period) or the bid prices (subsequent to the initial
offering period) of over-the-counter traded Securities) plus or minus a
pro rata share of cash, if any, in the Capital and Income Accounts of
the Trust. A Unit holder tendering 1,000 Units or more for redemption
may request a distribution of shares of Securities (reduced by customary
transfer and registration charges) (an "In-Kind Distribution") in lieu
of payment in cash. Any deferred sales charge remaining on Units at the
time of their sale or redemption will be collected at that time. See
"Rights of Unit Holders-How May Units be Redeemed?"
Termination. Commencing no later than the Mandatory Termination Date,
Securities will begin to be sold as prescribed by the Sponsor. The
Trustee shall provide written notice of any termination of the Trust to
Unit holders which will specify when Unit holders may surrender their
certificates for cancellation and will include a form to enable Unit
holders to elect an In-Kind Distribution if such Unit holder owns at
least 1,000 Units of the Trust, rather than to receive payment in cash
for such Unit holder's pro rata share of the amounts realized upon the
disposition by the Trustee of Securities. To be effective, the election
form, together with surrendered certificates and other documentation
required by the Trustee, must be returned to the Trustee at least ten
business days prior to the Mandatory Termination Date. Unit holders not
electing a distribution of shares of Securities will receive a cash
distribution within a reasonable time after the Trust is terminated. See
"Rights of Unit Holders-How are Income and Capital Distributed?" and
"Other Information-How May the Indenture be Amended or Terminated?"
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the possible deterioration of either the financial condition of
the issuers of the Securities or the general condition of the stock
market, market liquidity or an economic recession. Volatility in the
market price of the Securities in the Trust also changes the value of
the Units of the Trusts. Unit holders tendering Units for redemption
during periods of market volatility may receive redemption proceeds
which are more or less than they paid for the Units. Preferred
securities are also sensitive to changes in interest rates. The market
price of preferred securities generally falls with rising interest
rates. In addition, although falling interest rates generally lead to an
increase in the market price of preferred securities, preferred
securities are more likely to be called for redemption in a declining
interest rate environment. In addition, because certain of the
Securities may be redeemed or called prior to the Mandatory Termination
Date and because Securities at the Mandatory Termination Date will be
trading at their current market value, for investors purchasing on or
about the Initial Date of Deposit you will likely receive redemption or
termination proceeds which are less than the amount you
invested. The Trust's portfolio is not managed and Securities will not
be sold by the Trust regardless of market fluctuations, although some
Securities may be sold under certain limited circumstances. See
"Portfolio-Risk Factors."
Page 3
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Securities-December 18, 1998
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
General Information
<S> <C>
Initial Number of Units (1) 15,005
Fractional Undivided Interest in the Trust per Unit (1) 1/15,005
Public Offering Price:
Aggregate Offering Price Evaluation of Securities in Portfolio (2) $148,551
Aggregate Offering Price Evaluation of Securities per Unit $ 9.900
Maximum Sales Charge of 4.5% of the Public Offering Price per Unit
(4.545% of the net amount invested, exclusive of the deferred sales charge) (3) $ .450
Less Deferred Sales Charge per Unit $ (.350)
Public Offering Price per Unit (3) $ 10.000
Sponsor's Initial Repurchase Price per Unit (4) $ 9.550
Redemption Price per Unit (based on aggregate underlying value
of Securities less the deferred sales charge) (4) $ 9.550
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
CUSIP Number 30264S 742
Security Code 56289
First Settlement Date December 23, 1998
Mandatory Termination Date December 31, 2003
Discretionary Liquidation Amount The Trust may be terminated if the value thereof is less than the
lower of $2,000,000 or 20% of the total value of Securities
deposited in the Trust during the initial offering period.
Trustee's Annual Fee $.0096 per Unit outstanding.
Evaluator's Annual Fee $.0030 per Unit outstanding, payable to an affiliate of the
Sponsor. Evaluations for purposes of sale, purchase or redemption
of Units are made as of the close of trading (generally 4:00 p.m.
Eastern time) on the New York Stock Exchange on each day on which
it is open.
Portfolio Supervisor's Annual Fee (5) $.0035 per Unit outstanding, payable to an affiliate of the
Sponsor.
Estimated Organizational and Offering Costs (6) $.0085 per Unit.
Income Distribution Record Date Fifteenth day of each month commencing January 15, 1999.
Income Distribution Date (7) Last day of each month commencing January 31, 1999.
_________________
<FN>
(1) As of the close of business on the Initial Date of Deposit, the
number of Units of the Trust may be adjusted so that the Public Offering
Price per Unit will equal approximately $10.00. Therefore, to the extent
of any such adjustment, the fractional undivided interest per Unit will
increase or decrease accordingly, from the amounts indicated above.
(2) Each listed Security is valued at the last closing sale price, or if
no such price exists or if the Security is not so listed, at the closing
ask price thereof.
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" and "Public Offering" for
additional information regarding these charges. On the Initial Date of
Deposit there will be no accumulated dividends in the Income Account.
Anyone ordering Units after such date will pay a pro rata share of any
accumulated dividends or interest in such Income Account. The Public
Offering Price as shown reflects the value of the Securities at the
opening of business on the Initial Date of Deposit and establishes the
original proportionate relationship amongst the individual Securities.
No sales to investors will be executed at this price. Additional
Securities will be deposited during the day of the Initial Date of
Deposit which will be valued as of 4:00 p.m. Eastern time and sold to
investors at a Public Offering Price per Unit based on this valuation.
(4) The Sponsor's Initial Repurchase Price per Unit and the Redemption
Price per Unit set forth above and until the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period
include estimated organizational and offering costs per Unit. After such
date, the Sponsor's Repurchase Price and Redemption Price per Unit will
not include such estimated organizational and offering costs. See
"Rights of Unit Holders-How May Units be Redeemed?"
(5) In addition, the Sponsor will be reimbursed for bookkeeping and
other administrative expenses currently at a maximum annual rate of
$.0033 per Unit.
(6) Investors will bear all or a portion of the costs incurred in
organizing the Trust (including costs of preparing the registration
statement, the Trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio, legal fees and the initial fees
and expenses of the Trustee but not including the expenses incurred in
the printing of preliminary and final prospectuses, and expenses
incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses). Estimated
organizational and offering costs are included in the Public Offering
Price per Unit and will be deducted from the assets of the Trust at the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period. See "Public Offering" and "Statement of Net
Assets."
(7) Distributions from the Capital Account will be made monthly payable
on the last day of the month to Unit holders of record on the fifteenth
day of such month if the amount available for distribution equals at
least $0.01 per Unit. Notwithstanding, distributions of funds in the
Capital Account, if any, will be made in December of each year.
</FN>
</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 five 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) 1.00%(a) $.100
Deferred sales charge
(as a percentage of public offering price) 3.50%(b) .350
________ ________
4.50% $.450
======== ========
ORGANIZATIONAL AND OFFERING COSTS
Estimated Organizational and Offering Costs
(as a percentage of public offering price) .085%(c) $.0085
======== ========
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(as a percentage of average net assets)
Trustee's fee .098% $.0096
Portfolio supervision, bookkeeping, administrative and evaluation fees .101% .0098
Other operating expenses .049% .0049
________ ________
Total .248% $.0243
======== ========
</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 Income Trust Series has an estimated operating
expense ratio of .248% and a 5% annual return on the investment
throughout the periods $ 48 $ 53 $ 59
The example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and
Exchange Commission regulations applicable to mutual funds. For purposes
of the example, the deferred sales charge imposed on reinvestment of
dividends and interest is not reflected until the year following payment
of the dividend or interest; the cumulative expenses would be higher if
sales charges on reinvested dividends or interest were reflected in the
year of reinvestment. The example should not be considered a
representation of past or future expenses or annual rate of return; the
actual expenses and annual rate of return may be more or less than those
assumed for purposes of the example.
________________
<FN>
(a) The initial sales charge is actually the difference between the
maximum total sales charge of 4.5% and the maximum remaining deferred
sales charge (initially $.35 per Unit) and would exceed 1% if the Public
Offering Price exceeds $10.00 per Unit.
(b) The actual fee is $.07 per Unit per month, irrespective of purchase
or redemption price deducted monthly commencing August 20, 1999 through
December 20, 1999. If a Unit holder sells or redeems Units before all of
these deductions have been made, the balance of the deferred sales
charge payments remaining will be deducted from the sales or redemption
proceeds. If the Unit price is less than $10.00 per Unit, the deferred
sales charge will exceed 3.5%. Units purchased subsequent to the initial
deferred sales charge payment will be subject to the initial sales
charge and any remaining deferred sales charge payments not yet collected.
(c) Investors will bear all or a portion of the costs incurred in
organizing the Trust (including costs of preparing the registration
statement, the Trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio, legal fees and the initial fees
and expenses of the Trustee). Estimated organizational and offering
costs are included in the Public Offering Price per Unit and will be
deducted from the assets of the Trust at the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period.
</FN>
</TABLE>
Page 5
PREFERRED INCOME TRUST SERIES
FT 302
What is the FT Series?
FT 302 is one of a series of investment companies created by the Sponsor
under the name of the FT Series, all of which are generally similar but
each of which is separate and is designated by a different series
number. The FT Series was formerly known as The First Trust Special
Situations Trust Series. This Series consists of an underlying separate
unit investment trust designated as: Preferred Income Trust Series. The
Trust was created under the laws of the State of New York pursuant to a
Trust Agreement (the "Indenture"), dated the Initial Date of Deposit,
with Nike Securities L.P. as Sponsor, The Chase Manhattan Bank as
Trustee and First Trust Advisors L.P. as Portfolio Supervisor and
Evaluator.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
confirmations of contracts for the purchase of preferred securities,
together with an irrevocable letter or letters of credit of a financial
institution in an amount at least equal to the purchase price of such
Securities. In exchange for the deposit of Securities or contracts to
purchase Securities in the Trust, the Trustee delivered to the Sponsor
documents evidencing the entire ownership of the Trust.
The objective of the Trust is to provide the potential for a high level
of current income and capital preservation by investing the Trust's
portfolio in the Securities. The Securities consist of both Preferred
Stocks and Trust Preferred Securities.
Preferred stocks are unique securities that combine some of the
characteristics of both common stocks and bonds. Preferred stocks
generally pay a fixed rate of return and are sold on the basis of
current yield, like bonds. However, because they are equity securities,
preferred stocks provide equity ownership of a company and the income is
paid in the form of dividends. Preferred stocks typically have a yield
advantage over common stocks as well as comparably rated fixed income
investments.
Trust Preferred Securities are limited-life preferred securities that
are typically issued by corporations, generally in the form of interest-
bearing notes or preferred securities issued by corporations, or by an
affiliated business trust of a corporation, generally in the form of
beneficial interests in subordinated debentures issued by the
corporation, or similarly structured securities. The maturity and
dividend rate of the Trust Preferred Securities are structured to match
the maturity and coupon interest rate of the interest-bearing notes,
preferred securities or subordinated debentures. Trust Preferred
Securities usually mature on the stated maturity date of the interest-
bearing notes, preferred securities or subordinated debentures and may
be redeemed or liquidated prior to the stated maturity date of such
instruments for any reason on or after their stated call date or upon the
occurrence of certain extraordinary circumstances at any time. Trust
Preferred Securities generally have a yield advantage over traditional
preferred stocks, but unlike preferred stocks, distributions on the
Trust Preferred Securities are treated as interest rather than dividends
for Federal income tax purposes.
Each of the Securities included in the Trust have been carefully
selected by a team of experienced financial professionals utilizing
database screening techniques and fundamental analysis and are rated
"BBB-" or better by Standard & Poor's Corporation. There is, however, no
assurance that the objective of the Trust will be achieved. See
"Portfolio-Risk Factors."
With the deposit of the Securities on the Initial Date of Deposit, the
Sponsor established a percentage relationship between the amounts of
individual Securities in the Trust's portfolio. From time to time
following the Initial Date of Deposit, the Sponsor, pursuant to the
Indenture, may deposit additional Securities in the Trust or cash
(including a letter of credit) with instructions to purchase additional
Securities in the Trust, and Units may be continuously offered for sale
to the public by means of this Prospectus, resulting in a potential
increase in the outstanding number of Units of the Trust. Any deposit by
the Sponsor of additional Securities or cash will duplicate, as nearly
as is practicable, the original proportionate relationship and not the
actual proportionate relationship on the subsequent Date of Deposit,
since the two may differ. Any such difference may be due to the sale,
redemption or liquidation of any of the Securities deposited in the
Trust on the Initial, or any subsequent, Date of Deposit. See "Rights of
Unit Holders-How May Securities be Removed from the Trust?" Since the
Page 6
prices of the underlying Securities will fluctuate daily, the ratio, on
a market value basis, will also change daily. The portion of Securities
represented by each Unit will not change as a result of the deposit of
additional Securities in the Trust. If the Sponsor deposits cash,
however, existing and new investors may experience a dilution of their
investment and a reduction in their anticipated income because of
fluctuations in the price of the Securities and because the Trust will
pay the associated brokerage fees. To minimize this effect, the Trust
will try to purchase the Securities as close to the evaluation time or
as close to the evaluation price as possible. However, the purchase of
Securities may take up to several days to complete. The Trustee may from
time to time retain and pay compensation to the Sponsor (or an affiliate
of the Sponsor) to act as agent for the Trust with respect to acquiring
Securities for the Trust. In acting in such capacity, the Sponsor or its
affiliate will be held subject to the restrictions under the Investment
Company Act of 1940, as amended.
On the Initial Date of Deposit, each Unit of the Trust represented the
undivided fractional interest in the Securities as set forth under
"Summary of Essential Information." To the extent that Units of the
Trust are redeemed, the aggregate value of the Securities in the Trust
will be reduced and the undivided fractional interest represented by
each outstanding Unit of the Trust will increase. However, if additional
Units are issued by the Trust in connection with the deposit of
additional Securities or cash by the Sponsor, the aggregate value of the
Securities in the Trust will be increased by amounts allocable to
additional Units, and the fractional undivided interest represented by
each Unit of the Trust will be decreased proportionately. See "Rights of
Unit Holders-How May Units be Redeemed?"
What are the Expenses and Charges?
With the exception of the brokerage fees discussed above and bookkeeping
and other administrative services provided to the Trust, for which the
Sponsor will be reimbursed in amounts as set forth under "Summary of
Essential Information," the Sponsor will not receive any fees in
connection with its activities relating to the Trust.
First Trust Advisors L.P., an affiliate of the Sponsor, will receive an
annual supervisory fee as set forth under "Summary of Essential
Information" for providing portfolio supervisory services for the Trust.
Such fee is based on the number of Units outstanding in the Trust on
January 1 of each year, except for the year or years in which an initial
offering period occurs, in which case the fee for a month is based on
the number of Units outstanding at the end of such month. In providing
such supervisory services, the Portfolio Supervisor may purchase
research services from a variety of sources which may include dealers of
the Trust.
First Trust Advisors L.P., in its capacity as the Evaluator for the
Trust, will receive an annual evaluation fee as set forth under "Summary
of Essential Information" for providing evaluation services for the
Trust. Such fee is based on the number of Units outstanding in the Trust
on January 1 of each year, except for the year or years in which an
initial offering period occurs in which case the fee for a month is
based on the largest number of Units in the Trust outstanding during the
period for which the compensation is paid.
The Trustee pays certain expenses of the Trust for which it is
reimbursed by the Trust. The Trustee will receive for its ordinary
recurring services to the Trust an annual fee as set forth in "Summary
of Essential Information." Such fee will be based upon the largest
aggregate number of Units of the Trust outstanding during the calendar
year, except during the initial offering period, in which case the fee
is calculated based on the largest number of Units outstanding during
the period for which compensation is paid. For a discussion of the
services performed by the Trustee pursuant to its obligations under the
Indenture, reference is made to the material set forth under "Rights of
Unit Holders."
The fees described above are payable from the Income Account of the
Trust to the extent funds are available, and then from the Capital
Account of the Trust. Since the Trustee has the use of the funds being
held in the Capital and Income Accounts for payment of expenses and
redemptions and since such Accounts are noninterest-bearing to Unit
holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to the Trust is expected to result from
the use of these funds. Because the above fees are generally calculated
based on the largest aggregate number of Units of the Trust outstanding
during a calendar year, the per Unit amounts set forth under "Summary of
Essential Information" will be higher during any year in which
redemptions of Units occur.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
Page 7
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services,
supervisory services and evaluation services, such individual fees may
exceed the actual costs of providing such services for the Trust, but at
no time will the total amount received for such services rendered to all
unit investment trusts of which Nike Securities L.P. is the Sponsor in
any calendar year exceed the actual cost to the Sponsor or its affiliate
of supplying such services in such year.
The following additional charges are or may be incurred by the Trust:
all legal and annual auditing expenses of the Trustee incurred by or in
connection with its responsibilities under the Indenture; the expenses
and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Unit holders; fees of the Trustee
for any extraordinary services performed under the Indenture;
indemnification of the Trustee for any loss, liability or expense
incurred by it without negligence, bad faith or willful misconduct on
its part, arising out of or in connection with its acceptance or
administration of the Trust; any offering costs incurred after the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period; indemnification of the Sponsor for any
loss, liability or expense incurred without gross negligence, bad faith
or willful misconduct in acting as Depositor of the Trust; all taxes and
other government charges imposed upon the Securities or any part of the
Trust (no such taxes or charges are being levied or made or, to the
knowledge of the Sponsor, contemplated). The above expenses and the
Trustee's annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trust. In addition, the Trustee is empowered to sell
Securities in the Trust in order to make funds available to pay all
these amounts if funds are not otherwise available in the Income and
Capital Accounts of the Trust. The Sponsor cannot provide any assurance
that dividends will be sufficient to meet any or all expenses of the
Trust. As described above, if dividends are insufficient to cover
expenses, it is likely that Securities will have to be sold to meet
Trust expenses. These sales may result in capital gains or losses to
Unit holders. See "What is the Federal Tax Status of Unit Holders?"
The Indenture requires the Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. So
long as the Sponsor is making a secondary market for the Units, the
Sponsor is required to bear the cost of such annual audits to the extent
such cost exceeds $.0050 per Unit. Unit holders of the Trust covered by
an audit may obtain a copy of the audited financial statements upon
request.
What is the Federal Tax Status of Unit Holders?
This is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units.
The summary is limited to investors who hold the Units as "capital
assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986 (the "Code"). Unit
holders should consult their tax advisors in determining the Federal,
state, local and any other tax consequences of the purchase, ownership
and disposition of Units in the Trust. The Trust holds (i) preferred
stock (the "Preferred Stock"); (ii) interests in real estate
investment trusts (the "REIT Shares") and, together with the Preferred
Stock, the "Equity Securities"; (iii) undivided beneficial interests
(the "Trust Certificates") in affiliated business trusts that are taxed
as grantor trusts for Federal income tax purposes (the "Grantor Trusts")
and hold corporate debt obligations (the "Grantor Trust Debt
Obligations"); and (iv) corporate debt obligations (the "Corporate Debt
Obligations") and, together with the Grantor Trust Debt Obligations, the
"Debt Securities". The Equity Securities, the Trust Certificates and the
Corporate Debt Obligations held by the Trust are referred to
collectively as the "Securities."
Neither the Sponsor nor Chapman and Cutler has reviewed the assets to be
deposited in the Trust. However, although no opinion is expressed herein
regarding such matters, for purposes of the opinion set forth below, it
is assumed that (i) the Equity Securities qualify as equity for Federal
income tax purposes and that, accordingly, amounts received by the Trust
with respect to the Equity Securities will qualify as dividends as
defined in Section 316 of the Internal Revenue Code of 1986 (the "Code");
(ii) no Grantor Trust is an association taxable as a corporation for
Federal income tax purposes, but rather each Grantor Trust will be
governed by the provisions of subchapter J (relating to trusts) of
Chapter 1, of the Code; (iii) each holder of a Trust Certificate will be
considered the owner of a pro rata share of each asset of the respective
Grantor Trust; (iv) the Debt Securities qualify as debt for
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Federal income tax purposes; and (v) each REIT Share represents a share
in an entity treated as a real estate investment trust for Federal
income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor,
under existing law:
1. The Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated as the
owner of a pro rata portion of each of the assets of the Trust under the
Code; and the income of the Trust will be treated as income of the Unit
holders thereof under the Code. Each Unit holder will be considered to
have received his pro rata share of the income derived from each
Security when such income is considered to be received by the Trust.
Each Unit holder will also be required to include in taxable income for
Federal income tax purposes, original issue discount with respect to his
or her interest in any Debt Securities held by the Trust at the same
time and in the same manner as though the Unit holder were the direct
owner of such interest.
2. Each Unit holder will be considered to have received all of the
dividends and interest paid on his or her pro rata portion of each
Security when such dividends and interest are received by the Trust
regardless of whether such dividends or interest are used to pay a
portion of the deferred sales charge.
3. Each Unit holder will have a taxable event when the Trust disposes
of a Security (whether by sale, taxable exchange, liquidation,
redemption, or otherwise), an asset held by a Grantor Trust is disposed of
by the particular Grantor Trust, or upon the sale or redemption of Units by
such Unit holder (except to the extent an In-Kind distribution of Securities
is received by such Unit holder as described below). The price a Unit
holder pays for his or her Units, generally including sales charges, is
allocated among his or her pro rata portion of each Security held by the
Trust (in proportion to the fair market values thereof on the valuation
date closest to the date the Unit holder purchases his or her Units) in
order to determine his or her tax basis for his or her pro rata portion
of each Security held by such Trust. Unit holders must reduce the tax
basis of their Units for their share of accrued interest received, if
any, on Debt Securities delivered after the date the Unit holders pay
for their Units to the extent that such interest accrued on such Debt
Securities during the period from the Unit holder's settlement date to
the date such Debt Securities are delivered to the Trust or the Grantor
Trusts, as the case may be and, consequently, such Unit holders may have
an increase in taxable gain or reduction in capital loss upon the
disposition of such Units. Unit holders should consult their own tax
advisors with regard to calculation of basis. For Federal income tax
purposes, a Unit holder's pro rata portion of dividends (other than capital
gains dividends of a REIT, asdescribed below), as defined by Section 316 of
the Code, paid by a corporation with respect to an Equity Security held by
the Trust is taxable as ordinary income to the extent of such corporation's
current and accumulated "earnings and profits." A Unit holder's pro rata
portion of dividends paid on such Equity Security which exceed such current
and accumulated earnings and profits will first reduce a Unit holder's tax
basis in such Equity Security, and to the extent that such dividends
exceed a Unit holder's tax basis in such Equity Security shall generally
be treated as capital gain. In general, the holding period for such
capital gain will be determined by the period of time a Unit holder has
held his or her Units. Certain of the issuers of the Equity Securities
intend to qualify under special Federal income tax rules as "real estate
investment trusts" (a "REIT," shares of such issuer held by the Trust
shall be referred to as the "REIT Shares"). Because Unit holders are
deemed to directly own a pro rata portion of the REIT Shares as
discussed above, Unit holders are advised to consult their tax advisors
for information relating to the tax consequences of owning the REIT
Shares. Provided such issuers qualify as a REIT, certain distributions
by such issuers on the REIT Shares may qualify as "capital gain
dividends," taxable to shareholders (and, accordingly, to the Unit
holders as owners of a pro rata portion of the REIT Shares) as long-term
capital gains, regardless of how long a shareholder has owned such
shares. In addition, distributions of income or capital gains declared
on REIT Shares in October, November or December will be deemed to have
been paid to shareholders (and, accordingly, to the Unit holders as
owners of a pro rata portion of the REIT Shares) on December 31 of the
year they are declared, even when paid by the REIT during the following
Page 9
January and received by shareholders or Unit holders in such following
year.
4. The basis of each Unit and of each Debt Security which was issued
with original issue discount (or which has market discount) must be
increased by the amount of accrued original issue discount (and market
discount, if the Unit holder elects to include market discount in income
as it accrues) and the basis of each Unit and of each Debt Security
which was purchased by the Trust or any Grantor Trust, as the case may be,
at a premium must be reduced by the
annual amortization of Debt Security premium which the Unit holder has
properly elected to amortize under Section 171 of the Code. The tax
basis reduction requirements of the Code relating to amortization of
Debt Security premium may, under some circumstances, result in the Unit
holder realizing a taxable gain when his or her Units are sold or
redeemed for an amount equal to or less than his or her original cost.
Original issue discount is effectively treated as interest for Federal
income tax purposes and the amount of original issue discount in this
case is generally the difference between the Debt Security's purchase
price and its stated redemption price at maturity. A Unit holder will be
required to include in gross income for each taxable year the sum of his
or her daily portions of any original issue discount attributable to the
Debt Securities as such original issue discount
accrues for such year even though the income is not distributed to the
Unit holders during such year unless a Debt Security's original issue
discount is less than a "de minimis" amount as determined under the
Code. To the extent the amount of such discount is less than the
respective "de minimis" amount, such discount shall be treated as zero.
In general, original issue discount accrues daily under a constant
interest rate method which takes into account the semi-annual
compounding of accrued interest. Unit holders should consult their tax
advisors regarding the Federal income tax consequences and accretion of
original issue discount.
5. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust
will generally be considered a capital gain (except in the case of a
dealer or a financial institution). A Unit holder's portion of loss, if
any, upon the sale or redemption of Units or the disposition of
Securities held by the Trust will generally be considered a capital loss
(except in the case of a dealer or a financial institution). Unit
holders should consult their tax advisors regarding the recognition of
such capital gains and losses for Federal income tax purposes. In
addition, special rules, as described below, apply to a Unit holder's
pro rata portion of the REIT Shares.
The Debt Securities-Premium. If a Unit holder's tax basis of his or her
pro rata portion in any Debt Security exceeds the
amount payable by the issuer of the Debt Security with respect to such
pro rata interest upon maturity (or, in certain cases, the call date) of
the Debt Security, such excess would be considered premium which may be
amortized by the Unit holder at the Unit holder's election as provided
in Section 171 of the Code. Unit holders should consult their tax
advisors regarding whether such election should be made and the manner
of amortizing premium.
The Debt Securities-Original Issue Discount. Certain of the Debt
Securities may have been acquired with "original issue
discount." In the case of any Debt Securities acquired with
"original issue discount" that exceeds a "de minimis" amount as
specified in the Code, such discount is includable in taxable income of
the Unit holders on an accrual basis computed daily, without regard to
when payments of interest on such Debt Securities are received. The Code
provides a complex set of rules regarding the accrual of original issue
discount. These rules provide that original issue discount generally
accrues on the basis of a constant compound interest rate over the term
of the Debt Securities. Unit holders should consult their tax advisors
as to the amount of original issue discount which accrues.
Special original issue discount rules apply if the purchase price of the
Debt Security by the Trust or any Grantor Trust, as the case may be,
exceeds its original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price"). Similarly these
special rules would apply to a Unit holder if the tax basis of his or
her pro rata portion of a Debt Security issued with original issue
discount exceeds his or her pro rata portion of its adjusted issue
price. Unit holders should also consult their tax advisors regarding
these special rules.
It is possible that a Debt Security that has been issued at an original
issue discount may be characterized as a "high-yield discount
obligation" within the meaning of Section 163(e)(5) of the Code. To the
Page 10
extent that such an obligation is issued at a yield in excess of six
percentage points over the applicable Federal rate, a portion of the
original issue discount on such obligation will be characterized as a
distribution on stock (e.g., dividends) for purposes of the dividends
received deduction which is available to certain corporations with
respect to certain dividends received by such corporation.
The Debt Securities-Market Discount. If a Unit holder's tax basis in his
or her pro rata portion of Debt Securities is less than the allocable
portion of such Debt Security's stated redemption price at maturity (or,
if issued with original issue discount, the allocable portion of its
"revised issue price"), such difference will constitute market discount
unless the amount of market discount is "de minimis" as specified in the
Code. Market discount accrues daily computed on a straight line basis,
unless the Unit holder elects to calculate accrued market discount under
a constant yield method. Unit holders should consult their tax advisors
as to the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unit holders as ordinary income for Federal tax purposes upon the
receipt of serial principal payments on the Debt Securities, on the
sale, maturity or disposition of such Debt Securities by the Trust, and
on the sale by a Unit holder of Units, unless a Unit holder elects to
include the accrued market discount in taxable income as such discount
accrues. If a Unit holder does not elect to annually include accrued
market discount in taxable income as it accrues, deductions for any
interest expense incurred by the Unit holder which is incurred to
purchase or carry his or her Units will be reduced by such accrued
market discount. In general, the portion of any interest expense which
was not currently deductible would ultimately be deductible when the
accrued market discount is included in income. Unit holders should
consult their tax advisors regarding whether an election should be made
to include market discount in income as it accrues and as to the amount
of interest expense which may not be currently deductible.
The Debt Securities-Basis. The tax basis of a Unit holder with respect
to his or her interest in a Debt Security is increased by the amount of
original issue discount (and market discount, if the Unit holder elects
to include market discount, if any, on the Debt Securities in income as
it accrues) thereon properly included in the Unit
holder's gross income as determined for Federal income tax purposes and
reduced by the amount of any amortized premium which the Unit holder has
properly elected to amortize under Section 171 of the Code. A Unit
holder's tax basis in his or her Units will equal his or her tax basis
in his or her pro rata portion of all of the assets of the Trust.
Deferred Sales Charge. Generally, the tax basis of a Unit holder
includes sales charges, and such charges are not deductible. A portion
of the sales charge for the Trust is deferred. It is possible that for
Federal income tax purposes a portion of the deferred sales charge may
be treated as interest which would be deductible by a Unit holder
subject to limitations on the deduction of investment interest. In such
a case, the non-interest portion of the deferred sales charge would be
added to the Unit holder's tax basis in his or her Units. The deferred
sales charge could cause the Unit holder's Units to be considered to be
debt-financed under Section 246A of the Code which would result in a
small reduction of the dividends-received deduction. In any case, the
income (or proceeds from redemption) a Unit holder must take into
account for Federal income tax purposes is not reduced by amounts
deducted to pay the deferred sales charge. Unit holders should consult
their own tax advisors as to the income tax consequences of the deferred
sales charge.
Dividends Received Deduction. A corporation that owns Units will
generally be entitled to a 70% dividends received deduction with respect
to such Unit holder's pro rata portion of dividends received by the
Trust (to the extent such dividends are taxable as ordinary income, as
discussed above, and are attributable to domestic corporations) in the
same manner as if such corporation directly owned the Equity Securities
paying such dividends (other than corporate Unit holders, such as "S"
corporations, which are not eligible for the deduction because of their
special characteristics and other than for purposes of special taxes
such as the accumulated earnings tax and the personal holding
corporation tax). However, a corporation owning Units should be aware
that Sections 246 and 246A of the Code impose additional limitations on
the eligibility of dividends for the 70% dividends received deduction.
These limitations include a requirement that stock (and therefore Units)
must generally be held at least 46 days (as determined under, and during
the period specified in, Section 246(c) of the Code). Final regulations
have been issued which address special rules that must be considered in
determining whether the 46-day holding period requirement is met.
Page 11
Moreover, the allowable percentage of the deduction will be reduced from
70% if a corporate Unit holder owns certain stock (or Units) the
financing of which is directly attributable to indebtedness incurred by
such corporation. Dividends received on the REIT Shares are not eligible
for the dividends received deduction. Certain special rules may apply
with regard to preferred stock of a public utility. Unit holders should
consult their own tax advisors with regard to these rules.
To the extent dividends received by a Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of
such dividends, since the dividends received deduction is generally
available only with respect to dividends paid by domestic corporations.
It should be noted that various legislative proposals that would affect
the dividends received deduction have been introduced. Unit holders
should consult with their tax advisors with respect to the limitations
on and possible modifications to the dividends received deduction.
Limitations on Deductibility of the Trust's Expenses by Unit Holders.
Each Unit holder's pro rata share of each expense paid by the Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by such Unit holder. It should be noted that as a
result of the Tax Reform Act of 1986, certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to
the extent they exceed 2% of such individual's adjusted gross income.
Unit holders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by
the Trust or Disposition of Units. As discussed above, a Unit holder may
recognize taxable gain (or loss) when a Security is disposed of by the
Trust, an asset held by a Grantor Trust is disposed of by the particular
Grantor Trust or if the Unit holder disposes of a Unit. However, any loss
realized by a Unit holder with respect to the disposition of his or her
pro rata portion of the REIT Shares, to the extent such Unit holder has
owned his Units for less than six months or the Trust has held the REIT
Shares for less than six months, will be treated as long-term capital
loss to the extent of such Unit holder's pro rata portion of any capital
gain dividends received (or deemed to have been received) with respect
to the REIT Shares. The Internal Revenue Service Restructuring and
Reform Act of 1998 (the "1998 Tax Act") provides that for taxpayers
other than corporations, net capital gain (which is defined as net long-
term capital gain over net short-term capital loss for the taxable year)
realized from property (with certain exclusions) is subject to a maximum
marginal stated tax rate of 20% (10% in the case of certain taxpayers in
the lowest tax bracket). However, capital gain realized from assets held
more than one year that is considered unrecaptured Section 1250 gain is taxed
at a maximum stated tax rate of 25%. Capital gain or loss is long-term if the
holding period for the asset is more than one year, and is short-term if
the holding period for the asset is one year or less. The date on which
a Unit is acquired (i.e., the "trade date") is excluded for purposes of
determining the holding period of the Unit. Capital gains realized from
assets held for one year or less are taxed at the same rates as ordinary
income. Note, however, that the 1998 Tax Act (and The Taxpayer Relief
Act of 1997 (the "1997 Act")) provide that the application of the rules
described above in the case of pass-through entities such as REITs will
be prescribed in future Treasury Regulations. The Internal Revenue
Service has released preliminary guidance which provides that, in
general, pass-through entities such as REITs may designate their capital
gain dividends as either a 20% rate gain distribution, an unrecaptured
Section 1250 gain distribution, or a 28% rate gain distribution,
depending on the nature of the gain received by the pass-through entity.
Accordingly, Unit holders should consult their own tax advisors as to
the tax rate applicable to capital gain dividends.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
If the Unit holder disposes of a Unit, he or she is deemed thereby to
have disposed of his or her entire pro rata interest in all assets of
the Trust including his or her pro rata portion of all the Securities
represented by the Unit. This may result in a portion of the gain, if any,
on such sale being taxable as ordinary income under the market discount
rules (assuming no election was made by the Unit holder to include market
discount in income as it accrues) as previously discussed. The 1997 Act
includes provisions that treat certain transactions designed to reduce or
eliminate risk of loss and opportunities for gain (e.g., short sales,
offsetting notional principal contracts, futures or forward contracts,
or similar transactions) as constructive sales for
Page 12
purposes of recognition of gain (but not loss) and for purposes of
determining the holding period. Unit holders should consult their own
tax advisors with regard to any such constructive sales rules.
Special Tax Consequences of In-Kind Distributions Upon Redemption of
Units or Termination of the Trust. As discussed in "Rights of Unit
Holders-How are Income and Capital Distributed?", under certain
circumstances a Unit holder who owns at least 1,000 Units of the Trust
may request an In-Kind Distribution upon the redemption of Units or the
termination of the Trust. The Unit holder requesting an In-Kind
Distribution will be liable for expenses related thereto (the
"Distribution Expenses") and the amount of such In-Kind Distribution
will be reduced by the amount of the Distribution Expenses. See "Rights
of Unit Holders-How are Income and Capital Distributed?" As previously
discussed, prior to the redemption of Units or the termination of the
Trust, a Unit holder is considered as owning a pro rata portion of each
of the Trust's assets for Federal income tax purposes. The receipt of an
In-Kind Distribution will result in a Unit holder receiving an undivided
interest in whole Securities plus, possibly, cash.
The potential tax consequences that may occur under an In-Kind
Distribution will depend on whether or not a Unit holder receives cash
in addition to Securities. A Unit holder
will not recognize gain or loss if a Unit holder only receives
Securities in exchange for his or her pro rata portion in the Securities
held by the Trust. However, if a Unit holder also receives cash in
exchange for a fractional share of an Security held by the Trust, such
Unit holder will generally recognize gain or loss based upon the
difference between the amount of cash received by the Unit holder and
his or her tax basis in such fractional share of an Security held by the
Trust.
Because the Trust will own many Securities, a Unit holder who requests
an In-Kind Distribution will have to analyze the tax consequences with
respect to each Security owned by the Trust. The amount of taxable gain
(or loss) recognized upon such exchange will generally equal the sum of
the gain (or loss) recognized under the rules described above by such
Unit holder with respect to each Security owned by the Trust. Unit
holders who request an In-Kind Distribution are advised to consult their
tax advisors in this regard.
Computation of the Unit Holder's Tax Basis. Initially, a Unit holder's
tax basis in his or her Units will generally equal the price paid by
such Unit holder for his or her Units. The cost of the Units is
allocated among the Securities held in the Trust in accordance with the
proportion of the fair market values of such Securities on the valuation
date nearest the date the Units are purchased in order to determine such
Unit holder's tax basis for his or her pro rata portion of each Security.
A Unit holder's tax basis in his or her Units and his or her pro rata
portion of an Equity Security held by the Trust will be reduced to the
extent dividends paid with respect to such Equity Security are received
by the Trust which are not taxable as ordinary income as described
above. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received, if any, on Debt Securities delivered
after the date the Unit holders pay for their Units to the extent that
such interest accrued on such Debt Securities during the period from the
Unit holder's settlement date to the date such Debt Securities are
delivered to the Trust or any Grantor Trust as the case may be, and,
consequently, such Unit holders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units.
Foreign Investors. A Unit holder who is a foreign investor (i.e., an
investor other than a U.S. citizen or resident or a U.S. corporation,
partnership, estate or trust) will generally be subject to United States
Federal income taxes, including withholding taxes, on distributions from
the Trust relating to such investor's share of dividend income paid on
the Equity Securities (other than those that are not treated as United
States source income, if any). However, interest income (including any
original issue discount) on the Debt Securities, or any gain from the
sale or other disposition of, his or her pro rata interest in any
Security or the sale of his or her Units will not be subject to United
States Federal income taxes, including withholding taxes, provided that
all of the following conditions are met: (i) the interest income or gain
is not effectively connected with the conduct by the foreign investor of
a trade or business within the United States, (ii) if the interest is
United States source income and the Debt Security is issued after
July 18, 1984 then the
Page 13
foreign investor does not own, directly or indirectly, 10% or more of
the total combined voting power of all classes of voting stock of the
issuer of the Debt Security and the foreign investor is not a controlled
foreign corporation related (within the meaning of Section 864(d)(4) of
the Code) to the issuer of the Debt Security, (iii) with respect to any
gain, the foreign investor (if an individual) is not present in the
United States for 183 days or more during his or her taxable year and
(iv) the foreign investor provides all certification which may be
required of his or her status (foreign investors may contact the sponsor
to obtain a Form W-8 which must be filed with the Trustee and refiled
every three calendar years thereafter). Foreign investors should consult
their tax advisors with respect to United States tax consequences of
ownership of Units.
It should be noted that the interest exemption from United States
taxation, including withholding taxes, is not available for certain
"contingent interest" received after December 31, 1993. No opinion is
expressed herein regarding the potential applicability of this provision
and whether United States taxation or withholding taxes could be imposed
with respect to income derived from the Units as a result thereof. Unit
holders and prospective investors should consult with their tax advisors
regarding the potential effect of this provision on their investment in
Units.
General. Each Unit holder will be requested to provide the Unit holder's
taxpayer identification number to the Trustee and to certify that the
Unit holder has not been notified that payments to the Unit holder are
subject to back-up withholding. If the proper taxpayer identification
number and appropriate certification are not provided when requested,
distributions by the Trust to such Unit holder (including amounts
received upon the redemption of Units) will be subject to back-up
withholding.
At the termination of the Trust, the Trustee will furnish to each Unit
holder a statement containing information relating to the dividends
received by the Trust on the Equity Securities, the gross proceeds
received by the Trust from the disposition of any Security (resulting
from redemption or the sale of any Security) and the fees and expenses
paid by the Trust. The Trustee will also furnish annual information
returns to Unit holders and to the Internal Revenue Service.
In general, income that is not effectively connected to the conduct of a
trade or business within the United States that is earned by non-U.S.
Unit holders and derived from interest on debt of foreign corporations
and from dividends of foreign corporations will not be subject to U.S.
withholding tax provided (in the case of dividends) that less than 25%
of the gross income of the foreign corporation for a three-year period
ending with the close of its taxable year preceding payment was not
effectively connected to the conduct of a trade or business within the
United States. In addition, such earnings may be exempt from U.S.
withholding pursuant to a specific treaty between the United States and
a foreign country. Non-U.S. Unit holders should consult their own
advisors regarding the imposition of U.S. withholding on distributions
from the Trust.
It should be noted that payments to the Trust of dividends or interest
on Securities that are attributable to foreign corporations may be
subject to foreign withholding taxes and Unit holders should consult
their tax advisors regarding the potential tax consequences relating to
the payment of any such withholding taxes by the Trust. Any dividends or
interest withheld as a result thereof will nevertheless be treated as
income to the Unit holders. Because, under the grantor trust rules, an
investor is deemed to have paid directly his or her share of foreign
taxes that have been paid or accrued, if any, an investor may be
entitled to a foreign tax credit or deduction for U.S. income tax
purposes with respect to such taxes. A required holding period is
imposed for such credits. Investors should consult their tax advisors
with respect to foreign withholding taxes and foreign tax credits.
Unit holders desiring to purchase Units for tax-deferred plans and IRAs
should consult their broker for details on establishing such accounts.
Units may also be purchased by persons who already have self-directed
plans established. See "Are Investments in the Trust Eligible for
Retirement Plans?"
Except as specifically provided above, the foregoing discussion relates
only to the tax treatment of United States Unit holders with regard to
United States Federal income taxes; Unit holders may be subject to
foreign, state and local taxation. As used herein, the term "U.S. Unit
holder" means an owner of a Unit in the Trust that (a) is (i) for United
States Federal income tax purposes a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
Page 14
subdivision thereof, or (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its
source or (b) does not qualify as a U.S. Unit holder in paragraph (a)
but whose income from a Unit is effectively connected with such Unit
holder's conduct of a United States trade or business. The term also
includes certain former citizens of the United States whose income and
gain on the Units will be taxable. Unit holders should consult their tax
advisors regarding potential foreign, state or local taxation with
respect to the Units.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trust for New York tax matters, under the existing income tax laws of
the State of New York, the Trust is not an association taxable as a
corporation and the income of such Trust will be treated as the income
of the Unit holders thereof.
Are Investments in the Trust Eligible for Retirement Plans?
Units of the Trust are eligible for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other tax-deferred retirement
plans. Generally, the Federal income tax relating to capital gains and
income received in each of the foregoing plans is deferred until
distributions are received. Distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for
special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisors
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
PORTFOLIO
What are the Securities?
The Trust consists of different issues of Securities which are listed on
a securities exchange or The Nasdaq Stock Market or traded in the over-
the-counter market. See "Schedule of Investments" for a general
description of the Securities.
Risk Factors
An investment in Units of the Trust should be made with an understanding
of the problems and risks such an investment may entail. The Trust
consists of such of the Securities listed under "Schedule of
Investments" as may continue to be held from time to time in the Trust
and any additional Securities acquired and held by the Trust pursuant to
the provisions of the Indenture, together with cash held in the Income
and Capital Accounts. Neither the Sponsor nor the Trustee shall be
liable in any way for any failure in any of the Securities. However,
should any contract for the purchase of any of the Securities initially
deposited hereunder fail, the Sponsor will, unless substantially all of
the moneys held in the Trust to cover such purchase are reinvested in
substitute Securities in accordance with the Indenture, refund the cash
and sales charge attributable to such failed contract to all Unit
holders on the next distribution date.
Because certain of the Securities from time to time may be sold under
certain circumstances described herein, and because the proceeds from
such events will be distributed to Unit holders and will not be
reinvested, no assurance can be given that the Trust will retain for any
length of time its present size and composition. Although the Portfolio
is not managed, the Sponsor may instruct the Trustee to sell Securities
under certain limited circumstances. Pursuant to the Indenture and with
limited exceptions, the Trustee may sell or keep any securities or other
property acquired in exchange for Securities such as those acquired in
connection with a merger or other transaction. See "Rights of Unit
Holders-How May Securities be Removed from the Trust?" Securities,
however, will not be sold by the Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation or
depreciation.
Whether or not the Securities are listed on a securities exchange, the
principal trading market for the Securities may be in the over-the-
counter market. As a result, the existence of a liquid trading market
for the Securities may depend on whether dealers will make a market in
the Securities. There can be no assurance that a market will be made for
any of the Securities, that any market for the Securities will be
maintained or of the liquidity of the Securities in any markets made. In
addition, the Trust may be restricted under the Investment Company Act
of 1940 from selling Securities to the Sponsor. The price at which the
Page 15
Securities may be sold to meet redemptions and the value of the Trust
will be adversely affected if trading markets for the Securities are
limited or absent.
Holders of preferred stocks of the type held in the Trust have the right
to receive dividends, when and as declared by the issuer's Board of
Directors but do not participate in other amounts available for
distribution by the issuing corporation. Issues of preferred stock
generally provide that the preferred stock may be liquidated, either by
a partial scheduled redemption pursuant to a sinking fund or by a
refunding redemption pursuant to which, at the option of the issuer, all
or part of the issue can be retired from any available funds, at prices
which may or may not include a premium over the involuntary liquidation
preference, which generally is the same as the par or stated value of
the preferred stock. In general, optional redemption provisions are more
likely to be exercised when the preferred stocks are valued at a premium
over par or stated value than when they are valued at a discount from
par or stated value.
An investment in Units should be made with an understanding of the risks
which an investment in preferred stocks entails, including the risk that
the financial condition of the issuers of the Securities or the general
condition of the preferred stock market may worsen, and the value of the
preferred stocks and therefore the value of the Units may decline.
Preferred stocks may be susceptible to general stock market movements
and to volatile increases and decreases of value as market confidence in
and perceptions of the issuers change. These perceptions are based on
unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates,
economic expansion or contraction, market liquidity, and global or
regional political, economic or banking crises. Preferred stocks are
also vulnerable to Congressional reductions in the dividends-received
deduction which would adversely affect the after-tax return to the
investors who can take advantage of the deduction. Such a reduction
might adversely affect the value of preferred stocks in general. Holders
of preferred stocks, as owners of the entity, have rights to receive
payments from the issuers of those preferred stocks that are generally
subordinate to those of creditors of, or holders of debt obligations or,
in some cases, other senior preferred stocks of, such issuers. Preferred
stocks do not represent an obligation of the issuer and, therefore, do
not offer any assurance of income or provide the same degree of
protection of capital as do debt securities. The issuance of additional
debt securities or senior preferred stocks will create prior claims for
payment of principal and interest and senior dividends which could
adversely affect the ability and inclination of the issuer to declare or
pay dividends on its preferred stock or the rights of holders of
preferred stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of preferred stocks is subject to market
fluctuations for as long as the preferred stocks remain outstanding, and
thus the value of the Securities may be expected to fluctuate over the
life of the Trust to values higher or lower than those prevailing on the
Initial Date of Deposit.
Holders of Trust Preferred Securities incur risks in addition to or
slightly different than the typical risks of holding preferred stocks.
As previously discussed, Trust Preferred Securities are limited-life
preferred securities that are typically issued by corporations,
generally in the form of interest-bearing notes or preferred securities
issued by corporations, or by an affiliated business trust of a
corporation, generally in the form of beneficial interests in
subordinated debentures issued by the corporation, or similarly
structured securities. The maturity and dividend rate of the Trust
Preferred Securities are structured to match the maturity and coupon
interest rate of the interest-bearing notes, preferred securities or
subordinated debentures. Trust Preferred Securities usually mature on
the stated maturity date of the interest-bearing notes, preferred
securities or subordinated debentures and may be redeemed or liquidated
prior to the stated maturity date of such instruments for any reason on or
after their stated call date or upon the occurrence of certain extraordinary
circumstances at any time. Trust Preferred Securities generally have a
yield advantage over traditional preferred stocks, but unlike preferred
stocks, distributions on the Trust Preferred Securities are treated as
interest rather than dividends for Federal income tax purposes. Unlike
most preferred stocks, distributions received from Trust Preferred
Securities are not eligible for the dividends-received deduction.
Certain of the risks unique to Trust Preferred Securities include: (i)
distributions on Trust Preferred Securities will be made only if
interest payments on the interest-bearing notes, preferred securities or
subordinated debentures are made; (ii) a corporation issuing the
interest-bearing notes, preferred securities or subordinated debentures
may defer interest payments on these instruments for up to 20
consecutive quarters and if such election is made, distributions will
not be made on the Trust Preferred Securities during the deferral
Page 16
period; (iii) certain tax or regulatory events may trigger the
redemption of the interest-bearing notes, preferred securities or
subordinated debentures by the issuing corporation and result in
prepayment of the Trust Preferred Securities prior to their stated
maturity date; (iv) future legislation may be proposed or enacted that
may prohibit the corporation from deducting its interest payments on the
interest-bearing notes, preferred securities or subordinated debentures
for tax purposes, making redemption of these instruments likely; (v) a
corporation may redeem the interest-bearing notes, preferred securities
or subordinated debentures in whole at any time or in part from time to
time on or after a stated call date; (vi) Trust Preferred Securities
holders have very limited voting rights; and (vii) payment of interest
on the interest-bearing notes, preferred securities or subordinated
debentures, and therefore distributions on the Trust Preferred Securities,
is dependent on the financial condition of the issuing corporation.
The Trust is considered to be concentrated in securities issued by banks
and financial service providers, and as such, an investment in Units of
the Trust should be made with an understanding of the problems and risks
associated with an investment in the bank and financial services
industries in general.
Banks, thrifts and their holding companies are especially subject to the
adverse effects of economic recession, volatile interest rates,
portfolio concentrations in geographic markets and in commercial and
residential real estate loans, and competition from new entrants in
their fields of business. Banks and thrifts are highly dependent on net
interest margin. Recently, bank profits have come under pressure as net
interest margins have contracted, but volume gains have been strong in
both commercial and consumer products. There is no certainty that such
conditions will continue. Bank and thrift institutions had received
significant consumer mortgage fee income as a result of activity in
mortgage and refinance markets. As initial home purchasing and
refinancing activity subsided, this income diminished. Economic
conditions in the real estate markets, which have been weak in the past,
can have a substantial effect upon banks and thrifts because they
generally have a portion of their assets invested in loans secured by
real estate. Banks, thrifts and their holding companies are subject to
extensive federal regulation and, when such institutions are state-
chartered, to state regulation as well. Such regulations impose strict
capital requirements and limitations on the nature and extent of
business activities that banks and thrifts may pursue. Furthermore, bank
regulators have a wide range of discretion in connection with their
supervisory and enforcement authority and may substantially restrict the
permissible activities of a particular institution if deemed to pose
significant risks to the soundness of such institution or the safety of
the federal deposit insurance fund. Regulatory actions, such as
increases in the minimum capital requirements applicable to banks and
thrifts and increases in deposit insurance premiums required to be paid
by banks and thrifts to the Federal Deposit Insurance Corporation
("FDIC"), can negatively impact earnings and the ability of a company to
pay dividends. Neither federal insurance of deposits nor governmental
regulations, however, insures the solvency or profitability of banks or
their holding companies, or insures against any risk of investment in
the securities issued by such institutions.
The statutory requirements applicable to and regulatory supervision of
banks, thrifts and their holding companies have increased significantly
and have undergone substantial change in recent years. To a great
extent, these changes are embodied in the Financial Institutions Reform,
Recovery and Enforcement Act; enacted in August 1989, the Federal
Deposit Insurance Corporation Improvement Act of 1991, the Resolution
Trust Corporation Refinancing, Restructuring, and Improvement Act of
1991 and the regulations promulgated under these laws. Many of the
regulations promulgated pursuant to these laws have only recently been
finalized and their impact on the business, financial condition and
prospects of the Securities in the Trust's portfolio cannot be predicted
with certainty. Periodic efforts by recent Administrations to introduce
legislation broadening the ability of banks to compete with new products
have not been successful, but if enacted could lead to more failures as
a result of increased competition and added risks. Failure to enact such
legislation, on the other hand, may lead to declining earnings and an
inability to compete with unregulated financial institutions. Efforts to
expand the ability of federal thrifts to branch on an interstate basis
have been initially successful through promulgation of regulations, and
legislation to liberalize interstate banking has recently been signed
into law. Under the legislation, banks will be able to purchase or
establish subsidiary banks in any state, one year after the
legislation's enactment. Since mid-1997, banks have been allowed to turn
existing banks into branches. Consolidation is likely to continue. The
Securities and Exchange Commission and the Financial Accounting
Page 17
Standards Board require the expanded use of market value accounting by
banks and have imposed rules requiring market accounting for investment
securities held in trading accounts or available for sale. Adoption of
additional such rules may result in increased volatility in the reported
health of the industry, and mandated regulatory intervention to correct
such problems. Additional legislative and regulatory changes may be
forthcoming. For example, the bank regulatory authorities have proposed
substantial changes to the Community Reinvestment Act and fair lending
laws, rules and regulations, and there can be no certainty as to the
effect, if any, that such changes would have on the Securities in the
Trust's portfolio. In addition, from time to time the deposit insurance
system is reviewed by Congress and federal regulators, and proposed
reforms of that system could, among other things, further restrict the
ways in which deposited moneys can be used by banks or reduce the dollar
amount or number of deposits insured for any depositor. Such reforms
could reduce profitability as investment opportunities available to bank
institutions become more limited and as consumers look for savings
vehicles other than bank deposits. Banks and thrifts face significant
competition from other financial institutions such as mutual funds,
credit unions, mortgage banking companies and insurance companies, and
increased competition may result from legislative broadening of regional
and national interstate banking powers as has been recently enacted.
Among other benefits, the legislation allows banks and bank holding
companies to acquire across previously prohibited state lines and to
consolidate their various bank subsidiaries into one unit. The Sponsor
makes no prediction as to what, if any, manner of bank and thrift
regulatory actions might ultimately be adopted or what ultimate effect
such actions might have on the Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5%
of the outstanding shares of any class of voting securities of a bank or
bank holding company, (2) acquiring control of a bank or another bank
holding company, (3) acquiring all or substantially all the assets of a
bank, or (4) merging or consolidating with another bank holding company,
without first obtaining Federal Reserve Board ("FRB") approval. In
considering an application with respect to any such transaction, the FRB
is required to consider a variety of factors, including the potential
anti-competitive effects of the transaction, the financial condition and
future prospects of the combining and resulting institutions, the
managerial resources of the resulting institution, the convenience and
needs of the communities the combined organization would serve, the
record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the
prospective availability to the FRB of information appropriate to
determine ongoing regulatory compliance with applicable banking laws. In
addition, the federal Change In Bank Control Act and various state laws
impose limitations on the ability of one or more individuals or other
entities to acquire control of banks or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends
by bank holding companies. In the policy statement, the FRB expressed
its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends which exceed its net income or which could
only be funded in ways that would weaken its financial health, such as
by borrowing. The FRB also may impose limitations on the payment of
dividends as a condition to its approval of certain applications,
including applications for approval of mergers and acquisitions. The
Sponsor makes no prediction as to the effect, if any, such laws will
have on the Securities or whether such approvals, if necessary, will be
obtained.
Companies engaged in investment banking/brokerage and investment
management include brokerage firms, broker/dealers, investment banks,
finance companies and mutual fund companies. Earnings and share prices
of companies in this industry are quite volatile, and often exceed the
volatility levels of the market as a whole. Recently, ongoing
consolidation in the industry and the strong stock market has benefited
stocks which investors believe will benefit from greater investor and
issuer activity. Major determinants of future earnings of these
companies are the direction of the stock market, investor confidence,
equity transaction volume, the level and direction of long-term and
short-term interest rates, and the outlook for emerging markets.
Negative trends in any of these earnings determinants could have a
serious adverse effect on the financial stability, as well as the stock
prices, of these companies. Furthermore, there can be no assurance that
the issuers of the Securities included in the Trust will be able to
respond in a timely manner to compete in the rapidly developing
marketplace. In addition to the foregoing, profit margins of these
companies continue to shrink due to the commoditization of traditional
Page 18
businesses, new competitors, capital expenditures on new technology and
the pressures to compete globally.
The Trust is also considered to be concentrated in securities issued by
public utility companies, and as such, an investment in Units of the
Trust should be made with an understanding of the problems and risks
associated with an investment in the public utility industry in general.
General problems of the public utility industry include the difficulty
in obtaining an adequate return on invested capital despite frequent
increases in rates which have been granted by the public service
commissions having jurisdiction, the difficulty in financing large
construction programs during an inflationary period, the restrictions on
operations and increased cost and delays attributable to environmental
and other regulatory considerations, the difficulty to the capital
markets in absorbing utility debt and equity securities, the difficulty
in obtaining fuel for electric generation at reasonable prices, and the
effects of energy conservation. There is no assurance that such public
service commissions will grant rate increases in the future or that any
such increases will be adequate to cover operating and other expenses
and debt service requirements. All of the public utilities which are
issuers of the Securities in the Trust's portfolio have been
experiencing many of these problems in varying degrees. Furthermore,
utility stocks are particularly susceptible to interest rate risk,
generally exhibiting an inverse relationship to interest rates. As a
result, electric utility stock prices may be adversely affected as
interest rates rise. The Sponsor makes no prediction as to whether
interest rates will rise or fall or the effect, if any, interest rates
may have on the Securities in the Trust's portfolio. In addition,
federal, state and municipal governmental authorities may from time to
time review existing, and impose additional, regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of certain of the Securities
in the Trust's portfolio to make interest or dividend payments on their
Securities.
Utilities are generally subject to extensive regulation by state utility
commissions which, for example, establish the rates which may be charged
and the appropriate rate of return on an approved asset base, which must
be approved by the state commissions. Certain utilities have had
difficulty from time to time in persuading regulators, who are subject
to political pressures, to grant rate increases necessary to maintain an
adequate return on investment and voters in many states have the ability
to impose limits on rate adjustments (for example, by initiative or
referendum). Any unexpected limitations could negatively affect the
profitability of utilities whose budgets are planned far in advance. In
addition, gas pipeline and distribution companies have had difficulties
in adjusting to short and surplus energy supplies, enforcing or being
required to comply with long-term contracts and avoiding litigation from
their customers, on the one hand, or suppliers, on the other.
Recently, the California Public Utility Commission ("CPUC") announced
its intention to deregulate the electric utility industry in California.
This change will eventually result in full competition between electric
utilities and independent power producers in the generation and sale of
power to all customers in California by the year 2002. The legislation
restructures the California electrical industry by promoting competition
and allowing customers a right to choose their electrical supplier.
Preliminary assessments suggest that the deregulation of the electric
utility industry in California could have a significant adverse effect
on electric utility stocks of California issuers. Furthermore, the move
toward full competition in California could indicate that similar
changes may be made in other states in the future which could negatively
impact the profitability of electric utilities. Further deregulation
could adversely affect the issuers of certain of the Securities in the
Trust's portfolio. In view of the uncertainties regarding the CPUC
deregulation plan, it is unclear what effect, if any, that full
competition will have on electric utilities in California or whether
similar changes will be adopted in other states.
Certain of the issuers of the Securities in the Trust may own or operate
nuclear generating facilities. Governmental authorities may from time to
time review existing, and impose additional, requirements governing the
licensing, construction and operation of nuclear power plants. Nuclear
generating projects in the electric utility industry have experienced
substantial cost increases, construction delays and licensing
difficulties. These have been caused by various factors, including
inflation, high financing costs, required design changes and rework,
allegedly faulty construction, objections by groups and governmental
officials, limits on the ability to finance, reduced forecasts of energy
requirements and economic conditions. This experience indicates that the
risk of significant cost increases, delays and licensing difficulties
remain present until completion and achievement of commercial operation
of any nuclear project. Also, nuclear generating units in service have
Page 19
experienced unplanned outages or extensions of scheduled outages due to
equipment problems or new regulatory requirements sometimes followed by
a significant delay in obtaining regulatory approval to return to
service. A major accident at a nuclear plant anywhere, such as the
accident at a plant in Chernobyl, could cause the imposition of limits
or prohibitions on the operation, construction or licensing of nuclear
units in the United States.
In view of the uncertainties discussed above, there can be no assurance
that any company's share of the full cost of nuclear units under
construction ultimately will be recovered in rates or the extent to
which a company could earn an adequate return on its investment in such
units. The likelihood of a significantly adverse event occurring in any
of the areas of concern described above varies, as does the potential
severity of any adverse impact. It should be recognized, however, that
one or more of such adverse events could occur and individually or
collectively could have a material adverse impact on a company's
financial condition, the results of its operations, its ability to make
interest and principal payments on its outstanding debt or to pay
dividends.
Other general problems of the gas, water, telephone and electric utility
industries (including state and local joint action power agencies)
include difficulty in obtaining timely and adequate rate increases,
difficulty in financing large construction programs to provide new or
replacement facilities during an inflationary period, rising costs of
rail transportation to transport fossil fuels, the uncertainty of
transmission service costs for both interstate and intrastate
transactions, changes in tax laws which adversely affect a utility's
ability to operate profitably, increased competition in service costs,
recent reductions in estimates of future demand for electricity and gas
in certain areas of the country, restrictions on operations and
increased cost and delays attributable to environmental considerations,
uncertain availability and increased cost of capital, unavailability of
fuel for electric generation at reasonable prices, including the steady
rise in fuel costs and the costs associated with conversion to alternate
fuel sources such as coal, availability and cost of natural gas for
resale, technical and cost factors and other problems associated with
construction, licensing, regulation and operation of nuclear facilities
for electric generation, including, among other considerations, the
problems associated with the use of radioactive materials and the
disposal of radioactive wastes, and the effects of energy conservation.
Each of the problems referred to could adversely affect the ability of
the issuers of any Securities in the Trust to make interest or dividend
payments.
Certain of the Securities in the Trust are of foreign issuers, and
therefore, an investment in the Trust involves some investment risks
that differ in some respects from an investment in a trust that invests
entirely in securities of domestic issuers. Those investment risks
include future political and governmental restrictions which might
adversely affect the payment or receipt of payment of dividends on the
relevant Securities, currency exchange rate fluctuations, exchange
control policies, and the limited liquidity and small market
capitalization of such foreign countries' securities markets. In
addition, for foreign issuers that are not subject to the reporting
requirements of the Securities Exchange Act of 1934, there may be less
publicly available information than is available from a domestic issuer.
Also, foreign issuers are not necessarily subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. However, due to the
nature of the issuers of the Securities included in the Trust, the
Sponsor believes that adequate information will be available to allow
the Portfolio Supervisor to provide portfolio surveillance.
Unit holders will be unable to dispose of any of the Securities in the
Portfolio, as such, and will not be able to vote the Securities. As the
holder of the Securities, the Trustee will have the right to vote all of
the voting stocks in the Trust and will vote such stocks in accordance
with the instructions of the Sponsor.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before making
a decision to invest in the Trust.
The value of the Securities will fluctuate over the life of the Trust
and may be more or less than the price at which they were deposited in
the Trust. The Securities may appreciate or depreciate in value (or pay
dividends), depending on the full range of economic and market
influences affecting these securities.
The Sponsor and the Trustee shall not be liable in any way for any
default, failure or defect in any Security. In the event of a notice
that any Security will not be delivered ("Failed Contract Obligations")
Page 20
to the Trust, the Sponsor is authorized under the Indenture to direct
the Trustee to acquire other Securities ("Replacement Securities"). Any
Replacement Security will be identical to those which were the subject
of the failed contract. The Replacement Securities must be purchased
within 20 days after delivery of the notice of a failed contract, and
the purchase price may not exceed the amount of funds reserved for the
purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraphs is not utilized to acquire Replacement Securities in the
event of a failed contract, the Sponsor will refund the sales charge
attributable to such Failed Contract Obligations to all Unit holders of
the Trust, and the Trustee will distribute the principal attributable to
such Failed Contract Obligations not more than 120 days after the date
on which the Trustee received a notice from the Sponsor that a
Replacement Security would not be deposited in the Trust. In addition,
Unit holders should be aware that, at the time of receipt of such
principal, they may not be able to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such
proceeds would have earned for Unit holders of the Trust.
The Indenture also authorizes the Sponsor to increase the size of the
Trust and the number of Units thereof by the deposit of additional
Securities or cash (including a letter of credit) with instructions to
purchase additional Securities in the Trust and the issuance of a
corresponding number of additional Units. If the Sponsor deposits cash,
however, existing and new investors may experience a dilution of their
investment and a reduction in their anticipated income because of
fluctuations in the prices of the Securities between the time of the
cash deposit and the purchase of the Securities and because the Trust
will pay the associated brokerage fees.
The Trust consists of the Securities listed under "Schedule of
Investments" (or contracts to purchase such Securities) as may continue
to be held from time to time in the Trust and any additional Securities
acquired and held by the Trust pursuant to the provisions of the
Indenture (including provisions with respect to deposits into the Trust
of Securities or cash in connection with the issuance of additional
Units).
Once all of the Securities in the Trust are acquired, the Trustee will
have no power to vary the investments of the Trust, i.e., the Trustee
will have no managerial power to take advantage of market variations to
improve a Unit holder's investment, and may dispose of Securities only
under limited circumstances. See "Rights of Unit Holders-How May
Securities be Removed from the Trust?"
Like other investment companies, financial and business organizations
and individuals around the world, the Trust could be adversely affected
if the computer systems used by the Sponsor, Evaluator, Portfolio
Supervisor or Trustee or other service providers to the Trust do not
properly process and calculate date-related information and data
involving dates of January 1, 2000 and thereafter. This is commonly
known as the "Year 2000 Problem." The Sponsor, Evaluator, Portfolio
Supervisor and Trustee are taking steps that they believe are reasonably
designed to address the Year 2000 Problem with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by the Trust's other service providers.
At this time, however, there can be no assurance that these steps will
be sufficient to avoid any adverse impact to the Trust.
The Year 2000 Problem is expected to impact corporations, which may
include issuers of the Securities contained in the Trust, to varying
degrees based upon various factors, including, but not limited to, their
industry sector and degree of technological sophistication. The Sponsor
is unable to predict what impact, if any, the Year 2000 Problem will
have on issuers of the Securities contained in the Trust.
To the best of the Sponsor's knowledge, there is no litigation pending
as of the Initial Date of Deposit in respect of any Security which might
reasonably be expected to have a material adverse effect on the Trust.
At any time after the Initial Date of Deposit, litigation may be
instituted on a variety of grounds with respect to the Securities. The
Sponsor is unable to predict whether any such litigation will be
instituted, or if instituted, whether such litigation might have a
material adverse effect on the Trust.
Legislation. From time to time Congress considers proposals to reduce
the rate of the dividends-received deductions. Enactment into law of a
proposal to reduce the rate would adversely affect the after-tax return
to investors who can take advantage of the deduction. Unit holders are
urged to consult their own tax advisors. Further, at any time after the
Initial Date of Deposit, legislation may be enacted that could
negatively affect the Securities in the Trust or the issuers of the
Securities. Changing approaches to regulation, particularly with respect
to any of the industries represented in the portfolio of the Trust, may
have a negative impact on certain companies represented in the Trust.
Page 21
There can be no assurance that future legislation, regulation or
deregulation will not have a material adverse effect on the Trust or
will not impair the ability of the issuers of the Securities to achieve
their business goals.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, the Public Offering Price is based on the aggregate
underlying value of the Securities in the Trust (generally determined by
the closing sale prices of listed Securities and the ask prices of over-
the-counter traded Securities), plus or minus cash, if any, in the
Income and Capital Accounts of the Trust, plus an initial sales charge
equal to the difference between the maximum sales charge of 4.5% of the
Public Offering Price and the maximum remaining deferred sales charge,
initially $.35 per Unit, divided by the number of Units of the Trust
outstanding. Subsequent to the Initial Date of Deposit, the amount of
the initial sales charge will vary with changes in the aggregate value
of the Securities. Commencing on August 20, 1999, and on the twentieth
day of each month thereafter (or if such day is not a business day, on
the preceding business day) through December 20, 1999, a deferred sales
charge of $.07 will be assessed per Unit per month. Units purchased
subsequent to the initial deferred sales charge payment but still during
the initial offering period will be subject to the initial sales charge
and the remaining deferred sales charge payments not yet collected. The
deferred sales charge will be paid from funds in the Capital Account, if
sufficient, or from the periodic sale of Securities. The total maximum
sales charge assessed to Unit holders on a per Unit basis will be 4.5%
of the Public Offering Price (equivalent to 4.545% of the net amount
invested, exclusive of the deferred sales charge). In addition, a
portion of the Public Offering Price on Units purchased prior to the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period also consists of Securities in an amount
sufficient to pay for all or a portion of the costs incurred in
establishing the Trust, including the costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission and
states, the initial audit of the Trust portfolio, legal fees and the
initial fees and expenses of the Trustee. The organizational and
offering costs will be deducted from the assets of the Trust as of the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period. Upon completion of the deferred sales
charge period, the secondary market Public Offering Price per Unit for
the Trust will not include deferred payments, but will instead include
only a one-time initial sales charge of 4.5% of the Public Offering
Price (equivalent to 4.712% of the net amount invested), which will be
reduced by 1/2 of 1% on each December 31, commencing December 31, 1999
to a minimum sales charge of 3.0%.
During the initial offering period, the Sponsor's Repurchase Price is
based on the aggregate underlying value of the Securities in the Trust
(generally determined by the closing sale prices of listed Securities
and the ask prices of over-the-counter traded Securities), plus or minus
cash, if any, in the Income and Capital Accounts of the Trust, plus,
until the earlier of six months after the Initial Date of Deposit or the
end of the initial offering period, estimated organizational and
offering costs, divided by the number of Units of the Trust outstanding
and reduced by the deferred sales charge not yet paid. During the
secondary market, the Sponsor's Repurchase Price is also based on the
aggregate underlying value of the Securities in the Trust (generally
determined by the closing sale prices of listed Securities and the bid
prices of over-the-counter traded Securities), plus or minus cash, if
any, in the Income and Capital Accounts of the Trust, divided by the
number of outstanding Units of the Trust.
The minimum amount which an investor may purchase of the Trust is $1,000
($500 for Individual Retirement Accounts or other retirement plans). The
Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units. The applicable sales charge for both primary and
secondary market sales is reduced by a discount as indicated below for
volume purchases as a percentage of the Public Offering Price (except
for sales made pursuant to a "wrap fee account" or similar arrangements
as set forth below):
Page 22
<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
period. The initial purchase made pursuant to a letter of intent must
equal at least 5% of the amount of intended aggregate purchases. Units
purchased with rollover proceeds, reinvested dividends, redemption or
termination proceeds from other unit investment trusts or other similar
transactions will not be counted to reach the amount of intended
aggregate purchases. In the event that total purchases by an investor
pursuant to a letter of intent over the 13-month period are less than
the amount specified in the letter of intent, the selling broker/dealer
shall take such action as is necessary to receive from the investor the
difference between the amounts the investor paid for units pursuant to
the letter of intent and the amounts which the investor would have paid
if the higher sales charge had been applied. It is the responsibility of
the selling broker/dealer to notify the Sponsor of each sale made
pursuant to a letter of intent. Additionally, Units purchased in the
name of the spouse of a purchaser or in the name of a child of such
purchaser under 21 years of age will be deemed, for the purposes of
calculating the applicable sales charge, to be additional purchases by
the purchaser. The reduced sales charges will also be applicable to a
trustee or other fiduciary purchasing securities for a single trust
estate or single fiduciary account. The purchaser must inform the
broker/dealer, bank or other selling agent of any such combined purchase
prior to the sale, in order to obtain the indicated discount. In
addition, investors may utilize their redemption or termination proceeds
received from trusts sponsored by the Sponsor to purchase Units of the
Trust subject only to any remaining deferred sales charge payments on
such Units, deferred as provided herein. Unit holders who redeem units
of trusts sponsored by the Sponsor should note that they will be
assessed the amount of any remaining deferred sales charge on such units
at the time of redemption. Employees, officers and directors (including
their immediate family members, defined as spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law and daughters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons) of the Sponsor,
broker/dealers, banks or other selling agents and their subsidiaries and
vendors providing services to the Sponsor will be able to purchase Units
of the Trust at the Public Offering Price, less the applicable
broker/dealer concession during the initial offering period.
Units may be purchased in the primary or secondary market at the Public
Offering Price less the concession the Sponsor typically allows to
dealers and other selling agents (see "Public Offering-How are Units
Distributed?") for purchases by investors who purchase Units through
registered investment advisors, certified financial planners or
registered broker/dealers who in each case either charge periodic fees
for financial planning, investment advisory or asset management
Page 23
services, or provide such services in connection with the establishment
of an investment account for which a comprehensive "wrap fee" charge is
imposed.
Had the Units of the Trust been available for sale on the business day
prior to the Initial Date of Deposit, the Public Offering Price would
have been as indicated in "Summary of Essential Information." The Public
Offering Price of Units on the date of the prospectus or during the
initial offering period may vary from the amount stated under "Summary
of Essential Information" in accordance with fluctuations in the prices
of the underlying Securities. During the initial offering period, the
aggregate value of the Units of the Trust shall be determined on the
basis of the aggregate underlying value of the Securities therein plus
or minus cash, if any, in the Income and Capital Accounts of the Trust.
The aggregate underlying value of the Securities will be determined in
the following manner: if the Securities are listed, this evaluation is
generally based on the closing sale prices on that exchange or that
system (unless it is determined that these prices are inappropriate as a
basis for valuation) or, if there is no closing sale price on that
exchange or system, at the closing ask prices. If the Securities are not
so listed or, if so listed and the principal market therefor is other
than on the exchange, the evaluation shall generally be based on the
current ask prices on the over-the-counter market (unless it is
determined that these prices are inappropriate as a basis for
evaluation). If current ask prices are unavailable, the evaluation is
generally determined (a) on the basis of current ask prices for
comparable securities, (b) by appraising the value of the Securities on
the ask side of the market or (c) by any combination of the above.
The Evaluator on each business day will appraise or cause to be
appraised the value of the underlying Securities in the Trust as of the
Evaluation Time and will adjust the Public Offering Price of the Units
commensurate with such valuation. Such Public Offering Price will be
effective for all orders received prior to the Evaluation Time on each
such day. Orders received by the Trustee or Sponsor for purchases, sales
or redemptions after that time, or on a day which is not a business day,
will be held until the next determination of price. The term "business
day," as used herein and under "Rights of Unit Holders-How May Units be
Redeemed?", shall exclude Saturdays, Sundays and the following holidays
as observed by the New York Stock Exchange, Inc.: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the aggregate underlying
value of the Securities therein, plus or minus cash, if any, in the
Income and Capital Accounts of the Trust plus the applicable sales
charge. The aggregate underlying value of the Securities for secondary
market sales is calculated in the same manner as described above for
sales made during the initial offering period with the exception that
bid prices are used instead of ask prices.
Although payment is normally made three business days following the
order for purchase (the "date of settlement"), payment may be made prior
thereto. A person will become owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available to the
Sponsor prior to the date of settlement for the purchase of Units may be
used in the Sponsor's business and may be deemed to be a benefit to the
Sponsor, subject to the limitations of the Securities Exchange Act of
1934. Delivery of Certificates representing Units so ordered will be
made three business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are the Units Distributed?
During the initial offering period (i) for Units issued on the Initial
Date of Deposit and (ii) for additional Units issued after such date as
additional Securities are deposited by the Sponsor, Units will be
distributed to the public at the then current Public Offering Price. The
initial offering period may be up to approximately 360 days. Units
reacquired by the Sponsor during the initial offering period may be
resold at the then current Public Offering Price.
Upon completion of the initial offering period, Units repurchased in the
secondary market (see "Public Offering-Will There be a Secondary
Market?") may be offered by this prospectus at the secondary market
Public Offering Price determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Trust for
sale in a number of states. Sales initially will be made to dealers and
other selling agents at prices which represent a concession or agency
commission of 3.2% of the Public Offering Price, and, for secondary
Page 24
market sales, 3.2% of the Public Offering Price (or 65% of the then
current maximum sales charge after December 31, 1999). Dealers and other
selling agents will be allowed a concession or agency commission on the
sale of Units sold subject only to any remaining deferred sales charge
payments on such Units equal to (i) $.22 per Unit on Units sold subject
to a deferred sales charge of $.35 per Unit or (ii) 63% of the then
current maximum remaining deferred sales charge on Units sold subject to
a deferred sales charge of less than $.35 per Unit. Volume concessions
or agency commissions of an additional .30% of the Public Offering Price
on all purchases of Units of the Trust will be given to any
broker/dealer or bank who has aggregate purchases of Trust Units from
the Sponsor on the Initial Date of Deposit of at least $100,000 of the
Trust or purchases $250,000 of the Trust on any day thereafter or who
was eligible to receive a similar concession in connection with sales of
units of unit investment trusts sponsored by the Sponsor which have
substantially the same sales load and maturity structure as the Trust
and are currently in the initial offering period. In addition, dealers
and other selling agents will receive an additional volume concession or
agency commission with respect to sales of Units of the Trust in the
amounts set forth below:
Additional
Total Sales per Trust Concession
_____________________ __________
$1,000,000 but less than $2,000,000 .10%
$2,000,000 but less than $3,000,000 .15%
$3,000,000 but less than $10,000,000 .20%
$10,000,000 or more .30%
The Sponsor reserves the right to change the amount of the concession or
agency commission from time to time. Certain commercial banks may be
making Units of the Trust available to their customers on an agency
basis. A portion of the sales charge paid by these customers is retained
by or remitted to the banks in the amounts indicated above. Under the
Glass-Steagall Act, banks are prohibited from underwriting Trust Units;
however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act. In Texas and in
certain other states, any banks making Units available must be
registered as broker/dealers under state law.
From time to time the Sponsor may implement programs under which
broker/dealers, banks or other selling agents of the Trust may receive
nominal awards from the Sponsor for each of their registered
representatives who have sold a minimum number of UIT Units during a
specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales force of a broker/dealer,
bank or other selling agent may be eligible to win other nominal awards
for certain sales efforts, or under which the Sponsor will reallow to
any such dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Sponsor, or participates in
sales programs sponsored by the Sponsor, an amount not exceeding the
total applicable sales charges on the sales generated by such person at
the public offering price during such programs. Also, the Sponsor in its
discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying dealers for certain
services or activities which are primarily intended to result in sales
of Units of the Trust. Such payments are made by the Sponsor out of its
own assets, and not out of the assets of the Trust. These programs will
not change the price Unit holders pay for their Units or the amount that
the Trust will receive from the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns on the Trust and returns over
specified periods on other similar trusts sponsored by Nike Securities
L.P. with returns on other taxable investments such as corporate or U.S.
Government bonds, bank CDs and money market accounts or money market
funds, each of which has investment characteristics that may differ
from those of the Trust. U.S. Government bonds, for example, are
backed by the full faith and credit of the U.S. Government and bank
CDs and money market accounts are insured by an agency of the federal
government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the
condition of the short-term debt market. The investment characteristics
of the Trust are described more fully elsewhere in this Prospectus.
Page 25
Information on percentage changes in the dollar value of Units, on the
basis of changes in Unit price may be included from time to time in
advertisements, sales literature, reports and other information
furnished to current or prospective Unit holders. Total return figures
are not averaged, and may not reflect deduction of the sales charge,
which would decrease the return. Average annualized return figures
reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance may not be indicative of future results. The Trust's
portfolio is not managed. Unit price and return fluctuate with the value
of the common stocks in the Trust's portfolio, so there may be a gain or
loss when Units are sold.
The Trust's performance may be compared to performance on a total return
basis with the Dow Jones Industrial Average, the S&P 500 Composite Stock
Price Index, or performance data from Lipper Analytical Services, Inc.
and Morningstar Publications, Inc. or from publications such as Money,
The New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. As with other performance data, performance comparisons should
not be considered representative of the Trust's relative performance for
any future period.
What are the Sponsor's Profits?
The Sponsor of the Trust will receive a gross sales commission equal to
4.5% of the Public Offering Price of the Units (equivalent to 4.545% of
the net amount invested, exclusive of the deferred sales charge), less
any reduced sales charge as described under "Public Offering-How is the
Public Offering Price Determined?" See "Public Offering-How are Units
Distributed?" for information regarding additional concessions available
to dealers and others. In addition, the Sponsor may be considered to
have realized a profit or to have sustained a loss, as the case may be,
in the amount of any difference between the cost of the Securities to
the Trust and the cost of such Securities to the Sponsor. See Note (2)
of "Schedule of Investments." During the initial offering period, the
dealers and other selling agents also may realize profits or sustain
losses as a result of fluctuations after the Initial Date of Deposit in
the Public Offering Price received by the dealers and other selling
agents upon the sale of Units.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between the
price at which Units are purchased and the price at which Units are
resold (which price includes a sales charge of 4.5%, subject to
reduction beginning December 31, 1999) or redeemed. The secondary market
public offering price of Units may be greater or less than the cost of
such Units to the Sponsor.
Will There be a Secondary Market?
After the initial offering period, although not obligated to do so, the
Sponsor intends to maintain a market for the Units and continuously
offer to purchase Units at prices, subject to change at any time, based
upon the aggregate underlying value of the Securities in the Trust plus
or minus cash, if any, in the Income and Capital Accounts of the Trust.
All expenses incurred in maintaining a secondary market, other than the
fees of the Evaluator and the costs of the Trustee in transferring and
recording the ownership of Units, will be borne by the Sponsor. If the
supply of Units exceeds demand, or for some other business reason, the
Sponsor may discontinue purchases of Units at such prices. IF A UNIT
HOLDER WISHES TO DISPOSE OF HIS OR HER UNITS, HE OR SHE SHOULD INQUIRE
OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR TO MAKING A TENDER FOR
REDEMPTION TO THE TRUSTEE. Units subject to a deferred sales charge
which are sold or tendered for redemption prior to such time as the
entire deferred sales charge on such Units has been collected will be
assessed the amount of the remaining deferred sales charge at the time
of sale or redemption. See "Rights of Unit Holders-How May Units be
Redeemed?"
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units may be evidenced by registered certificates executed
by the Trustee and the Sponsor. Delivery of certificates representing
Units ordered for purchase is normally made three business days
Page 26
following such order or shortly thereafter. Certificates are
transferable by presentation and surrender to the Trustee properly
endorsed or accompanied by a written instrument or instruments of
transfer. Certificates to be redeemed must be properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unit
holder must sign exactly as his or her name appears on the face of the
certificate with the signature guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guaranty program in addition to, or in substitution for,
STAMP, as may be accepted by the Trustee. In certain instances, the
Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form. The
Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of the Trust; the number of Units issued or transferred; the
name, address and taxpayer identification number, if any, of the new
registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such Units are or may be subject or a
statement that there are no such liens, restrictions or adverse claims;
and the date the transfer was registered. Uncertificated Units are
transferable through the same procedures applicable to Units evidenced
by certificates (described above), except that no certificate need be
presented to the Trustee and no certificate will be issued upon the
transfer unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income received with respect to any
of the Securities in the Trust on or about the Income Distribution Dates
to Unit holders of record on the preceding Income Distribution Record
Date. See "Summary of Essential Information." Persons who purchase Units
will commence receiving distributions only after such person becomes a
record owner. Notification to the Trustee of the transfer of Units is
the responsibility of the purchaser, but in the normal course of
business such notice is provided by the selling broker/dealer. The pro
rata share of cash in the Capital Account of the Trust will be computed
as of the fifteenth day of each month. Proceeds received on the sale of
any Securities in the Trust, to the extent not used to meet redemptions
of Units or pay expenses, will, however, be distributed on the last day
of each month to Unit holders of record on the fifteenth day of such
month if the amount available for distribution equals at least $0.01 per
Unit. The Trustee is not required to pay interest on funds held in the
Capital Account of the Trust (but may itself earn interest thereon and
therefore benefit from the use of such funds). Notwithstanding,
distributions of funds in the Capital Account, if any, will be made on
the last day of each December to Unit holders of record as of December
15. See "What is the Federal Tax Status of Unit Holders?"
It is anticipated that the deferred sales charge will be collected from
the Capital Account and that amounts in the Capital Account will be
sufficient to cover the cost of the deferred sales charge. However, to
the extent that amounts in the Capital Account are insufficient to
satisfy the then current deferred sales charge obligation, Securities
may be sold to meet such shortfall. Distributions of amounts necessary
to pay the deferred portion of the sales charge will be made to an
account designated by the Sponsor for purposes of satisfying Unit
holders' deferred sales charge obligations.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
Page 27
the Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder only when filing a tax return. Under
normal circumstances the Trustee obtains the Unit holder's tax
identification number from the selling broker. However, a Unit holder
should examine his or her statements from the Trustee to make sure that
the Trustee has been provided a certified tax identification number in
order to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should be
provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit holder
will, upon surrender of his or her Units for redemption, receive: (i)
the pro rata share of the amounts realized upon the disposition of
Securities, unless he or she elects an In-Kind Distribution as described
under "Other Information-How May the Indenture be Amended or
Terminated?" and (ii) a pro rata share of any other assets of the Trust,
less expenses of the Trust.
The Trustee will credit to the Income Account of the Trust any interest
or dividends received on the Securities therein. All other receipts
(e.g. return of capital, etc.) are credited to the Capital Account of
the Trust.
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any governmental charges
payable out of the Trust.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and the amount
of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable period of
time after the end of each calendar year, the Trustee shall furnish to
each person who at any time during the calendar year was a Unit holder
of the Trust the following information in reasonable detail: (1) a
summary of transactions in the Trust for such year; (2) any Securities
sold during the year and the Securities held at the end of such year by
the Trust; (3) the redemption price per Unit based upon a computation
thereof on the 31st day of December of such year (or the last business
day prior thereto); and (4) amounts of income and capital distributed
during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his or her Units by
tendering to the Trustee, at its unit investment trust office in the
City of New York, the certificates representing the Units to be
redeemed, or in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments of
transfer with signature guaranteed as explained above (or by providing
satisfactory indemnity, as in connection with lost, stolen or destroyed
certificates), and payment of applicable governmental charges, if any.
No redemption fee will be charged. On the third business day following
such tender, the Unit holder will be entitled to receive in cash an
amount for each Unit equal to the Redemption Price per Unit next
computed after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received by the
Trustee (if such day is a day in which the New York Stock Exchange is
open for trading), except that as regards Units received after 4:00 p.m.
Eastern time (or as of any earlier closing time on a day on which the
New York Stock Exchange is scheduled in advance to close at such earlier
time), the date of tender is the next day on which the New York Stock
Exchange is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units so redeemed shall be cancelled. Units
tendered for redemption prior to such time as the entire deferred sales
charge on such Units has been collected will be assessed the amount of
remaining deferred sales charge at the time of redemption.
Any Unit holder tendering 1,000 Units or more of the Trust for
redemption may request by written notice submitted at the time of tender
from the Trustee, in lieu of a cash redemption, a distribution of shares
Page 28
of Securities in an amount and value of Securities per Unit equal to the
Redemption Price Per Unit as determined as of the evaluation next
following tender. However, no In-Kind Distribution requests submitted
during the nine business days prior to the Mandatory Termination Date
will be honored. To the extent possible, In-Kind Distributions shall be
made by the Trustee through the distribution of each of the Securities
in book-entry form to the account of the Unit holder's bank or
broker/dealer at the Depository Trust Company. An In-Kind Distribution
will be reduced by customary transfer and registration charges. The
tendering Unit holder will receive his or her pro rata number of whole
shares of each of the Securities comprising the portfolio and cash from
the Capital Account equal to the fractional shares to which the
tendering Unit holder is entitled. The Trustee may adjust the number of
shares of any issue of Securities included in a Unit holder's In-Kind
Distribution to facilitate the distribution of whole shares, such
adjustment to be made on the basis of the value of Securities on the
date of tender. See "What is the Federal Tax Status of Unit Holders?" If
funds in the Capital Account are insufficient to cover the required cash
distribution to the tendering Unit holder, the Trustee may sell
Securities in the manner described above.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unit
holder's tax identification number in the manner required by such
regulations. For further information regarding this withholding, see
"Rights of Unit Holders-How are Income and Capital Distributed?" In the
event the Trustee has not been previously provided such number, one must
be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds are
available for such purpose, or from the Capital Account. All other
amounts paid on redemption shall be withdrawn from the Capital Account
of the Trust.
The Trustee is empowered to sell Securities of the Trust in order to
make funds available for redemption. To the extent that Securities are
sold, the size and diversity of the Trust will be reduced. Such sales
may be required at a time when Securities would not otherwise be sold
and might result in lower prices than might otherwise be realized.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the aggregate
underlying value of the Securities in the Trust plus or minus cash, if
any, in the Income and Capital Accounts of the Trust. The Redemption
Price per Unit is the pro rata share of each Unit determined by the
Trustee by adding: (1) the cash on hand in the Trust other than cash
deposited in the Trust to purchase Securities not applied to the
purchase of such Securities; (2) the aggregate value of the Securities
held in the Trust, as determined by the Evaluator on the basis of the
aggregate underlying value of the Securities in the Trust next computed;
and (3) dividends receivable on the Securities trading ex-dividend as of
the date of computation; and deducting therefrom: (1) amounts
representing any applicable taxes or governmental charges payable out of
the Trust; (2) any amounts owing to the Trustee for its advances; (3) an
amount representing estimated accrued expenses of the Trust, including
but not limited to fees and expenses of the Trustee (including legal and
auditing fees), the Evaluator and supervisory fees, if any; (4) cash
held for distribution to Unit holders of record of the Trust as of the
business day prior to the evaluation being made; and (5) other
liabilities incurred by the Trust; and finally dividing the results of
such computation by the number of Units of the Trust outstanding as of
the date thereof. The redemption price per Unit will be assessed the
amount of the remaining deferred sales charge, if any, at the time of
redemption. Until the earlier of six months after the Initial Date of
Deposit or the end of the initial offering period, the Redemption Price
per Unit will include estimated organizational and offering costs as set
forth under "Summary of Essential Information."
The aggregate value of the Securities will be determined in the
following manner: if the Securities are listed on a national securities
exchange or The Nasdaq Stock Market, this evaluation is generally based
on the closing sale prices on that exchange or that system (unless it is
determined that these prices are inappropriate as a basis for valuation)
or, if there is no closing sale price on that exchange or system, either
at the closing ask prices (during the initial offering period) or the
closing bid prices (subsequent to the initial offering period). If the
Page 29
Securities are not so listed or, if so listed and the principal market
therefor is other than on the exchange, the evaluation shall generally
be based on the current ask or bid prices (as appropriate) on the over-
the-counter market (unless these prices are inappropriate as a basis for
evaluation). If current ask or bid prices (as appropriate) are
unavailable, the evaluation is generally determined (a) on the basis of
current ask or bid prices (as appropriate) for comparable securities,
(b) by appraising the value of the Securities on the ask or bid side of
the market (as appropriate) or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on the New
York Stock Exchange is restricted or any emergency exists, as a result
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances, the
Sponsor may apply to the Securities and Exchange Commission for an order
permitting a full or partial suspension of the right of Unit holders to
redeem their Units. The Trustee is not liable to any person in any way
for any loss or damage which may result from any such suspension or
postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before 1:00 p.m. Eastern time on the same
business day and by making payment therefor to the Unit holder not later
than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units. In the event the Sponsor does not
purchase Units, the Trustee may sell Units tendered for redemption in
the over-the-counter market, if any, as long as the amount to be
received by the Unit holder is equal to the amount he or she would have
received on redemption of the Units.
The offering price of any Units acquired by the Sponsor will be in
accord with the Public Offering Price described in the then effective
prospectus describing such Units. Any profit or loss resulting from the
resale or redemption of such Units will belong to the Sponsor.
How May Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of a Security in the event
that an issuer defaults in the payment of a dividend that has been
declared, that any action or proceeding has been instituted restraining
the payment of dividends or there exists any legal question or
impediment affecting such Security, that the issuer of the Security has
breached a covenant which would affect the payments of dividends, the
credit standing of the issuer or otherwise impair the sound investment
character of the Security, that the issuer has defaulted on the payment
on any other of its outstanding obligations, or that the price of the
Security has declined to such an extent or other such credit factors
exist so that in the opinion of the Sponsor, the retention of such
Securities would be detrimental to the Trust. Except as stated under
"Portfolio-What are Some Additional Considerations for Investors?" for
Failed Contract Obligations, the acquisition by the Trust of any
securities or other property other than the Securities is prohibited.
Pursuant to the Indenture and with limited exceptions, the Trustee may
sell any securities or other property acquired in exchange for
Securities such as those acquired in connection with a merger or other
transaction. If offered such new or exchanged securities or property,
the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by the Trust, they may
be accepted for deposit in the Trust and either sold by the Trustee or
held in the Trust pursuant to the direction of the Sponsor (who may rely
on the advice of the Portfolio Supervisor). Proceeds from the sale of
Securities (or any securities or other property received by the Trust in
exchange for Securities) by the Trustee are credited to the Capital
Account of the Trust for distribution to Unit holders or to meet
redemptions. The Trustee may from time to time retain and pay
compensation to the Sponsor (or an affiliate of the Sponsor) to act as
agent for the Trust with respect to selling Securities from the Trust.
In acting in such capacity the Sponsor or its affiliate will be held
subject to the restrictions under the Investment Company Act of 1940, as
amended.
The Trustee may also sell Securities designated by the Sponsor, or if
not so directed, in its own discretion, for the purpose of redeeming
Units of the Trust tendered for redemption and the payment of expenses.
Page 30
The Sponsor, in designating Securities to be sold by the Trustee, will
generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares
of individual issues of Securities. To the extent this is not
practicable, the composition and diversity of the Securities may be
altered. In order to obtain the best price for the Trust, it may be
necessary for the Sponsor to specify minimum amounts (generally 100
shares) in which blocks of Securities are to be sold. The Sponsor may
consider sales of Units of unit investment trusts which it sponsors in
making recommendations to the Trustee as to the selection of
broker/dealers to execute the Trust's portfolio transactions.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, FT Series (formerly known as The First Trust Special Situations
Trust), The First Trust Insured Corporate Trust, The First Trust of
Insured Municipal Bonds and The First Trust GNMA. First Trust introduced
the first insured unit investment trust in 1974 and to date more than
$20 billion in First Trust unit investment trusts have been deposited.
The Sponsor's employees include a team of professionals with many years
of experience in the unit investment trust industry. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and
Securities Investor Protection Corporation and has its principal offices
at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number (630)
241-4141. As of December 31, 1997, the total partners' capital of Nike
Securities L.P. was $11,724,071 (audited). This paragraph relates only
to the Sponsor and not to the Trust or to any series thereof or to the
Underwriter. The information is included herein only for the purpose of
informing investors as to the financial responsibility of the Sponsor
and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trust may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the Securities. For information
relating to the responsibilities of the Trustee under the Indenture,
reference is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Page 31
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Securities. In the event of the failure of the
Sponsor to act under the Indenture, the Trustee may act thereunder and
shall not be liable for any action taken by it in good faith under the
Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of the Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532. The
Evaluator may resign or may be removed by the Sponsor or the Trustee, in
which event the Sponsor and the Trustee are to use their best efforts to
appoint a satisfactory successor. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor
Evaluator. If upon resignation of the Evaluator no successor has
accepted appointment within 30 days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the Mandatory
Termination Date indicated herein under "Summary of Essential
Information." The Trust may be liquidated at any time by consent of 100%
of the Unit holders of the Trust or by the Trustee when the value of the
Securities owned by the Trust as shown by any evaluation, is less than
the lower of $2,000,000 or 20% of the total value of Securities
deposited in the Trust during the initial offering period, or in the
event that Units of the Trust not yet sold aggregating more than 60% of
the Units of the Trust are tendered for redemption by underwriters,
including the Sponsor. If the Trust is liquidated because of the
redemption of unsold Units of the Trust by underwriters, the Sponsor
will refund to each purchaser of Units of the Trust the entire sales
charge and the transaction fees paid by such purchaser. In the event of
termination, written notice thereof will be sent by the Trustee to all
Unit holders of the Trust. Within a reasonable period after termination,
Page 32
the Trustee will follow the procedures set forth under "Rights of Unit
Holders-How are Income and Capital Distributed?"
Commencing during the period beginning nine business days prior to and
no later than the Mandatory Termination Date, Securities will begin to
be sold in connection with the termination of the Trust. The Sponsor
will determine the manner, timing and execution of the sale of the
Securities. Written notice of any termination of the Trust specifying
the time or times at which Unit holders may surrender their certificates
for cancellation shall be given by the Trustee to each Unit holder at
his or her address appearing on the registration books of the Trust
maintained by the Trustee. At least 60 days prior to the Maturity Date
of the Trust, the Trustee will provide written notice thereof to all
Unit holders and will include with such notice a form to enable Unit
holders to elect a distribution of shares of Securities (reduced by
customary transfer and registration charges), if such Unit holder owns
at least 1,000 Units of the Trust, rather than to receive payment in
cash for such Unit holder's pro rata share of the amounts realized upon
the disposition by the Trustee of Securities. To be effective, the
election form, together with surrendered certificates and other
documentation required by the Trustee, must be returned to the Trustee
at least ten business days prior to the Mandatory Termination Date of
the Trust. Unit holders not electing a distribution of shares of
Securities will receive a cash distribution from the sale of the
remaining Securities within a reasonable time after the Trust is
terminated. Regardless of the distribution involved, the Trustee will
deduct from the funds of the Trust any accrued costs, expenses, advances
or indemnities provided by the Indenture, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to provide for payment of any applicable taxes or
other governmental charges. Any sale of Securities in the Trust upon
termination may result in a lower amount than might otherwise be
realized if such sale were not required at such time. In addition, to
the extent that Securities are sold prior to the Mandatory Termination
Date, Unit holders will not benefit from any stock appreciation they
would have received had the Securities not been sold at such time. The
Trustee will then distribute to each Unit holder his or her pro rata
share of the balance of the Income and Capital Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn, will act as counsel for the Trustee and as
special New York tax counsel for the Trust.
Experts
The statement of net assets, including the schedule of investments, of
the Trust at the opening of business on the Initial Date of Deposit
appearing in this Prospectus and Registration Statement has been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement,
and is included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
Page 33
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
FT 302
We have audited the accompanying statement of net assets, including the
schedule of investments, of FT 302, comprised of Preferred Income Trust
Series, as of the opening of business on December 18, 1998. This
statement of net assets is the responsibility of the Trust's Sponsor.
Our responsibility is to express an opinion on this statement of net
assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement
of net assets. Our procedures included confirmation of the letter of
credit held by the Trustee and deposited in the Trust on December 18,
1998. An audit also includes assessing the accounting principles used
and significant estimates made by the Sponsor, as well as evaluating the
overall presentation of the statement of net assets. We believe that our
audit of the statement of net assets provides a reasonable basis for our
opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of FT 302,
comprised of Preferred Income Trust Series, at the opening of business
on December 18, 1998 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 18, 1998
Page 34
Statement of Net Assets
PREFERRED INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-December 18, 1998
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Securities represented by purchase contracts (1) (2) $148,551
Less accrued organizational and offering costs (3) (128)
Less liability for deferred sales charge (4) (5,252)
__________
Net assets $143,171
==========
Units outstanding 15,005
ANALYSIS OF NET ASSETS
Cost to investors (5) $150,051
Less sales charge (5) (6,752)
Less estimated organizational and offering costs (3) (128)
__________
Net assets $143,171
==========
</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 $200,000 issued by The
Chase Manhattan Bank has been deposited with the Trustee as collateral,
which is sufficient to cover the monies necessary for the purchase of
the Securities pursuant to contracts for the purchase of such Securities.
(3) A portion of the Public Offering Price on Units purchased prior to
the earlier of six months after the Initial Date of Deposit or the end
of the initial offering period consists of Securities in an amount
sufficient to pay for all or a portion of the costs incurred in
establishing the Trust. These costs have been estimated at $.0085 per
Unit, based upon the expected number of Units of the Trust to be
created. A distribution will be made at the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period to
an account maintained by the Trustee from which the organizational and
offering cost obligations of the investors to the Sponsor will be
satisfied. To the extent the number of Units of the Trust is larger or
smaller than the estimate, the actual distribution per Unit may differ
from that set forth above.
(4) Represents the amount of mandatory distributions from the Trust
($.35 per Unit), payable to the Sponsor in five equal monthly
installments beginning on August 20, 1999, and on the twentieth day of
each month thereafter (or if such day is not a business day, on the
preceding business day) through December 20, 1999. If Units are redeemed
prior to December 20, 1999, the remaining amount of the deferred sales
charge applicable to such Units will be payable at the time of redemption.
(5) The aggregate cost to investors includes a sales charge computed at
the rate of 4.5% of the Public Offering Price (equivalent to 4.545% of
the net amount invested, exclusive of the deferred sales charge),
assuming no reduction of sales charge as set forth under "Public
Offering-How is the Public Offering Price Determined?"
Page 35
Schedule of Investments
PREFERRED INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-December 18, 1998
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of
of Offering Redemption Value per Securities
Shares Name of Issuer of Preferred Securities (1) Rating (2) Price Provisions (3) Share to Trust (4)
____ __________________________________________ _________ ____________ _____________ _________ ____________
<C> <S> <C> <C> <C> <C> <C>
147 AMBAC Financial Group, AA 2.5% 03/31/03 @ 25 $25.188 $3,703
7.08%, Due 03/31/2098
178 AT&T Capital Corp., BBB 3.0% 12/15/03 @ 25 25.000 4,450
8.125%, Due 12/15/2028
180 Agrium Inc., 8.00%, BBB- 3.0% 04/22/03 @ 25 24.688 4,444
Due 06/30/2047 (5)
118 Alabama Power Co., A 2.0% 04/23/03 @ 25 25.125 2,965
7.00%, Due 03/31/2048
118 American Express Company Capital A 2.0% 07/16/03 @ 25 25.188 2,972
Trust I, 7.00%, Due 07/16/2028
116 BGE Capital Trust I, A 2.0% 06/15/03 @ 25 25.625 2,972
7.16%, Due 06/30/2038
117 BankAmerica Capital IV, A- 2.0% 02/24/03 @ 25 25.375 2,969
7.00%, Due 03/31/2028
169 Barclays Bank Plc, Series E, A+ 3.0% 04/30/03 @ 25 26.375 4,457
8.00% (5)
116 Chase Capital Trust V, A- 2.0% 03/31/03 @ 25 25.625 2,972
7.03%, Due 03/31/2028
116 Citicorp Capital III, A 2.0% 08/15/03 @ 25 25.625 2,972
7.10%, Due 08/15/2028
189 Developers Diversified Realty, Series C, BBB- 3.0% 07/07/03 @ 25 23.625 4,465
8.375%
175 Dillards Capital Trust, Series I, BBB- 3.0% 08/12/03 @ 25 25.438 4,452
7.50%, Due 08/01/2038
147 Duke Capital Financing, A- 2.5% 09/30/03 @ 25 25.250 3,712
7.375%, Due 06/30/2038
147 Duquesne Light Co., BBB+ 2.5% 05/01/03 @ 25 25.313 3,721
7.375%, Due 04/15/2038
145 Enterprise Capital Trust I, BBB- 2.5% 03/31/03 @ 25 25.563 3,707
7.44%, Due 03/31/2047
146 Equitable Resources Capital Trust, A- 2.5% 04/23/03 @ 25 25.438 3,714
7.35%, Due 04/15/2038
203 First Industrial Realty, Series D, 7.95% BBB- 3.0% 02/04/03 @ 25 22.000 4,466
</TABLE>
Page 36
Schedule of Investments (cont'd.)
PREFERRED INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-December 18, 1998
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of
of Offering Redemption Value per Securities
Shares Name of Issuer of Preferred Securities (1) Rating (2) Price Provisions (3) Share to Trust (4)
____ __________________________________________ _________ ____________ _____________ _________ ____________
<C> <S> <C> <C> <C> <C> <C>
201 First Industrial Realty, Series E, 7.90% BBB- 3.0% 03/18/03 @ 25 $22.188 $4,460
116 Fleet Capital Trust IV, BBB+ 2.0% 03/31/03 @ 25 25.563 2,965
7.17%, Due 03/31/2028
118 Gulf Power Capital Trust II, A 2.0% 01/20/03 @ 25 25.125 2,965
7.00%, Due 12/31/2037
177 Harris Preferred Capital, Series A, A 3.0% 03/30/03 @ 25 25.125 4,447
7.375%
146 Hartford Life Capital I, A- 2.5% 06/30/03 @ 25 25.500 3,723
7.20%, Due 06/30/2038
187 Highwoods Properties, Inc., Series D, BBB- 3.0% 04/23/03 @ 25 23.813 4,453
8.00%
146 Household Capital Trust IV, A- 2.5% 03/19/03 @ 25 25.438 3,714
7.25%, Due 12/31/2037
142 Indiana Michigan Power, BBB 2.5% 05/07/03 @ 25 26.125 3,710
7.60%, Due 06/30/2038
173 International Paper Capital Trust III, BBB 3.0% 09/24/03 @ 25 25.688 4,444
7.875%, Due 12/01/2038
117 ML Capital Trust IV, 7.12% A 2.0% 06/30/08 @ 25 25.438 2,976
149 MSDW Capital Trust I, A- 2.5% 03/12/03 @ 25 25.000 3,725
7.10%, Due 02/28/2038
146 National Rural Utility, A+ 2.5% 09/15/03 @ 25 25.438 3,714
7.375%, Due 09/15/2047
167 National Westminster Bank A+ 3.0% 11/04/03 @ 25 26.625 4,446
Series A, 7.875% (5)
145 Ohio Power Company, BBB+ 2.5% 04/29/03 @ 25 25.688 3,725
7.375%, Due 06/30/2038
183 ProLogis Trust, Series D, 7.92% BBB 3.0% 04/13/03 @ 25 24.313 4,449
147 SSBH Capital Trust, BBB+ 2.5% 01/28/03 @ 25 25.313 3,721
7.20%, Due 01/28/2038
</TABLE>
Page 37
Schedule of Investments (cont'd.)
PREFERRED INCOME TRUST SERIES
FT 302
At the Opening of Business on the
Initial Date of Deposit-December 18, 1998
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of
of Offering Redemption Value per Securities
Shares Name of Issuer of Preferred Securities (1) Rating (2) Price Provisions (3) Share to Trust (4)
_____ __________________________________________ __________ ____________ ______________ ______ ____________
<C> <S> <C> <C> <C> <C> <C>
118 Sears Roebuck Acceptance, A- 2.0% 03/01/03 @ 25 $25.250 $ 2,980
7.00%, Due 03/01/2038
180 Shaw Communications Inc., BBB 3.0% 09/30/03 @ 25 24.750 4,455
8.50%, Due 09/30/2097 (5)
147 Southern Company Capital Trust IV, A- 2.5% 06/30/03 @ 25 25.313 3,721
7.125%, Due 06/30/2028
188 Spieker Properties, Inc., 8.00% BBB- 3.0% 06/30/03 @ 25 23.750 4,465
146 U.S. Bancorp Capital II, BBB+ 2.5% 04/01/03 @ 25 25.438 3,714
7.20%, Due 04/01/2028
176 Weingarten Realty Investment, 7.44% A- 3.0% 03/31/03 @ 25 25.375 4,466
_____ ________
Total Investments 100% $148,551
===== ========
____________
<FN>
(1) Shown under this heading is the stated dividend rate of each of the
Securities, expressed as a percentage of par or stated value. Also shown
is the stated maturity date of the Trust Preferred Securities; the
Preferred Stocks have no stated maturity date. All Securities are
represented by regular way contracts to purchase such Securities for the
performance of which an irrevocable letter of credit has been deposited
with the Trustee. The contracts to purchase Securities were entered into
by the Sponsor on December 18, 1998. Each Security was originally issued
with a par or stated value per share equal to $25.
(2) The ratings are by Standard & Poor's. For a brief description of the
rating symbols and their related meanings, see "Description of Preferred
Stock Ratings." Such ratings were obtained from an information reporting
service.
(3) The Securities are first redeemable on such date and at
such price as listed above. Optional redemption provisions, which may be
exercised in whole or in part, are at prices of par or stated value.
Optional redemption provisions generally will occur at times when the
redeemed Securities have an offering side evaluation which represents a
premium over par or stated value. To the extent that the Securities were
acquired at a price higher than the redemption price, this will
represent a loss of capital when compared with the Public Offering Price
of the Units when acquired. Distributions will generally be reduced by
the amount of the dividends which otherwise would have been paid with
respect to redeemed Securities, and any principal amount received on
such redemption after satisfying any redemption requests for Units
received by the Trust will be distributed to Unit holders. Certain of
the Securities have provisions which would allow for their redemption
prior to the earliest stated call date pursuant to the occurrence of
certain extraordinary events.
(4) The cost of the Securities to the Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the last sale prices of the listed Securities and the ask
prices of the over-the-counter traded Securities on the business day
preceding the Initial Date of Deposit). The valuation of the Securities
has been determined by the Evaluator, an affiliate of the Sponsor. The
aggregate underlying value of the Securities on the Initial Date of
Deposit was $148,551. Cost and loss to Sponsor relating to the
Securities sold to the Trust were $149,026 and $475, respectively.
(5) This Security represents the preferred stock of a foreign company
which trades directly on a United States national securities exchange.
</FN>
</TABLE>
Page 38
DESCRIPTION OF PREFERRED STOCK RATINGS*
Standard & Poor's. A Standard & Poor's preferred stock rating is an
assessment of the capacity and willingness of an issuer to pay preferred
stock dividends and any applicable sinking fund obligations. A preferred
stock rating differs from a bond rating inasmuch as it is assigned to an
equity issue, which issue is intrinsically different from, and
subordinated to, a debt issue. Therefore, to reflect this difference,
the preferred stock rating symbol will normally not be higher than the
bond rating symbol assigned to, or that would be assigned to, the senior
debt of the same issuer.
The preferred stock ratings are based on the following considerations:
I. Likelihood of payment-capacity and willingness of the issuer to
meet the timely payment of preferred stock dividends and any applicable
sinking fund requirements in accordance with the terms of the obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
"AAA" This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
"AA" A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated AAA.
"A" An issued rated A is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions.
"BBB" An issue rated BBB is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the A
category.
"BB," "B," "CCC" Preferred stock issues rated BB, B and CCC are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the
lowest degree of speculation and CCC the highest degree of speculation.
While such issues will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
________________
As published by Standard & Poor's.
Page 39
CONTENTS:
Summary of Essential Information 4
Preferred Income Trust Series
FT 302:
What is the FT Series? 6
What are the Expenses and Charges? 7
What is the Federal Tax Status of Unit Holders? 8
Are Investments in the Trust Eligible for
Retirement Plans? 15
Portfolio:
What are the Securities? 15
Risk Factors 15
What are Some Additional Considerations
for Investors? 20
Public Offering:
How is the Public Offering Price Determined? 21
How are the Units Distributed? 24
What are the Sponsor's Profits? 26
Will There be a Secondary Market? 26
Rights of Unit Holders:
How is Evidence of Ownership Issued
and Transferred? 26
How are Income and Capital Distributed? 27
What Reports will Unit Holders Receive? 28
How May Units be Redeemed? 28
How May Units be Purchased by the Sponsor? 30
How May Securities be Removed from the Trust? 30
Information as to Sponsor, Trustee
and Evaluator:
Who is the Sponsor? 31
Who is the Trustee? 31
Limitations on Liabilities of Sponsor and Trustee 32
Who is the Evaluator? 32
Other Information:
How May the Indenture be Amended or Terminated? 32
Legal Opinions 33
Experts 33
Report of Independent Auditors 34
Statement of Net Assets 35
Notes to Statement of Net Assets 35
Schedule of Investments 36
Description of Preferred Stock Ratings 39
____________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
PREFERRED INCOME TRUST SERIES
Nike Securities, L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
December 18, 1998
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 40
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being
National Union Fire Insurance Company of Pittsburgh.
B. This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
The Registrant, FT 302, hereby identifies The First Trust
Special Situations Trust, Series 4 Great Lakes Growth and
Treasury Trust, Series 1; The First Trust Special Situations
Trust, Series 18 Wisconsin Growth and Treasury Securities Trust,
Series 1; The First Trust Special Situations Trust, Series 69
Target Equity Trust Value Ten Series; The First Trust Special
Situations Trust, Series 108; The First Trust Special Situations
Trust, Series 119 Target 5 Trust, Series 2 and Target 10 Trust,
Series 8; and The First Trust Special Situations Trust, Series
190 Biotechnology Growth Trust, Series 3 for purposes of the
representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from
those deposited in such previous series;
(2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide
essential financial information for, the series with respect to
the securities of which this Registration Statement is being
filed, this Registration Statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities
Act of 1933.
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 302, has duly caused this Amendment to
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on December 18, 1998.
FT 302
By NIKE SECURITIES L.P.
Depositor
By Robert M. Porcellino
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
Robert D. Van Kampen Director of )
Nike Securities )
Corporation, the ) December 18, 1998
General Partner of )
Nike Securities L.P. )
)
)
David J. Allen Director of ) Robert M. Porcellino
Nike Securities ) Attorney-in-Fact**
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.,
Depositor.
** An executed copy of the related power of attorney
was filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of The
First Trust Combined Series 258 (File No. 33-63483) and
the same is hereby incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated December 18, 1998 in
Amendment No. 2 to the Registration Statement (Form S-6) (File
No. 333-64587) and related Prospectus of FT 302.
ERNST & YOUNG LLP
Chicago, Illinois
December 18, 1998
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement
will be filed as Exhibit 4.1 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 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 First Trust
Advisors 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, First Trust Advisors L.P., as Evaluator, and
First Trust Advisors L.P., as Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities
L.P., Depositor (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-
6 [File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42755] filed on
behalf of The First Trust Special Situations Trust,
Series 19).
2.1 Copy of Certificate of Ownership (included in Exhibit
1.1 filed herewith on page 2 and incorporated herein by
reference).
S-5
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion of counsel as to New York income tax status of
securities being registered.
3.4 Opinion of counsel as to advancement of funds by
Trustee.
4.1 Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on
page S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
63483] filed on behalf of The First Trust Combined
Series 258).
S-6
FT 302
TRUST AGREEMENT
Dated: December 18, 1998
The Trust Agreement among Nike Securities L.P., as Depositor, The
Chase Manhattan Bank, as Trustee and First Trust Advisors L.P.,
as Evaluator and Portfolio Supervisor, sets forth certain
provisions in full and incorporates other provisions by reference
to the document entitled "Standard Terms and Conditions of Trust
for The First Trust Special Situations Trust, Series 22 and
certain subsequent Series, Effective November 20, 1991" (herein
called the "Standard Terms and Conditions of Trust"), and such
provisions as are incorporated by reference constitute a single
instrument. All references herein to Articles and Sections are
to Articles and Sections of the Standard Terms and Conditions of
Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and the Portfolio Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II and Part III hereof,
all the provisions contained in the Standard Terms and Conditions
of Trust are herein incorporated by reference in their entirety
and shall be deemed to be a part of this instrument as fully and
to the same extent as though said provisions had been set forth
in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR PREFERRED DIVIDEND INCOME TRUST SERIES
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
for the sale of Units dated the date hereof (the "Prospectus")
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee as set forth in the Prospectus under "Summary of
Essential Information," calculated based on the largest number of
Units outstanding during the calendar year except during the
initial offering period as determined in Section 4.01 of this
Indenture, in which case the fee is calculated based on the
largest number of units outstanding during the period for which
the compensation is paid (such annual fee to be pro rated for any
calendar year in which the Evaluator provides services during
less than the whole of such year). Such fee may exceed the
actual cost of providing such evaluation services for the Trust,
but at no time will the total amount received for evaluation
services rendered to unit investment trusts of which Nike
Securities L.P. is the sponsor in any calendar year exceed the
aggregate cost to the Evaluator of supplying such services in
such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee as set forth in the Prospectus under "Summary of
Essential Information," calculated based on the largest number of
Units outstanding during the calendar year except during the
initial offering period as determined in Section 4.01 of this
Indenture, in which case the fee is calculated based on the
largest number of units outstanding during the period for which
the compensation is paid (such annual fee to be pro rated for any
calendar year in which the Trustee provides services during less
than the whole of such year). However, in no event, except as
may otherwise be provided in the Standard Terms and Conditions of
Trust, shall the Trustee receive compensation in any one year
from any Trust of less than $2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is December
18, 1998.
J. The minimum amount of Equity Securities to be sold by
the Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
PART III
A. Notwithstanding anything to the contrary in the
Standard Terms and Conditions of Trust, references to subsequent
Series established after the date of effectiveness of the First
Trust Special Situations Trust, Series 22 shall include FT 302.
B. The term "Principal Account" as set forth in the
Standard Terms and Conditions of Trust shall be replaced with the
term "Capital Account."
C. Section 1.01(2) shall be amended to read as follows:
"(2) "Trustee" shall mean The Chase Manhattan Bank, or
any successor trustee appointed as hereinafter provided."
All references to United States Trust Company of New York in
the Standard Terms and Conditions of Trust shall be amended to
refer to The Chase Manhattan Bank.
D. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean First Trust Advisors L.P.
and its successors in interest, or any successor evaluator
appointed as hereinafter provided."
E. Section 1.01(4) shall be amended to read as follows:
"(4) "Portfolio Supervisor" shall mean First Trust
Advisors L.P. and its successors in interest, or any
successor portfolio supervisor appointed as hereinafter
provided."
F. Section 1.01(29) shall be added to read as follows:
"(29) The term "Distribution Agent" shall refer to the
Trustee acting in its capacity as distribution agent
pursuant to Section 5.02 herein."
G. Paragraph (b) of Section 2.01 shall be restated in its
entirety as follows:
(b)(1)From time to time following the Initial Date of
Deposit, the Depositor is hereby authorized, in its
discretion, to assign, convey to and deposit with the
Trustee (i) additional Securities, duly endorsed in blank or
accompanied by all necessary instruments of assignment and
transfer in proper form, (ii) Contract Obligations relating
to such additional Securities, accompanied by cash and/or
Letter(s) of Credit as specified in paragraph (c) of this
Section 2.01, and/or (iii) cash (or a Letter of Credit in
lieu of cash) with instructions to purchase additional
Securities, in an amount equal to the portion of the Unit
Value of the Units created by such deposit attributable to
the Securities to be purchased pursuant to such
instructions. Except as provided in the following
subparagraphs (2), (3) and (4) the Depositor, in each case,
shall ensure that each deposit of additional Securities
pursuant to this Section shall maintain, as nearly as
practicable, the Percentage Ratio. Each such deposit of
additional Securities shall be made pursuant to a Notice of
Deposit of Additional Securities delivered by the Depositor
to the Trustee. Instructions to purchase additional
Securities shall be in writing, and shall specify the name
of the Security, CUSIP number, if any, aggregate amount,
price or price range and date to be purchased. When
requested by the Trustee, the Depositor shall act as broker
to execute purchases in accordance with such instructions;
the Depositor shall be entitled to compensation therefor in
accordance with applicable law and regulations. The Trustee
shall have no liability for any loss or depreciation
resulting from any purchase made pursuant to the Depositor's
instructions or made by the Depositor as broker.
(2) Additional Securities (or Contract Obligations
therefor) may, at the Depositor's discretion, be deposited
or purchased in round lots. If the amount of the deposit is
insufficient to acquire round lots of each Security to be
acquired, the additional Securities shall be deposited or
purchased in the order of the Security in the Trust most
under-represented immediately before the deposit with
respect to the Percentage Ratio.
(3) If at the time of a deposit of additional
Securities, Securities of an issue deposited on the Initial
Date of Deposit (or of an issue of Replacement Securities
acquired to replace an issue deposited on the Initial Date
of Deposit) are unavailable, cannot be purchased at
reasonable prices or their purchase is prohibited or
restricted by applicable law, regulation or policies, the
Depositor may (i) deposit, or instruct the Trustee to
purchase, in lieu thereof, another issue of Securities or
Replacement Securities or (ii) deposit cash or a letter of
credit in an amount equal to the valuation of the issue of
Securities whose acquisition is not feasible with
instructions to acquire such Securities of such issue when
they become available.
(4) Any contrary authorization in the preceding
subparagraphs (1) through (3) notwithstanding, deposits of
additional Securities made after the 90-day period
immediately following the Initial Date of Deposit (except
for deposits made to replace Failed Contract Obligations if
such deposits occur within 20 days from the date of a
failure occurring within such initial 90-day period) shall
maintain exactly the Percentage Ratio existing immediately
prior to such deposit.
(5) In connection with and at the time of any deposit
of additional Securities pursuant to this Section 2.01(b),
the Depositor shall exactly replicate Cash (as defined
below) received or receivable by the Trust as of the date of
such deposit. For purposes of this paragraph, "Cash" means,
as to the Capital Account, cash or other property (other
than Securities) on hand in the Capital Account or
receivable and to be credited to the Capital Account as of
the date of the deposit (other than amounts to be
distributed solely to persons other than holders of Units
created by the deposit) and, as to the Income Account, cash
or other property (other than Securities) received by the
Trust as of the date of the deposit or receivable by the
Trust in respect of a record date for a payment on a
Security which has occurred or will occur before the Trust
will be the holder of record of a Security, reduced by the
amount of any cash or other property received or receivable
on any Security allocable (in accordance with the Trustee's
calculations of distributions from the Income Account
pursuant to Section 3.05) to a distribution made or to be
made in respect of a Record Date occurring prior to the
deposit. Such replication will be made on the basis of a
fraction, the numerator of which is the number of Units
created by the deposit and the denominator of which is the
number of Units which are outstanding immediately prior to
the deposit.
H. The following shall be added immediately following the
first sentence of paragraph (c) of Section 2.01:
"The Trustee may allow the Depositor to substitute for any
Letter(s) of Credit deposited with the Trustee in connection with
the deposits described in Section 2.01(a) and (b) cash in an
amount sufficient to satisfy the obligations to which the
Letter(s) of Credit relates. Any substituted Letter(s) of Credit
shall be released by the Trustee."
I. Section 2.03(a) of the Standard Terms and Conditions of
Trust shall be amended by adding the following sentence after the
first sentence of such section:
"The number of Units may be increased through a split
of the Units or decreased through a reverse split thereof,
as directed in writing by the Depositor, at any time when
the Depositor is the only beneficial holder of Units, which
revised number of Units shall be recorded by the Trustee on
its books. The Trustee shall be entitled to rely on the
Depositor's direction as certification that no person other
than the Depositor has a beneficial interest in the Units
and the Trustee shall have no liability to any person for
action taken pursuant to such direction."
J. Section 3.01 of the Standard Terms and Conditions of
Trust shall be replaced in its entirety with the following:
"Section 3.01. Initial Cost. Subject to reimbursement
as hereinafter provided, the cost of organizing the Trust
and the sale of the Trust Units shall be borne by the
Depositor, provided, however, that the liability on the part
of the Depositor under this section shall not include any
fees or other expenses incurred in connection with the
administration of the Trust subsequent to the deposit
referred to in Section 2.01. At the earlier of six months
after the Initial Date of Deposit or the conclusion of the
primary offering period (as certified by the Depositor to
the Trustee), the Trustee shall withdraw from the Account or
Accounts specified in the Prospectus or, if no Account is
therein specified, from the Capital Account, and pay to the
Depositor the Depositor's reimbursable expenses of
organizing the Trust and sale of the Trust Units in an
amount certified to the Trustee by the Depositor. If the
cash balance of the Capital Account is insufficient to make
such withdrawal, the Trustee shall, as directed by the
Depositor, sell Securities identified by the Depositor, or
distribute to the Depositor Securities having a value, as
determined under Section 4.01 as of the date of
distribution, sufficient for such reimbursement. The
reimbursement provided for in this section shall be for the
account of the Unit holders of record at the earlier of six
months after the Initial Date of Deposit or the conclusion
of the primary offering period. Any assets deposited with
the Trustee in respect of the expenses reimbursable under
this Section 3.01 shall be held and administered as assets
of the Trust for all purposes hereunder. The Depositor
shall deliver to the Trustee any cash identified in the
Statement of Net Assets of the Trust included in the
Prospectus not later than the expiration of the Delivery
Period and the Depositors obligation to make such delivery
shall be secured by the letter of credit deposited pursuant
to Section 2.01. Any cash which the Depositor has
identified as to be used for reimbursement of expenses
pursuant to this Section 3.01 shall be held by the Trustee,
without interest, and reserved for such purpose and,
accordingly, prior to the earlier of six months after the
Initial Date of Deposit or the conclusion of the primary
offering period, shall not be subject to distribution or,
unless the Depositor otherwise directs, used for payment of
redemptions in excess of the per Unit amount payable
pursuant to the next sentence. If a Unit holder redeems
Units prior to the earlier of six months after the Initial
Date of Deposit or the conclusion of the primary offering
period, the Trustee shall pay to the Unit holder, in
addition to the Redemption Value of the tendered Units,
unless otherwise directed by the Depositor, an amount equal
to the estimated per Unit cost of organizing the Trust and
the sale of Trust Units set forth in the Prospectus, or such
revision thereof most recently communicated to the Trustee
by the Depositor pursuant to Section 5.01, multiplied by the
number of Units tendered for redemption; to the extent the
cash on hand in the Trust is insufficient for such payment,
the Trustee shall have the power to sell Securities in
accordance with Section 5.02. The Trustee, upon receipt of
notification and certification from the Depositor of the
amount of any reimbursable expenses relating to the sale of
Trust Units incurred by the Depositor subsequent to the
earlier of six months after the Initial Date of Deposit or
the conclusion of the primary offering period, shall
withdraw from the Capital Account as set forth above, and
pay to the Depositor such amount. As used herein, the
Depositor's reimbursable expenses of organizing the Trust
and sale of the Trust Units shall include the cost of the
initial preparation and typesetting of the registration
statement, prospectuses (including preliminary
prospectuses), the indenture, and other documents relating
to the Trust, SEC and state blue sky registration fees, the
cost of the initial valuation of the portfolio and audit of
the Trust, the initial fees and expenses of the Trustee, and
legal and other out-of-pocket expenses related thereto, but
not including the expenses incurred in the printing of
preliminary prospectuses and prospectuses, expenses incurred
in the preparation and printing of brochures and other
advertising materials and any other selling expenses.
K. The second paragraph of Section 3.02 of the Standard
Terms and Conditions is hereby deleted and replaced with the
following sentence:
"Any non-cash distributions (other than a non-taxable
distribution of the shares of the distributing corporation
which shall be retained by a Trust) received by a Trust
shall be dealt with in the manner described at Section 3.11,
herein, and shall be retained or disposed of by such Trust
according to those provisions. The proceeds of any
disposition shall be credited to the Income Account of a
Trust. Neither the Trustee nor the Depositor shall be
liable or responsible in any way for depreciation or loss
incurred by reason of any such sale."
L. Section 3.05.II(a) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as follows:
"II. (a) On each Distribution Date, the Trustee shall
distribute to each Unit holder of record at the close of
business on the Record Date immediately preceding such
Distribution Date an amount per Unit equal to such Unit
holder's Income Distribution (as defined below), plus such
Unit holder's pro rata share of the balance of the Capital
Account (except for monies on deposit therein required to
purchase Contract Obligations) computed as of the close of
business on such Record Date after deduction of any amounts
provided in Subsection I, provided, however, that the
Trustee shall not be required to make a distribution from
the Capital Account unless the amount available for
distribution shall equal $1.00 per 100 Units.
Each Trust shall provide the following distribution
elections: (1) distributions to be made by check mailed to
the post office address of the Unit holder as it appears on
the registration books of the Trustee, or (2) if provided
for in the Prospectus, the following reinvestment option:
The Trustee will, for any Unit holder who provides
the Trustee written instruction, properly executed and
in form satisfactory to the Trustee, received by the
Trustee no later than its close of business 10 business
days prior to a Record Date (the "Reinvestment Notice
Date"), reinvest such Unit holder's distribution from
the Income and Capital Accounts in Units of the Trust,
purchased from the Depositor, to the extent the
Depositor shall make Units available for such purchase,
at the Depositor's offering price as of the third
business day prior to the following Distribution Date,
and at such reduced sales charge as may be described in
the prospectus for the Trusts. If, for any reason, the
Depositor does not have Units of the Trust available
for purchase, the Trustee shall distribute such Unit
holder's distribution from the Income and Capital
Accounts in the manner provided in clause (1) of the
preceding paragraph. The Trustee shall be entitled to
rely on a written instruction received as of the
Reinvestment Notice Date and shall not be affected by
any subsequent notice to the contrary. The Trustee
shall have no responsibility for any loss or
depreciation resulting from any reinvestment made in
accordance with this paragraph, or for any failure to
make such reinvestment in the event the Depositor does
not make Units available for purchase.
Any Unit holder who does not effectively elect
reinvestment in Units of their respective Trust pursuant to
the preceding paragraph shall receive a cash distribution in
the manner provided in clause (1) of the second preceding
paragraph."
M. Section 3.05.II(b) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as follows:
"II. (b) For purposes of this Section 3.05, the Unit
holder's Income Distribution shall be equal to such Unit
holder's pro rata share of the cash balance in the Income
Account computed as of the close of business on the Record
Date immediately preceding such Income Distribution after
deduction of (i) the fees and expenses then deductible
pursuant to Section 3.05.I. and (ii) the Trustee's estimate
of other expenses properly chargeable to the Income Account
pursuant to the Indenture which have accrued, as of such
Record Date, or are otherwise properly attributable to the
period to which such Income Distribution relates."
N. Paragraph (c) of Subsection II of Section 3.05 of the
Standard Terms and Conditions of Trust is hereby amended to read
as follows:
"On each Distribution Date the Trustee shall distribute
to each Unit holder of record at the close of business on
the Record Date immediately preceding such Distribution Date
an amount per Unit equal to such Unit holder's pro rata
share of the balance of the Capital Account (except for
monies on deposit therein required to purchase Contract
Obligations) computed as of the close of business on such
Record Date after deduction of any amounts provided in
Subsection I."
O. Section 3.05 of Article III of the Standard Terms and
Conditions of Trust is hereby amended to include the following
subsection:
"Section 3.05.I.(e) deduct from the Interest Account
or, to the extent funds are not available in such Account,
from the Capital Account and pay to the Depositor the amount
that it is entitled to receive pursuant to Section 3.14.
P. Section 3.11 of the Standard Terms and Conditions of
Trust is hereby deleted in its entirety and replaced with the
following language:
"Section 3.11. Notice to Depositor.
In the event that the Trustee shall have been notified
at any time of any action to be taken or proposed to be
taken by at least a legally required number of holders of
any Securities deposited in a Trust, the Trustee shall take
such action or omit from taking any action, as appropriate,
so as to insure that the Securities are voted as closely as
possible in the same manner and the same general proportion
as are the Securities held by owners other than such Trust.
In the event that an offer by the issuer of any of the
Securities or any other party shall be made to issue new
securities, or to exchange securities, for Trust Securities,
the Trustee shall reject such offer. However, should any
issuance, exchange or substitution be effected
notwithstanding such rejection or without an initial offer,
any securities, cash and/or property received shall be
deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee pursuant to the
Depositor's direction, unless the Depositor advises the
Trustee to keep such securities or property. The Depositor
may rely on the Portfolio Supervisor in so advising the
Trustee. The cash received in such exchange and cash
proceeds of any such sales shall be distributed to Unit
holders on the next distribution date in the manner set
forth in Section 3.05 regarding distributions from the
Capital Account. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by
reason of any such sale.
Neither the Depositor nor the Trustee shall be liable
to any person for any action or failure to take action
pursuant to the terms of this Section 3.11.
Whenever new securities or property is received and
retained by a Trust pursuant to this Section 3.11, the
Trustee shall provide to all Unit holders of such Trust
notices of such acquisition in the Trustee's annual report
unless prior notice is directed by the Depositor."
Q. The first sentence of Section 3.13. shall be amended to
read as follows:
"As compensation for providing supervisory portfolio
services under this Indenture, the Portfolio Supervisor
shall receive, in arrears, against a statement or statements
therefor submitted to the Trustee monthly or annually an
aggregate annual fee in an amount which shall not exceed
$0.0035 per Unit outstanding as of January 1 of such year
except for a Trust during the year or years in which an
initial offering period as determined in Section 4.01 of
this Indenture occurs, in which case the fee for a month is
based on the number of Units outstanding at the end of such
month (such annual fee to be pro rated for any calendar year
in which the Portfolio Supervisor provides services during
less than the whole of such year), but in no event shall
such compensation when combined with all compensation
received from other series of the Trust for providing such
supervisory services in any calendar year exceed the
aggregate cost to the Portfolio Supervisor for the cost of
providing such services."
R. Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraphs
which shall be entitled Section 3.14.:
"Section 3.14. Bookkeeping and Administrative Expenses.
As compensation for providing bookkeeping and other
administrative services of a character described in Section
26(a)(2)(C) of the Investment Company Act of 1940 to the
extent such services are in addition to, and do not
duplicate, the services to be provided hereunder by the
Trustee or the Portfolio Supervisor, the Depositor shall
receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee
in an amount as set forth in the Prospectus times the number
of Units outstanding as of January 1 of such year except for
a year or years in which an initial offering period as
determined by Section 4.01 of this Indenture occurs, in
which case the fee for a month is based on the number of
Units outstanding at the end of such month (such annual fee
to be pro rated for any calendar year in which the Depositor
provides service during less than the whole of such year),
but in no event shall such compensation when combined with
all compensation received from other unit investment trusts
for which the Depositor hereunder is acting as Depositor for
providing such bookkeeping and administrative services in
any calendar year exceed the aggregate cost to the Depositor
providing services to such unit investment trusts. Such
compensation may, from time to time, be adjusted provided
that the total adjustment upward does not, at the time of
such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for
services as measured by the United States Department of
Labor Consumer Price Index entitled "All Services Less Rent
of Shelter" or similar index, if such index should no longer
be published. The consent or concurrence of any Unit holder
hereunder shall not be required for any such adjustment or
increase. Such compensation shall be paid by the Trustee,
upon receipt of an invoice therefor from the Depositor, upon
which, as to the cost incurred by the Depositor of providing
services hereunder the Trustee may rely, and shall be
charged against the Income and Capital Accounts on or before
the Distribution Date following the Monthly Record Date on
which such period terminates. The Trustee shall have no
liability to any Certificateholder or other person for any
payment made in good faith pursuant to this Section.
If the cash balance in the Income and Capital Accounts
shall be insufficient to provide for amounts payable
pursuant to this Section 3.14, the Trustee shall have the
power to sell (i) Securities from the current list of
Securities designated to be sold pursuant to Section 5.02
hereof, or (ii) if no such Securities have been so
designated, such Securities as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds of any
such sale in payment of the amounts payable pursuant to this
Section 3.14.
Any moneys payable to the Depositor pursuant to this
Section 3.14 shall be secured by a prior lien on the Trust
Fund except that no such lien shall be prior to any lien in
favor of the Trustee under the provisions of Section 6.04
herein.
S. Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraph
which shall be entitled Section 3.15:
"Section 3.15. Deferred Sales Charge. If the
prospectus related to the Trust specifies a deferred sales
charge, the Trustee shall, on the dates specified in and as
permitted by such Prospectus (the "Deferred Sales Charge
Payment Dates"), withdraw from the Capital Account, an
amount per Unit specified in such Prospectus and credit such
amount to a special non-Trust account designated by the
Depositor out of which the deferred sales charge will be
distributed to or on the order of the Depositor on such
Deferred Sales Charge Payment Dates (the "Deferred Sales
Charge Account"). If the balance in the Capital Account is
insufficient to make such withdrawal, the Trustee shall, as
directed by the Depositor, advance funds in an amount
required to fund the proposed withdrawal and be entitled to
reimbursement of such advance upon the deposit of additional
monies in the Capital Account, and/or sell Securities and
credit the proceeds thereof to the Deferred Sales Charge
Account, provided, however, that the aggregate amount
advanced by the Trustee at any time for payment of the
deferred sales charge shall not exceed $15,000. Such
direction shall, if the Trustee is directed to sell a
Security, identify the Security to be sold and include
instructions as to the execution of such sale. In the
absence of such direction by the Depositor, the Trustee
shall sell Securities sufficient to pay the deferred sales
charge (and any unreimbursed advance then outstanding) in
full, and shall select Securities to be sold in such manner
as will maintain (to the extent practicable) the relative
proportion of number of shares of each Security then held.
The proceeds of such sales, less any amounts paid to the
Trustee in reimbursement of its advances, shall be credited
to the Deferred Sales Charge Account. If a Unit holder
redeems Units prior to full payment of the deferred sales
charge, the Trustee shall, if so provided in the related
Prospectus, on the Redemption Date, withhold from the
Redemption Price payable to such Unit holder an amount equal
to the unpaid portion of the deferred sales charge and
distribute such amount to the Deferred Sales Charge Account.
If the Trust is terminated for reasons other than that set
forth in Section 6.01(g), the Trustee shall, if so provided
in the related Prospectus, on the termination of the Trust,
withhold from the proceeds payable to Unit holders an amount
equal to the unpaid portion of the deferred sales charge and
distribute such amount to the Deferred Sales Charge Account.
If the Trust is terminated pursuant to Section 6.01(g), the
Trustee shall not withhold from the proceeds payable to Unit
holders any amounts of unpaid deferred sales charges. If
pursuant to Section 5.02 hereof, the Depositor shall
purchase a Unit tendered for redemption prior to the payment
in full of the deferred sales charge due on the tendered
Unit, the Depositor shall pay to the Unit holder the amount
specified under Section 5.02 less the unpaid portion of the
deferred sales charge. All advances made by the Trustee
pursuant to this Section shall be secured by a lien on the
Trust prior to the interest of the Unit holders."
T. Notwithstanding anything to the contrary in Sections
3.15 and 4.05 of the Standard Terms and Conditions of Trust, so
long as Nike Securities L.P. is acting as Depositor, the Trustee
shall have no power to remove the Portfolio Supervisor.
U. The first sentence of Section 4.03. shall be amended to
read as follows:
"As compensation for providing evaluation services under
this Indenture, the Evaluator shall receive, in arrears, against
a statement or statements therefor submitted to the Trustee
monthly or annually an aggregate annual fee equal to the amount
specified as compensation for the Evaluator in the Trust
Agreement per Unit outstanding as of January 1 of such year
except for a Trust during the year or years in which an initial
offering period as determined in Section 4.01 of this Indenture
occurs, in which case the fee is calculated based on the largest
number of Units outstanding during the period for which the
compensation is paid (such annual fee to be pro rated for any
calendar year in which the Evaluator provides services during
less than the whole of such year). Such compensation may, from
time to time, be adjusted provided that the total adjustment
upward does not, at the time of such adjustment, exceed the
percentage of the total increase, after the date hereof, in
consumer prices for services as measured by the United States
Department of Labor Consumer Price Index entitled "All Services
Less Rent of Shelter" or similar index, if such index should no
longer be published. The consent or concurrence of any Unit
holder hereunder shall not be required for any such adjustment or
increase. Such compensation shall be paid by the Trustee, upon
receipt of invoice therefor from the Evaluator, upon which, as to
the cost incurred by the Evaluator of providing services
hereunder the Trustee may rely, and shall be charged against the
Income and/or Principal Accounts, in accordance with Section
3.05."
V. Section 5.01 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The second sentence of the first paragraph of Section
5.01 shall be amended by deleting the phrase "and (iii)" and
adding the following "(iii) amounts representing unpaid accrued
organizational and offering costs, and (iv)" ; and
(ii) The following text shall immediately precede the last
sentence of the first paragraph of Section 5.01:
"Prior to the payment to the Depositor of its
reimbursable organizational and offering costs to be
made at the earlier of six months after the Initial
Date of Deposit or the conclusion of the primary
offering period in accordance with Section 3.01, for
purposes of determining the Trust Fund Evaluation under
this Section 5.01, the Trustee shall rely upon the
amounts representing unpaid accrued organizational and
offering costs in the estimated amount per Unit set
forth in the Prospectus until such time as the
Depositor notifies the Trustee in writing of a revised
estimated amount per Unit representing unpaid accrued
organizational and offering costs. Upon receipt of
such notice, the Trustee shall use this revised
estimated amount per Unit representing unpaid accrued
organizational and offering costs in determining the
Trust Fund Evaluation but such revision of the
estimated expenses shall not effect calculations made
prior thereto and no adjustment shall be made in
respect thereof. Reimbursable offering costs incurred
by the Depositor subsequent to the earlier of six
months after the Initial Date of Deposit or the
conclusion of the primary offering period shall be
accounted for as paid by the Trustee."
W. Section 5.02 of the Standard Terms and Conditions of
Trust is amended by adding the following after the second
paragraph of such section:
"Notwithstanding anything herein to the contrary, in
the event that any tender of Units pursuant to this Section
5.02 would result in the disposition by the Trustee of less
than a whole Security, the Trustee shall distribute cash in
lieu thereof and sell such Securities as directed by the
Sponsors as required to make such cash available.
Subject to the restrictions set forth in the
Prospectus, Unit holders may redeem 1,000 Units or more of a
Trust and request a distribution in kind of (i) such Unit
holder's pro rata portion of each of the Securities in such
Trust, in whole shares, and (ii) cash equal to such Unit
holder's pro rata portion of the Income and Capital Accounts
as follows: (x) a pro rata portion of the net proceeds of
sale of the Securities representing any fractional shares
included in such Unit holder's pro rata share of the
Securities and (y) such other cash as may properly be
included in such Unit holder's pro rata share of the sum of
the cash balances of the Income and Capital Accounts in an
amount equal to the Unit Value determined on the basis of a
Trust Fund Evaluation made in accordance with Section 5.01
determined by the Trustee on the date of tender less amounts
determined in clauses (i) and (ii)(x) of this Section.
Subject to Section 5.05 with respect to Rollover Unit
holders, if applicable, to the extent possible,
distributions of Securities pursuant to an in kind
redemption of Units shall be made by the Trustee through the
distribution of each of the Securities in book-entry form to
the account of the Unit holder's bank or broker-dealer at
the Depository Trust Company. Any distribution in kind will
be reduced by customary transfer and registration charges."
X. Paragraph (g) of Section 6.01 of the Standard Terms and
Conditions of Trust is hereby amended by inserting the following
after the first word thereof:
"(i) the value of any Trust as shown by an evaluation
by the Trustee pursuant to Section 5.01 hereof shall be less
than the lower of $2,000,000 or 20% of the total value of
Securities deposited in such Trust during the initial
offering period, or (ii)"
Y. Section 8.02 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The fourth sentence of the second paragraph shall
be deleted and replaced with the following:
"The Trustee will honor duly executed requests for in-
kind distributions received (accompanied by the electing
Unit holder's Certificate, if issued) by the close of
business ten business days prior to the Mandatory
Termination Date."
(ii) The first sentence of the fourth paragraph shall
be deleted and replaced with the following:
"Commencing no earlier than the business day following
that date on which Unit holders must submit to the Trustee
notice of their request to receive an in-kind distribution
of Securities at termination, the Trustee will liquidate the
Securities not segregated for in-kind distributions during
such period and in such daily amounts as the Depositor shall
direct."
IN WITNESS WHEREOF, Nike Securities L.P., The Chase
Manhattan Bank and First Trust Advisors L.P. have each caused
this Trust Agreement to be executed and the respective corporate
seal to be hereto affixed and attested (if applicable) by
authorized officers; all as of the day, month and year first
above written.
NIKE SECURITIES L.P.,
Depositor
By Robert M. Porcellino
Senior Vice President
THE CHASE MANHATTAN BANK,
Trustee
By Rosalia A. Raviele
Vice President
[SEAL]
ATTEST:
Joan Currie
Assistant Treasurer
FIRST TRUST ADVISORS L.P.,
Evaluator
By Robert M. Porcellino
Senior Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Robert M. Porcellino
Senior Vice President
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
FT 302
(Note: Incorporated herein and made a part hereof for the
Trust is the "Schedule of Investments" for the Trust as set forth
in the Prospectus.)
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
December 18, 1998
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: FT 302
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of FT 302 in connection with the
preparation, execution and delivery of a Trust Agreement dated
December 18, 1998 among Nike Securities L.P., as Depositor, The
Chase Manhattan Bank, as Trustee and First Trust Advisors L.P. as
Evaluator and Portfolio Supervisor, pursuant to which the
Depositor has delivered to and deposited the Securities listed in
Schedule A to the Trust Agreement with the Trustee and pursuant
to which the Trustee has issued to or on the order of the
Depositor a certificate or certificates representing units of
fractional undivided interest in and ownership of the Fund
created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. the certificates evidencing the Units in the Fund when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-64587)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF:erg
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
December 18, 1998
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Re: FT 302
Gentlemen:
We have acted as counsel for Nike Securities L.P., Depositor of FT 302
(the "Fund"), in connection with the issuance of units of fractional
undivided interest in the Trust of said Fund (the "Trust"), under a Trust
Agreement, dated December 18, 1998 (the "Indenture") between Nike
Securities L.P., as Depositor, The Chase Manhattan Bank, as Trustee, and
First Trust Advisors L.P., as Evaluator and Portfolio Supervisor.
In this connection, we have examined the Registration Statement, the form
of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we
have deemed pertinent. The opinions expressed herein assume that the
Trust will be administered, and investments by the Trust from proceeds of
subsequent deposits, if any, will be made in accordance with the terms of
the Indenture. The Trust holds (i) preferred stock (the "Preferred
Stock"); (ii) interests in real estate investment trusts (the "REIT
Shares"), which together with the Preferred Stock are collectively
referred to herein as the "Equity Securities"; (iii) undivided beneficial
interest (the "Trust Certificates") in affiliated business trusts that
are taxed as grantor trusts for federal income tax purposes (the "Grantor
Trusts") which hold corporate debt obligations (the "Grantor Trust Debt
Obligations"); and (iv) corporate debt obligations (the "Corporate Debt
Obligations"), which together with the Grantor Trust Debt Obligations are
collectively referred to herein as the "Debt Securities." The Equity
Securities, the Trust Certificates and the Corporate Debt Obligations
held by the Trust are referred to collectively as the "Securities."
Neither the Sponsor nor its counsel has independently examined the assets
to be deposited in and held by the Trust. However, although no opinion
is expressed herein regarding such matters, for purposes of the opinion
set forth below, it is assumed that (i) The Equity Securities qualify as
equity for Federal income tax purposes and that, accordingly, amounts
received by the Trust with respect to the Equity Securities will qualify
as dividends as defined in Section 316 of the Internal Revenue Code of
1986 (the "Code"); (ii) no Grantor Trust is an association taxable as a
corporation for Federal income tax purposes, but rather each Grantor
Trust will be governed by the provisions of subchapter J (relating to
trusts) of Chapter 1 of the Code; (iii) each holder of a Trust
Certificate will be considered the owner of a pro rata share of each
asset of the respective Grantor Trust; (iv) the Debt Securities qualify
as debt for Federal income tax purposes, and; (v) each REIT Share
represents a share in an entity treated as a real estate investment trust
for Federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under
existing United States Federal income tax law:
(i)The Trust is not an association taxable as a corporation for Federal
income tax purposes, but will be governed by the provisions of subchapter
J (relating to trusts) of chapter 1, of the Code.
(ii) Each Unit holder will be considered the owner of a pro rata share
of each Security of the Trust in the proportion that the number of Units
held by a Unit holder bears to the total number of Units outstanding.
Under subpart E, subchapter J of Chapter 1 of the Code, income of the
Trust will be treated as income of each Unit holder in the proportion
described above; and an item of Trust income will have the same character
in the hands of a Unit holder as it would have in the hands of the
Trustee. Each Unit holder will be considered to have received his or her
pro rata share of income derived from each Trust asset when such income
is considered to be received by the Trust. Each Unit holder will also be
required to include in taxable income for Federal income tax purposes,
original issue discount with respect to his or her interest in any Debt
Security which was issued with original issue discount at the same time
and in the same manner, as though the Unit holder were the direct owner
of such interest. Original issue discount will be treated as zero with
respect to Debt Securities if it is "de minimis" within the meaning of
Section 1273 of the Code. If a Debt Security is a "high yield discount
obligation" within the meaning of Section 163(e)(5) of the Code, certain
special rules may apply. A Unit holder may elect to include in taxable
income for Federal income tax purposes market discount as it accrues with
respect to his or her interest in any Debt Security which he or she is
considered to have acquired with market discount at the same time and in
the same manner as though the Unit holder were the direct owner of such
interest.
(iii) The price a Unit holder pays for his or her Units, generally
including sales charges, is allocated among his or her pro rata portion
of each Security held by the Trust ( in proportion to the fair market
values thereof on the valuation date closest to the date the Unit holder
purchases his or her Units) in order to determine his or her tax basis
for his or her pro rata portion of each Security held by the Trust. For
Federal income tax purposes, a Unit holder's pro rata portion of
distributions of cash or property by a corporation with respect to an
Equity Security ("dividends" as defined by Section 316 of the Code) is
taxable as ordinary income to the extent of such corporation's current
and accumulated "earnings and profits." A Unit holder's pro rata portion
of dividends paid on such Equity Security which exceeds such current and
accumulated earnings and profits will first reduce a Unit holder's tax
basis in such Equity Security, and to the extent that such dividends
exceed a Unit holder's tax basis in such Equity Security, shall be
treated as gain from the sale or exchange of property. Certain of the
issuers of the Equity Securities intend to qualify under special Federal
income tax rules as "real estate investment trusts" (a "REIT," shares of
such issuer held by the Trust shall be referred to as the "REIT Shares").
Because Unit holders are deemed to directly own a pro rata portion of
the REIT Shares as discussed above, Unit holders are advised to consult
their tax advisers for information relating to the tax consequences of
owning the REIT Shares. Provided such issuer qualifies as a REIT,
certain distributions by such issuer on the REIT Shares may qualify as
"capital gain dividends," taxable to shareholders (and, accordingly, to
the Unit holders as owners of a pro rata portion of the REIT Shares) as
long-term capital gain, regardless of how long a shareholder has owned
such shares. In addition, distributions of income and capital gains
declared on REIT Shares in October, November, or December will be deemed
to have been paid to the shareholders (and, accordingly, to the Unit
holders as owners of a pro rata portion of the REIT Shares) on December
31 of the year they are declared, even when paid by the REIT during the
following January and received by shareholders or Unit holders in such
following year.
(iv) Gain or loss will be recognized to a Unit holder (subject to
various nonrecognition provisions under the Code) upon redemption or sale
of his or her Units, except to the extent an in kind distribution of
Securities is received by such Unit holder from the Trust as discussed
below. Such gain or loss is measured by comparing the proceeds of such
redemption or sale with the adjusted basis of his or her Units. Before
adjustment, such basis would normally be cost if the Unit holder had
acquired his or her Units by purchase. Such basis will be reduced, but
not below zero, by the Unit holder's pro rata portion of dividends with
respect to each Equity Security which is not taxable as ordinary income.
However, any loss realized by a Unit holder with respect to the
disposition of his or her pro rata portion of the REIT Shares, to the
extent such Unit holder has owned his or her Units for less than six
months or the Trust has held the REIT Shares for less than six months,
will be treated as long-term capital loss to the extent of the Unit
holder's pro rata portion of any capital gain dividends received (or
deemed to have been received) with respect to the REIT Shares. In
addition, such basis will be increased by the Unit holder's aliquot share
of the accrued original issue discount with respect to each Debt Security
for which there was original issue discount at the time such Debt
Security was issued, and by accrued market discount which the Unit holder
has elected to annually include in income with respect to each Debt
Security, and reduced by the Unit holder's aliquot share of the amortized
acquisition premium, if any, which the Unit holder has properly elected
to amortize under Section 171 of the Code on each Debt Security. The tax
basis reduction requirements of the Code relating to amortization of
premium may, under some circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than original cost.
(v) Each Unitholder will have a taxable event when a Security is
disposed of (whether by sale, exchange, liquidation, redemption, payment
on maturity or otherwise), an asset held by a Grantor Trust is disposed
of by the particular Grantor Trust, or when a Unit holder redeems or
sells his Units. A Unit holder's tax basis in his Units will equal his
tax basis in his pro rata portion of all the assets of the Trust. Such
basis is ascertained by apportioning the tax basis for his or her Units
(as of the date on which the Units were acquired) ratably, according to
their values as of the valuation date nearest the date on which he or she
purchased such Units. A Unit holder's basis in his or her Units and of
his or her fractional interest in each Debt Security must be reduced by
the Unit holder's share of the amortized acquisition premium, if any, on
Debt Securities which the Unit holder has properly elected to amortize
under Section 171 of the Code, and must be increased by the Unit holder's
share of the accrued original issue discount with respect to each Debt
Security which, at the time the Debt Security was issued, had original
issue discount, and by accrued market discount which the Unit holder has
elected to annually include in income. 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 are 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 which exceed
such current and accumulated earnings and profits will first reduce a
Unit holder's tax basis in such Equity Security (and accordingly his or
her basis in such Units), and to the extent that such dividends exceed a
Unit holder's tax basis in such Equity Security shall be treated as gain
from the sale or exchange of property.
(vi) Under the Indenture, under certain circumstances, a Unit holder
tendering Units for redemption may request an in kind distribution of
Securities upon the redemption of Units or upon the termination of the
Trust. Unit holders electing an In-Kind Distribution will receive a cash
payment representing their proportionate amount of the Corporate Debt
Obligations. As previously discussed, prior to the redemption of Units
or the termination of the Trust, a Unit holder is considered as owning a
pro rata portion of each of the Trust's assets. The receipt of an in
kind distribution will result in a Unit holder receiving an undivided
interest in whole Securities and possibly cash. The potential Federal
income tax consequences which may occur under an in kind distribution
will depend upon 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. The total amount of taxable gains (or losses)
recognized upon such redemption will generally equal the sum of the gain
(or loss) recognized under the rules described above by the redeeming
Unit holder with respect to each Security owned by the Trust.
A domestic corporation owning Units in the Trust may be eligible for the
70% dividends received deduction pursuant to section 243(a) of the Code
with respect to such Unit holder's pro rata portion of dividends received
by the Trust (to the extent such dividends are taxable as ordinary
income, as discussed above, and are attibutable to domestic
corporations), subject to the limitations imposed by Sections 246 and
246A of the Code. However, dividends received on the REIT Shares are not
eligible for the dividends received deduction. Certain special rules,
however, may apply with regard to the preferred stock of a public utility.
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.
Section 67 of the Code provides that certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to
the extent they exceed 2% of such individual's adjusted gross income.
Unit holders may be required to treat some or all of the expenses of a
Trust as miscellaneous itemized deductions subject to this limitation.
The Code provides a complex set of rules governing the accrual of
original issue discount. These rules provide that original issue
discount generally accrues on the basis of a constant compound interest
rate. Special rules apply if the purchase price of a Debt Security
exceeds its original issue price plus the amount of original issue
discount which would have previously accrued, based upon its issue price
(its "adjusted issue price"). Similarly, these special rules would apply
to a Unit holder if the tax basis of his or her pro rata portion of a
Debt Security issued with original issue discount exceeds his or her pro
rata portion of its adjusted issue price. It is possible that a Debt
Security that has been issued at an original issue discount may be
characterized as a "high-yield discount obligation" within the meaning of
Section 163(e)(5) of the Code. To the extent that such an obligation is
issued at a yield in excess of six percentage points over the applicable
Federal rate, a portion of the original issue discount on such obligation
will be characterized as a distribution on stock (e.g., dividends) for
purposes of the dividends received deduction which is available to
certain corporations with respect to certain dividends received by such
corporations.
If a Unit holder's tax basis in his interest in any Debt Security held by
the Trust is less than his or her allocable portion of such Debt
Security's stated redemption price at maturity (or, if issued with
original issue discount, his or her allocable portion of its revised
issue price on the date he or she buys such Units), such difference will
constitute market discount unless the amount of market discount is "de
minimis" as specified in the Code. Market discount accrues daily
computed on a straight line basis, unless the Unit holder elects to
calculate accrued market discount under a constant yield method.
Accrued market discount is generally includible in taxable income of the
Unit holders as ordinary income for Federal tax purposes upon the receipt
of serial principal payments on Debt Securities, on the sale, maturity or
disposition of such Debt Securities and on the sale of a Unit holder's
Units unless a Unit holder elects to include the accrued market discount
in taxable income as such discount accrues. If a Unit holder does not
elect to annually include accrued market discount in taxable income as it
accrues, deductions of any interest expense incurred by the Unit holder
to purchase or carry his or her Units will be reduced by such accrued
market discount. In general, the portion of any interest which is not
currently deductible is deductible when the accrued market discount is
included in income upon the sale or redemption of the Debt Securities or
the sale of Units.
The tax basis of a Unit holder with respect to his or her interest in an
obligation is increased by the amount of original issue discount (and
market discount, if the Unit holder elects to include market discount, if
any, on the Debt Securities in income as it accrues) thereon properly
included in the Unit holder's gross income as determined for Federal
income tax purposes and reduced by the amount of any amortized premium
which the Unit holder has properly elected to amortize under Section 171
of the Code. A Unit holder's tax basis in his or her Units will equal
his or her tax basis in his or her pro rata portion of all the assets of
the Trust.
A Unit holder will recognize taxable gain (or loss) when all or part of
his or her pro rata interest in a Security or an asset held by any
Grantor Trust is disposed of for an amount greater (or less) than his or
her tax basis therefor in a taxable transaction, subject to various non
recognition provisions of the Code.
As previously discussed, gain attributable to any Debt Security deemed to
have been acquired by the Unit holder with market discount will be
treated as ordinary income to the extent the gain does not exceed the
amount of accrued market discount not previously taken into income. The
tax basis reduction requirements of the Code relating to amortization of
bond premium may, under certain circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than his or her original cost.
If a 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 Trust assets
including his or her pro rata portion of all of the Securities
represented by the Unit. This may result in a portion of the gain, if
any, on such sale being taxable as ordinary income under the market
discount rules (assuming no election was made by the Unit holder to
include market discount in income as it accrues) as previously discussed.
In addition it should be noted that capital gains as can 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.
It should be noted that payments to the Trust of dividends or interest on
Securities that are attributable to foreign corporations may be subject
to foreign withholding taxes and Unit holders should consult their tax
advisers regarding the potential tax consequences relating to the payment
of any such withholding taxes by the Trust. Any dividends or interest
withheld as a result thereof will nevertheless be treated as income to
the Unit holders. Because under the grantor trust rules, an investor is
deemed to have paid directly his 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. A required holding period is imposed for such credits.
A Unit holder who is a foreign investor (i.e., an investor other than a
United States citizen or resident or United States corporation,
partnership, estate or trust) will be subject to United States Federal
income taxes, including withholding taxes on distributions from the Trust
relating to such investor's share of dividend income paid on Equity
Securities. A Unit holder who is a foreign investor will not be subject
to United States Federal income taxes, including withholding taxes on
interest income (including any original issue discount) on the Debt
Securities, or any gain from the sale or other disposition of, his or her
pro rata interest in any Security held by the Trust or the sale of his or
her Units provided that all of the following conditions are met:
(i) the interest income or gain is not effectively connected with the
conduct by the foreign investor of a trade or business within the United
States;
(ii) the interest is United States source income (which is the case for
most securities issued by United States issuers), the Debt Security is
issued after July 18, 1984, the foreign investor does not own, directly
or indirectly, 10% or more of the total combined voting power of all
classes of voting stock of the issuer of the Debt Security and the
foreign investor is not a controlled foreign corporation related (within
the meaning of Section 864(d)(4) of the Code) to the issuer of the Debt
Security;
(iii)with respect to any gain, the foreign investor (if an individual)
is not present in the United States for 183 days or more during his or
her taxable year; and
(iv) the foreign investor provides all certification which may be
required of his status.
It should be noted that the 1993 Tax Act includes a provision which
eliminates the exemption from United States taxation, including
withholding taxes, for certain "contingent interest." This provision
applies to interest received after December 31, 1993. No opinion is
expressed herein regarding the potential applicability of this provision
and whether United States taxation or withholding taxes could be imposed
with respect to income derived from the Units as a result thereof.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion
with respect to any other taxes, including state or local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-64587) relating to the Units
referred to above and to the use of our name and to the reference to our
firm in said Registration Statement and in the related Prospectus.
CHAPMAN AND CUTLER
EFF/erg
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
December 18, 1998
The Chase Manhattan Bank, as Trustee of
FT 302
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Attention: Mr. Thomas Porrazzo
Vice President
Re: FT 302
Dear Sirs:
We are acting as special counsel with respect to New York
tax matters for the unit investment trust or trusts contained in
FT 302 (each, a "Trust"), which will be established under certain
Standard Terms and Conditions of Trust dated November 20, 1991,
and a related Trust Agreement dated as of today (collectively,
the "Indenture") among Nike Securities L.P., as Depositor (the
"Depositor"), First Trust Advisors L.P., as Evaluator, First
Trust Advisors L.P., as Portfolio Supervisor, and The Chase
Manhattan Bank, as Trustee (the "Trustee"). Pursuant to the
terms of the Indenture, units of fractional undivided interest in
the Trust (the "Units") will be issued in the aggregate number
set forth in the Indenture.
We have examined and are familiar with originals or
certified copies, or copies otherwise identified to our
satisfaction, of such documents as we have deemed necessary or
appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each dated today
and addressed to the Trustee, of Chapman and Cutler, counsel for
the Depositor, with respect to the matters of law set forth
therein.
Based upon the foregoing, we are of the opinion that the
Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the
New York State franchise tax or the New York City general
corporation tax.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 333-64587) filed with the
Securities and Exchange Commission with respect to the
registration of the sale of the Units and to the references to
our name under the captions "What is the Federal Tax Status of
Unit-holders?" and "Legal Opinions" in such Registration
Statement and the preliminary prospectus included therein.
Very truly yours,
CARTER, LEDYARD & MILBURN
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
December 18, 1998
The Chase Manhattan Bank, as Trustee of
FT 302
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Attention: Mr. Thomas Porrazzo
Vice President
Re: FT 302
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank
("Chase") in connection with the execution and delivery of a
Trust Agreement ("the Trust Agreement") dated today's date (which
Trust Agreement incorporates by reference certain Standard Terms
and Conditions of Trust dated November 20, 1991, and the same are
collectively referred to herein as the "Indenture") among Nike
Securities L.P., as Depositor (the "Depositor"), First Trust
Advisors L.P., as Evaluator, First Trust Advisors L.P., as
Portfolio Supervisor, and Chase, as Trustee (the "Trustee"),
establishing the unit investment trust or trusts included in FT
302 (each, a "Trust"), and the confirmation by Chase, as Trustee
under the Indenture, that it has registered on the registration
books of the Trust the ownership by the Depositor of a number of
units constituting the entire interest in the Trust (such
aggregate units being herein called "Units"), each of which
represents an undivided interest in the respective Trust which
consists of common stocks (including, confirmations of contracts
for the purchase of certain stocks not delivered and cash, cash
equivalents or an irrevocable letter of credit or a combination
thereof, in the amount required for such purchase upon the
receipt of such stocks), such stocks being defined in the
Indenture as Securities and referenced in the Schedule to the
Indenture.
We have examined the Indenture, a specimen of the
certificates to be issued hereunder (the "Certificates"), the
Closing Memorandum dated todays date, and such other documents
as we have deemed necessary in order to render this opinion.
Based on the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing corporation
having the powers of a Trust Company under the laws of the State
of New York.
2. The Trust Agreement has been duly executed and
delivered by Chase and, assuming due execution and delivery by
the other parties thereto, constitutes the valid and legally
binding obligation of Chase.
3. The Certificates are in proper form for execution and
delivery by Chase, as Trustee.
4. Chase, as Trustee, has registered on the registration
books of the Trust the ownership of the Units by the Depositor.
Upon receipt of confirmation of the effectiveness of the
registration statement for the sale of the Units filed with the
Securities and Exchange Commission under the Securities Act of
1933, the Trustee may deliver Certificates for such Units, in
such names and denominations as the Depositor may request, to or
upon the order of the Depositor as provided in the Closing
Memorandum.
In rendering the foregoing opinion, we have not considered,
among other things, whether the Securities have been duly
authorized and delivered.
Very truly yours,
CARTER, LEDYARD & MILBURN
First Trust Advisors L.P.
1001 Warrenville Road
Lisle, Illinois 60532
December 18, 1998
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: FT 302
Gentlemen:
We have examined the Registration Statement File No.
333-64587 for the above captioned fund. We hereby consent to the
use in the Registration Statement of the references to First
Trust Advisors L.P. as evaluator.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
First Trust Advisors L.P.
Robert M. Porcellino
Senior Vice President
