SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 2 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 304
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN & CUTLER
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
E. Title of Securities
Being Registered: An indefinite number of
Units pursuant to Rule
24f-2 promulgated under
the Investment Company Act
of 1940, as amended.
F. Approximate Date of Proposed
Sale to the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED DECEMBER 22, 1998
AS AMENDED JANUARY 6, 1999
RYAN BECK BANKING AND INSURANCE OPPORTUNITY TRUST, SERIES 8
The Trust. FT 304 (the "Trust") is a unit investment trust consisting of
a portfolio of trust preferred securities (the "Trust Preferred
Securities") and common stocks (the "Common Stocks") issued by financial
institutions and insurance companies which are incorporated or
headquartered in the United States. Collectively, the Trust Preferred
Securities and Common Stocks are referred to herein as the "Securities."
The objective of the Trust is to provide the potential for a high level
of current income through an investment in the Trust Preferred
Securities and the potential for increasing dividend income and capital
appreciation through an investment in the Common Stocks. See "Schedule
of Investments." The Trust has a mandatory termination date ("Mandatory
Termination Date" or "Trust Ending Date") as set forth under "Summary of
Essential Information." There is, of course, no guarantee that the
objective of the Trust will be achieved.
Each Unit of the Trust represents an undivided fractional interest in
all the Securities deposited in the Trust. The Trust Preferred
Securities consist of preferred securities issued by business trust
affiliates of corporations, which generally represent beneficial
ownership interests in junior subordinated debentures issued by the
corporation, or similarly structured securities. Although the Common
Stocks have no stated maturity date and the Trust Preferred Securities
each have fixed maturity dates occurring after the Mandatory Termination
Date, certain of the Securities may be sold, 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 common stocks and trust preferred securities in general. In
particular, increasing interest rates will reduce the value of the Trust
Preferred Securities, as well as the value of the Units. Because certain
of the Trust Preferred Securities may be redeemed or called prior to the
Mandatory Termination Date and because the Securities in the Trust will
be trading at their current market value at the Mandatory Termination
Date, for investors purchasing on or about the Initial Date of Deposit
you may receive redemption or termination proceeds which are more or
less than the amount you invested. In addition, the Trust Preferred
Securities are generally not rated which usually indicates that they
have investment characteristics similar to non-investment grade
securities. An investment in these Securities is subject to greater risk
of loss than higher rated securities and should be viewed as
speculative. See "Portfolio-Risk Factors." On the Initial Date of
Deposit, approximately _____% of the value of the portfolio was trading
at a premium to the redemption price of the Trust Preferred Securities.
Subject to the requirement to amortize annually any premium on a Trust
Preferred Security which is debt, Unit holders may also realize a
capital loss upon receipt of redemption or termination proceeds.
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 amongst 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, 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?"
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
Ryan Beck & Co.
The date of this Prospectus is ____________, 1999
Page 1
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 a maximum
sales charge of 4.75% (equivalent to 4.987% of the net amount invested),
divided by the number of Units in the Trust outstanding. A pro rata
share of accumulated dividends, if any, in the Income Account is
included in the Public Offering Price. In addition, a portion of the
Public Offering Price of 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. The secondary
market Public Offering Price per Unit will 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 bid 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, divided
by the number of Units in the Trust outstanding, plus a maximum sales
charge of 4.75% (equivalent to 4.987% of the net amount invested) subject
to reduction of 1/2 of 1% on each February 1, beginning February 1, 2000
to a minimum sales charge of 3/25%. The minimum amount which an
investor may purchase of the Trust is $5,000 ($2,000 for IRAs and other
retirement plans). The sales charge is reduced on a graduated scale for
sales involving at least 10,000 Units. 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
distributions to Unit holders (based on the most recent annualized
dividends or interest paid with respect to the Securities in the Trust)
on the Initial Date of Deposit was $ per Unit during the first year
and $ 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 will be sold
during the first year. The actual net annual distributions per Unit 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 distributions will be realized in the future.
Distributions. Distributions of dividends, interest and capital, if any,
received by the Trust 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, both the Sponsor and the Underwriter
intend 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 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
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
Page 2
(generally determined by the closing sale prices of listed Securities
and either the ask prices (during the initial offering period) or the
bid prices (subsequent to the initial offering period) of over-the-
counter traded Securities) plus or minus a pro rata share of cash, if
any, in the Capital and Income Accounts of the Trust. A Unit holder
tendering 2,500 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. 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 include a form to enable Unit holders to elect
an In-Kind Distribution if such Unit holder owns at least 2,500 Units of
the Trust, rather than to receive payment in cash for such Unit holder's
pro rata share of the amounts realized upon the disposition by the
Trustee of the Securities. To be effective, the election form, together
with other documentation required by the Trustee, must be returned to
the Trustee at least ten business days prior to the Mandatory
Termination Date. Unit holders not electing a distribution of shares of
Securities will receive a cash distribution within a reasonable time
after the Trust is terminated. See "Rights of Unit Holders-How are
Income and Capital Distributed?" and "Other Information-How May the
Indenture be Amended or Terminated?"
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the possible deterioration of either the financial condition of
the issuers of the Securities or the general condition of the stock
market, volatile interest rates, economic recession or increased
regulation of financial institutions and insurance companies. Volatility
in the market price of the Securities in the Trust also changes the
value of the Units of the Trust. Unit holders tendering Units for
redemption during periods of market volatility may receive redemption
proceeds which are more or less than they paid for their Units. Trust
preferred securities are very sensitive to changes in interest rates.
The market price of trust preferred securities generally falls with
rising interest rates. In addition, although falling interest rates
generally lead to an increase in the market price of trust preferred
securities, they are more likely to be called for redemption in a
declining interest rate environment. Because certain of the Trust
Preferred Securities may be redeemed or called prior to the Mandatory
Termination Date and because all of the Securities will be trading at
their current market value at the Mandatory Termination Date, for
investors purchasing on or about the Initial Date of Deposit you may
receive redemption or termination proceeds which are more or less than
the amount you invested. In addition, the Trust Preferred Securities are
generally not rated which usually indicates that they have investment
characteristics similar to non-investment grade securities. An
investment in these Securities is subject to greater risk of loss than
higher rated securities and should be viewed as speculative. 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 Equity Securities-____________, 1999
Underwriter: Ryan, Beck & Co.
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
General Information
<S> <C>
Initial Number of Units (1)
Fractional Undivided Interest in the Trust per Unit (1) 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Equity Securities in Portfolio (2) $
Aggregate Offering Price Evaluation of Equity Securities per Unit $ 9.525
Sales Charge of 4.75% of the Public Offering Price per Unit (4.987% of the net amount invested) $ .475
Public Offering Price per Unit (3) $10.000
Sponsor's Initial Repurchase Price per Unit (4) $ 9.525
Redemption Price per Unit (based on aggregate underlying value of Equity Securities) (4) $ 9.525
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
CUSIP Number 30264U 200
Security Code _____
First Settlement Date January 26, 1999
Mandatory Termination Date January 31, 2002
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 Equity Securities deposited in the
Trust during the initial offering period.
Trustee's Annual Fee $.0096 per Unit outstanding.
Evaluator's Annual Fee $.0030 per Unit outstanding, 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) $.0180 per Unit.
Income Distribution Record Dates Fifteenth day of each March, June, September and December, commencing March
15, 1999.
Income Distribution Dates (7) Last day of each March, June, September and December, commencing March 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) On the Initial Date of Deposit there will be no accumulated interest
or dividends in the Income Account. Anyone ordering Units after such
date will pay a pro rata share of any accumulated interest or dividends
in such Income Account. The Public Offering Price as shown reflects the
value of the Securities at the opening of business on the Initial Date
of Deposit and establishes the original proportionate relationship
amongst the individual Securities. No sales to investors will be
executed at this price. Additional Securities will be deposited during
the day of the Initial Date of Deposit which will be valued as of 4:00
p.m. Eastern time and sold to investors at a Public Offering Price per
Unit based on this valuation.
(4) The Sponsor's Initial Repurchase Price per Unit and the Redemption
Price per Unit set forth above and until the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period
include estimated organizational and offering costs per Unit. After such
date, the Sponsor's Repurchase Price and Redemption Price per Unit will
not include such estimated organizational and offering costs. See
"Rights of Unit Holders-How May Units be Redeemed?"
(5) In addition, the Sponsor will be reimbursed for bookkeeping and
other administrative expenses currently at a maximum annual rate of
$.0033 per Unit.
(6) Investors will bear all or a portion of the costs incurred in
organizing the Trust (including costs of preparing the registration
statement, the Trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio, legal fees and the initial fees
and expenses of the Trustee but not including the expenses incurred in
the printing of preliminary and final prospectuses, and expenses
incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses). Estimated
organizational and offering costs are included in the Public Offering
Price per Unit and will be deducted from the assets of the Trust at the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period. See "Public Offering" and "Statement of Net
Assets."
(7) Distributions from the Capital Account will be made monthly payable
on the last day of the month to Unit holders of record on the fifteenth
day of such month if the amount available for distribution equals at
least $0.01 per Unit. Notwithstanding, distributions of funds in the
Capital Account, if any, will be made in December of each year.
</FN>
</TABLE>
Page 4
RYAN BECK BANKING AND INSURANCE OPPORTUNITY TRUST, SERIES 8
FT 304
What is the FT Series?
FT 304 is one of a series of investment companies created by the Sponsor
under the name of the FT Series, all of which are generally similar but
each of which is separate and is designated by a different series number
(the "Trust"). The FT Series was previously known as The First Trust
Special Situations Trust. This Series consists of an underlying separate
unit investment trust designated as: Ryan Beck Banking and Insurance
Opportunity Trust, Series 8. 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 the Securities, together
with an irrevocable letter or letters of credit of a financial
institution in an amount at least equal to the purchase price of such
Securities. In exchange for the deposit of Securities or contracts to
purchase Securities in the Trust, the Trustee delivered to the Sponsor
documents evidencing the entire ownership of the Trust.
The portfolio of the Trust consists of Trust Preferred Securities of
U.S. banks and thrifts and Common Stocks of U.S. banks, thrifts and
insurance companies.
The objective of the Trust is to provide the potential for a high level
of current income through an investment in the Trust Preferred
Securities and the potential for increasing dividend income and capital
appreciation through an investment in the Common Stocks. In the opinion
of Ryan, Beck & Co. (the "Underwriter") the Trust Preferred Securities
offer the potential for high current income with only moderate
investment risk. In addition to distribution rates and coverage ratios,
the Trust Preferred Securities were chosen based on an institution's mix
of loans and deposits, level of capital, earnings growth and franchise
strength. The Trust Preferred Securities are limited-life preferred
securities that are typically issued by an affiliated business trust of
a corporation, generally in the form of beneficial interests in junior
subordinated debentures issued by the corporation, or similarly
structured securities. The maturity and distribution rates 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.
The Common Stocks included in the Trust were selected by the Underwriter
based on their capacity to provide the potential for increasing
dividends and capital appreciation. Factors considered in choosing the
Common Stocks were their potential for earnings growth, low relative
valuation, asset quality, franchise strength and possible acquisition
value.
The Securities have been selected for the Trust by the Underwriter's
experienced research analysts based upon their comprehensive
understanding of the fundamental factors influencing financial
institutions and insurance companies.
The financial services sector can be expected to benefit as more
individuals invest and save for the future. Due to the strong U.S.
economy, the Underwriter believes that financial institutions' earnings
will continue to be positively impacted as businesses and consumers
increase their borrowings. In the opinion of the Underwriter, the
economic expansion will also continue to benefit insurance companies
through increased demand for personal and commercial insurance products.
Insurance companies with product and/or distribution niches may realize
additional earnings potential.
Both the financial institutions industry and the insurance industry
continue to experience significant consolidation activity. In the
Page 5
Underwriter's opinion, certain of the Securities selected for the Trust,
because of attractive fundamentals and franchises, may be potential
acquirors and/or acquisition targets. Investors may benefit from
companies expanding their earnings potential through acquisitions, and
the resulting efficiency gains and market share expansion. Investors may
also benefit from takeover premiums if certain companies in the Trust
are acquired.
It is important to note, however, that financial institutions and
insurance companies are subject to the adverse effects of volatile
interest rates, economic recession, potential asset quality problems,
increased competition from new entrants and the potential for increased
regulation of financial institutions and insurance companies. Trust
preferred securities do not generally have the capital appreciation
potential of common stocks and are more sensitive to changes in interest
rates. The market price of trust preferred securities generally falls
with rising interest rates. In addition, trust preferred securities are
more likely to be called for redemption in a declining interest rate
environment. Also, because all of the Securities will be sold at their
current market price at the Trust termination, your Units may be worth
more or less at termination than your initial investment.
See "Schedule of Investments" and "Portfolio-Risk Factors." There is, of
course, no guarantee that the objective of the Trust will be achieved.
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 create additional Units of the Trust by depositing
additional Securities or cash (including a letter of credit) with
instructions to purchase additional Securities in the Trust. 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?" The original percentage
relationship of each Security to the Trust is set forth herein under
"Schedule of Investments." Since the prices of the underlying Securities
will fluctuate daily, the ratio, on a market value basis, will also
change daily. The portion of Securities represented by each Unit will
not change as a result of the deposit of additional Securities in the
Trust. If the Sponsor deposits cash, however, existing and new investors
may experience a dilution of their investment and a reduction in their
anticipated income because of fluctuations in the price of the
Securities and because the Trust will pay the associated brokerage fees.
To minimize this effect, the Trust will try to purchase the Securities
as close to the evaluation time or as close to the evaluation price as
possible. The Trustee may from time to time retain and pay compensation
to the Sponsor (or an affiliate of the Sponsor) to act as agent for the
Trust with respect to acquiring Securities for the Trust. In acting in
such capacity, the Sponsor or its affiliate will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
On the Initial Date of Deposit, each Unit of the Trust represented the
undivided fractional interest in the Securities as set forth under
"Summary of Essential Information." To the extent that Units of the
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 may 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.
Page 6
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 the
Underwriter or 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 the compensation is paid. For a discussion of the
services performed by the Trustee pursuant to its obligations under the
Indenture, reference is made to the material set forth under "Rights of
Unit Holders."
The Trustee's and above described fees are payable from the Income
Account of the Trust to the extent funds are available, and then from
the Capital Account of the Trust. Since the Trustee has the use of the
funds being held in the Capital and Income Accounts for payment of
expenses and redemptions and since such Accounts are noninterest-bearing
to Unit holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to the Trust is expected to result from
the use of these funds. Because the above fees are generally calculated
based on the largest aggregate number of Units of the Trust outstanding
during a calendar year, the per Unit amounts set forth under "Summary of
Essential Information" will be higher during any year in which
redemptions of Units occur.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services,
supervisory services and evaluation services, such individual fees may
exceed the actual costs of providing such services for the Trust, but at
no time will the total amount received for such services rendered to all
unit investment trusts of which Nike Securities L.P. is the Sponsor in
any calendar year exceed the actual cost to the Sponsor or its affiliate
of supplying such services in such year.
The following additional charges are or may be incurred by the Trust:
all legal and annual auditing expenses of the Trustee incurred by or in
connection with its responsibilities under the Indenture; the expenses
and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Unit holders; fees of the Trustee
for any extraordinary services performed under the Indenture;
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. Since the Securities are all common
stocks and the income stream produced by dividend payments is
unpredictable, the Sponsor cannot provide any assurance that dividends
will be sufficient to meet any or all expenses of the Trust. As
Page 7
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 $0.0050 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) common stock
(the "Equity Securities"); (ii) 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 (iii) 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; and (iv) the Debt Securities
qualify as debt 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
Page 8
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, as defined by
Section 316 of the Code, paid by a corporation with respect to an Equity
Security held by the Trust is taxable as ordinary income to the extent
of such corporation's current and accumulated "earnings and profits." A
Unit holder's pro rata portion of dividends paid on such Equity Security
which exceed such current and accumulated earnings and profits will
first reduce a Unit holder's tax basis in such Equity Security, and to
the extent that such dividends exceed a Unit holder's tax basis in such
Equity Security shall generally be treated as capital gain. In general,
the holding period for such capital gain will be determined by the
period of time a Unit holder has held his or her Units.
4. 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.
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
Page 9
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
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.
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
Page 10
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.
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. Unit holders should consult their own tax advisors
with regard to these rules.
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. 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). 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.
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 purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisors with regard to any such constructive
sales rules.
Special Tax Consequences of In-Kind Distributions Upon Redemption of
Units or Termination of the Trust. As discussed in "Rights of Unit
Holders-How are Income and Capital Distributed?", under certain
circumstances a Unit holder who owns at least 2,500 Units 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
Page 11
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 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
Page 12
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.
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
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 Trust Preferred Securities and
Common Stocks issued by banks, thrifts and insurance companies and are
listed on a national securities exchange or The Nasdaq Stock Market or
traded in the over-the-counter market. See "What are the Securities
Selected for Ryan Beck Banking and Insurance Opportunity Trust, Series
8?" for a general description of the companies.
What are the Securities Selected for the Ryan Beck Banking and Insurance
Opportunity Trust, Series 8?
TRUST PREFERRED SECURITIES
Page 13
PREFERRED STOCKS
The Sponsor has obtained the foregoing company descriptions from sources
it deems reliable. The Sponsor has not independently verified the
provided information either in terms of accuracy or completeness.
Risk Factors
An investment in Units of the Trust should be made with an understanding
of the problems and risks inherent in the financial institutions and
insurance industries in general.
Financial Institutions. Financial institutions, 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 income. Recent profits have
benefited from a favorable interest rate environment allowing for a
relatively high yield on earning assets and relatively low cost of
funds. There is no certainty that such conditions will continue,
especially in a rising interest rate environment. Commercial loan demand
for banks has not been robust and an increasing number of commercial
loans have been securitized, which may have a potentially adverse effect
on the market share of the commercial banking system. Bank and thrift
institutions have received significant consumer mortgage fee income as a
result of activity in mortgage and refinance markets. As initial home
purchasing and refinancing activity subsides, this income is expected to
diminish to a lower level. Economic conditions in the real estate
markets, which have been weak in the recent 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, as has recently
been the case for a number of banks and thrifts with respect to
commercial real estate in the northeastern and southwestern regions of
the United States. 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
Page 14
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 competitors. 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. Ongoing consolidation of the industry is likely to increase as
a result. The Securities and Exchange Commission and the Financial
Accounting 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
monies 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 service companies 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,
recent 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
Page 15
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.
Some of the nation's largest banks, already working to upgrade their own
computer systems to meet the year 2000 deadline, are concerned that some
borrowers may fail to upgrade their computers in time, creating problem
loans and increasing overall loan losses. Banks considered most
vulnerable by analysts include those lending primarily to small
businesses, which aren't as likely as large businesses to have a plan
for upgrading their computers. Also at risk are banks with significant
exposure overseas, where many foreign businesses are not moving as
quickly to resolve this problem. Analysts warn that it will be difficult
for banks to determine their potential loan losses related to year 2000
credit risk.
Insurance Companies. Companies involved in the insurance industry are
engaged in underwriting, reinsuring, selling, distributing or placing of
property and casualty, life or health insurance. Other growth areas
within the insurance industry include brokerage, reciprocals, claims
processors and multiline insurance companies. Multiline insurance
companies provide property and casualty coverage, as well as life and
health insurance. The Trust may also invest in diversified financial
companies with subsidiaries (including insurance brokerage, reciprocals
and claims processors) engaged in underwriting, reinsuring, selling,
distributing or placing insurance with independent third parties.
Insurance company profits are affected by interest rate levels, general
economic conditions, and price and marketing competition. Property and
casualty insurance profits may also be affected by weather catastrophes
and other disasters. Life and health insurance profits may be affected
by mortality and morbidity rates. Individual companies may be exposed to
material risks including reserve inadequacy and the inability to collect
from reinsurance carriers. Insurance companies are subject to extensive
governmental regulation, including the imposition of maximum rate
levels, which may not be adequate for some lines of business. Proposed
or potential tax law changes may also adversely affect insurance
companies' policy sales, tax obligations, and profitability. In addition
to the foregoing, profit margins of these companies continue to shrink
due to the commoditization of traditional businesses, new competitors,
capital expenditures on new technology and the pressures to compete
globally.
In addition to the normal risks of business, companies involved in the
insurance industry are subject to significant risk factors, including
those applicable to regulated insurance companies, such as (i) the
inherent uncertainty in the process of establishing property-liability
loss reserves, particularly reserves for the cost of environmental,
asbestos and mass tort claims, and the fact that ultimate losses could
materially exceed established loss reserves which could have a material
adverse effect on results of operations and financial condition; (ii)
the fact that insurance companies have experienced, and can be expected
in the future to experience, catastrophe losses which could have a
material adverse impact on their financial condition, results of
operations and cash flow; (iii) the inherent uncertainty in the process
of establishing property-liability loss reserves due to changes in loss
payment patterns caused by new claims settlement practices; (iv) the
need for insurance companies and their subsidiaries to maintain
appropriate levels of statutory capital and surplus, particularly in
light of continuing scrutiny by rating organizations and state insurance
regulatory authorities, and in order to maintain acceptable financial
strength or claims-paying ability rating; (v) the extensive regulation
and supervision to which insurance companies' subsidiaries are subject,
various regulatory initiatives that may affect insurance companies, and
regulatory and other legal actions; (vi) the adverse impact that
increases in interest rates could have on the value of an insurance
company's investment portfolio and on the attractiveness of certain of
its products; (vii) the need to adjust the effective duration of the
Page 16
assets and liabilities of life insurance operations in order to meet the
anticipated cash flow requirements of its policyholder obligations; and
(vii) the uncertainty involved in estimating the availability of
reinsurance and the collectibility of reinsurance recoverables.
The state insurance regulatory framework has, during recent years, come
under increased federal scrutiny, and certain state legislatures have
considered or enacted laws that alter and, in many cases, increase state
authority to regulate insurance companies and insurance holding company
systems. Further, the National Association of Insurance Commissioners
("NAIC") and state insurance regulators are re-examining existing laws
and regulations, specifically focusing on insurance companies,
interpretations of existing laws and the development of new laws. In
addition, Congress and certain federal agencies have investigated the
condition of the insurance industry in the United States to determine
whether to promulgate additional federal regulation. The Sponsor is
unable to predict whether any state or federal legislation will be
enacted to change the nature or scope of regulation of the insurance
industry, or what effect, if any, such legislation would have on the
industry.
All insurance companies are subject to state laws and regulations that
require diversification of their investment portfolios and limit the
amount of investments in certain investment categories. Failure to
comply with these laws and regulations would cause non-conforming
investments to be treated as non-admitted assets for purposes of
measuring statutory surplus and, in some instances, would require
divestiture.
Environmental pollution clean-up is the subject of both federal and
state regulation. By some estimates, there are thousands of potential
waste sites subject to clean up. The insurance industry is involved in
extensive litigation regarding coverage issues. The Comprehensive
Environmental Response Compensation and Liability Act of 1980
("Superfund") and comparable state statutes ("mini-Superfund") govern
the clean-up and restoration by "Potentially Responsible Parties"
("PRP's"). Superfund and the mini-Superfunds (Environmental Clean-up
Laws or "ECLs") establish a mechanism to pay for clean-up of waste sites
if PRP's fail to do so, and to assign liability to PRP's. The extent of
liability to be allocated to a PRP is dependent on a variety of factors.
Further, the number of waste sites subject to clean-up is unknown. Very
few sites have been subject to clean-up to date. The extent of clean-up
necessary and the assignment of liability has not been established. The
insurance industry is disputing many such claims. Key coverage issues
include whether Superfund response costs are considered damages under
the policies, when and how coverage is triggered, applicability of
pollution exclusions, the potential for joint and several liability and
definition of an occurrence. Similar coverage issues exist for clean up
and waste sites not covered under Superfund. To date, courts have been
inconsistent in their rulings on these issues. An insurer's exposure to
liability with regard to its insureds which have been, or may be, named
as PRPs is uncertain. Superfund reform proposals have been introduced in
Congress, but none have been enacted. There can be no assurance that any
Superfund reform legislation will be enacted or that any such
legislation will provide for a fair, effective and cost-efficient system
for settlement of Superfund related claims.
Proposed federal legislation which would permit banks greater
participation in the insurance business could, if enacted, present an
increased level of competition for the sale of insurance products. In
addition, while current federal income tax law permits the tax-deferred
accumulation of earnings on the premiums paid by an annuity owner and
holders of certain savings-oriented life insurance products, no
assurance can be given that future tax law will continue to allow such
tax deferrals. If such deferrals were not allowed, consumer demand for
the affected products would be substantially reduced. In addition,
proposals to lower the federal income tax rates through a form of flat
tax or otherwise could have, if enacted, a negative impact on the demand
for such products.
General. 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
Page 17
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. In fact, no Security will be sold prior to termination of
the Trust (except to satisfy redemption requests or to pay expenses and
in certain other limited circumstances) even if the Underwriter comes to
believe that such Security no longer satisfies the criteria which
originally caused its selection for the Trust, or issues a "sell"
recommendation with respect to such Security.
Whether or not the Securities are listed on a national securities
exchange, the principal trading market for the Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading
market for the Securities may depend on whether dealers will make a
market in the Securities. There can be no assurance that a market will
be made for any of the Securities, that any market for the Securities
will be maintained or of the liquidity of the Securities in any markets
made. In addition, the Trust may be restricted under the Investment
Company Act of 1940 from selling Securities to the Sponsor. The price at
which the Securities may be sold to meet redemptions and the value of
the Trust will be adversely affected if trading markets for the
Securities are limited or absent.
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails, including the risk that
the financial condition of the issuers of the Common Stocks or the
general condition of the common stock market may worsen, and the value
of the Common Stocks and therefore the value of the Units may decline.
Common stocks are especially susceptible to general stock market
movements and to volatile increases and decreases of value as market
confidence in and perceptions of the issuers change. These perceptions
are based on unpredictable factors, including expectations regarding
government, economic, monetary and fiscal policies, inflation and
interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Shareholders of common
stocks have rights to receive payments from the issuers of those common
stocks that are generally subordinate to those of creditors of, or
holders of debt obligations or preferred stocks of, such issuers.
Shareholders of common stocks of the type held by the Trust have a right
to receive dividends only when and if and in the amounts declared by the
issuer's board of directors, and they have a right to participate in
amounts available for distribution by the issuer only after all other
claims on the issuer have been paid or provided for. Common stocks do
not represent an obligation of the issuer and, therefore, do not offer
any assurance of income or provide the same degree of protection of
capital as do debt securities. The issuance of additional debt
securities or preferred stock will create prior claims for payment of
principal, interest and dividends which could adversely affect the
ability and inclination of the issuer to declare or pay dividends on its
common stock or the rights of holders of common stock with respect to
assets of the issuer upon liquidation or bankruptcy. The value of common
stocks is subject to market fluctuations for as long as the common
stocks remain outstanding, and thus the value of the Common Stocks in
the Trust may be expected to fluctuate over the life of the Trust to
values higher or lower than those prevailing on the Initial Date of
Deposit.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners of
the entity, have generally inferior rights to receive payments from the
issuer in comparison with the rights of creditors of, or holders of debt
obligations or preferred stocks issued by, the issuer. Cumulative
preferred stock dividends must be paid before common stock dividends,
and any cumulative preferred stock dividend omitted is added to future
dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights on
liquidation which are senior to those of common stockholders.
Holders of Trust Preferred Securities incur risks in addition to or
slightly different than the typical risks of holding common or preferred
stocks. As previously discussed, trust preferred securities are limited-
life preferred securities that are typically issued by an affiliated
Page 18
business trust of a corporation, generally in the form of beneficial
interests in junior subordinated debentures issued by the corporation,
or similarly structured securities. The maturity and distribution rates 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
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. Trust preferred securities do not generally have the
capital appreciation potential of common stocks and are more sensitive
to changes in interest rates. The market price of trust preferred
securities generally falls with rising interest rates. In addition,
trust preferred securities are more likely to be called for redemption
in a declining interest rate environment. Also, because the Trust
Preferred Securities will be sold at their current market price at the
Trust termination, your Units may be worth more or less at termination
than your initial investment.
The Trust Preferred Securities are generally not rated which usually
indicates that they have investment characteristics similar to non-
investment grade securities. An investment in these securities is
subject to greater risk of loss than higher rated securities and should
be viewed as speculative. Non-rated securities with non-investment grade
characteristics have additional risks, including increased credit risks
and the risk that the value of the Units will decline, and may decline
precipitously, with increases in interest rates. In recent years there
have been wide fluctuations in interest rates and thus in the value of
fixed-rate obligations generally. Non-rated trust preferred securities
such as those included in the Trust are, under most circumstances,
subject to greater market fluctuations and risk of loss of income and
principal than are investments in lower-yielding, higher-rated
securities, and their value may decline precipitously because of
increases in interest rates, not only because the increases in rates
generally decrease values, but also because increased rates may indicate
a slowdown in the economy and a decrease in the value of assets
generally that may adversely affect the credit of issuers resulting in a
higher incidence of defaults. A slowdown in the economy, or a
development adversely affecting an issuer's creditworthiness, may result
in the issuer being unable to maintain earnings or sell assets at the
rate and at the prices, respectively, that are required to produce
sufficient cash flow to meet its interest and principal requirements.
The Sponsor cannot predict future economic policies or their
consequences or, therefore, the course or extent of any similar market
fluctuations in the future.
Non-rated or lower-rated securities tend to offer higher yields than
higher-rated securities with the same maturities because the
creditworthiness of the issuers of non-rated or lower-rated securities
may not be as strong as that of other issuers. Because investors
generally perceive that there are greater risks associated with non-
rated or lower-rated securities, the yields and prices of these
securities tend to fluctuate more than higher-rated securities with
changes in the perceived quality of the credit of their issuers. In
Page 19
addition, the market value of non-rated or lower-rated securities may
fluctuate more than the market value of higher-rated securities since
non-rated or lower-rated securities tend to reflect short-term credit
development to a greater extent than higher-rated securities. Non-rated
or lower-rated securities generally involve greater risks of loss of
income and principal than higher-rated securities. Issuers of non-rated
or lower-rated securities may possess fewer creditworthiness
characteristics than issuers of higher-rated securities and, especially
in the case of issuers whose obligations or credit standing have
recently been downgraded, may be subject to claims by debtholders,
owners of property leased to the issuer or others which, if sustained,
would make it more difficult for the issuers to meet their payment
obligations. Therefore, investors should consider carefully the relative
risks associated with investment in securities which carry lower ratings.
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.
Investors should note that because the Underwriter uses the list of
Securities which comprises the portfolio in its independent capacity as
an investment advisor to individuals, mutual funds, employee benefit
plans and other institutions and persons and distributes this
information to various individuals and entities, the Underwriter may
recommend or effect from time to time the purchase or sale of one or
more of the Securities. This may have an effect on the prices of the
Securities which is adverse to the interests of the purchasers of Units
of the Trust. Additionally, this may have an impact on the price paid by
the Trust for the Securities as well as the price received upon
redemption of the Units or upon the termination of the Trust. Investors
should also note that Securities will not be removed from the Trust and
additional Units of the Trust may be created even if the Underwriter no
longer believes certain or all of the Securities have the potential to
provide high current income, capital appreciation and/or increasing
dividend income over the life of the Trust or issues a sell
recommendation regarding any of the Securities included in the Trust.
The Underwriter has acquired or may acquire the Securities for the
Sponsor and thereby may benefit. The Underwriter in its general
securities business acts as agent or principal in connection with the
purchase and sale of securities, including the Securities in the Trust,
and may act as a market maker in certain of the Securities. The
Underwriter also from time to time may issue reports on and make
recommendations relating to Securities, which may include the
Securities. The Underwriter has performed investment banking services,
and may have acted as underwriter, manager or co-manager of a public
offering of securities, for certain of the issuers of the Securities
during the last three years.
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, including the impact of the
Sponsor's purchase and sale of the Securities (especially during the
initial offering period of Units of the Trust) and other factors.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any Security. In the event of a notice
that any Security will not be delivered ("Failed Contract Obligations")
to the Trust, the Sponsor is authorized under the Indenture to direct
the Trustee to acquire other Securities ("Replacement Securities"). Any
Replacement Security will be identical to those which were the subject
of the failed contract. The Replacement Securities must be purchased
within 20 days after delivery of the notice of a failed contract, and
the purchase price may not exceed the amount of funds reserved for the
purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraphs is not utilized to acquire Replacement Securities in the
event of a failed contract, the Sponsor will refund the sales charge
attributable to such Failed Contract Obligations to all Unit holders of
the Trust, and the Trustee will distribute the principal attributable to
such Failed Contract Obligations not more than 120 days after the date
on which the Trustee received a notice from the Sponsor that a
Replacement Security would not be deposited in the Trust. In addition,
Page 20
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 from
and after January 1, 2000. 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. 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 sales 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 a sales charge of 4.75%
(equivalent to 4.987% of the net amount invested), divided by the number
of Units in the Trust outstanding. In addition, a portion of the Public
Offering Price of Units purchased prior to the earlier of six months
Page 21
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 costs of preparing the registration statement, the Trust
indenture and other closing documents, registering Units with the
Securities and Exchange Commission and states, the initial audit of the
Trust portfolio, legal fees and the initial fees and expenses of the
Trustee. The 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. For secondary
market sales after the completion of the initial offering period, the
Public Offering Price is also based on the aggregate underlying value of
the 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, plus a maximum sales charge of 4.75% of
the Public Offering Price, divided by the number of outstanding Units of
the Trust.
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 sales 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.
For secondary market sales after the completion of the initial offering
period, the Sponsor's Repurchase Price is also based on the aggregate
underlying value of the Securities in the Trust (generally determined by
the closing sales 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 $5,000
($2,000 for IRAs and other retirement plans). 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):
Number of Units* Discount
________________ _________
10,000 to 24,999 0.50%
25,000 to 49,999 1.00%
50,000 or more 1.50%
* The breakpoint sales charges are also applied on a dollar basis
utilizing a breakpoint equivalent in the above table of $10.00 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.
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, 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 the Underwriter or any one
broker/dealer, bank or other selling agent. Additionally, Units
purchased in the name of the spouse of a purchaser or in the name of a
child of such purchaser under 21 years of age will be deemed, for the
purposes of calculating the applicable sales charge, to be additional
purchases by the purchaser. The reduced sales charges will also be
applicable to a trustee or other fiduciary purchasing securities for a
single trust estate or single fiduciary account. The purchaser must
inform the Underwriter, broker/dealer, bank or other selling agent of
any such combined purchase prior to the sale, in order to obtain the
indicated discount. In addition, with respect to the 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, Underwriter and broker/dealers, banks or other selling
agents and their subsidiaries, the sales charge is reduced by 2.0% of
the Public Offering Price for purchases of Units during the primary and
secondary public offering periods.
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
Page 22
registered investment advisers, certified financial planners or
registered broker/dealers who in each case either charge periodic fees
for financial planning, investment advisory or asset management
services, or provide such services in connection with the establishment
of an investment account for which a comprehensive "wrap fee" charge is
imposed.
Had the Units of the Trust been available for sale on the business day
prior to the Initial Date of Deposit, the Public Offering Price would
have been as indicated in "Summary of Essential Information." The Public
Offering Price of Units on the date of the prospectus or during the
initial offering period may vary from the amount stated under "Summary
of Essential Information" in accordance with fluctuations in the prices
of the underlying Securities. During the initial offering period, the
aggregate value of the Units of the Trust shall be determined on the
basis of the aggregate underlying value of the Securities therein plus
or minus cash, if any, in the Income and Capital Accounts of the Trust.
The aggregate underlying value of the Securities during the initial
offering period will be determined in the following manner: if the
Securities are listed on a national securities exchange, this evaluation
is generally based on the closing sale prices on that exchange (unless
it is determined that these prices are inappropriate as a basis for
valuation) or, if there is no closing sale price on that exchange, at
the closing ask prices. If the 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 documentation evidencing 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 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. During such
period, the Sponsor may deposit additional Securities in the Trust and
create additional Units. Units reacquired by the Sponsor during the
initial offering period (at prices based upon the aggregate underlying
value of the Securities in the Trust plus or minus a pro rata share of
cash, if any in the Income and Capital Accounts of the Trust) may be
resold at the then current Public Offering Price. Upon the termination
of the initial offering period, unsold Units created or reacquired
during the initial offering period will be sold or resold at the then
current Public Offering Price.
Upon completion of the initial offering, Units repurchased in the
secondary market (see "Public Offering-Will There be a Secondary
Page 23
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 2.9% of the Public Offering Price, and, for secondary
market sales, 2.9% of the Public Offering Price (or 65% of the then
current maximum sales charge after February 1, 2000).
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.
What are the Sponsor's and Underwriter's Profits?
The Underwriter of the Trust will receive a gross sales commission equal
to 4.75% of the Public Offering Price of the Units (equivalent to 4.987%
of the net amount invested) less any reduced sales charge as described
under "Public Offering-How is the Public Offering Price Determined?" See
"Underwriting" for information regarding the receipt of the excess gross
sales commissions by the Sponsor from the Underwriter and additional
concessions available to the Underwriter, 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 (which is
based on the Evaluator's determination of the aggregate offering price
of the underlying Securities of such Trust on the Initial Date of
Deposit as well as subsequent deposits) and the cost of such Securities
to the Sponsor. See "Underwriting" and Note (2) of "Schedule of
Investments." During the initial offering period, the Sponsor,
Underwriter, 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 Sponsor,
Underwriter, dealers and other selling agents upon the sale of Units.
In maintaining a market for the Units, the Sponsor and Underwriter 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 4.75% subject
to reduction beginning February 1, 2000) or redeemed. The secondary
market public offering price of Units may be greater or less than the
cost of such Units to the Sponsor or the Underwriter.
Will There be a Secondary Market?
After the initial offering period, although not obligated to do so, both
the Sponsor and the Underwriter intend 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 or Underwriter 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 UNDERWRITER OR SPONSOR
AS TO CURRENT MARKET PRICES PRIOR TO MAKING A TENDER FOR REDEMPTION TO
THE TRUSTEE.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Unit holders will hold their Units in uncertificated form (i.e., book
entry). 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, the Trustee will send to the registered owner of Units a
Page 24
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. Units are transferable by presentation to
the Trustee of a written instrument or instruments of transfer. A Unit
holder must sign the instrument or instruments of transfer exactly as
his or her name appears on the records of the Trustee 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.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay any governmental charge that may be imposed in
connection with the transfer or exchange of Units.
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?"
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
the Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder only when filing a tax return. Under
normal circumstances the Trustee obtains the Unit holder's tax
identification number from the selling broker. However, a Unit holder
should examine his or her statements from the Trustee to make sure that
the Trustee has been provided a certified tax identification number in
order to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should be
provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit holder
will, upon surrender of his or her Units for redemption, receive: (i)
the pro rata share of the amounts realized upon the disposition of
Securities, unless he or she elects an In-Kind Distribution as described
under "Other Information-How May the Indenture be Amended or
Terminated?" and (ii) a pro rata share of any other assets of the Trust,
less expenses of the Trust.
The Trustee will credit to the Income Account of the Trust any 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
Page 25
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 corporate trust office in the City of
New York, a request for redemption, duly endorsed or accompanied by
proper instruments of transfer with signature guaranteed as explained
above and payment of applicable governmental charges, if any. No
redemption fee will be charged. On the third business day following such
tender, the Unit holder will be entitled to receive in cash an amount
for each Unit equal to the Redemption Price per Unit next computed after
receipt by the Trustee of such tender of Units. The "date of tender" is
deemed to be the date on which Units are received by the Trustee (if
such day is a day in which the New York Stock Exchange is open for
trading), except that as regards Units received after 4:00 p.m. Eastern
time (or as of any earlier closing time on a day on which the New York
Stock Exchange is scheduled in advance to close at such earlier time),
the date of tender is the next day on which the New York Stock Exchange
is open for trading and such Units will be deemed to have been tendered
to the Trustee on such day for redemption at the redemption price
computed on that day. Units so redeemed shall be cancelled.
Any Unit holder tendering 2,500 Units or more for redemption may request
by written notice submitted at the time of tender from the Trustee, in
lieu of a cash redemption, a distribution of shares of Securities in an
amount and value of Securities per Unit equal to the Redemption Price
per Unit as determined as of the evaluation next following tender.
However, no In-Kind Distribution requests submitted during the nine
business days prior to the Mandatory Termination Date will be honored.
To the extent possible, In-Kind Distributions shall be made by the
Trustee through the distribution of each of the Securities in book-entry
form to the account of the Unit holder's bank or broker/dealer at the
Depository Trust Company. An In-Kind Distribution will be reduced by
customary transfer and registration charges. The tendering Unit holder
will receive his or her pro rata number of whole shares of each of the
Securities comprising the portfolio and cash from the Capital Account
equal to the fractional shares to which the tendering Unit holder is
entitled. The Trustee may adjust the number of shares of any issue of
Securities included in a Unit holder's In-Kind Distribution to
facilitate the distribution of whole shares, such adjustment to be made
on the basis of the value of Securities on the date of tender. 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
Page 26
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. 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, this evaluation is
generally based on the closing sale prices on that exchange (unless it
is determined that these prices are inappropriate as a basis for
valuation) or, if there is no closing sale price on that exchange, at
the closing ask prices (during the initial offering period) or at the
closing bid prices (subsequent to the initial offering period). If the
Securities are not so listed or, if so listed and the principal market
therefor is other than on the exchange, the evaluation shall generally
be based on the current ask or bid prices (as appropriate) on the over-
the-counter market (unless these prices are inappropriate as a basis for
evaluation). If current ask or bid prices (as appropriate) are
unavailable, the evaluation is generally determined (a) on the basis of
current ask or bid prices (as appropriate) for comparable securities,
(b) by appraising the value of the Securities on the ask or bid side of
the market (as appropriate) or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on the New
York Stock Exchange is restricted or any emergency exists, as a result
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances, the
Sponsor may apply to the Securities and Exchange Commission for an order
permitting a full or partial suspension of the right of Unit holders to
redeem their Units. The Trustee is not liable to any person in any way
for any loss or damage which may result from any such suspension or
postponement.
How May Units be Purchased by the Sponsor or Underwriter?
The Trustee shall notify the Sponsor and Underwriter of any tender of
Units for redemption. If the Sponsor's or Underwriter's bid in the
secondary market at that time equals or exceeds the Redemption Price per
Unit, the Sponsor or the Underwriter 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 or the Underwriter may be tendered to
the Trustee for redemption as any other Units. In the event the Sponsor
or the Underwriter 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 or the
Underwriter 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 or the Underwriter.
Page 27
How May Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of a Security in the event
that an issuer defaults in the payment of a dividend that has been
declared, that any action or proceeding has been instituted restraining
the payment of dividends or there exists any legal question or
impediment affecting such Security, that the issuer of the Security has
breached a covenant which would affect the payments of dividends, the
credit standing of the issuer or otherwise impair the sound investment
character of the Security, that the issuer has defaulted on the payment
on any other of its outstanding obligations, or that the price of the
Security has declined to such an extent or other such credit factors
exist so that in the opinion of the Sponsor, the retention of such
Securities would be detrimental to the Trust. Except as stated under
"Portfolio-What are Some Additional Considerations for Investors?" for
Failed Contract Obligations, the acquisition by the Trust of any
securities or other property other than the Securities is prohibited.
Pursuant to the Indenture and with limited exceptions, the Trustee may
sell any securities or other property acquired in exchange for
Securities such as those acquired in connection with a merger or other
transaction. If offered such new or exchanged securities or property,
the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by the Trust, they may
be accepted for deposit in the Trust and either sold by the Trustee or
held in the Trust pursuant to the direction of the Sponsor (who may rely
on the advice of the Portfolio Supervisor). Proceeds from the sale of
Securities (or any securities or other property received by the Trust in
exchange for Securities) by the Trustee are credited to the Capital
Account of the Trust for distribution to Unit holders or to meet
redemptions. The Trustee may from time to time retain and pay
compensation to the Sponsor (or an affiliate of the Sponsor) to act as
agent for the Trust with respect to selling Securities from the Trust.
In acting in such capacity the Sponsor or its affiliate will be held
subject to the restrictions under the Investment Company Act of 1940, as
amended.
The Trustee may also sell Securities designated by the Sponsor, or if
not so directed, in its own discretion, for the purpose of redeeming
Units of the Trust tendered for redemption and the payment of expenses.
The Sponsor, in designating Securities to be sold by the Trustee, will
generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares
of individual issues of Securities. To the extent this is not
practicable, the composition and diversity of the Securities may be
altered. In order to obtain the best price for the Trust, it may be
necessary for the Sponsor to specify minimum amounts (generally 100
shares) in which blocks of Securities are to be sold.
INFORMATION AS TO UNDERWRITER, SPONSOR, TRUSTEE AND EVALUATOR
Who is the Underwriter?
Ryan, Beck & Co. ("Ryan Beck") is one of the nation's leading investment
banking firms providing investment banking and consulting services to
regional and community financial institutions. Ryan Beck was organized
in 1946 and has been publicly held since 1986. The firm is registered as
a broker/dealer with the Securities and Exchange Commission and is a
member of the National Association of Securities Dealers, Inc. and the
Securities Investor Protection Corporation. Ryan Beck maintains sales
and research departments that specialize in the securities of the
financial services industry, including banks, thrifts and insurance
companies. Ryan Beck has positioned itself among the largest market
makers for such securities. Ryan Beck's Corporate Finance Department is
dedicated to financial institutions, and it is one of the nation's
largest such specialized groups. It provides a full range of advisory
services in connection with mergers and acquisitions, capital formation,
branch sales, bank holding company formation and development,
shareholder/investor relations and financial management issues.
The research team for the Ryan Beck Banking and Insurance Opportunity
Trust is led by Lawrence W. Cohn, CFA, Senior Vice President. Mr. Cohn
has followed the banking industry for 27 years. Before joining Ryan Beck
as Director of Research, Mr. Cohn was the senior banking analyst at
Paine Webber. Prior to joining Paine Webber, Mr. Cohn was a Managing
Director at The Chase Manhattan Bank, providing investment banking
services to commercial banks. Before joining Chase, Mr. Cohn was senior
banking analyst at Drexel Burnham Lambert, Merrill Lynch, and Dean
Page 28
Witter Reynolds. Mr. Cohn is a Chartered Financial Analyst and has been
a member of both the New York Society of Securities Analysts and the
Bank and Financial Analysts Association for the last 20 years.
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, the FT Series (formerly known as The First Trust Special
Situations Trust), The First Trust Insured Corporate Trust, The First
Trust of Insured Municipal Bonds 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.
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.
Page 29
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 such Trust during the initial offering period, or in the
event that Units of the Trust not yet sold aggregating more than 60% of
the Units of the Trust are tendered for redemption by the Underwriter,
including the Sponsor. If the Trust is liquidated because of the
redemption of unsold Units of the Trust by the Underwriter, the Sponsor
will refund to each purchaser of Units of the Trust the entire sales
charge and the transaction fees paid by such purchaser. In the event of
termination, written notice thereof will be sent by the Trustee to all
Unit holders of the Trust. Within a reasonable period after termination,
the Trustee will follow the procedures set forth under "Rights of Unit
Holders-How are Income and Capital Distributed?"
Commencing during the period beginning nine business days prior to and
no later than the Mandatory Termination Date, Securities will begin to
be sold in connection with the termination of the Trust. The Sponsor
will determine the manner, timing and execution of the sale of the
Securities. Written notice of any termination of the Trust 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 2,500 Units of the Trust,
rather than to receive payment in cash for such Unit holder's pro rata
share of the amounts realized upon the disposition by the Trustee of the
Securities. To be effective, the election form, together with other
Page 30
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.
UNDERWRITING
The Underwriter named below has purchased Units in the following amount:
<TABLE>
<CAPTION>
Number
Name Address of Units
______ _________ ________
<S> <C> <C>
Ryan, Beck & Co. 220 South Orange Avenue
Livingston, New Jersey 07039
========
</TABLE>
On the Initial Date of Deposit, the Underwriter of the Trust became the
owner of the Units of the Trust and entitled to the benefits thereof, as
well as the risks inherent therein.
The Underwriter Agreement provides that a public offering of the Units
of the Trust will be made at the Public Offering Price described in the
prospectus. Units may also be sold to or through dealers and other
selling agents during the initial offering period and in the secondary
market at prices representing a concession or agency commission as
described in "Public Offering-How are Units Distributed?"
The Underwriter has agreed to underwrite additional Units of the Trust
as they become available. The Sponsor will receive from the Underwriter
the difference between the gross sales commission and the Underwriter
concession listed below. The Underwriter concession will be calculated
as a percentage of the Public Offering Price per Unit according to the
following schedule:
Underwriting Concession
____________ __________
Less than $5,000,000 3.65%
$5,000,000 but less than $10,000,000 3.75%
$10,000,000 or more 3.90%
From time to time the Sponsor may implement programs under which
Underwriters and dealers of the Trust may receive nominal awards from
the Sponsor for each of their registered representatives who have sold a
minimum number of UIT Units during a specified time period. In addition,
at various times the Sponsor may implement other programs under which
the sales force of an Underwriter or dealer may be eligible to win other
Page 31
nominal awards for certain sales efforts, or under which the Sponsor
will reallow to any such Underwriter or 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 Underwriters or dealers for certain services or activities
which are primarily intended to result in sales of Units of the Trust.
Such payments are made by the Sponsor out of its own assets, and not out
of the assets of the Trust. These programs will not change the price
Unit holders pay for their Units or the amount that the Trust will
receive from the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns on the Trust and returns over
specified periods on other similar Trusts sponsored by Nike Securities
L.P. with returns on other taxable investments such as corporate or U.S.
Government bonds, bank CDs and money market accounts or money market
funds, each of which has investment characteristics that may differ from
those of the Trust. U.S. Government bonds, for example, are backed by
the full faith and credit of the U.S. Government and bank CDs and money
market accounts are insured by an agency of the federal government.
Money market accounts and money market funds provide stability of
principal, but pay interest at rates that vary with the condition of the
short-term debt market. The investment characteristics of the Trust are
described more fully elsewhere in this Prospectus.
Information on percentage changes in the dollar value of Units, on the
basis of changes in Unit price may be included from time to time in
advertisements, sales literature, reports and other information
furnished to current or prospective Unit holders. Total return figures
are not averaged, and may not reflect deduction of the sales charge,
which would decrease the return. Average annualized return figures
reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance may not be indicative of future results. The Trust's
portfolio is not managed. Unit price and return fluctuate with the value
of the common stocks in the Trust's portfolio, so there may be a gain or
loss when Units are sold.
Trust 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.
Page 32
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
FT 304
We have audited the accompanying statement of net assets, including the
schedule of investments, of FT 304, comprised of Ryan Beck Banking and
Insurance Opportunity Trust, Series 8, as of the opening of business on
____________, 1999. 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 ____________,
1999. 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 304,
comprised of Ryan Beck Banking and Insurance Opportunity Trust, Series
8, at the opening of business on ____________, 1999 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
____________, 1999
Page 33
Statement of Net Assets
RYAN BECK BANKING AND INSURANCE OPPORTUNITY TRUST, SERIES 8
FT 304
At the Opening of Business on the Initial Date of Deposit-____________,
1999
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Securities represented by purchase contracts (1) (2) $
Less accrued organizational and offering costs (3) ( )
__________
Net assets $
==========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (4) $
Less sales charge (4) ( )
Less estimated organizational and offering costs (3) ( )
__________
Net Assets $
==========
</TABLE>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $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 $.0180 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 obligation 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) The aggregate cost to investors includes a sales charge computed at
the rate of 4.75% of the Public Offering Price (equivalent to 4.987% of
the net amount invested), assuming no reduction of sales charge as set
forth under "Public Offering-How is the Public Offering Price Determined?"
Page 34
Schedule of Investments
RYAN BECK BANKING AND INSURANCE OPPORTUNITY TRUST, SERIES 8
FT 304
At the Opening of Business on the
Initial Date of Deposit-____________, 1999
<TABLE>
<CAPTION>
Trust Preferred Securities
__________________________
Percentage
Number of Aggregate Market Cost of
of Offering Redemption Value per Securities
Shares Name of Issue of Trust Preferred Securities (1) Price (6) Provisions (2) Share to Trust (3)
_______ _______________________________________________ ___________ ______________ _________ ___________
<S> <C> <C> <C> <C>
% % $ $
% %
% %
% %
% %
% %
% %
________ ________
Total Trust Preferred Securities % $
======== ========
</TABLE>
<TABLE>
<CAPTION>
Preferred Stocks
________________
Percentage Market
of Aggregate Value Cost of
Number Ticker Symbol and Offering per Securities
of Shares Name of Issuer of Common Stocks (1) Price (3) Share to Trust (3)
_________ __________________________________ ___________ _______ ___________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
________ ________
Total Preferred Stocks % $
======== ========
Total Investments 100% $
======== ========
<FN>
______________
(1) Shown under this heading is the stated dividend rate of each of the
Trust Preferred Securities, expressed as a percentage of par or stated
value. Also shown is the stated maturity date of the Trust Preferred
Securities; the Common 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 January 21, 1999. Each
Trust Preferred Security was originally issued with a par or stated
value per share equal to $25. None of the Trust Preferred Securities are
Page 35
rated, which generally indicates that they have investment
characteristics similar to non-investment grade securities. See
"Portfolio-Risk Factors" for additional information concerning these
securities.
(2) The Trust Preferred Securities are first redeemable on such date and
at such price as listed above. Optional redemption provisions, which may
be exercised in whole or in part, are at prices of par or stated value.
Optional redemption provisions generally will occur at times when the
redeemed Trust Preferred Securities have an offering side evaluation
which represents a premium over par or stated value. To the extent that
the Trust Preferred 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 Trust Preferred
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 Trust Preferred
Securities have provisions which would allow for their redemption prior
to the earliest stated call date pursuant to the occurrence of certain
extraordinary events.
(3) The cost of the Securities to the Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the last sale prices of the listed Securities and the ask
prices of the over-the-counter traded Securities on the business day
preceding the Initial Date of Deposit). The valuation of the Securities
has been determined by the Evaluator, an affiliate of the Sponsor. The
aggregate underlying value of the Securities on the Initial Date of
Deposit was $ . Cost and loss to Sponsor relating to the Securities
sold to the Trust were $ and $ , respectively.
</FN>
</TABLE>
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Page 39
CONTENTS:
Summary of Essential Information:
Ryan Beck Banking and Insurance Opportunity Trust
Series 8 4
FT 304:
What is the FT Series? 5
What are the Expenses and Charges? 6
What is the Federal Tax Status of Unit Holders? 8
Are Investments in the Trust Eligible for
Retirement Plans? 13
Portfolio:
What are the Securities? 13
What are the Securities Selected for the
Ryan Beck Banking and Insurance Opportunity
Trust
Series 8? 13
Risk Factors 14
What are Some Additional Considerations
for Investors? 20
Public Offering:
How is the Public Offering Price Determined? 21
How are Units Distributed? 23
What are the Sponsor's and Underwriter's Profits? 24
Will There be a Secondary Market? 24
Rights of Unit Holders:
How is Evidence of Ownership Issued
and Transferred? 24
How are Income and Capital Distributed? 25
What Reports will Unit Holders Receive? 25
How May Units be Redeemed? 26
How May Units be Purchased by the Sponsor
or Underwriter? 27
How May Securities be Removed
from the Trust? 28
Information as to Underwriter, Sponsor, Trustee
and Evaluator:
Who is the Underwriter? 28
Who is the Sponsor? 29
Who is the Trustee? 29
Limitations on Liabilities of Sponsor and Trustee 29
Who is the Evaluator? 30
Other Information:
How May the Indenture be Amended or Terminated? 30
Legal Opinions 31
Experts 31
Underwriting 31
Report of Independent Auditors 33
Statement of Net Assets 34
Notes to Statement of Net Assets 34
Schedule of Investments 35
____________
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 FUND
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.
Ryan, Beck & Co.
RYAN BECK BANKING AND INSURANCE OPPORTUNITY TRUST SERIES 8
Ryan, Beck & Co.
220 South Orange Avenue
Livingston, New Jersey 07039
1-800-342-2325
603 Village Blvd.
West Palm Beach, Florida 33409
1-800-793-7226
150 Monument Road
Bala Cynwyd, Pennsylvania 19004
1-800-223-8969
740 Broad Street
Shrewsbury, New Jersey 07702
1-888-231-7226
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
Security Code: _____
____________, 1999
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 40
MEMORANDUM
Re: FT 304
As indicated in our cover letter transmitting the
Registration Statement on Form S-6 and other related material
under the Securities Act of 1933 to the Commission, the only
difference of consequence (except as described below) between FT
273, which is the current fund, and FT 304, the filing of which
this memorandum accompanies, is the change in the series number.
The list of securities comprising the Fund, the evaluation,
record and distribution dates and other changes pertaining
specifically to the new series, such as size and number of Units
in the Fund and the statement of condition of the new Fund, will
be filed by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of Templeton Growth and Treasury Trust, Series 1
and subsequent series (File No. 811-05903) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 273 Prospectus relate to the series number and size and
the date and various items of information which will be derived
from and apply specifically to the bonds deposited in the Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Broker's Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
ITEM B This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 304 has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on January 6, 1999.
FT 304
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
Robert D. Van Kampen Director of
Nike Securities January 6, 1999
Corporation, the
General Partner of
Nike Securities L.P. Robert M. Porcellino
Attorney-in-Fact**
David J. Allen Director of
Nike Securities
Corporation, the
General Partner of
Nike Securities L.P.
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to form S-6 of The First Trust Combined
Series 258 (File No. 33-63483) and the same is hereby
incorporated by this reference.
S-2
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF ERNST & YOUNG LLP
The consent of Ernst & Young LLP to the use of its name and
to the reference to such firm in the Prospectus included in this
Registration Statement will be filed by amendment.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement is
filed as Exhibit 4.1 to the Registration Statement.
S-3
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and Nike
Financial Advisory Services L.P. as Portfolio Supervisor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-43693] filed on behalf of The First Trust
Special Situations Trust, Series 22).
1.1.1* Form of Trust Agreement for Series 304 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank,
as Trustee and First Trust Advisors L.P., as Evaluator
and Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42683] filed on behalf of The
First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
3.1* Opinion of counsel as to legality of Securities being
registered.
3.2* Opinion of counsel as to Federal income tax status of
Securities being registered.
S-4
3.3* Opinion of counsel as to New York income tax status of
Securities being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
4.1* Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-63483] filed on behalf of The First Trust Combined
Series 258).
___________________________________
* To be filed by amendment.
S-5
