Registration No. 333-94023
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to Form S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
FT 396
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
E. Title of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as
amended
F. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
|XXX|Check box if it is proposed that this filing will become
effective on January 6, 2000 at 2:00 p.m. pursuant to Rule 487.
________________________________
The Dow(sm) Dividend And Repurchase Target 10 FlexPortfolio
1(st) Quarter 2000 Series
The Nasdaq Target 15 FlexPortfolio, 1(st) Quarter 2000 Series
The S&P Target 10 FlexPortfolio, 1(st) Quarter 2000 Series
Bandwidth FlexPortfolio Series
e-Business FlexPortfolio Series
New e-conomy FlexPortfolio Series
FT 396
FT 396 is a series of a unit investment trust, the FT Series. Each of
the six portfolios listed above (each, a "Trust," and collectively, the
"Trusts") is a separate portfolio, or series, of FT 396. The Dow(sm)
Dividend And Repurchase Target 10 FlexPortfolio, 1(st) Quarter 2000
Series; The Nasdaq Target 15 FlexPortfolio, 1(st) Quarter 2000 Series;
and The S&P Target 10 FlexPortfolio, 1(st) Quarter 2000 Series (the
"Target FlexPortfolios") each consist of a portfolio of common stocks
("Securities") selected by applying a specialized strategy. Bandwidth
FlexPortfolio Series; e-Business FlexPortfolio Series; and New e-conomy
FlexPortfolio Series (the "Sector FlexPortfolios") each consist of a
diversified portfolio of Securities issued by companies in the industry
sector or investment focus for which each Trust is named. The objective
of each Trust is to provide an above-average total return.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First Trust (registered trademark)
1-800-621-9533
The date of this prospectus is January 6, 2000
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 5
Report of Independent Auditors 7
Statements of Net Assets 8
Schedules of Investments 10
The FT Series 17
Portfolios 18
Risk Factors 22
Hypothetical Performance Information 23
Public Offering 26
Distribution of Units 27
The Sponsor's Profits 27
The Secondary Market 28
How We Purchase Units 28
Expenses and Charges 28
Tax Status 29
Rights of Unit Holders 30
Income and Capital Distributions 30
Redeeming Your Units 31
Investing in a New Trust 32
Removing Securities from a Trust 33
Amending or Terminating the Indenture 33
Information on the Sponsor, Trustee and Evaluator 34
Other Information 35
Page 2
Summary of Essential Information
FT 396
At the Opening of Business on the Initial Date of Deposit-January 6, 2000
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
The Dow(sm) The Nasdaq The S&P
DART 10 Target 15 Target 10
FlexPortfolio FlexPortfolio FlexPortfolio
1(st) Quarter 1(st) Quarter 1(st) Quarter
2000 Series 2000 Series 2000 Series
____________ ____________ ____________
<S> <C> <C> <C>
Initial Number of Units (1) 14,996 14,986 14,997
Fractional Undivided Interest in the Trust per Unit (1) 1/14,996 1/14,986 1/14,997
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 10.000 $ 10.000 $ 10.000
Maximum Sponsor retention of .6690% of the Public Offering Price
per Unit (.6690% of the net amount invested, exclusive
of the deferred Sponsor retention) (3) $ .06690 $ .06690 $ .06690
Less deferred Sponsor retention per Unit $ (.06690) $ (.06690) $ (.06690)
Public Offering Price per Unit (4) $ 10.000 $ 10.000 $ 10.000
Sponsor's Initial Repurchase Price per Unit (5) $ 10.000 $ 10.000 $ 10.000
Redemption Price per Unit (based on aggregate underlying
value of Securities less accrued Sponsor retention) (5) $ 10.000 $ 10.000 $ 10.000
Estimated Net Annual Distribution per Unit (6) $ .2418 N.A. N.A.
Cash CUSIP Number 30265H 257 30265H 273 30265H 299
Reinvestment CUSIP Number 30265H 265 30265H 281 30265H 307
Security Code 57982 57984 57986
Mandatory Termination Date (7) March 30, 2001 March 30, 2001 March 30, 2001
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date January 11, 2000
Rollover Notification Date March 1, 2001
Special Redemption and Liquidation Period March 15, 2001 to March 30, 2001
Income Distribution Record Date Fifteenth day of June and December, commencing June 15, 2000
Income Distribution Date (6) Last day of June and December, commencing June 30, 2000
_____________
<FN>
See "Notes to Summary of Essential Information" on page 4.
</FN>
</TABLE>
Page 3
Summary of Essential Information
FT 396
At the Opening of Business on the Initial Date of Deposit-January 6, 2000
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
Bandwidth e-Business New e-conomy
FlexPortfolio FlexPortfolio FlexPortfolio
Series Series Series
____________ ____________ ____________
<S> <C> <C> <C>
Initial Number of Units (1) 15,000 14,989 15,036
Fractional Undivided Interest in the Trust per Unit (1) 1/15,000 1/14,989 1/15,036
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 10.000 $ 10.000 $ 10.000
Maximum Sponsor retention of 2.75% of
the Public Offering Price per Unit
(2.75% of the net amount invested, exclusive of the
deferred Sponsor retention) (3) $ .275 $ .275 $ .275
Less deferred Sponsor retention per Unit $ (.275) $ (.275) $ (.275)
Public Offering Price per Unit (4) $ 10.000 $ 10.000 $ 10.000
Sponsor's Initial Repurchase Price per Unit (5) $ 10.000 $ 10.000 $ 10.000
Redemption Price per Unit (based on aggregate underlying
value of Securities less accrued Sponsor retention) (5) $ 10.000 $ 10.000 $ 10.000
Cash CUSIP Number 30265H 315 30265H 331 30265H 356
Reinvestment CUSIP Number 30265H 323 30265H 349 30265H 364
Security Code 57988 57990 57992
Mandatory Termination Date (7) January 6, 2005 January 6, 2005 January 6, 2005
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date January 11, 2000
Income Distribution Record Date Fifteenth day of June and December, commencing June 15, 2000
Income Distribution Date (6) Last day of June and December, commencing June 30, 2000
_____________
<FN>
NOTES TO SUMMARY OF ESSENTIAL INFORMATION
(1) As of the close of business on the Initial Date of Deposit, we may
adjust the number of Units of a Trust so that the Public Offering Price
per Unit will equal approximately $10.00. If we make such an adjustment,
the fractional undivided interest per Unit will vary from the amount
indicated above.
(2) Each listed Security is valued at its last closing sale price. If a
Security is not listed, or if no closing sale price exists, it is valued
at its closing ask price. Evaluations for purposes of determining the
purchase, sale or redemption price of Units are made as of the close of
trading on the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern time) on each day on which it is open (the "Evaluation Time").
(3) The maximum Sponsor retention is entirely deferred. See "Fee Table"
and "Public Offering." If you redeem or sell Units, you will not be
assessed any remaining unaccrued Sponsor retention at the time of sale
or redemption.
(4) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit. No
investor will purchase Units at this price. The price you pay for your
Units will be based on their valuation at the Evaluation Time on the
date you purchase your Units. On the Initial Date of Deposit the Public
Offering Price per Unit will not include any accumulated dividends on
the Securities. After this date, a pro rata share of any accumulated
dividends on the Securities will be included.
(5) Until the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period the Sponsor's Initial Repurchase
Price per Unit and Redemption Price per Unit will include the estimated
organization costs per Unit set forth under "Fee Table." After such
date, the Sponsor's Initial Repurchase Price per Unit and Redemption
Price per Unit will not include such estimated organization costs. See
"Redeeming Your Units."
(6) The actual net annual distribution per Unit you will receive will
vary with changes in the Dowsm DART 10 FlexPortfolio's fees and expenses,
dividends received and the sale of Securities. Dividend yield was not a
selection criterion for any Trust except for the Dowsm DART 10
FlexPortfolio. We will distribute money from the Capital Account monthly
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
$1.00 per 100 Units. In any case, we will distribute any funds in the
Capital Account in December of each year for the Sector FlexPortfolios or
as part of the final liquidation distribution for the Target FlexPortfolios.
(7) See "Amending or Terminating the Indenture."
</FN>
</TABLE>
Page 4
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of a Trust. See "Public
Offering" and "Expenses and Charges." Although each Target FlexPortfolio
has a term of approximately 15 months, each Sector FlexPortfolio has a
term of approximately five years, and each is a unit investment trust
rather than a mutual fund, this information allows you to compare fees.
This Fee Table also assumes that when each Target FlexPortfolio
terminates, the principal amount and distributions are rolled over into
a New Trust, and you pay the Sponsor retention (sales charge).
<TABLE>
<CAPTION>
THE DOW(SM) THE NASDAQ
DART 10 TARGET 15
FLEXPORTFOLIO FLEXPORTFOLIO
1(ST) QUARTER 1(ST) QUARTER
2000 SERIES 2000 SERIES
______________ _____________
<S> <C> <C> <C> <C>
Amount Amount
per Unit per Unit
________ ________
Unit Holder Transaction Expenses
(as a percentage of public offering price)
Maximum Sponsor retention (sales charge) .6690%(a) $.06690 .6690%(a) $.06690
===== ======= ===== =======
Maximum Sponsor retention imposed on reinvested dividends .6690%(b) $.06690 .6690%(b) $.06690
===== ======= ===== =======
Organization Costs
(as a percentage of public offering price)
Estimated organization costs .128%(c) $.0128 .108%(c) $.0108
====== ====== ===== ======
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, .064% $.0065 .064% $.0065
administrative and evaluation fees
Trustee's fee and other operating expenses .104%(d) .0107 .123%(d) .0127
_____ _____ _____ ______
Total .168% $.0172 .187% $.0192
===== ====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
THE S&P
TARGET 10
FLEXPORTFOLIO
1(ST) QUARTER
2000 SERIES
________________
<S> <C> <C>
Amount
per Unit
________
Unit Holder Transaction Expenses
(as a percentage of public offering price)
Maximum Sponsor retention (sales charge) .6690%(a) $.06690
===== =======
Maximum Sponsor retention imposed on reinvested dividends .6690%(b) $.06690
===== =======
Organization Costs
(as a percentage of public offering price)
Estimated organization costs .098%(c) $.0098
===== ======
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, .064% $.0065
administrative and evaluation fees
Trustee's fee and other operating expenses .133%(d) .0137
_____ ______
Total .197% $.0202
===== ======
</TABLE>
<TABLE>
<CAPTION>
BANDWIDTH E-BUSINESS NEW E-CONOMY
FLEXPORTFOLIO FLEXPORTFOLIO FLEXPORTFOLIO
SERIES SERIES SERIES
________________ ________________ ________________
<S> <C> <C> <C> <C> <C> <C>
Amount Amount Amount
per Unit per Unit per Unit
________ ________ ________
Unit Holder Transaction Expenses
(as a percentage of public offering price)
Maximum Sponsor retention (sales charge) 2.75%(a) $.275 2.75%(a) $.275 2.75%(a) $.275
====== ======= ===== ======= ====== =======
Maximum Sponsor retention imposed on reinvested dividends 2.75%(b) $.275 2.75%(a) $.275 2.75%(b) $.275
====== ======= ===== ======= ====== =======
Organization Costs
(as a percentage of public offering price)
Estimated organization costs .052%(c) $.0052 .052%(c) $.0052 .052%(c) $.0052
====== ====== ===== ======= ===== ======
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, .096% $.0098 .096% $.0098 .096% $.0098
administrative and evaluation fees
Trustee's fee and other operating expenses .146%(d) .0150 .146%(d) .0150 .146%(d) .0150
______ ______ ______ _____ _____ _____
Total .242% $.0248 .242% $.0248 .242% $.0248
====== ====== ====== ===== ===== =====
Page 5
______________
<FN>
Example
This example is intended to help you compare the cost of investing in a
Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in a Trust for the periods shown
and sell all your Units at the end of those periods. The example also
assumes a 5% return on your investment each year and that a Trust's
operating expenses stay the same. Although your actual costs may vary,
based on these assumptions your costs would be:
1 Year 3 Years(e) 5 Years(e) 10 Years(e)
______ _______ _______ ________
The Dow(sm) DART 10 FlexPortfolio, 1(st) Quarter 2000 Series $83 $258 $433 $954
The Nasdaq Target 15 FlexPortfolio, 1(st) Quarter 2000 Series 83 258 436 961
The S&P Target 10 FlexPortfolio, 1(st) Quarter 2000 Series 83 258 437 965
Bandwidth FlexPortfolio Series 84 253 436 N.A.
e-Business FlexPortfolio Series 84 253 436 N.A.
New e-conomy FlexPortfolio Series 84 253 436 N.A.
The example will not differ if you hold rather than sell your Units at
the end of each period. The example does not reflect sales charges on
reinvested dividends and other distributions. If these sales charges
were included, your costs would be higher.
(a) The maximum Sponsor retention (sales charge) is entirely deferred.
Sponsor retention is the sales charge paid to the Sponsor as
compensation for its activities in connection with creating a Trust.
Dealers and other selling agents will receive no concessions or
commissions on the sale of Units. The maximum Sponsor retention for each
Target FlexPortfolio is a fixed dollar amount equal to $.06690 per Unit,
accrued daily at the rate of $.00015067 per Unit and for each Sector
FlexPortfolio is a fixed dollar amount equal to $.275 per Unit, accrued
daily at the rate of $.00015093 per Unit. Accrued Sponsor retention for
all Trusts will be deducted monthly beginning January 20, 2000 and on
the 20th day of each month thereafter (or the preceding business day if
the 20th day is not a business day) over the life of a Trust and at a
Trust's termination. If you buy Units at a price of less than $10.00 per
Unit, the dollar amount of the Sponsor retention will not change but the
Sponsor retention on a percentage basis will be more than .6690% of the
Public Offering Price for each Target FlexPortfolio and more than 2.75%
of the Public Offering Price for each Sector FlexPortfolio. When you
purchase Units, you will only be subject to Sponsor retention payments
not yet accrued.
(b)Reinvested dividends will be subject only to Sponsor retention
payments not yet accrued at the time of reinvestment. See "Income and
Capital Distributions."
(c) You will bear all or a portion of the costs incurred in organizing
your respective Trust. These estimated organization costs are included
in the price you pay for your Units and will be deducted from the assets
of a Trust at the earlier of six months after the Initial Date of
Deposit or the end of the initial offering period.
(d) Other operating expenses for the Sector FlexPortfolios include the
costs incurred by these Trusts for annually updating such Trusts'
registration statements. Historically, we paid these costs. Other
operating expenses for The Dow(sm) DART 10 FlexPortfolio, The Nasdaq
Target 15 FlexPortfolio and The S&P Target 10 FlexPortfolio include
estimated per Unit costs associated with a license fee as described in
"Expenses and Charges." Other operating expenses do not include
brokerage costs and other portfolio transaction fees for any of the
Trusts. In certain circumstances the Trusts may incur additional
expenses not set forth above. See "Expenses and Charges."
(e) The example represents the estimated costs incurred by each Target
FlexPortfolio assuming that when a Trust terminates, the principal amount
and distributions are rolled over into a New Trust. For each Sector
FlexPortfolio, the example represents the estimated costs incurred
through each Trust's approximate five-year life.
</FN>
</TABLE>
Page 6
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
FT 396
We have audited the accompanying statements of net assets, including the
schedules of investments, of FT 396, comprised of The Dow(sm) Dividend
And Repurchase Target 10 FlexPortfolio, 1(st) Quarter 2000 Series; The
Nasdaq Target 15 FlexPortfolio, 1(st) Quarter 2000 Series; The S&P
Target 10 FlexPortfolio, 1(st) Quarter 2000 Series; Bandwidth
FlexPortfolio Series; e-Business FlexPortfolio Series; and New e-conomy
FlexPortfolio Series, as of the opening of business on January 6, 2000.
These statements of net assets are the responsibility of the Trusts'
Sponsor. Our responsibility is to express an opinion on these statements
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 statements of net assets
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
statements of net assets. Our procedures included confirmation of the
letter of credit allocated among the Trusts on January 6, 2000. 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 statements of net assets. We believe that our audit
of the statements of net assets provides a reasonable basis for our
opinion.
In our opinion, the statements of net assets referred to above present
fairly, in all material respects, the financial position of FT 396,
comprised of The Dow(sm) Dividend And Repurchase Target 10
FlexPortfolio, 1(st) Quarter 2000 Series; The Nasdaq Target 15
FlexPortfolio, 1(st) Quarter 2000 Series; The S&P Target 10
FlexPortfolio, 1(st) Quarter 2000 Series; Bandwidth FlexPortfolio
Series; e-Business FlexPortfolio Series; and New e-conomy FlexPortfolio
Series, at the opening of business on January 6, 2000 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 6, 2000
Page 7
Statements of Net Assets
FT 396
At the Opening of Business on the
Initial Date of Deposit-January 6, 2000
<TABLE>
<CAPTION>
The Dow(sm) The Nasdaq The S&P
DART 10 Target 15 Target 10
FlexPortfolio FlexPortfolio FlexPortfolio
1(st) Quarter 1(st) Quarter 1(st) Quarter
2000 Series 2000 Series 2000 Series
____________ ____________ ____________
<S> <C> <C> <C>
NET ASSETS
Investment in Securities represented
by purchase contracts (1) (2) $149,959 $149,861 $149,973
Less liability for reimbursement
to Sponsor for organization costs (3) (192) (162) (147)
________ ________ ________
Net assets $149,767 $149,699 $149,826
======== ======== ========
Units outstanding 14,996 14,986 14,997
ANALYSIS OF NET ASSETS
Cost to investors (4) $149,959 $149,861 $149,973
Less Sponsor retention (4) (0) (0) (0)
Less estimated reimbursement
to Sponsor for organization costs (3) (192) (162) (147)
________ ________ ________
Net assets $149,767 $149,699 $149,826
======== ======== ========
______________
<FN>
See "Notes to Statements of Net Assets" on page 9.
</FN>
</TABLE>
Page 8
Statements of Net Assets (cont'd.)
FT 396
At the Opening of Business on the Initial Date of Deposit-January 6, 2000
<TABLE>
<CAPTION>
Bandwidth e-Business New e-conomy
FlexPortfolio FlexPortfolio FlexPortfolio
Series Series Series
____________ ____________ ____________
<S> <C> <C> <C>
NET ASSETS
Investment in Securities represented by purchase contracts (1) (2) $150,002 $149,895 $150,361
Less liability for reimbursement to Sponsor for organization costs (3) (78) (78) (78)
________ ________ ________
Net assets $149,924 $149,817 $150,283
======== ======== ========
Units outstanding 15,000 14,989 15,036
ANALYSIS OF NET ASSETS
Cost to investors (4) $150,002 $149,895 $150,361
Less Sponsor retention (4) (0) (0) (0)
Less estimated reimbursement to Sponsor for organization costs (3) (78) (78) (78)
________ ________ ________
Net assets $149,924 $149,817 $150,283
======== ======== ========
______________
<FN>
NOTES TO STATEMENTS OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" for each Trust is based on their aggregate underlying value.
(2) Irrevocable letters of credit issued by The Chase Manhattan Bank,
of which $1,200,000 will be allocated among each of the six Trusts in FT
396, have been deposited with the Trustee as collateral, covering the
monies necessary for the purchase of the Securities according to their
purchase contracts.
(3) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trusts. These costs have been estimated at $.0128,
$.0108, $.0098, $.0052, $.0052 and $.0052 per Unit for The Dow(sm) DART
10 FlexPortfolio, The Nasdaq Target 15 FlexPortfolio, The S&P Target 10
FlexPortfolio, Bandwidth FlexPortfolio, e-Business FlexPortfolio and New
e-conomy FlexPortfolio Series, respectively. A payment will be made as
of 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 obligation of the investors to the Sponsor will
be satisfied. To the extent that actual organization costs of a Trust
are greater than the estimated amount, only the estimated organization
costs added to the Public Offering Price will be reimbursed to the
Sponsor and deducted from the assets of such Trust.
(4) The maximum Sponsor retention is entirely deferred. The maximum
Sponsor retention is .6690% of the Public Offering Price for each Target
FlexPortfolio (equivalent to .6690% of the net amount invested,
exclusive of the deferred Sponsor retention) or 2.75% of the Public
Offering Price per Unit for each Sector FlexPortfolio (equivalent to
2.75% of the net amount invested, exclusive of the deferred Sponsor
retention). This Sponsor retention, which accrues on a daily basis and
which will total $.06690 per Unit for each Target FlexPortfolio or $.275
per Unit for each Sector FlexPortfolio over the life of a Trust, will be
paid to us in monthly installments beginning on January 20, 2000 and on
the twentieth day of each month thereafter (or if such date is not a
business day, on the preceding business day) over the life of a Trust
and at a Trust's termination. If you redeem or sell Units, you will not
be subject to any remaining unaccrued Sponsor retention payments at the
time of sale or redemption.
</FN>
</TABLE>
Page 9
Schedule of Investments
The Dow(sm) Dividend And Repurchase TARGET 10 FlexPortfolio,
1(st) Quarter 2000 Series
FT 396
At the Opening of Business on the Initial Date of Deposit-January 6, 2000
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of Current
of Ticker Symbol and Offering Value per Securities to Dividend
Shares Name of Issuer of Securities (1) Price Share the Trust (2) Yield (3)
______ _______________________________________ ___________ ________ _____________ _________
<C> <S> <C> <C> <C> <C>
352 BA The Boeing Company 10% $42.625 $ 15,004 1.31%
303 CAT Caterpillar Inc. 10% 49.438 14,980 2.63%
239 EK Eastman Kodak Company 10% 62.688 14,982 2.81%
209 GM General Motors Corporation 10% 71.625 14,970 2.79%
139 HWP Hewlett-Packard Company 10% 107.875 14,994 0.59%
272 HON Honeywell International Inc. 10% 55.125 14,994 1.23%
221 MRK Merck & Co., Inc. 10% 67.750 14,973 1.71%
128 JPM J.P. Morgan & Company, Inc. 10% 117.500 15,040 3.40%
638 MO Philip Morris Companies, Inc. 10% 23.500 14,993 8.17%
146 PG Procter & Gamble Company 10% 102.938 15,029 1.24%
______ ________
Total Investments 100% $149,959
===== ========
___________
<FN>
See "Notes to Schedules of Investments" on page 15.
</FN>
</TABLE>
Page 10
Schedule of Investments
The Nasdaq Target 15 FlexPortfolio, 1(st) Quarter 2000 Series
FT 396
At the Opening of Business on the
Initial Date of Deposit-January 6, 2000
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of Market
Of Ticker Symbol and Offering Value per Securities to Capitalization
Shares Name of Issuer of Securities (1) Price Share the Trust (2) (in millions) (4)
______ _______________________________________ ___________ ________ _____________ _________________
<C> <S> <C> <C> <C> <C>
72 ADBE Adobe Systems Incorporated 2.94% $ 61.250 $ 4,410 $ 7,362
84 AAPL Apple Computer, Inc. 5.83% 104.000 8,736 16,761
30 AMCC Applied Micro Circuits Corporation 2.33% 116.250 3,487 6,272
121 ATML Atmel Corporation 2.14% 26.563 3,214 5,355
61 CMGI CMGI Inc. 11.52% 283.000 17,263 34,801
33 ERTS Electronic Arts Inc. 1.97% 89.313 2,947 5,645
39 MEDI MedImmune, Inc. 3.65% 140.125 5,465 8,867
367 ORCL Oracle Corporation 24.98% 102.000 37,434 145,215
38 PMCS PMC-Sierra, Inc. (5) 3.56% 140.563 5,341 9,566
20 QLGC QLogic Corporation 2.05% 153.688 3,074 5,617
41 RFMD RF Micro Devices, Inc. 1.95% 71.313 2,924 5,660
115 SEBL Siebel Systems, Inc. 5.72% 74.563 8,575 14,097
521 SUNW Sun Microsystems, Inc. 24.99% 71.875 37,447 112,277
30 VISX VISX, Incorporated 1.00% 50.000 1,500 3,216
180 XLNX Xilinx, Inc. 5.37% 44.688 8,044 14,249
______ ________
Total Investments 100% $149,861
===== ========
___________
<FN>
See "Notes to Schedules of Investments" on page 15.
</FN>
</TABLE>
Page 11
Schedule of Investments
The S&P Target 10 FlexPortfolio, 1(st) Quarter 2000 Series
FT 396
At the Opening of Business on the
Initial Date of Deposit-January 6, 2000
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of
Of Ticker Symbol and Offering Value per Securities to
Shares Name of Issuer of Securities (1) Price Share the Trust (2)
______ _______________________ _________ ______ _____________
<C> <S> <C> <C> <C> <C>
216 AA Alcoa Inc. 12.39% $ 86.000 $ 18,576
255 AVY Avery Dennison Corporation 12.37% 72.750 18,551
437 CC Circuit City Stores-Circuit City Group 12.36% 42.438 18,546
133 C Citigroup Inc. 4.51% 50.813 6,758
375 GP Georgia-Pacific Group 12.35% 49.375 18,516
96 LEH Lehman Brothers Holdings Inc. 4.48% 70.000 6,720
56 MWD Morgan Stanley Dean Witter & Co. 4.49% 120.250 6,734
445 SEG Seagate Technology, Inc. 12.35% 41.625 18,523
329 TAN Tandy Corporation 12.35% 56.313 18,527
294 WMT Wal-Mart Stores, Inc. 12.35% 63.000 18,522
______ ________
Total Investments 100% $149,973
====== ========
______________
<FN>
See "Notes to Schedules of Investments" on page 15.
</FN>
</TABLE>
Page 12
Schedule of Investments
Bandwidth FlexPortfolio Series
FT 396
At the Opening of Business on the
Initial Date of Deposit-January 6, 2000
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of
Of Ticker Symbol and Offering Value per Securities to
Shares Name of Issuer of Securities (1) Price Share the Trust (2)
______ _______________________________________ ___________ ________ _____________
<C> <S> <C> <C> <C>
Communications Services
______________________
118 T AT&T Corp. 4% $ 50.938 $ 6,011
102 COVD Covad Communications Group, Inc. 4% 59.000 6,018
125 GBLX Global Crossing Ltd. (5) 4% 47.969 5,996
78 LVLT Level 3 Communications, Inc. 4% 76.938 6,001
117 WCOM MCI WorldCom, Inc. 4% 51.313 6,004
151 Q Qwest Communications International Inc. 4% 39.688 5,993
Communications Equipment
______________________
95 ADCT ADC Telecommunications, Inc. 4% 63.125 5,997
111 CMTN Copper Mountain Networks, Inc. 4% 54.125 6,008
83 LU Lucent Technologies Inc. 4% 72.625 6,028
67 NT Nortel Networks Corporation (5) 4% 89.750 6,013
97 TLAB Tellabs, Inc. 4% 61.625 5,978
Fiber Optics
______________________
73 HLIT Harmonic Inc. 4% 81.750 5,968
38 JDSU JDS Uniphase Corporation 4% 158.250 6,013
Networking Products
______________________
59 CSCO Cisco Systems, Inc. 4% 101.688 6,000
18 JNPR Juniper Networks, Inc. 4% 326.375 5,875
34 RBAK Redback Networks Inc. 4% 176.063 5,986
Semiconductors
______________________
52 AMCC Applied Micro Circuits Corporation 4% 116.250 6,045
24 BRCM Broadcom Corporation (Class A) 4% 248.500 5,964
96 CNXT Conexant Systems, Inc. 4% 62.375 5,988
43 PMCS PMC-Sierra, Inc. (5) 4% 140.563 6,044
114 VTSS Vitesse Semiconductor Corporation 4% 52.750 6,013
Wireless Communications
______________________
100 ERICY L.M. Ericsson AB (ADR) 4% 60.250 6,025
45 MOT Motorola, Inc. 4% 134.500 6,052
35 NOK Nokia Oy (ADR) 4% 172.500 6,037
38 QCOM QUALCOMM Incorporated 4% 156.438 5,945
_____ ________
Total Investments 100% $150,002
===== ========
___________
<FN>
See "Notes to Schedules of Investments" on page 15.
</FN>
</TABLE>
Page 13
Schedule of Investments
e-Business FlexPortfolio Series
FT 396
At the Opening of Business on the Initial Date of Deposit-January 6, 2000
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of
Of Ticker Symbol and Offering Value per Securities to
Shares Name of Issuer of Securities (1) Price Share the Trust (2)
______ _______________________ _________ ______ _____________
<C> <S> <C> <C> <C>
Horizontal Portals
______________________
67 AOL America Online, Inc. 3.36% $ 75.063 $ 5,029
29 ARBA Ariba, Inc. 3.34% 172.375 4,999
23 CMRC Commerce One, Inc. 3.29% 214.500 4,933
42 PPRO PurchasePro.com, Inc. 3.31% 118.125 4,961
33 VERT VerticalNet, Inc. 3.34% 151.625 5,004
12 YHOO Yahoo! Inc. 3.29% 410.500 4,926
Infrastructure
______________________
73 BEAS BEA Systems, Inc. 3.34% 68.625 5,010
31 BVSN BroadVision, Inc. 3.31% 159.875 4,956
25 CHKP Check Point Software Technologies Ltd. (5) 3.28% 196.750 4,919
51 ISLD Digital Island 3.37% 99.000 5,049
56 EXDS Exodus Communications, Inc. 3.36% 89.938 5,037
65 LVLT Level 3 Communications, Inc. 3.34% 76.938 5,001
97 WCOM MCI WorldCom, Inc. 3.32% 51.313 4,977
44 MSFT Microsoft Corporation 3.34% 113.813 5,008
58 PRSF Portal Software, Inc. 3.32% 85.875 4,981
67 SCNT Scient Corporation 3.31% 74.125 4,966
67 SEBL Siebel Systems, Inc. 3.33% 74.563 4,996
37 TIBX TIBCO Software Inc. 3.37% 136.500 5,050
28 VRSN VeriSign, Inc. 3.33% 178.000 4,984
29 VIGN Vignette Corporation 3.39% 175.438 5,088
Procurement
___________
49 CSCO Cisco Systems, Inc. 3.33% 101.688 4,983
100 DELL Dell Computer Corporation 3.33% 49.938 4,994
30 ITWO i2 Technologies, Inc. 3.29% 164.375 4,931
42 IBM International Business Machines Corporation 3.31% 118.250 4,966
49 ORCL Oracle Corporation 3.33% 102.000 4,998
Venture Capital
_______________
18 CMGI CMGI Inc. 3.40% 283.000 5,094
30 ICGE Internet Capital Group, Inc. 3.36% 167.750 5,033
Vertical Portals
________________
47 CMDX Chemdex Corporation 3.35% 106.938 5,026
147 HLTH Healtheon/WebMD Corporation 3.33% 34.000 4,998
98 PCOR pcOrder.com, Inc. 3.33% 51.000 4,998
______ ________
Total Investments 100% $149,895
====== ========
______________
<FN>
See "Notes to Schedules of Investments" on 15.
</FN>
</TABLE>
Page 14
Schedule of Investments
New e-conomy FlexPortfolio Series
FT 396
At the Opening of Business on the Initial Date of Deposit-January 6, 2000
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of
Of Ticker Symbol and Offering Value per Securities to
Shares Name of Issuer of Securities (1) Price Share the Trust (2)
______ _______________________ _________ ______ _____________
<C> <S> <C> <C> <C>
Bandwidth
__________
118 T AT&T Corp. 4% $ 50.938 $ 6,011
59 CSCO Cisco Systems, Inc. 4% 101.688 6,000
83 LU Lucent Technologies Inc. 4% 72.625 6,028
117 WCOM MCI WorldCom, Inc. 4% 51.313 6,004
97 TLAB Tellabs, Inc. 4% 61.625 5,978
e-Business
___________
35 ARBA Ariba, Inc. 4% 172.375 6,033
38 BVSN BroadVision, Inc. 4% 159.875 6,075
28 CMRC Commerce One, Inc. 4% 214.500 6,006
67 EXDS Exodus Communications, Inc. 4% 89.938 6,026
36 ICGE Internet Capital Group, Inc. 4% 167.750 6,039
e-Infrastructure
_____________
120 DELL Dell Computer Corporation 4% 49.938 5,993
58 EMC EMC Corporation 4% 103.313 5,992
72 INTC Intel Corporation 4% 83.625 6,021
59 ORCL Oracle Corporation 4% 102.000 6,018
83 SUNW Sun Microsystems, Inc. 4% 71.875 5,966
Internet
_____________
80 AOL America Online, Inc. 4% 75.063 6,005
21 CMGI CMGI Inc. 4% 283.000 5,943
84 LCOS Lycos, Inc. 4% 71.375 5,995
53 MSFT Microsoft Corporation 4% 113.813 6,032
15 YHOO Yahoo! Inc. 4% 410.500 6,157
Wireless
__________
100 ERICY L.M. Ericsson AB (ADR) 4% 60.250 6,025
45 MOT Motorola, Inc. 4% 134.500 6,052
35 NOK Nokia Oy (ADR) 4% 172.500 6,037
38 QCOM QUALCOMM Incorporated 4% 156.438 5,945
130 VOD Vodafone AirTouch Plc (ADR) 4% 46.000 5,980
_____ ________
Total Investments 100% $150,361
===== ========
______________
<FN>
NOTES TO SCHEDULES OF INVESTMENTS
(1) All Securities are represented by regular way contracts to purchase
such Securities which are backed by an irrevocable letter of credit
deposited with the Trustee. We entered into purchase contracts for the
Securities on January 6, 2000. Each Target FlexPortfolio has a Mandatory
Termination Date of March 30, 2001. Each Sector FlexPortfolio has a
Mandatory Termination Date of January 6, 2005.
Page 15
(2) The cost of the Securities to a Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the closing sale prices of the listed Securities and the
ask prices of the over-the-counter traded Securities at the Evaluation
Time on the business day preceding the Initial Date of Deposit). The
valuation of the Securities has been determined by the Evaluator, an
affiliate of ours. The cost of the Securities to us and our profit or
loss (which is the difference between the cost of the Securities to us
and the cost of the Securities to a Trust) are set forth below:
Cost of
Securities Profit
to Sponsor (Loss)
___________ ______
The Dow(sm) DART 10 FlexPortfolio, 1(st) Quarter 2000 Series $150,786 $ (827)
The Nasdaq Target 15 FlexPortfolio, 1(st) Quarter 2000 Series 149,623 238
The S&P Target 10 FlexPortfolio, 1(st) Quarter 2000 Series 149,089 884
Bandwidth FlexPortfolio Series 150,705 (703)
e-Business FlexPortfolio Series 149,766 129
New e-conomy FlexPortfolio Series 149,010 1,351
(3) Current Dividend Yield for each Security was calculated by dividing
the most recent annualized ordinary dividend paid on a Security by that
Security's closing sale price at the Evaluation Time on the business day
prior to the Initial Date of Deposit.
(4) Market capitalization is based on the market value as of the close of
business on January 5, 2000.
(5) This Security represents the common stock of a foreign company which
trades directly on a U.S. national securities exchange.
</FN>
</TABLE>
Page 16
The FT Series
The FT Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created several similar
yet separate series of a unit investment trust which we have named the
FT Series. We designate each of these series of the FT Series with a
different series number. Each of the following is a separate portfolio,
or series, of FT 396:
- - The Dow(sm) DART 10 FlexPortfolio, 1(st) Quarter 2000 Series
- - The Nasdaq Target 15 FlexPortfolio, 1(st) Quarter 2000 Series
- - The S&P Target 10 FlexPortfolio, 1(st) Quarter 2000 Series
- - Bandwidth FlexPortfolio Series
- - e-Business FlexPortfolio Series
- - New e-conomy FlexPortfolio Series
Units of the Trusts can only be purchased through registered
broker/dealers who charge periodic fees as part of an alternative
account relationship for providing services, including financial
planning, investment advisory or asset management, or provide these or
comparable services as part of an investment account where a
comprehensive "wrap fee" or similar charge is imposed; or by employees,
officers and directors (or their immediate family members) of the
Sponsor, our related companies, dealers and their affiliates, and
vendors providing services to us. You may switch from one FlexPortfolio
to any other FlexPortfolio series which is currently in the primary
market on any business day at no additional cost. However, your
broker/dealer or the Sponsor may at any time, without prior notice,
place limits on the number of exchanges you can make.
YOU MAY GET MORE SPECIFIC DETAILS CONCERNING THE NATURE, STRUCTURE AND
RISKS OF THIS PRODUCT IN AN "INFORMATION SUPPLEMENT" BY CALLING THE
TRUSTEE AT 1-800-682-7520.
Mandatory Termination Date.
Each Trust will terminate on the Mandatory Termination Date set forth in
"Summary of Essential Information." Each Trust was created under the
laws of the State of New York by a Trust Agreement (the "Indenture")
dated the Initial Date of Deposit. This agreement, entered into among
Nike Securities L.P., as Sponsor, The Chase Manhattan Bank as Trustee
and First Trust Advisors L.P. as Portfolio Supervisor and Evaluator,
governs the operation of the Trusts.
How We Created the Trusts.
On the Initial Date of Deposit, we deposited portfolios of common stocks
with the Trustee and in turn, the Trustee delivered documents to us
representing our ownership of the Trusts in the form of units ("Units").
With our deposit of Securities on the Initial Date of Deposit we
established a percentage relationship among the Securities in each
Trust's portfolio, as stated under "Schedule of Investments" for each
Trust. After the Initial Date of Deposit, we may deposit additional
Securities in a Trust, or cash (including a letter of credit) with
instructions to buy more Securities to create new Units for sale. If we
create additional Units, we will attempt, to the extent practicable, to
maintain the percentage relationship established among the Securities on
the Initial Date of Deposit, and not the percentage relationship
existing on the day we are creating new Units, since the two may differ.
This difference may be due to the sale, redemption or liquidation of any
of the Securities.
Since the prices of the Securities will fluctuate daily, the ratio of
Securities in a Trust, 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 or cash in a Trust. If we
deposit cash, you and new investors may experience a dilution of your
investment. This is because prices of Securities will fluctuate between
the time of the cash deposit and the purchase of the Securities, and
because the Trusts pay the associated brokerage fees. To reduce this
dilution, the Trusts will try to buy the Securities as close to the
Evaluation Time and as close to the evaluation price as possible.
However, because each Trust pays the brokerage fees associated with its
creation of new Units and with the sale of Securities to meet redemption
and exchange requests, the ability to exchange between FlexPortfolio
series will likely result in higher brokerage expenses.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may retain and pay us (or our affiliate) to act as agent for a
Trust to buy Securities. If we or an affiliate of ours act as agent to a
Trust we will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
Page 17
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Securities may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. However, Securities will not be sold to take
advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation, or if they no longer meet the criteria by
which they were selected. You will not be able to dispose of or vote any
of the Securities in a Trust. As the holder of the Securities, the
Trustee will vote all of the Securities and will do so based on our
instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in a Trust fails, unless we can purchase
substitute Securities ("Replacement Securities") we will refund to you
that portion of the purchase price and accrued Sponsor retention
resulting from the failed contract on the next Income Distribution Date.
Any Replacement Security a Trust acquires will be identical to those
from the failed contract.
Portfolios
Objectives.
When you invest in one of the Trusts you are purchasing a quality
portfolio of attractive common stocks in one convenient purchase. The
investment objective of each Trust is to provide an above-average total
return. To achieve this objective, each Target FlexPortfolio will invest
in the common stocks of companies which are selected by applying a
unique investment strategy, and each Sector FlexPortfolio will invest in
a diversified portfolio of common stocks of companies in the industry
sector or investment focus for which each Trust is named. Each Target
FlexPortfolio has an expected maturity of approximately 15 months, and
each Sector FlexPortfolio has an expected maturity of five years.
Target FlexPortfolio Strategies.
The Dow (sm) Dividend And Repurchase Target 10 FlexPortfolio Strategy.
The Dow (sm) Dividend And Repurchase Target ("DART") 10 FlexPortfolio
Strategy selects a portfolio of Dow Jones Industrial Average ("DJIA")
stocks with high dividend yields and/or high buyback ratios as a means
to achieving its investment objective. By analyzing dividend yields, the
Strategy seeks to uncover stocks that may be out of favor or
undervalued. More recently, many companies have turned to stock
reduction programs as a tax efficient way to bolster their stock prices
and reward shareholders. Companies which have reduced their shares
through a share buyback program may indicate a company with a strong
cash flow position and high quality earnings. Buyback ratio is the ratio
of a company's shares of common stock outstanding 12 months prior to the
date of this prospectus divided by a company's shares outstanding as of
six business days prior to the date of this prospectus, minus "1." The
Dow(sm) DART 10 FlexPortfolio Strategy stocks are determined as follows:
Step 1: We rank all 30 stocks contained in the DJIA by the sum of their
dividend yield and buyback ratio as of six business days prior to the
date of this prospectus.
Step 2: We then select the ten stocks with the highest combined dividend
yields and buyback ratios for The Dow(sm) DART 10 FlexPortfolio.
The Nasdaq Target 15 FlexPortfolio Strategy.
The Nasdaq Target 15 FlexPortfolio Strategy selects a portfolio of the
15 Nasdaq 100 Index stocks with the best overall ranking on both 12- and
6-month price appreciation, return on assets and price to cashflow as a
means to achieving its investment objective. The Nasdaq Target 15
FlexPortfolio Strategy stocks are determined as follows:
Step 1: We select stocks which are components of the Nasdaq 100 Index as
of seven business days prior to the date of this prospectus and
numerically rank them by 12-month price appreciation (best (1) to worst
(100)).
Step 2: We then numerically rank the stocks by six-month price
appreciation.
Step 3: The stocks are then numerically ranked by return on assets ratio.
Step 4: We then numerically rank the stocks by the ratio of cash flow
per share to stock price.
Step 5: We add up the numerical ranks achieved by each company in the
above steps and select the 15 stocks with the lowest sums for The Nasdaq
Page 18
Target 15 FlexPortfolio.
The stocks which comprise The Nasdaq Target 15 FlexPortfolio are
weighted by market capitalization subject to the restriction that no
stock will comprise less than 1% or 25% or more of the portfolio on the
date of this prospectus. The Securities will be adjusted on a
proportionate basis to accommodate this constraint.
Companies that, based on publicly available information as of seven
business days prior to the date of this prospectus, are the subject of
an announced business combination which we expect will happen within six
months of date of this prospectus have been excluded from The Nasdaq
Target 15 FlexPortfolio.
The S&P Target 10 FlexPortfolio Strategy.
The S&P Target 10 FlexPortfolio Strategy selects a portfolio of 10 of
the largest Standard & Poor's 500 Composite Stock Price Index ("S&P 500
Index") stocks with the lowest price-to-sales ratio and greatest one-
year price appreciation as a means to achieving its investment
objective. The S&P Target 10 FlexPortfolio Strategy stocks are
determined as follows:
Step 1: We select the 250 largest companies based on market
capitalization which are components of the S&P 500 Index as of seven
business days prior to the date of this prospectus.
Step 2: From the above list, the 125 companies with the lowest price to
sales ratios are selected.
Step 3: The 10 companies which had the greatest 1-year stock price
appreciation are selected for The S&P Target 10 FlexPortfolio.
During the initial offering period The S&P Target 10 FlexPortfolio will
not invest more than 5% of its portfolio in shares of any one securities-
related issuer.
Please note that we applied each strategy which makes up the portfolio
for each Target FlexPortfolio at a particular time. If we create
additional Units of a Target FlexPortfolio after the Initial Date of
Deposit we will deposit the Securities originally selected by applying
the strategy at such time. This is true even if a later application of a
strategy would have resulted in the selection of different securities.
Because the life of each Target FlexPortfolio is short (approximately 15
months), we cannot guarantee that the Trusts will achieve their
objectives or that the Trusts will be profitable once expenses are
deducted.
"Dow Jones Industrial Average(sm) ," "Dow(sm)" and "DJIA(sm)" are
service marks of Dow Jones & Company, Inc. ("Dow Jones") and have been
licensed for use for certain purposes by First Trust Advisors L.P., an
affiliate of ours. The Dow(sm) DART 10 FlexPortfolio is not endorsed,
sold or promoted by Dow Jones and Dow Jones makes no representation
regarding the advisability of investing in such product.
The "Nasdaq 100(registered trademark)," "Nasdaq 100 Index(registered
trademark)," and "Nasdaq(registered trademark)" are trade or service
marks of The Nasdaq Stock Market, Inc. (which with its affiliates are
the "Corporations") and are licensed for use by us. The Nasdaq Target 15
FlexPortfolio has not been passed on by the Corporations as to its
legality or suitability. The Nasdaq Target 15 FlexPortfolio is not
issued, endorsed, sold, or promoted by the Corporations. The
Corporations make no warranties and bear no liability with respect to
The Nasdaq Target 15 FlexPortfolio.
"S&P," "S&P 500," and "Standard & Poor's" are trademarks of The McGraw-
Hill Companies, Inc. and have been licensed for use by us. The S&P
Target 10 FlexPortfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in such Trust. Please see the
Information Supplement which sets forth certain additional disclaimers
and limitations of liabilities on behalf of Standard & Poor's.
Dow Jones, Standard & Poor's and The Nasdaq Stock Market, Inc. are not
affiliated with us and have not participated in creating the Trusts or
selecting the Securities for the Trusts. Except as noted above, none of
the index publishers have given us a license to use their index nor have
they approved of any of the information in this prospectus.
Sector FlexPortfolios.
Bandwidth FlexPortfolio Series consists of a portfolio of common stocks
of telecommunications companies which are focusing on bandwidth
technologies. The term bandwidth refers to the amount of information
that can be transmitted from one user to another in a given amount of
time. The speed at which these signals travel is often as important to
the end-user as the information that is being transmitted. The growing
demand for bandwidth is being driven by the surge in the volume and
Page 19
complexity of data communications on the Internet. For example, it would
take more bandwidth to download a video game off the Internet in one
second than a page of text.
Now that the Internet infrastructure is firmly in place, the demand for
bandwidth should continue to grow as more people access the Web
worldwide, and as telecommunications service providers begin to mass
market their newer and faster broadband systems.
The following factors support our positive outlook for the companies in
these portfolios:
- - Communications networks presently carry nearly 30 times more voice
traffic than data. In light of the growth in Internet usage, data
traffic is expected to surpass voice communications in the years ahead.
- - Wireless communications is now the fastest growing segment of the
communications equipment market. The demand for wireless products and
services should continue to grow as analog networks are upgraded to
digital systems. Digital signals will accommodate wireless data
communications and potentially increase demand for bandwidth.
- - The transition from copper wiring to fiber-optics is occurring at a
brisk pace. In 1998, it is estimated that over 20 million miles of fiber
cables were installed across the United States.
- - Internet access revenues are expected to shift from independent
Internet service providers to telecom and cable companies.
Deregulation. The U.S. Telecommunications Act of 1996 and the 1997
Telecommunications Agreement, passed by the World Trade Organization,
have opened markets domestically and internationally to encourage
competition and capital investment. New service providers, such as Level
3 Communications, are investing aggressively in network equipment.
Broadband Systems. The future of high-speed access to the Internet lies
in Digital Subscriber Lines (DSL) and cable modems. A new DSL technology
standard, known as the G.Lite, will allow for high-speed Internet access
concurrent with normal telephone service. The technology can be
installed directly by consumers into their PCs, so there will be no
added cost to the telecommunications carriers.
Communications Equipment. The demand for value-added services, like high-
speed Internet access, should continue to fuel demand for more bandwidth
and communications equipment. On a worldwide basis, demand for
communications equipment was estimated at approximately $250 billion in
1997. With the level of competition intensifying, telecommunications
companies have the potential to spend more on equipment in the future.
e-Business FlexPortfolio Series consists of a portfolio of common stocks
of companies that are either marketing their goods and services on the
Internet or selling their products and services to those companies
transacting business on the Web.
Until recently, the media has focused its attention primarily on
companies that are engaging in business to consumer e-commerce. It is
now becoming apparent, however, that business-to-business e-commerce is
growing at a much faster rate than the more consumer driven market.
The following factors support our positive outlook for business-to-
business e-commerce:
- - The Internet economy, though still in its formative stages, generated
$300 billion in revenue in the U.S in 1998. To put this new economy into
perspective, the auto and telecommunications industries, far more
mature, generated $350 and $270 billion of revenue respectively, over
the same period.
- - It is estimated that as e-commerce evolves, business-to-business
revenues have the potential to outpace business to consumer revenues by
approximately tenfold. Business to consumer companies may dominate the
total number of e-commerce companies (approximately 64%, compared to
approximately 36% providing business-to-business services in 1998), but
the majority of total revenue is being generated by business to business
e-commerce (approximately 23% of total revenue for business to consumer
compared to approximately 77% of total revenue for business-to-business).
- - The revenues generated by e-commerce are only half the story. The cost
savings associated with transacting business on the Internet could be
substantial. It is estimated that corporations around the world have the
potential to experience an aggregate cost savings in excess of a
trillion dollars over the next several years.
A New Breed Of Middlemen. In the bricks-and-mortar business world they
are known as middlemen, but in the cyber-world they are called
intermediaries. They serve the same purpose, which is to act as market
makers and help facilitate transactions between businesses.
Page 20
Intermediaries are essentially network hubs, comparable to airline hubs
that route travelers making connecting flights. They generate revenues
by charging transaction fees for bringing buyers and sellers together.
Intermediaries help make e-Business run faster-better-cheaper.
Technology Makes it Possible. We believe that technology-based
companies, especially those involved in creating the Internet
infrastructure and those that provide access to the Internet, are in an
ideal position to capitalize on the potential growth of business-to-
business e-commerce. More specifically, the emphasis will be on computer
hardware and software companies that design products to improve front
and back-office capabilities, ranging from raw materials procurement to
the delivery of finished goods. It is technology that will allow
companies to communicate effectively in real time with their customers
and suppliers.
No Boundaries. The motivation behind the business-to-business sales
model is to transact business faster-better-cheaper, but it accomplishes
much more. By conducting business online, companies are not only
removing geographical boundaries, both domestically and globally, but
are eliminating many of the boundaries that have long prevented many
smaller companies from engaging in business with their larger
counterparts. As the business-to-business marketplace expands, we
believe that the companies in the e-Business FlexPortfolio have the
potential to participate in growth opportunities.
New e-conomy FlexPortfolio Series consists of a portfolio of common
stocks of companies that bring products and services to the new
technology-driven economy.
The new economy is about change: change at a dizzying pace. Most of the
focus has been on those acting on the changes. They are hoping to take
advantage of new markets and technologies to run their businesses more
efficiently and to reach consumers and each other in ways never before
possible.
In the New e-conomy FlexPortfolio, we are interested in the companies
who are the agents of change; those companies that are enacting change
as opposed to reacting to change. The portfolio focuses on companies
involved in business-to-business e-commerce, bandwidth technologies, the
Internet, the Internet's infrastructure and wireless technology. In our
opinion, it is these companies that are helping to redefine the new
economy.
Business. The Internet has established an entirely new method of
transacting business. It has few barriers to entry beyond that of a
personal computer, and is very cost-efficient. We believe that
corporations around the world could potentially experience significant
cost savings from e-commerce over the next several years. By conducting
business online, companies are not only removing domestic geographical
boundaries, but global boundaries as well.
The Consumer. One of the real advantages of the new economy is that the
consumer also benefits. It has been reported that technology has been
credited with reducing the rate of inflation in the United States by
0.7% in each of the past two years. Unlike previous economic expansions,
the new economy has shown that it is possible to have sustained growth
without higher inflation. In the new economy, if inflation can be
restrained, there is a greater chance of boosting consumption across the
globe.
Convergence. It's the quintessential new economy idea: translate
everything from Seinfeld to your child's homework into the digitized 1s
and 0s of computer language, then make it all available anywhere in the
world via the Internet. Big dollars are already being wagered on the
prospect of phone, TV and PC convergence. The idea that three of the
most powerful devices of the last century can be merged into a single
seamless information system is a vision which could have profound
ramifications on the corporate media landscape in the not-too-distant
future.
Consider the following factors:
- - The Internet economy, though still in its formative stages, generated
approximately $300 billion in revenue in the United States in 1998. To
put this new economy into perspective, the auto and telecommunications
industries, far more mature, generated approximately $350 and $270
billion of revenue respectively over the same period.
- - A new computer is added to the Internet approximately every four
seconds.
- - 1.5 million web pages are being created every day.
- - The World Wide Web doubles in size every eight months.
- - Approximately half of all U.S. households own a computer. Lower-income
households are buying personal computers at a faster rate than any other
segment, in part because of the introduction of models that retail below
$1,000.
- - Approximately 110 million U.S. adults are connected to the Internet.
In addition, 28 million offices are connected, an increase of
Page 21
approximately 76% over early 1998.
You should be aware that predictions stated herein for a particular
industry may not be realized. In addition, the Securities in each Trust
are not intended to be representative of the selected industry as a
whole and the performance of each Trust is expected to differ from that
of its comparative industry. Of course, as with any similar investments,
there can be no guarantee that the objective of the Trusts will be
achieved. See "Risk Factors" for a discussion of the risks of investing
in the Trusts.
Risk Factors
Price Volatility. The Trusts invest in common stocks of U.S. and, for
certain Trusts, foreign companies. The value of a Trust's Units will
fluctuate with changes in the value of these common stocks. Common stock
prices fluctuate for several reasons including changes in investors'
perceptions of the financial condition of an issuer or the general
condition of the relevant stock market, or when political or economic
events affecting the issuers occur.
Because the Trusts are not managed, the Trustee will not sell stocks in
response to or in anticipation of market fluctuations, as is common in
managed investments. As with any investment, we cannot guarantee that
the performance of any Trust will be positive over any period of time,
especially the relatively short 15-month life of the Target
FlexPortfolios, or that you won't lose money. Units of the Trusts are
not deposits of any bank and are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
The Dow (sm) DART 10 FlexPortfolio uses dividend yield as a selection
criterion, a contrarian strategy in which the Securities selected share
qualities that have caused them to have lower share prices or higher
dividend yields than other common stocks in their peer group. There is
no assurance that negative factors affecting the share price or dividend
yield of these Securities will be overcome over the life of the Trusts
or that these Securities will increase in value.
Certain of the Securities in certain Trusts may be issued by companies
with market capitalizations of less than $1 billion. The share prices of
these small-cap companies are often more volatile than those of larger
companies as a result of several factors common to many such issuers,
including limited trading volumes, products or financial resources,
management inexperience and less publicly available information.
Dividends. There is no guarantee that the issuers of the Securities will
declare dividends in the future or that if declared they will either
remain at current levels or increase over time.
Securities Selection. Please note that we applied each strategy which
makes up the portfolio for each Target FlexPortfolio at a particular
time. If we create additional Units of a Target FlexPortfolio after the
Initial Date of Deposit we will deposit the Securities originally
selected by applying the strategy at such time. This is true even if a
later application of a strategy would have resulted in the selection of
different securities.
Communications Industry. Because more than 25% of the Bandwidth
FlexPortfolio is invested in telecommunications companies which are
focusing on bandwidth technologies, this Trust is considered to be
concentrated in the communications industry. A portfolio concentrated in
a single industry may present more risks than a portfolio which is
broadly diversified over several industries. The market for high
technology communications products and services is characterized by
rapidly changing technology, rapid product obsolescence or loss of
patent protection, cyclical market patterns, evolving industry standards
and frequent new product introductions. Certain communications/bandwidth
companies are subject to substantial governmental regulation, which
among other things, regulates permitted rates of return and the kinds of
services that a company may offer. The communications industry has
experienced substantial deregulation in recent years. Deregulation may
lead to fierce competition for market share and can have a negative
impact on certain companies. Competitive pressures are intense and
communications stocks can experience rapid volatility.
e-Commerce Industry. The e-Business FlexPortfolio and the New e-conomy
FlexPortfolio are considered to be concentrated in companies involved
with business-to-business online selling, including companies who are
marketing goods and services or transacting business online. General
risks for these companies include the state of the worldwide economy,
intense global competition, and rapid obsolescence of the utilized
technologies and their related systems, products and services. While
business-to-business e-commerce is evolving rapidly, future demand for
individual products and services is impossible to predict.
Page 22
E-commerce company stocks have experienced extreme price and volume
fluctuations that are often unrelated to their operating performance.
Many such companies have exceptionally high price-to-earnings ratios
with little or no earnings histories. In addition, numerous e-commerce
companies have only recently begun operations, and may have limited
product lines, markets or financial resources, limited trading histories
and fewer experienced management personnel. Finally, the lack of
barriers to entry suggests a future of intense competition for online
retailers. For additional information regarding the risks associated
with the e-Business FlexPortfolio and New e-conomy FlexPortfolio, see
"Risk Factors-Technology Industry."
Retail Industry. The S&P Target 10 FlexPortfolio is considered to be
concentrated in the retail industry. General risks of these companies
include the general state of the economy, intense competition and
consumer spending trends. A decline in the economy which results in a
reduction of consumers' disposable income can negatively impact spending
habits. Competitiveness in the retail industry will require large
capital outlays for the installation of automated checkout equipment to
control inventory, track the sale of items and gauge the success of
sales campaigns. Retailers who sell their products over the Internet
have the potential to access more consumers, but will require
sophisticated technology to remain competitive.
Technology Industry. The Nasdaq Target 15 FlexPortfolio, e-Business
FlexPortfolio and New e-conomy FlexPortfolio are considered to be
concentrated in technology stocks. Technology companies are generally
subject to the risks of rapidly changing technologies; short product
life cycles; fierce competition; aggressive pricing; frequent
introduction of new or enhanced products; the loss of patent, copyright
and trademark protections; and government regulation. Technology
companies may be smaller and less experienced companies, with limited
product lines, markets or financial resources. Technology company
stocks, especially those which are Internet-related, have experienced
extreme price and volume fluctuations that are often unrelated to their
operating performance. Also, the stocks of many Internet companies have
exceptionally high price-to-earnings histories. For additional
information regarding the risks associated with the e-Business
FlexPortfolio and the New e-conomy FlexPortfolio, see "Risk Factors-e-
Commerce Industry."
Legislation/Litigation. From time to time, various legislative
initiatives are proposed in the United States and abroad which may have
a negative impact on certain of the companies represented in the Trusts.
In addition, litigation regarding any of the issuers of the Securities,
such as that concerning Microsoft Corporation, or of the industries
represented by these issuers, may negatively impact the share prices of
these Securities. We cannot predict what impact any pending or
threatened litigation will have on the share prices of the Securities.
Year 2000 Problem. Many computer systems were not designed to properly
process information and data involving dates of January 1, 2000 and
thereafter. This is commonly known as the "Year 2000 Problem." We do not
expect that any of the computer system changes necessary to prepare for
the Year 2000 Problem will cause any major operational difficulties for
the Trusts. However, we are unable to predict what impact the Year 2000
Problem will have on any of the issuers of the Securities, but you
should note that foreign issuers may have greater complications than
other issuers.
Foreign Stocks. Certain of the Securities in certain Trusts are issued
by foreign companies, which makes these Trusts subject to more risks
than if they invested solely in domestic common stocks. These Securities
are either directly listed on a U.S. securities exchange or are in the
form of American Depositary Receipts ("ADRs") which are listed on a U.S.
securities exchange. Risks of foreign common stocks include higher
brokerage costs; different accounting standards; expropriation,
nationalization or other adverse political or economic developments;
currency devaluations, blockages or transfer restrictions; restrictions
on foreign investments and exchange of securities; inadequate financial
information; and lack of liquidity of certain foreign markets.
Hypothetical Performance Information
The following table compares hypothetical performance information for
the strategies employed by each Target FlexPortfolio and the actual
performance of the DJIA, Nasdaq 100 Index and S&P 500 Index in each of
the full years listed below. It is not possible to show hypothetical
Page 23
performance information for the Sector FlexPortfolios because the
Securities included in these Trusts are not derived from an objective
investment strategy.
These hypothetical returns for the Target FlexPortfolios should not be
used to predict future performance of these Trusts. Returns from a Trust
will differ from its strategy for several reasons, including the
following:
- - Total Return figures shown do not reflect Sponsor retention,
commissions, Trust expenses or taxes.
- - Strategy returns are for calendar years, while the Trusts begin and
end on various dates.
- - Trusts may not be fully invested at all times or equally weighted in
all stocks comprising a strategy.
- - Securities are often purchased or sold at prices different from the
closing prices used in buying and selling Units.
You should note that the Trusts are not designed to parallel movements
in any index and it is not expected that they will do so. In fact, each
Trust's strategy underperformed its comparative index in certain years
and we cannot guarantee that a Trust will outperform its respective
index over the life of a Trust or over consecutive rollover periods, if
available. Each index differs widely in size and focus, as described
below.
DJIA. The DJIA consists of 30 U.S. stocks chosen by the editors of The
Wall Street Journal as being representative of the broad market and of
American industry. Changes in the component stocks of the DJIA are made
entirely by the editors of The Wall Street Journal without consulting
the companies, the stock exchange or any official agency. For the sake
of continuity, changes are made rarely. Effective November 1, 1999, Home
Depot Inc., Microsoft Corporation, Intel Corporation and SBC
Communications Inc. were added to the DJIA, replacing Chevron
Corporation, Goodyear Tire & Rubber Company, Sears, Roebuck & Company
and Union Carbide Corporation.
Nasdaq 100 Index. The NASDAQ 100 Index consists of the 100 largest non-
financial companies listed on the NASDAQ National Market System. As of
December 18, 1998, the constituents are constructed using a modified
market capitalization approach.
S&P 500 Index. The S&P 500 Index consists of 500 stocks chosen by
Standard and Poor's to be representative of the leaders of various
industries.
Page 24
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURN(2)
Hypothetical Strategy Total Returns(1) Index Total Returns
______________________________________ _______________________________________
The Dow(sm) The Nasdaq The S&P
DART 10 Target 15 Target 10 Nasdaq S&P 500
Year Strategy Strategy Strategy DJIA 100 Index Index
____ ___________ __________ __________ ______ _________ _______
<S> <C> <C> <C> <C> <C> <C>
1979 13.01% 43.17% 10.60% 18.22%
1980 24.80% 54.15% 21.90% 32.11%
1981 2.02% -10.59% -3.61% -4.92%
1982 27.46% 38.21% 26.85% 21.14%
1983 40.44% 20.01% 25.82% 22.28%
1984 6.22% 16.34% 1.29% 6.22%
1985 39.31% 43.49% 33.28% 31.77%
1986 41.95% 22.94% 21.81% 27.00% 6.89% 18.31%
1987 5.24% 14.10% 9.16% 5.66% 10.49% 5.33%
1988 19.02% -0.59% 20.35% 16.03% 13.54% 16.64%
1989 28.49% 37.33% 39.62% 32.09% 26.17% 31.35%
1990 1.27% -5.39% -5.64% -0.73% -10.41% -3.30%
1991 43.84% 109.27% 24.64% 24.19% 64.99% 30.40%
1992 8.53% -0.15% 24.66% 7.39% 8.86% 7.62%
1993 21.15% 28.55% 42.16% 16.87% 11.67% 9.95%
1994 0.17% 10.50% 8.17% 5.03% 1.74% 1.34%
1995 38.14% 53.80% 25.26% 36.67% 43.01% 37.22%
1996 34.93% 60.03% 26.61% 28.71% 42.74% 22.82%
1997 25.64% 35.15% 61.46% 24.82% 20.76% 33.21%
1998 19.96% 123.10% 53.85% 18.03% 85.43% 28.57%
1999 18.47% 100.55% 3.49% 27.06% 102.08% 20.94%
____________
<FN>
(1) The Strategy stocks for each Strategy for a given year consist of the
common stocks selected by applying the respective Strategy as of the
beginning of the period (and not the date the Trust actually sells Units).
(2) Total Return represents the sum of the change in market value of each
group of stocks between the first and last trading day of a period plus
the total dividends paid on each group of stocks during such period
divided by the opening market value of each group of stocks as of the
first trading day of a period. Total Return figures assume that all
dividends are reinvested semi-annually. Based on the year-by-year
returns contained in the table, over the full years listed above, The
Dow(sm) DART 10 Strategy, The Nasdaq Target 15 Strategy and The S&P
Target 10 Strategy achieved an average annual total return of 18.92%,
36.76% and 25.20%, respectively. In addition, over each stated period,
each individual strategy achieved a greater average annual total return
than that of its corresponding index, the DJIA, the Nasdaq 100 Index and
the S&P 500 Index, which were 13.91%, 27.06% and 17.77%, respectively.
</FN>
</TABLE>
Page 25
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the price per Unit of
which is comprised of the following:
- - The aggregate underlying value of the Securities;
- - The amount of any cash in the Income and Capital Accounts;
- - Dividends receivable on Securities; and
- - The accrued Sponsor retention (which is entirely deferred).
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the prices of the Securities and changes in
the value of the Income and/or Capital Accounts.
Securities purchased with the portion of the Public Offering Price
intended to be used to reimburse the Sponsor for a Trust's organization
costs (including costs of preparing the registration statement, the
Indenture and other closing documents, registering Units with the
Securities and Exchange Commission ("SEC") and states, the initial audit
of each Trust portfolio, legal fees and the initial fees and expenses of
the Trustee) will be purchased in the same proportionate relationship as
all the Securities contained in a Trust. Securities will be sold to
reimburse the Sponsor for a Trust's organization costs at the earlier of
six months after the Initial Date of Deposit or the end of the initial
offering period (a significantly shorter time period than the life of
the Trusts). During the period ending with the earlier of six months
after the Initial Date of Deposit or the end of the initial offering
period, there may be a decrease in the value of the Securities. To the
extent the proceeds from the sale of these Securities are insufficient
to repay the Sponsor for Trust organization costs, the Trustee will sell
additional Securities to allow a Trust to fully reimburse the Sponsor.
In that event, the net asset value per Unit of a Trust will be reduced
by the amount of additional Securities sold. Although the dollar amount
of the reimbursement due to the Sponsor will remain fixed and will never
exceed the per Unit amount set forth for a Trust in "Statements of Net
Assets," this will result in a greater effective cost per Unit to Unit
holders for the reimbursement to the Sponsor. To the extent actual
organization costs are less than the estimated amount, only the actual
organization costs will be deducted from the assets of a Trust. When
Securities are sold to reimburse the Sponsor for organization costs, the
Trustee will sell Securities, to the extent practicable, which will
maintain the same proportionate relationship among the Securities
contained in a Trust as existed prior to such sale.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Minimum Purchase.
The minimum amount you can purchase of a Trust is $1,000 worth of Units.
Sponsor Retention.
The maximum Sponsor retention you will pay is entirely deferred. For
each Target FlexPortfolio this sales charge is equal to $.06690 per
Unit, accrued daily at the rate of $.00015067 per Unit. For each Sector
FlexPortfolio this sales charge is equal to $.275 per Unit, accrued
daily at the rate of $.00015093 per Unit. Accrued Sponsor retention for
all Trusts will be paid on the 20th day of each month (or if the 20th
day is not a business day on the preceding business day) beginning
January 20, 2000 and continuing for the life of a Trust and at a Trust's
termination. On the Initial Date of Deposit, Sponsor retention will
equal .6690% of the Public Offering Price (equivalent to .6690% of the
net amount invested) for each Target FlexPortfolio, and 2.75% of the
Public Offering Price (equivalent to 2.75% of the net amount invested)
for each Sector FlexPortfolio, but because this fee is a fixed dollar
amount per Unit it will vary from .6690% for each Target FlexPortfolio
and 2.75% for each Sector FlexPortfolio as the Public Offering Price
varies from $10 per Unit. However, in no event will the maximum Sponsor
retention exceed 1.00% of the Public Offering Price per Unit for a
Target FlexPortfolio or 4.0% of the Public Offering Price per Unit for a
Sector FlexPortfolio. Units purchased subsequent to the initial Sponsor
retention payment will be subject only to those Sponsor retention
payments not yet accrued.
Page 26
The Value of the Securities.
The Evaluator will appraise the aggregate underlying value of the
Securities in a Trust as of the Evaluation Time on each business day and
will adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and certain national holidays
on which the NYSE is closed.
The aggregate underlying value of the Securities in a Trust will be
determined as follows: if the Securities are listed on a securities
exchange or The Nasdaq Stock Market, their value is generally based on
the closing sale prices on that exchange or system (unless it is
determined that these prices are not appropriate as a basis for
valuation). However, if there is no closing sale price on that exchange
or system, they are valued based on the closing ask prices. If the
Securities are not so listed, or, if so listed and the principal market
for them is other than on that exchange or system, their value will
generally be based on the current ask prices on the over-the-counter
market (unless it is determined that these prices are not appropriate as
a basis for valuation). If current ask prices are unavailable, the
valuation 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.
After the initial offering period is over, the aggregate underlying
value of the Securities will be determined as set forth above, except
that bid prices are used instead of ask prices when necessary.
Distribution of Units
We intend to qualify Units of the Trusts for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trusts. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable sales charge on Units sold by such persons during such
programs. We make these payments out of our own assets and not out of
Trust assets. These programs will not change the price you pay for your
Units.
Investment Comparisons.
From time to time we may compare the estimated returns of a Trust (which
may show performance net of the expenses and charges a Trust would have
incurred) and returns over specified periods of other similar trusts we
sponsor in our advertising and sales materials, with (1) returns on
other taxable investments such as the common stocks comprising various
market indices, corporate or U.S. Government bonds, bank CDs and money
market accounts or funds, (2) performance data from Morningstar
Publications, Inc. or (3) information from publications such as Money,
The New York Times, U.S. News and World Report, BusinessWeek, Forbes or
Fortune. The investment characteristics of each Trust differ from other
comparative investments. You should not assume that these performance
comparisons will be representative of a Trust's future performance.
The Sponsor's Profits
We will receive the Sponsor retention per Unit for each Trust as stated
in "Public Offering." Also, any difference between our cost to purchase
the Securities and the price at which we sell them to a Trust is
considered a profit or loss (see Note 2 of "Notes to Schedules of
Investments"). During the initial offering period, dealers and others
may also realize profits or sustain losses as a result of fluctuations
in the Public Offering Price they receive when they sell the Units.
In maintaining a market for Units, any difference between the price at
which we purchase Units and the price at which we sell or redeem them
will be a profit or loss to us.
Page 27
The Secondary Market
Although not obligated, we intend to maintain a market for the Units
after the initial offering period and continuously offer to purchase
Units at prices based on the Redemption Price per Unit.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees, Trustee costs to transfer and record the ownership of
Units, and in the case of the Sector FlexPortfolios, costs incurred in
annually updating such Trusts' registration statements. We may
discontinue purchases of Units at any time. IF YOU WISH TO DISPOSE OF
YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET PRICES BEFORE
MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid is equal to or greater than the Redemption Price per Unit, we may
purchase the Units. You will receive your proceeds from the sale no
later than if they were redeemed by the Trustee. We may tender Units we
hold to the Trustee for redemption as any other Units. If we elect not
to purchase Units, the Trustee may sell tendered Units in the over-the-
counter market, if any. However, the amount you will receive is the same
as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trusts are listed under "Fee
Table." If actual expenses of a Trust exceed the estimate, that Trust
will bear the excess. The Trustee will pay operating expenses of the
Trusts from the Income Account of a Trust if funds are available, and
then from the Capital Account. The Income and Capital Accounts are
noninterest-bearing to Unit holders, so the Trustee may earn interest on
these funds, thus benefiting from their use.
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to the Trusts, and will receive brokerage fees
when a Trust uses us (or an affiliate of ours) as agent in buying or
selling Securities. For the Sector FlexPortfolios, legal, typesetting,
electronic filing and regulatory filing fees and expenses associated
with updating those Trusts' registration statements yearly are also now
chargeable to such Trusts. Historically, we paid these fees and
expenses. There are no such fees and expenses that will be charged to
the Target FlexPortfolios. First Trust Advisors L.P., an affiliate of
ours, acts as both Portfolio Supervisor and Evaluator to the Trusts and
will receive the fees set forth under "Fee Table" for providing
portfolio supervisory and evaluation services to the Trusts. In
providing portfolio supervisory services, the Portfolio Supervisor may
purchase research services from a number of sources, which may include
underwriters or dealers of the Trusts.
The fees payable to us, First Trust Advisors L.P. and the Trustee are
based on the largest aggregate number of Units of a Trust outstanding at
any time during the calendar year, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fee paid to us or our
affiliates for providing a given service to all unit investment trusts
for which we provide such services be more than the actual cost of
providing such service in such year.
In addition to a Trust's operating expenses, and the fees described
above, the Trusts may also incur the following charges:
- - A quarterly license fee (which will fluctuate with a Trust's net asset
value) payable by certain Trusts for the use of certain trademarks and
trade names of Dow Jones, Standard & Poor's or The Nasdaq Stock Market,
Inc.;
- - All legal expenses of the Trustee according to its responsibilities
under the Indenture;
- - The expenses and costs incurred by the Trustee to protect a Trust and
your rights and interests;
- - Fees for any extraordinary services the Trustee performed under the
Indenture;
- - Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of a Trust;
- - Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of a
Trust; and/or
- - All taxes and other government charges imposed upon the Securities or
any part of a Trust.
Page 28
The above expenses and the Trustee's annual fee are secured by a lien on
a Trust. Since the Securities are all common stocks and dividend income
is unpredictable, we cannot guarantee that dividends will be sufficient
to meet any or all expenses of a Trust. If there is not enough cash in
the Income or Capital Accounts of a Trust, the Trustee has the power to
sell Securities in a Trust to make cash available to pay these charges
which may result in capital gains or losses to you. See "Tax Status."
The Sector FlexPortfolios will be audited annually. So long as we are
making a secondary market for Units, we will bear the cost of these
annual audits to the extent the costs exceed $0.0050 per Unit.
Otherwise, the Sector FlexPortfolios will pay for the audit. You can
request a copy of the audited financial statements from the Trustee.
Tax Status
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trusts. This section is current as
of the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a broker-
dealer, or other investor with special circumstances. In addition, this
section does not describe your state or foreign taxes. As with any
investment, you should consult your own tax professional about your
particular consequences.
Trust Status.
The Trusts will not be taxed as corporations for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of the Securities and other assets held by a Trust, and as
such you will be considered to have received a pro rata share of income
(i.e., dividends and capital gains, if any) from each Security when such
income is considered to be received by a Trust. This is true even if you
elect to have your distributions automatically reinvested into
additional Units. In addition, the income from the Trust which you must
take into account for federal income tax purposes is not reduced for
amounts used to pay the Sponsor retention.
Your Tax Basis and Income or Loss Upon Disposition.
If your Trust disposes of Securities, you will generally recognize gain
or loss. If you dispose of your Units or redeem your Units for cash, you
will also generally recognize gain or loss. To determine the amount of
this gain or loss, you must subtract your tax basis in the related
Securities from your share of the total amount received in the
transaction. You can generally determine your initial tax basis in each
Security or other Trust asset by apportioning the cost of your Units,
generally including sales charges, among each Security or other Trust
asset ratably according to their value on the date you purchase your
Units. In certain circumstances, however, you may have to adjust your
tax basis after you purchase your Units (for example, in the case of
certain dividends that exceed a corporation's accumulated earnings and
profits).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the lowest
tax bracket). Net capital gain equals net long-term capital gain minus
net short-term capital loss for the taxable year. 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. You must exclude the date you purchase your Units to determine the
holding period of your Units. The tax rates for capital gains realized
from assets held for one year or less are generally the same as for
ordinary income. The Tax Code may, however, treat certain capital gains
as ordinary income in special situations.
Rollovers.
If you elect to have your proceeds from a Target FlexPortfolio rolled
over into the next series of such Trust, it is considered a sale for
federal income tax purposes, and any gain on the sale will be treated as
a capital gain, and any loss will be treated as a capital loss. However,
any loss you incur in connection with the exchange of your Units of such
Trust for units of the next series will generally be disallowed with
respect to this deemed sale and subsequent deemed repurchase, to the
extent the two trusts have identical Securities under the wash sale
provisions of the Internal Revenue Code.
In-Kind Distributions.
Under certain circumstances, you may request a distribution of
Securities (an "In-Kind Distribution") at a Trust's termination. If you
Page 29
request an In-Kind Distribution you will be responsible for any expenses
related to this distribution. By electing to receive an In-Kind
Distribution, you will receive an undivided interest in whole shares of
stock plus, possibly, cash.
You will not recognize gain or loss if you only receive Securities in
exchange for your pro rata portion of the Securities held by a Trust.
However, if you also receive cash in exchange for a fractional share of
a Security held by such Trust, you will generally recognize gain or loss
based on the difference between the amount of cash you receive and your
tax basis in such fractional share of the Security.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes you must take into account
your full pro rata share of a Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by a Trust to the same extent as if you directly
paid the expense. You may, however, be required to treat some or all of
the expenses of a Trust as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Foreign, State and Local Taxes.
Under the existing income tax laws of the State and City of New York,
the Trusts will not be taxed as corporations, and the income of the
Trusts will be treated as the income of the Unit holders in the same
manner as for federal income tax purposes.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
you become Record Owner, but normally your broker/dealer provides this
notice. All Units will be held in uncertificated form.
The Trustee will establish an account for you and credit your account
with the number of Units you purchase. Within two business days of the
issuance or transfer of Units, the Trustee will send you:
- - A written initial transaction statement containing a description of
your Trust;
- - The number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
You may transfer or redeem your Units by submitting a written request,
together with a signature guaranteed by an eligible institution. In
certain cases the Trustee may require additional documentation before
they will transfer or redeem your Units. You may be required to pay a
nominal fee to the Trustee, including any government charge that may be
imposed, for each transfer or redemption.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of income (if any)
distributed. After the end of each calendar year, the Trustee will
provide you:
- - A summary of transactions in your Trust for the year;
- - A list of any Securities sold during the year and the Securities held
at the end of that year by your Trust;
- - The Redemption Price per Unit, computed on the 31st day of December of
such year (or the last business day before); and
- - Amounts of income and capital distributed during the year.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator.
Income and Capital Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit dividends received on
Securities to the Income Account of a Trust. All other receipts, such as
return of capital, are credited to the Capital Account of a Trust.
The Trustee will distribute any net income in the Income Account on or
near the Income Distribution Dates to Unit holders of record on the
preceding Income Distribution Record Date. See "Summary of Essential
Information." No income distribution will be paid if accrued expenses of
a Trust exceed amounts in the Income Account on the Income Distribution
Page 30
Dates. Distribution amounts will vary with changes in a Trust's fees and
expenses, in dividends received and with the sale of Securities. The
Trustee will distribute amounts in the Capital Account, net of amounts
designated to meet redemptions, pay the Sponsor retention or pay
expenses, on the last day of each month to Unit holders of record on the
fifteenth day of each month provided the amount equals at least $1.00
per 100 Units. If the Trustee does not have your TIN, it is required to
withhold a certain percentage of your distribution and deliver such
amount to the Internal Revenue Service ("IRS"). You may recover this
amount by giving your TIN to the Trustee, or when you file a tax return.
However, you should check your statements to make sure the Trustee has
your TIN to avoid this "back-up withholding."
We anticipate that there will be enough money in the Capital Account of
a Trust to pay the Sponsor retention. If not, the Trustee may sell
Securities to meet the shortfall.
Within a reasonable time after a Trust is terminated, unless you are a
Rollover Unit holder of a Target FlexPortfolio, you will receive the pro
rata share of the money from the sale of the Securities. However, you
may elect to receive an In-Kind Distribution as described under
"Amending or Terminating the Indenture." All Unit holders will receive a
pro rata share of any other assets remaining in their Trust, after
deducting any unpaid expenses.
The Trustee may establish reserves (the "Reserve Account") within a
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of that Trust.
Distribution Reinvestment Option. You may elect to have each
distribution of income and/or capital reinvested into additional Units
of your Trust by notifying the Trustee at least 10 days before any
Record Date. Each later distribution of income and/or capital on your
Units will be reinvested by the Trustee into additional Units of your
Trust. You will have to pay any remaining Sponsor retention payments not
yet accrued on any Units acquired pursuant to this distribution
reinvestment option. This option may not be available in all states.
PLEASE NOTE THAT EVEN IF YOU REINVEST DISTRIBUTIONS, THEY ARE STILL
CONSIDERED DISTRIBUTIONS FOR INCOME TAX PURPOSES.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by delivering
a request for redemption to the Trustee. The redemption request must be
properly endorsed with proper instruments of transfer and signature
guarantees as explained in "Rights of Unit Holders-Unit Ownership." No
redemption fee will be charged, but you are responsible for any
governmental charges that apply. Three business days after the day you
tender your Units (the "Date of Tender") you will receive cash in an
amount for each Unit equal to the Redemption Price per Unit calculated
at the Evaluation Time on the Date of Tender.
The Date of Tender is considered to be the date on which the Trustee
receives your redemption request (if such day is a day the NYSE is open
for trading). However, if your redemption request is received after 4:00
p.m. Eastern time (or after any earlier closing time on a day on which
the NYSE is scheduled in advance to close at such earlier time), the
Date of Tender is the next day the NYSE is open for trading.
Any amounts paid on redemption representing income will be withdrawn
from the Income Account of a Trust if funds are available for that
purpose, or from the Capital Account. All other amounts paid on
redemption will be taken from the Capital Account of a Trust. The IRS
will require the Trustee to withhold a portion of your redemption
proceeds if it does not have your TIN, as generally discussed under
"Income and Capital Distributions."
The Trustee may sell Securities of a Trust to make funds available for
redemption. If Securities are sold, the size and diversification of a
Trust will be reduced. These sales may result in lower prices than if
the Securities were sold at a different time. As a result, your
broker/dealer or the Sponsor may at any time place limits on the number
of exchanges between FlexPortfolios you can make with or without prior
notice. However, any limitation on your right to exchange between
FlexPortfolios will have no effect on your right to redeem Units.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- - If the NYSE is closed (other than customary weekend and holiday
closings);
Page 31
- - If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- - For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Income and Capital Accounts of a Trust not designated to
purchase Securities;
2. the aggregate underlying value of the Securities held in that Trust;
and
3. dividends receivable on the Securities trading ex-dividend as of the
date of computation; and
deducting
1. any applicable taxes or governmental charges that need to be paid out
of such Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of such Trust, if any;
4. cash held for distribution to Unit holders of record of such Trust as
of the business day before the evaluation being made;
5. other liabilities incurred by such Trust; and
dividing
1. the result by the number of outstanding Units of such Trust.
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 organization costs as set forth under "Fee Table."
Investing in a New Trust
The portfolio for each Target FlexPortfolio has been selected on the
basis of capital appreciation potential for a limited time period. When
the Target FlexPortfolios are about to terminate, you may have the
option to roll your proceeds into the next series of such Trust (the
"New Trusts") if one is available. We intend to create the New Trusts in
conjunction with the termination of the Target FlexPortfolios and plan
to apply the same strategy we used to select the portfolios for the
Target FlexPortfolios to the New Trusts.
If you wish to have the proceeds from your Units rolled into a New Trust
you must notify the Trustee in writing of your election by the Rollover
Notification Date stated in the "Summary of Essential Information." As a
Rollover Unit holder, your Units will be redeemed and the underlying
Securities sold by the Trustee, in its capacity as Distribution Agent,
during the Special Redemption and Liquidation Period. The Distribution
Agent may engage us or other brokers as its agent to sell the Securities.
Once all of the Securities are sold, your proceeds, less any brokerage
fees, governmental charges or other expenses involved in the sales, will
be used to buy units of a New Trust or trust with a similar investment
strategy that you have selected, provided such trusts are registered and
being offered. Accordingly, proceeds may be uninvested for up to several
days. Units purchased with rollover proceeds will generally be purchased
subject only to the maximum remaining Sponsor retention on such units.
We intend to create New Trust units as quickly as possible, depending on
the availability of the Securities contained in a New Trust's portfolio.
Rollover Unit holders will be given first priority to purchase New Trust
units. We cannot, however, assure the exact timing of the creation of
New Trust units or the total number of New Trust units we will create.
Any proceeds not invested on behalf of Rollover Unit holders in New
Trust units will be distributed within a reasonable time after such
occurrence. Although we believe that enough New Trust units can be
created, monies in a New Trust may not be fully invested on the next
business day.
Please note that there are certain tax consequences associated with
becoming a Rollover Unit holder. See "Tax Status." If you elect not to
participate as a Rollover Unit holder ("Remaining Unit holders"), you
will not incur capital gains or losses due to the Special Redemption and
Liquidation, nor will you be charged any additional Sponsor retention.
We may modify, amend or terminate this rollover option upon 60 days
notice.
Page 32
Removing Securities from a Trust
The portfolios of the Trusts are not managed. However, we may, but are
not required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- - The issuer of the Security defaults in the payment of a declared
dividend;
- - Any action or proceeding prevents the payment of dividends;
- - There is any legal question or impediment affecting the Security;
- - The issuer of the Security has breached a covenant which would affect
the payment of dividends, the issuer's credit standing, or otherwise
damage the sound investment character of the Security;
- - The issuer has defaulted on the payment of any other of its
outstanding obligations; or
- - The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to a Trust.
Except in the limited instance in which a Trust acquires Replacement
Securities, as described in "The FT Series," a Trust may not acquire any
securities or other property other than the Securities. The Trustee, on
behalf of a Trust, will reject any offer for new or exchanged securities
or property in exchange for a Security, such as those acquired in a
merger or other transaction. If such exchanged securities or property
are nevertheless acquired by a Trust, at our instruction they will
either be sold or held in such Trust. In making the determination as to
whether to sell or hold the exchanged securities or property we may get
advice from the Portfolio Supervisor. Any proceeds received from the
sale of Securities, exchanged securities or property will be credited to
the Capital Account of a Trust for distribution to Unit holders or to
meet redemption requests. The Trustee may retain and pay us or an
affiliate of ours to act as agent for the Trusts to facilitate selling
Securities, exchanged securities or property from the Trusts. If we or
our affiliate act in this capacity, we will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Securities designated by us, or, absent our
direction, at its own discretion, in order to meet redemption requests
or pay expenses. In designating Securities to be sold, we will try to
maintain the proportionate relationship among the Securities. If this is
not possible, the composition and diversification of a Trust may be
changed. To get the best price for a Trust we may specify minimum
amounts (generally 100 shares) in which blocks of Securities are to be
sold. We may consider sales of Units of unit investment trusts which we
sponsor when we make recommendations to the Trustee as to which
broker/dealers they select to execute the Trusts' portfolio
transactions, or when acting as agent for the Trusts in acquiring or
selling Securities on behalf of the Trusts.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- - To cure ambiguities;
- - To correct or supplement any defective or inconsistent provision;
- - To make any amendment required by any governmental agency; or
- - To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, each Trust will terminate on
the Mandatory Termination Date. A Trust may be terminated earlier:
- - Upon the consent of 100% of the Unit holders;
- - If the value of the Securities owned by such Trust as shown by any
evaluation is less than the lower of $2,000,000 or 20% of the total
value of Securities deposited in such Trust during the initial offering
period ("Discretionary Liquidation Amount"); or
- - In the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination, the Trustee will send written notice to all Unit
holders which will specify how you should tender your Units. If a Trust
is terminated due to this last reason, we will refund your entire
Sponsor retention; however, termination of a Trust before the Mandatory
Termination Date for any other stated reason will result only in the
waiver of any remaining unaccrued Sponsor retention payments at the time
of termination. For various reasons, including Unit holders'
Page 33
participation as Rollover Unit holders or exchanging between
FlexPortfolios, a Trust may be reduced below the Discretionary
Liquidation Amount and could therefore be terminated before the
Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of a Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Securities. Because the Trustee must sell the Securities within a
relatively short period of time, the sale of Securities as part of the
termination process may result in a lower sales price than might
otherwise be realized if such sale were not required at this time.
If you own at least 1,000 Units of a Trust the Trustee will send you a
form at least 30 days prior to the Mandatory Termination Date which will
enable you to receive an In-Kind Distribution (reduced by customary
transfer and registration charges and subject to any additional
restrictions imposed by your "Wrap Fee" plan) rather than the typical
cash distribution. You must notify the Trustee at least ten business
days prior to the Mandatory Termination Date if you elect this In-Kind
Distribution option. Where possible, the Trustee will make an In-Kind
Distribution by distributing each of the Securities in book-entry from
to your bank or broker/dealer account at the Depository Trust Company.
Upon termination you will receive your pro rata number of whole shares
of the Securities that make up a portfolio and cash from the Capital
Account equal to the fractional shares to which you are entitled. If you
do not elect to participate in either the Rollover Option (for Target
FlexPortfolios) or In-Kind Distribution option, you will receive a cash
distribution from the sale of the remaining Securities, along with your
interest in the Income and Capital Accounts, within a reasonable time
after your Trust is terminated. Regardless of the distribution involved,
the Trustee will deduct from a Trust any accrued costs, expenses,
advances or indemnities provided for by the Indenture, including
estimated compensation of the Trustee and costs of liquidation and any
amounts required as a reserve to pay any taxes or other governmental
charges.
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- - The First Trust Combined Series
- - FT Series (formerly known as The First Trust Special Situations Trust)
- - The First Trust Insured Corporate Trust
- - The First Trust of Insured Municipal Bonds
- - The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $25 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1998, the total partners' capital of
Nike Securities L.P. was $18,506,548 (audited).
This information refers only to us and not to the Trusts or to any
series of the Trusts or to any other dealer. We are including this
information only to inform you of our financial responsibility and our
ability to carry out our contractual obligations. We will provide more
detailed financial information on request.
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. If you have questions regarding the Trusts, you may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised 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.
Page 34
The Trustee has not participated in selecting the Securities; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- - Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC;
- - Terminate the Indenture and liquidate the Trust; or
- - Continue to act as Trustee without terminating the Indenture.
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 Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel, as well as special New York tax
counsel for the Trusts.
Experts.
Ernst & Young LLP, independent auditors, have audited the Trusts'
statements of net assets, including the schedules of investments, at the
opening of business on the Initial Date of Deposit, as set forth in
their report. We've included the Trusts' statements of net assets,
including the schedules of investments, in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
Page 35
FIRST TRUST(registered trademark)
The Dow(sm) Dividend And Repurchase Target 10 FlexPortfolio, 1(st)
Quarter 2000 Series
The Nasdaq Target 15 FlexPortfolio, 1(st) Quarter 2000 Series
The S&P Target 10 FlexPortfolio, 1(st) Quarter 2000 Series
Bandwidth FlexPortfolio Series
e-Business FlexPortfolio Series
New e-conomy FlexPortfolio Series
FT 396
Sponsor:
Nike Securities L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
________________________
When Units of the Trusts are no longer available, this prospectus may be
used as a preliminary prospectus for a future series, in which case you
should note the following:
THE INFORMATION IN THE PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL, OR ACCEPT OFFERS TO BUY, SECURITIES OF A FUTURE SERIES
UNTIL THAT SERIES HAS BECOME EFFECTIVE WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO SECURITIES CAN BE SOLD IN ANY STATE WHERE A SALE WOULD BE
ILLEGAL.
________________________
This prospectus contains information relating to the above-mentioned
unit investment trusts, but does not contain all of the information
about this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- - Securities Act of 1933 (file no. 333-94023) and
- - Investment Company Act of 1940 (file no. 811-05903)
Information about the Trusts can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington
D.C. Information regarding the operation of the Commission's Public
Reference Room may be obtained by calling the Commission at 1-202-942-
8090.
Information about the Trusts is available on the EDGAR Database on the
Commission's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0102
e-mail address: [email protected]
January 6, 2000
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 36
First Trust (registered trademark)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in FT 396 not found in the prospectus for the Trust. This
Information Supplement is not a prospectus and does not include all of
the information you should consider before investing in the Trust. This
Information Supplement should be read in conjunction with the prospectus
for the Trust in which you are considering investing.
This Information Supplement is dated January 6, 2000. Capitalized terms
have been defined in the prospectus.
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Dow Jones & Company, Inc. 1
The Nasdaq Stock Market, Inc. 2
Standard & Poor's 2
Risk Factors
Securities 3
Dividends 3
Concentrations
Communications 3
Electronic Commerce 3
Retail Companies 4
Technology Companies 4
Portfolios
Equity Securities Selected for The Dow sm DART 10 FlexPortfolio, 1(st) Quarter 2000 Series 5
Equity Securities Selected for The Nasdaq Target 15 FlexPortfolio, 1(st) Quarter 2000 Series 6
Equity Securities Selected for The S&P Target 10 FlexPortfolio, 1(st) Quarter 2000 Series 7
Equity Securities Selected for Bandwidth FlexPortfolio Series 7
Equity Securities Selected for e-Business FlexPortfolio Series 9
Equity Securities Selected for New e-conomy FlexPortfolio Series 10
</TABLE>
Dow Jones & Company, Inc.
The Dow sm DART 10 FlexPortfolio is not sponsored, endorsed, sold or
promoted by Dow Jones & Company, Inc. ("Dow Jones"). Dow Jones makes no
representation or warranty, express or implied, to the owners of the
Trust or any member of the public regarding the advisability of
investing in securities generally or in the Trust particularly. Dow
Jones' only relationship to the Sponsor is the licensing of certain
trademarks, trade names and service marks of Dow Jones and of the Dow
Jones Industrial Average(sm), which is determined, composed and
calculated by Dow Jones without regard to the Sponsor or the Trust. Dow
Jones has no obligation to take the needs of the Sponsor or the owners
of the Trust into consideration in determining, composing or calculating
the Dow Jones Industrial Average(sm). Dow Jones is not responsible for
and has not participated in the determination of the timing of, prices
at, or quantities of the Trust to be issued or in the determination or
calculation of the equation by which the Trust are to be converted into
cash. Dow Jones has no obligation or liability in connection with the
administration, marketing or trading of the Dow sm DART 10 FlexPortfolio.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN AND DOW
JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE SPONSOR, OWNERS OF THE TRUSTS, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES INDUSTRIAL
AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
Page 1
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT
TO THE DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE
ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
The Nasdaq Stock Market, Inc.
The Nasdaq Target 15 FlexPortfolio is not sponsored, endorsed, sold or
promoted by The Nasdaq Stock Market, Inc. (including its affiliates)
(Nasdaq, with its affiliates, are referred to as the "Corporations").
The Corporations have not passed on the legality or suitability of, or
the accuracy or adequacy of descriptions and disclosures relating to
Nasdaq Target 15 FlexPortfolio. The Corporations make no representation
or warranty, express or implied, to the owners of Units of Nasdaq Target
15 FlexPortfolio or any member of the public regarding the advisability
of investing in securities generally or in Nasdaq Target 15
FlexPortfolio particularly, or the ability of the Nasdaq 100
Index(registered trademark) to track general stock market performance.
The Corporations' only relationship to the Sponsor ("Licensee") is in
the licensing of the Nasdaq 100(registered trademark), Nasdaq 100
Index(registered trademark) and Nasdaq(registered trademark) trademarks
or service marks, and certain trade names of the Corporations and the
use of the Nasdaq 100 Index(registered trademark) which is determined,
composed and calculated by Nasdaq without regard to Licensee or The
Nasdaq Target 15 FlexPortfolio. Nasdaq has no obligation to take the
needs of the Licensee or the owners of Units of Nasdaq Target 15
FlexPortfolio into consideration in determining, composing or
calculating the Nasdaq 100 Index(registered trademark). The Corporations
are not responsible for and have not participated in the determination
of the timing of, prices at or quantities of Nasdaq Target 15
FlexPortfolio to be issued or in the determination or calculation of the
equation by which Nasdaq Target 15 FlexPortfolio is to be converted into
cash. The Corporations have no liability in connection with the
administration, marketing or trading of Nasdaq Target 15 FlexPortfolio.
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED
CALCULATION OF THE NASDAQ 100 INDEX(registered trademark) OR ANY DATA
INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE LICENSEE, OWNERS OF THE NASDAQ
TARGET 15 PORTFOLIO SERIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE
OF THE NASDAQ 100 INDEX(registered trademark) OR ANY DATA INCLUDED
THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES AND
EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ 100
INDEX(registered trademark) OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE
ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES.
Standard & Poor's
The S&P Target 10 FlexPortfolio is not sponsored, endorsed, sold or
promoted by Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. ("S&P"). S&P makes no representation or warranty, express or
implied, to the owners of the Trust or any member of the public
regarding the advisability of investing in securities generally or in
the Trust particularly or the ability of the S&P 500 Index to track
general stock market performance. S&P's only relationship to the
licensee is the licensing of certain trademarks and trade names of S&P
and of the S&P 500 Index, which is determined, composed and calculated
by S&P without regard to the licensee or the Trust. S&P has no
obligation to take the needs of the licensee or the owners of the Trust
into consideration in determining, composing or calculating the S&P 500
Index. S&P is not responsible for and has not participated in the
determination of the prices and amount of the Trust or the timing of the
issuance or sale of the Trust or in the determination or calculation of
the equation by which the Trusts are to be converted into cash. S&P has
no obligation or liability in connection with the administration,
marketing or trading of the S&P Target 10 FlexPortfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
LICENSEE, OWNERS OF THE TRUSTS, OR ANY OTHER PERSON OR ENTITY FROM THE
USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES,
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY
FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING
LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
Page 2
Risk Factors
Securities. 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 Securities or
the general condition of the relevant stock market may worsen, and the
value of the Securities and therefore the value of the Units may
decline. Common stocks are especially susceptible to general stock
market movements and to volatile increases and decreases of value, as
market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors, including expectations
regarding government, economic, monetary and fiscal policies, inflation
and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Both U.S. and foreign
markets have experienced substantial volatility and significant declines
recently as a result of certain or all of these factors. From September
30, 1997 through October 30, 1997, amid record trading volume, the S&P
500 Index and DJIA declined 4.60% and 7.09%, respectively. In addition,
against a backdrop of continued uncertainty regarding the current global
currency crisis and falling commodity prices, during the period between
July 31, 1998 and September 30, 1998, the S&P 500 and DJIA declined by
8.97% and 11.32%, respectively.
Dividends. 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 Trusts have a right to receive dividends only when and if, and in
the amounts, declared by the issuer's board of directors and have a
right to participate in amounts available for distribution by the issuer
only after all other claims on the issuer have been paid or provided
for. Common stocks do not represent an obligation of the issuer and,
therefore, do not offer any assurance of income or provide the same
degree of protection of capital as do debt securities. The issuance of
additional debt 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.
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.
Concentrations
Communications. An investment in Units of the Bandwidth FlexPortfolio
should be made with an understanding of the problems and risks such an
investment may entail. The market for high-technology communications
products and services is characterized by rapidly changing technology,
rapid product obsolescence, cyclical market patterns, evolving industry
standards and frequent new product introductions. The success of the
issuers of the Securities depends in substantial part on the timely and
successful introduction of new products and services. An unexpected
change in one or more of the technologies affecting an issuer's products
or in the market for products based on a particular technology could
have a material adverse affect on an issuer's operating results.
Furthermore, there can be no assurance that the issuers of the
Securities will be able to respond in a timely manner to compete in the
rapidly developing marketplace.
The communications industry is subject to governmental regulation.
However, as market forces develop, the government will continue to
deregulate the communications industry, promoting vigorous economic
competition and resulting in the rapid development of new communications
technologies. The products and services of communications companies may
be subject to rapid obsolescence. These factors could affect the value
of the Trust's Units. For example, while telephone companies in the
United States are subject to both state and federal regulations
affecting permitted rates of returns and the kinds of services that may
be offered, the prohibition against phone companies delivering video
services has been lifted. This creates competition between phone
companies and cable operators and encourages phone companies to
modernize their communications infrastructure. Certain types of
companies represented in the Trust's portfolio are engaged in fierce
competition for a share of the market of their products. As a result,
competitive pressures are intense and the stocks are subject to rapid
price volatility.
Many communications companies rely on a combination of patents,
copyrights, trademarks and trade secret laws to establish and protect
their proprietary rights in their products and technologies. There can
be no assurance that the steps taken by the issuers of the Securities to
protect their proprietary rights will be adequate to prevent
misappropriation of their technology or that competitors will not
independently develop technologies that are substantially equivalent or
superior to such issuers' technology.
Electronic Commerce. An investment in Units of the e-Business
FlexPortfolio and the New e-conomy FlexPortfolio should be made with an
understanding of the characteristics of the problems and risks such an
investment may entail. These portfolios consist of common stocks of
retailers that market their goods and services on the Internet and
technology companies that create the tools to make it possible. The
profitability of companies engaged in the retail industry will be
affected by various factors including the general state of the economy
and consumer spending trends. Recently, there have been major changes in
Page 3
the retail environment due to the declaration of bankruptcy by some of
the major corporations involved in the retail industry, particularly the
department store segment. The continued viability of the retail industry
will depend on the industry's ability to adapt and to compete in
changing economic and social conditions, to attract and retain capable
management, and to finance expansion. Weakness in the banking or real
estate industry, a recessionary economic climate with the consequent
slowdown in employment growth, less favorable trends in unemployment or
a marked deceleration in real disposable personal income growth could
result in significant pressure on both consumer wealth and consumer
confidence, adversely affecting consumer spending habits. In addition,
competitiveness of the retail industry will require large capital
outlays for investment in the installation of automated checkout
equipment to control inventory, to track the sale of individual items
and to gauge the success of sales campaigns. Increasing employee and
retiree benefit costs may also have an adverse effect on the industry.
In many sectors of the retail industry, competition may be fierce due to
market saturation, converging consumer tastes and other factors. Because
of these factors and the recent increase in trade opportunities with
other countries, American retailers are now entering global markets
which entail added risks such as sudden weakening of foreign economies,
difficulty in adapting to local conditions and constraints and added
research costs.
Retailers who sell their products over the Internet have the potential
to access more consumers, but will require the capital to acquire and
maintain sophisticated technology. E-commerce company stocks have
experienced extreme price and volume fluctuations that are often
unrelated to their operating performance. Many such companies have
exceptionally high price-to-earnings ratios with little or no earnings
histories. In addition, numerous e-commerce companies have only recently
begun operations, and may have limited product lines, markets or
financial resources, as well as fewer experienced management personnel.
Finally, the lack of barriers to entry suggests a future of intense
competition for online retailers.
See "Technology" below, for additional information concerning the risks
of companies engaged in the technology industry.
Retail Companies. The S&P Target 10 FlexPortfolio is considered to be
concentrated in common stocks of retail companies. See "Risk Factors" in
the prospectus which will indicate, if applicable, a Trust's
concentration in this industry. The profitability of companies engaged
in the retail industry will be affected by various factors including the
general state of the economy and consumer spending trends. Recently,
there have been major changes in the retail environment due to the
declaration of bankruptcy by some of the major corporations involved in
the retail industry, particularly the department store segment. The
continued viability of the retail industry will depend on the industry's
ability to adapt and to compete in changing economic and social
conditions, to attract and retain capable management, and to finance
expansion. Weakness in the banking or real estate industry, a
recessionary economic climate with the consequent slowdown in employment
growth, less favorable trends in unemployment or a marked deceleration
in real disposable personal income growth could result in significant
pressure on both consumer wealth and consumer confidence, adversely
affecting consumer spending habits. In addition, competitiveness of the
retail industry will require large capital outlays for investment in the
installation of automated checkout equipment to control inventory, to
track the sale of individual items and to gauge the success of sales
campaigns. Increasing employee and retiree benefit costs may also have
an adverse effect on the industry. In many sectors of the retail
industry, competition may be fierce due to market saturation, converging
consumer tastes and other factors. Because of these factors and the
recent increase in trade opportunities with other countries, American
retailers are now entering global markets which entail added risks such
as sudden weakening of foreign economies, difficulty in adapting to
local conditions and constraints and added research costs.
Technology Companies. The Nasdaq Target 15 FlexPortfolio, the e-Business
FlexPortfolio and the New e-conomy FlexPortfolio are considered to be
concentrated in common stocks of technology companies. See "Risk
Factors" in the prospectus which will indicate, if applicable, a Trust's
concentration in this industry.
Technology companies generally include companies involved in the
development, design, manufacture and sale of computers and peripherals,
software and services, data networking/communications equipment,
internet access/information providers, semiconductors and semiconductor
equipment and other related products, systems and services. The market
for these products, especially those specifically related to the
Internet, is characterized by rapidly changing technology, rapid product
obsolescence, cyclical market patterns, evolving industry standards and
frequent new product introductions. The success of the issuers of the
Securities depends in substantial part on the timely and successful
introduction of new products. An unexpected change in one or more of the
technologies affecting an issuer's products or in the market for
products based on a particular technology could have a material adverse
affect on an issuer's operating results. Furthermore, there can be no
assurance that the issuers of the Securities will be able to respond in
a timely manner to compete in the rapidly developing marketplace.
Based on trading history of common stock, factors such as announcements
of new products or development of new technologies and general
conditions of the industry have caused and are likely to cause the
market price of high-technology common stocks to fluctuate
substantially. In addition, technology company stocks have experienced
Page 4
extreme price and volume fluctuations that often have been unrelated to
the operating performance of such companies. This market volatility may
adversely affect the market price of the Securities and therefore the
ability of a Unit holder to redeem Units at a price equal to or greater
than the original price paid for such Units.
Some key components of certain products of technology issuers are
currently available only from single sources. There can be no assurance
that in the future suppliers will be able to meet the demand for
components in a timely and cost effective manner. Accordingly, an
issuer's operating results and customer relationships could be adversely
affected by either an increase in price for, or an interruption or
reduction in supply of, any key components. Additionally, many
technology issuers are characterized by a highly concentrated customer
base consisting of a limited number of large customers who may require
product vendors to comply with rigorous industry standards. Any failure
to comply with such standards may result in a significant loss or
reduction of sales. Because many products and technologies of technology
companies are incorporated into other related products, such companies
are often highly dependent on the performance of the personal computer,
electronics and telecommunications industries. There can be no assurance
that these customers will place additional orders, or that an issuer of
Securities will obtain orders of similar magnitude as past orders from
other customers. Similarly, the success of certain technology companies
is tied to a relatively small concentration of products or technologies.
Accordingly, a decline in demand of such products, technologies or from
such customers could have a material adverse impact on issuers of the
Securities.
Many technology companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their
proprietary rights in their products and technologies. There can be no
assurance that the steps taken by the issuers of the Securities to
protect their proprietary rights will be adequate to prevent
misappropriation of their technology or that competitors will not
independently develop technologies that are substantially equivalent or
superior to such issuers' technology. In addition, due to the increasing
public use of the Internet, it is possible that other laws and
regulations may be adopted to address issues such as privacy, pricing,
characteristics, and quality of Internet products and services. For
example, recent proposals would prohibit the distribution of obscene,
lascivious or indecent communications on the Internet. The adoption of
any such laws could have a material adverse impact on the Securities in
a Trust.
Like many areas of technology, the semiconductor business environment is
highly competitive, notoriously cyclical and subject to rapid and often
unanticipated change. Recent industry downturns have resulted, in part,
from weak pricing, persistent overcapacity, slowdown in Asian demand and
a shift in retail personal computer sales toward the low end, or "sub-
$1,000" segment. Industry growth is dependent upon several factors,
including: the rate of global economic expansion; demand for products
such as personal computers and networking and communications equipment;
excess productive capacity and the resultant effect on pricing; and the
rate of growth in the market for low-priced personal computers.
Portfolios
Equity Securities Selected for The Dow(sm) DART 10 FlexPortfolio, 1(st)
Quarter 2000 Series
The Boeing Company, headquartered in Seattle, Washington, with
subsidiaries, produces and markets commercial jet transports and
provides related support services, principally to commercial customers;
and develops, produces, modifies and supports military aircraft and
helicopters and related systems, and electronic, space and missile
systems.
Caterpillar Inc., headquartered in Peoria, Illinois, makes earthmoving,
construction and materials handling machinery and equipment and diesel
engines; and provides various financial products and services.
Eastman Kodak Company, headquartered in Rochester, New York, develops,
makes and sells consumer and commercial photographic imaging products.
The company's products include films, photographic papers and chemicals,
cameras, projectors, processing equipment, audiovisual equipment,
copiers, microfilm products, applications software, printers and other
equipment.
General Motors Corporation, headquartered in Detroit, Michigan,
manufactures and sells cars and trucks worldwide under the trademarks
"Chevrolet," "Oldsmobile," "Pontiac," "Buick," "Saturn," "Cadillac" and
"GMC Trucks."
Hewlett-Packard Company, headquartered in Palo Alto, California,
designs, makes and services equipment and systems for measurement,
computation and communications including computer systems, personal
computers, printers, calculators, electronic test equipment, medical
electronic equipment, electronic components and instrumentation for
chemical analysis.
Honeywell International Inc., headquartered in Morristown, New Jersey,
makes products for the textiles, construction, plastics, electronics,
automotive, chemicals, housing, telecommunications, utilities,
packaging, military and commercial aviation industries. The company also
provides products and services for the aerospace program.
Merck & Co., Inc., headquartered in Whitehouse Station, New Jersey, is a
leading pharmaceutical concern that discovers, develops, makes and
markets a broad range of human and animal health products and services.
Page 5
The company also administers managed prescription drug programs.
J.P. Morgan & Company, Inc., headquartered in New York, New York, is a
global investment banking firm that serves clients with complex needs
through an integrated range of advisory, financing, trading, investment
and related capabilities.
Philip Morris Companies, Inc., headquartered in New York, New York, is
the world's largest producer and marketer of consumer packaged goods.
Its five principal operating companies are Kraft Foods, Inc., Miller
Brewing Company, Philip Morris International Inc., Philip Morris U.S.A.
and Philip Morris Capital Corporation.
Procter & Gamble Company, headquartered in Cincinnati, Ohio,
manufactures consumer products worldwide, including detergents, fabric
conditioners and hard surface cleaners; products for personal cleansing,
oral care, digestive health, hair and skin; paper tissue, disposable
diapers, and pharmaceuticals; and shortenings, oils, snacks, baking
mixes, peanut butter, coffee, drinks and citrus products.
Equity Securities Selected for The Nasdaq Target 15 FlexPortfolio,
1st Quarter 2000 Series
Adobe Systems Incorporated, headquartered in San Jose, California,
develops, markets and supports computer software products and
technologies that enable users to express and use information across all
print and electronic media.
Apple Computer, Inc., headquartered in Cupertino, California, designs,
makes and markets microprocessor-based personal computers and related
personal computing and communicating solutions for sale mainly to
education, creative, home, business and government customers.
Applied Micro Circuits Corporation, headquartered in San Diego,
California, designs, makes and markets high-performance, high-bandwidth
silicon products for automated test equipment, high-speed computing and
military markets throughout the world.
Atmel Corporation, headquartered in San Jose, California, designs,
develops, makes and markets a broad range of high-performance, non-
volatile memory and logic integrated circuits using its proprietary
complementary metal-oxide semiconductor technologies.
CMGI Inc., headquartered in Andover, Massachusetts, invests in and
develops Internet companies; operates direct marketing companies and
venture funds focused on the Internet; and, through subsidiaries,
provides fulfillment services.
Electronic Arts Inc., headquartered in Redwood City, California,
creates, markets and distributes interactive entertainment software for
a variety of hardware platforms. The company markets its products under
the "Electronic Arts," "Bullfrog Productions," "EA SPORTS," "Jane's
Combat Simulations," "Maxis," "ORIGIN" and "Westwood Studios" brand names.
MedImmune, Inc., headquartered in Gaithersburg, Maryland, develops and
markets products for the prevention and treatment of infectious
diseases, autoimmune diseases and cancer. The company's products are
also used in transplantation medicine.
Oracle Corporation, headquartered in Redwood Shores, California,
designs, develops, markets and supports computer software products with
a wide variety of uses, including database management, application
development, business intelligence and business applications.
PMC-Sierra, Inc., headquartered in Burnaby, British Columbia, Canada,
designs, develops, markets and supports high-performance semiconductor
system solutions used in broadband communications infrastructures, high-
bandwidth networks and multimedia personal computers.
QLogic Corporation, headquartered in Costa Mesa, California, develops
and markets host and peripheral input/output controller integrated
circuits and host adapter cards. The company also develops small
computer system interface target and disk controller chips.
RF Micro Devices, Inc., headquartered in Greensboro, North Carolina,
designs, develops and markets proprietary radio frequency integrated
circuits for wireless communications applications such as cellular,
cordless telephony, wireless security and remote meter reading.
Siebel Systems, Inc., headquartered in San Mateo, California, designs,
sells and supports enterprise-class sales and marketing information
software systems. The company also designs, develops and markets a Web-
based application software product.
Sun Microsystems, Inc., headquartered in Palo Alto, California, supplies
network computing products, including desktop systems, storage
subsystems, network switches, servers, software, microprocessors and a
full range of services and support, using the UNIX operating system.
VISX, Incorporated, headquartered in Santa Clara, California, has
developed and makes a device which uses an excimer laser to reshape the
surface of the cornea to treat nearsightedness, astigmatism and
farsightedness and is intended to reduce or eliminate the patient's
dependence on corrective lenses.
Xilinx, Inc., headquartered in San Jose, California, designs, develops
and sells complementary metal-oxide-silicon (CMOS) programmable logic
devices and related design software, including field programmable gate
arrays and erasable programmable logic devices.
Page 6
Equity Securities Selected for The S&P Target 10 FlexPortfolio,
1st Quarter 2000 Series
Alcoa Inc., headquartered in Pittsburgh, Pennsylvania, makes primary
aluminum and fabricated products for the transportation, construction,
packaging and other markets.
Avery Dennison Corporation, headquartered in Pasadena, California,
through subsidiaries, develops, manufactures and markets self-adhesive
materials. The company also makes and sells a variety of office products
and other items, including notebooks, three-ring binders, organizing
systems, felt-tip markers, glues, fasteners, business forms, tickets,
tags and imprinting equipment. The company markets its products worldwide.
Circuit City Stores-Circuit City Group, headquartered in Richmond,
Virginia, is one of the nation's largest retailers of brand name
consumer electronics products, including video and audio equipment, home
office products and major appliances. The company operates retail
superstores, consumer electronics-only stores and mall-based "Circuit
City Express" stores throughout the United States.
Citigroup Inc., headquartered in New York, New York, operates the
largest financial services company in the United States. The company
offers consumer, investment and private banking, life insurance,
property and casualty insurance and consumer finance products.
Georgia-Pacific Group, headquartered in Atlanta, Georgia, produces and
distributes pulp, paper and building products. The company's operating
groups are the Georgia-Pacific Group, which operates softwood plywood
plants, oriented strand board plants, and manufacturing facilities; and
The Timber Company, which manages 5.8 million acres of timberland in
North America.
Lehman Brothers Holdings Inc., headquartered in New York, New York,
through wholly-owned Lehman Brothers Inc., provides securities
underwriting, financial advisory and investment and merchant banking
services, securities and commodities trading as principal and agent, and
asset management to institutional, corporate, government and high-net-
worth individual clients throughout the United States and the world.
Morgan Stanley Dean Witter & Co., headquartered in New York, New York,
provides a broad range of nationally-marketed credit and investment
products, with a principal focus on individual customers. The company
provides investment banking, transaction processing, private-label
credit card and various other investment advice services.
Seagate Technology, Inc., headquartered in Scotts Valley, California,
designs, manufactures and markets products for storage, retrieval and
management of data on computer and data communications systems. The
company's products include disk drives and magnetic discs used in
computer systems and multimedia applications; and disc drive components,
tape drives and software.
Tandy Corporation, headquartered in Fort Worth, Texas, with
subsidiaries, sells consumer electronic products across the United
States through its chain of RadioShack stores. The company's products
include private label electronic parts and accessories, audio/video
equipment, digital satellite systems, personal computers, telephones,
scanners, electronic toys and batteries.
Wal-Mart Stores, Inc., headquartered in Bentonville, Arkansas, is one of
the largest retailers in the United States measured by total revenues.
The company operates "Wal-Mart" retail discount department stores, "Wal-
Mart Supercenters" and "Sam's" wholesale clubs in the United States and
several other countries.
Equity Securities Selected for Bandwidth FlexPortfolio Series
Communications Services
_______________________
AT&T Corp., headquartered in New York, New York, provides voice, data
and video telecommunications services; regional, domestic, international
and local communication transmission services; cellular telephone and
other wireless services; and billing, directory and calling card services.
Covad Communications Group, Inc., headquartered in Santa Clara,
California, provides high-speed digital communications services using
digital subscriber line technology to Internet service providers and
enterprise customers. The company's services are provided over standard
copper telephone lines at speeds up to 1.5 megabits per second.
Global Crossing Ltd., headquartered in Hamilton, Bermuda, provides
global internet and long distance telecommunications facilities and
services utilizing a network of undersea digital fiber optic cable
systems and associated terrestrial backhaul capacity. The company
operates as a carrier's carrier, providing tiered pricing and segmented
products to licensed providers of international telecommunications
services.
Level 3 Communications, Inc., headquartered in Broomfield, Colorado,
provides telecommunications and information services, including local,
long distance and data transmission. The company is building the first
international network optimized for Internet Protocol technology. The
network will combine both local and long distance networks, connecting
customers end-to-end across the United States and in Europe and Asia.
MCI WorldCom, Inc., headquartered in Clinton, Mississippi, operates as a
global communications company which provides facilities-based and fully-
integrated local, long distance, international and Internet services in
over 65 countries encompassing the Americas, Europe and the Asia-Pacific
regions. The company also offers wireless and 800 services, calling
cards, private lines and debit cards.
Qwest Communications International Inc., headquartered in Denver,
Colorado, provides broadband Internet-based data, voice and image
communications for businesses and consumers. The company also constructs
and installs fiber optic systems for other communications providers and
its own use.
Page 7
Communications Equipment
________________________
ADC Telecommunications, Inc., headquartered in Minnetonka, Minnesota,
designs, makes and markets a broad range of products and services that
enable its customers to construct and upgrade their telecommunications
networks to support increasing user demand for voice, data and video
services.
Copper Mountain Networks, Inc., headquartered in Palo Alto, California,
develops and markets Digital Subscriber Line (DSL) solutions that enable
high-speed Internet connectivity over the existing copper wire telephone
infrastructure.
Lucent Technologies Inc., headquartered in Murray Hill, New Jersey,
designs, develops and manufactures communications systems, software and
products worldwide. The company's research and development activities
are conducted through Bell Laboratories.
Nortel Networks Corporation, headquartered in Brampton, Ontario, Canada,
makes fully-digital telecommunications switching equipment and
communications equipment and systems for business and residential use.
The company operates worldwide.
Tellabs, Inc., headquartered in Lisle, Illinois, makes and services
voice, data and video transport and network access systems used by
public telephone companies, long-distance carriers, alternate service
providers, cellular providers, cable operators, government agencies,
utilities and business end-users.
Fiber Optics
____________
Harmonic Inc., headquartered in Sunnyvale, California, makes and sells
highly integrated fiber optic and digital systems for delivering video,
voice and data services over cable, satellite and wireless networks. The
company's "TRANsend" digital product line combines and customizes
content from a variety of sources.
JDS Uniphase Corporation, headquartered in San Jose, California,
designs, develops, makes and markets laser subsystems, laser-based
semiconductor wafer defect examination and analysis equipment and fiber
optic telecommunications equipment products.
Networking Products
___________________
Cisco Systems, Inc., headquartered in San Jose, California, provides
networking solutions that connect computing devices and computer
networks. The company offers various products to utilities,
corporations, universities, governments and small to medium businesses
worldwide.
Juniper Networks, Inc., headquartered in Mountain View, California,
provides Internet infrastructure solutions for Internet service
providers and other telecommunications service providers. The company
delivers next generation Internet backbone routers that are designed for
service provider networks.
Redback Networks Inc., headquartered in Sunnyvale, California, provides
advanced networking solutions. The company's solutions enable carriers,
cable multiple system operators and service providers to rapidly deploy
high-speed broadband access to the Internet and corporate networks. The
company's subscriber management system connects and manages subscribers
using digital subscriber line, cable and wireless technologies.
Semiconductors
______________
Applied Micro Circuits Corporation, headquartered in San Diego,
California, designs, makes and markets high-performance, high-bandwidth
silicon products for automated test equipment, high-speed computing and
military markets throughout the world.
Broadcom Corporation (Class A), headquartered in Irvine, California,
develops highly integrated silicon solutions that enable broadband
digital data transmission to the home and within the business enterprise.
Conexant Systems, Inc., headquartered in Newport Beach, California,
makes semiconductor products for communications applications. The
company's applications include personal computing, digital information
and entertainment, wireless communications and network access.
PMC-Sierra, Inc., headquartered in Burnaby, British Columbia, Canada,
designs, develops, markets and supports high-performance semiconductor
system solutions used in broadband communications infrastructures, high-
bandwidth networks and multimedia personal computers.
Vitesse Semiconductor Corporation, headquartered in Camarillo,
California, designs, develops, makes and sells digital gallium arsenide
integrated circuits primarily for telecommunications, data
communications and automated test equipment systems providers.
Wireless Communications
_______________________
L.M. Ericsson AB (ADR), headquartered in Stockholm, Sweden, develops and
produces advanced systems, products and services for wired and mobile
communications in public and private networks worldwide. The company's
product line includes digital and analog systems for telephones and
networks, microwave radio links, radar surveillance systems and business
systems.
Motorola, Inc., headquartered in Schaumburg, Illinois, designs, makes
and sells, mainly under the "Motorola" brand name, two-way land mobile
communication systems, paging and wireless data systems, personal
communications equipment and systems; semiconductors; and electronic
equipment for military and aerospace use.
Nokia Oy (ADR), headquartered in Espoo, Finland, supplies
telecommunications systems and equipment, including mobile phones,
battery chargers for mobile phones, computer monitors, multimedia
Page 8
network terminals and satellite receivers. The company provides its
products and services worldwide.
QUALCOMM Incorporated, headquartered in San Diego, California, designs,
develops, makes, sells, licenses and operates advanced communications
systems and products based on proprietary digital wireless technology.
The company's products include "CDMA" integrated circuits, wireless
phones and infrastructure products, transportation management
information systems and ground stations, and phones for the low-earth-
orbit satellite communications system.
Equity Securities Selected for e-Business FlexPortfolio Series
Horizontal Portals
__________________
America Online, Inc., headquartered in Dulles, Virginia, provides online
services to consumers in the United States, Canada, Europe and Japan
offering subscribers a wide variety of services, including electronic
mail, conferencing, news, sports, Internet access, entertainment,
weather, stock quotes, software, computing support and online classes.
Ariba, Inc., headquartered in Sunnyvale, California, provides Internet-
and intranet-based business-to-business e-commerce solutions for
operating resources that include information technology and
telecommunications equipment, professional services, facilities and
office equipment, and expense items.
Commerce One, Inc., headquartered in Walnut Creek, California, provides
business-to-business electronic procurement solutions. The company's
"The Commerce Chain Solution" dynamically links buying and supplying
organizations into real-time trading communities, increasing efficiency
and significantly reducing operational costs across the entire indirect
supply chain.
PurchasePro.com, Inc., headquartered in Las Vegas, Nevada, provides
Internet business-to-business e-commerce services. The company's
solution is a standard platform for small- and medium-sized businesses
as well as corporate purchasing departments to buy and sell products in
secure, online, open and private marketplaces.
VerticalNet, Inc., headquartered in Horsham, Pennsylvania, is one of the
Internet's leading creators and operators of vertical trade communities.
The company leverages the interactive features and global reach of the
Internet to create multi-national, targeted business-to-business
communities. These narrowly focused Web sites attract buyers and sellers
from around the world by catering to individuals with similar
professional interests. The company's communities include industries
such as electronics, environment and services.
Yahoo! Inc., headquartered in Santa Clara, California, is a global
Internet media company that offers a family of branded on-line media
properties, including "YAHOO!" The company's Web site enables users to
locate and access information and services through hypertext links from
a hierarchical, subject-based directory of Web sites.
Infrastructure
______________
BEA Systems, Inc., headquartered in San Jose, California, markets and
supports software used by large organizations to enable and support
their most critical business processes. The company's products have been
adopted in a wide variety of industries, including telecommunications,
banking and finance, manufacturing, retail and transportation.
BroadVision, Inc., headquartered in Redwood City, California, develops,
markets and supports application software solutions. The company
provides an integrated software application system, "BroadVision One-To-
One," that enables businesses to create applications for interactive
marketing and selling services on the World Wide Web.
Check Point Software Technologies Ltd., headquartered in Ramat-Gan,
Israel, develops, sells and supports secure enterprise networking
solutions. The company's integrated architecture includes network
security ("FireWall-1," "VPN-1," "Open Security Manager" and "Provider-
1"), traffic control ("FloodGate-1" and "ConnectControl") and Internet
protocol address management ("Meta IP")
Digital Island, headquartered in San Francisco, California, is a leading
provider of network services for globalizing e-Business applications.
The Company serves corporations which operate in multiple countries that
need to securely and consistently extend business-critical applications
for marketing, selling, servicing or distributing products via the
Internet.
Exodus Communications, Inc., headquartered in Santa Clara, California,
provides Internet system and network management solutions for
enterprises with mission-critical Internet operations. The company's
data centers are located throughout the United States and in England.
Level 3 Communications, Inc., headquartered in Broomfield, Colorado,
provides telecommunications and information services, including local,
long distance and data transmission. The company is building the first
international network optimized for Internet Protocol technology. The
network will combine both local and long distance networks, connecting
customers end-to-end across the United States and in Europe and Asia.
MCI WorldCom, Inc., headquartered in Clinton, Mississippi, operates as a
global communications company which provides facilities-based and fully-
integrated local, long distance, international and Internet services in
over 65 countries encompassing the Americas, Europe and the Asia-Pacific
regions. The company also offers wireless and 800 services, calling
cards, private lines and debit cards.
Microsoft Corporation, headquartered in Redmond, Washington, develops,
manufactures, licenses and supports a wide range of software products.
The company offers operating system software, server application
Page 9
software, business and consumer applications software, software
development tools and Internet and intranet software. "Windows" is the
company's flagship PC operating system. The company also develops the
MSN network of Internet products and services.
Portal Software, Inc., headquartered in Cupertino, California, develops,
markets and supports customer management and billing software for
providers of Internet-based services. The company's products provide
account creation, user authentication and authorization, activity
tracking, pricing and rating, and billing and customer service functions.
Scient Corporation, headquartered in San Francisco, California, provides
eBusiness professional services that enable its clients to strengthen
and improve competitive positions through new technologies and the
Internet.
Siebel Systems, Inc., headquartered in San Mateo, California, designs,
sells and supports enterprise-class sales and marketing information
software systems. The company also designs, develops and markets a Web-
based application software product.
TIBCO Software Inc., headquartered in Palo Alto, California, provides
software solutions enabling businesses to integrate internal operations,
partners and customer channels in real time. The company's products and
services enable computer applications and platforms to communicate
across local or wide area networks, including the Internet.
VeriSign, Inc., headquartered in Mountain View, California, provides
digital certificate solutions and infrastructure needed by companies,
government agencies, trading partners and individuals to conduct trusted
and secure communications and commerce over the Internet and over
intranets and extranets using the Internet Protocol.
Vignette Corporation, headquartered in Austin, Texas, Vignette
Corporation is a provider of Internet Relationship Management software
products and services, which enable enterprises to develop and manage
online customer relationships and to capitalize on Internet business
opportunities.
Procurement
___________
Cisco Systems, Inc., headquartered in San Jose, California, provides
networking solutions that connect computing devices and computer
networks. The company offers various products to utilities,
corporations, universities, governments and small to medium businesses
worldwide.
Dell Computer Corporation, headquartered in Round Rock, Texas, designs,
develops, makes, sells, services and supports a broad range of computer
systems, including desktops, notebooks and servers compatible with
industry standards under the "Dell" brand name. The company also sells
software, peripheral equipment, and service and support programs.
i2 Technologies, Inc., headquartered in Dallas, Texas, provides supply
chain management software, which encompasses the planning and scheduling
of manufacturing and related logistics from raw materials procurement
through work-in-process to customer delivery. The company's product,
"RHYTHM," generates integrated solutions to planning and scheduling
problems.
International Business Machines Corporation, headquartered in Armonk,
New York, provides customer solutions through the use of advanced
information technologies. The company offers a variety of solutions that
include services, software, systems, products, financing and technologies.
Oracle Corporation, headquartered in Redwood City, California, designs,
develops, markets and supports computer software products with a wide
variety of uses, including database management, application development
and business intelligence, and business applications.
Venture Capital
_______________
CMGI Inc., headquartered in Andover, Massachusetts, invests in and
develops Internet companies; operates direct marketing companies and
venture funds focused on the Internet; and, through subsidiaries,
provides fulfillment services.
Internet Capital Group, Inc., headquartered in Wayne, Pennsylvania, is
an Internet holding company primarily engaged in business-to-business,
or B2B, e-commerce through a network of partner companies.
Vertical Portals
________________
Chemdex Corporation, headquartered in Palo Alto, California, is the
leading provider of business-to-business e-commerce solutions for the
life sciences industry. The company offers a complete solution that
allows its customers to identify, locate and purchase life sciences
research products.
Healtheon/WebMD Corporation, headquartered in Santa Clara, California,
provides advanced Internet technology to connect healthcare participants
and enable them to communicate, exchange information and perform
transactions which cut across the healthcare maze. The company's
services include the areas of membership, healthcare administration,
financial management and clinical information.
pcOrder.com, Inc., headquartered in Austin, Texas, is a leading provider
of Internet-based electronic commerce solutions that enable the computer
industry's suppliers, resellers and end-users to buy and sell computer
products online.
Equity Securities Selected for New e-conomy FlexPortfolio Series
Bandwidth
_________
AT&T Corp., headquartered in New York, New York, provides voice, data
and video telecommunications services; regional, domestic, international
Page 10
and local communication transmission services; cellular telephone and
other wireless services; and billing, directory and calling card services.
Cisco Systems, Inc., headquartered in San Jose, California, provides
networking solutions that connect computing devices and computer
networks. The company offers various products to utilities,
corporations, universities, governments and small to medium businesses
worldwide.
Lucent Technologies Inc., headquartered in Murray Hill, New Jersey,
designs, develops and manufactures communications systems, software and
products worldwide. The company's research and development activities
are conducted through Bell Laboratories.
MCI WorldCom, Inc., headquartered in Clinton, Mississippi, operates as a
global communications company which provides facilities-based and fully-
integrated local, long distance and Internet services.
Tellabs, Inc., headquartered in Lisle, Illinois, makes and services
voice, data and video transport and network access systems used by
public telephone companies, long-distance carriers, alternate service
providers, cellular providers, cable operators, government agencies,
utilities and business end-users.
e-Business
__________
Ariba, Inc., headquartered in Sunnyvale, California, provides intranet
and Internet-based business-to-business electronic commerce solutions
for operating resources. Operating resources include information
technology and telecommunications equipment, professional services,
facilities and office equipment, and expense items.
BroadVision, Inc., headquartered in Redwood City, California, develops,
markets and supports application software solutions. The company
provides an integrated software application system, "BroadVision One-To-
One," that enables businesses to create applications for interactive
marketing and selling services on the World Wide Web.
Commerce One, Inc., headquartered in Walnut Creek, California, provides
Web-based, enterprise procurement solutions that link buying and
supplying organizations into real-time trading communities. The
company's "Commerce Chain Solution" automates the entire indirect goods
and services supply chain.
Exodus Communications, Inc., headquartered in Santa Clara, California,
provides Internet system and network management solutions for
enterprises with mission-critical Internet operations. The company's
data centers are located throughout the United States and in England.
Internet Capital Group, Inc., headquartered in Wayne, Pennsylvania, is
an Internet holding company primarily engaged in business-to-business,
or B2B, e-commerce through a network of partner companies.
e-Infrastructure
________________
Dell Computer Corporation, headquartered in Round Rock, Texas, designs,
develops, makes, sells, services and supports a broad range of computer
systems, including desktops, notebooks and servers compatible with
industry standards under the "Dell" brand name. The company also sells
software, peripheral equipment, and service and support programs.
EMC Corporation, headquartered in Hopkinton, Massachusetts, designs,
manufactures, markets and supports hardware, software and service
products for the enterprise storage market. The company's products are
sold as integrated storage solutions for customers on various computing
platforms including "UNIX" and "Windows NT."
Intel Corporation, headquartered in Santa Clara, California, designs,
develops, makes and markets advanced microcomputer components and
related products at various levels of integration. Principal components
consist of silicon-based semiconductors etched with complex patterns of
transistors.
Oracle Corporation, headquartered in Redwood Shores, California,
designs, develops, markets and supports computer software products with
a wide variety of uses, including database management, application
development, business intelligence and business applications.
Sun Microsystems, Inc., headquartered in Palo Alto, California, supplies
network computing products, including desktop systems, storage
subsystems, network switches, servers, software, microprocessors and a
full range of services and support, using the UNIX operating system.
Internet
________
America Online, Inc., headquartered in Dulles, Virginia, provides online
services to consumers in the United States, Canada, Europe and Japan
offering subscribers a wide variety of services, including electronic
mail, conferencing, news, sports, Internet access, entertainment,
weather, stock quotes, software, computing support and online classes.
CMGI Inc., headquartered in Andover, Massachusetts, invests in and
develops Internet companies; operates direct marketing companies and
venture funds focused on the Internet; and, through subsidiaries,
provides fulfillment services.
Lycos, Inc., headquartered in Waltham, Massachusetts, owns and operates
a free, global Internet navigation and community network which provides
Web search and navigation, communications and personalization tools,
home-page building and Web community services and a contemporary
shopping center.
Microsoft Corporation, headquartered in Redmond, Washington, develops,
manufactures, licenses and supports a wide range of software products.
The company offers operating system software, server application
software, business and consumer applications software, software
development tools and Internet and intranet software. "Windows" is the
Page 11
company's flagship PC operating system. The company also develops the
MSN network of Internet products and services.
Yahoo! Inc., headquartered in Santa Clara, California, is a global
Internet media company that offers a family of branded on-line media
properties, including "YAHOO!" The company's Web site enables users to
locate and access information and services through hypertext links from
a hierarchical, subject-based directory of Web sites.
Wireless
________
L.M. Ericsson AB (ADR), headquartered in Stockholm, Sweden, develops and
produces advanced systems, products and services for wired and mobile
communications in public and private networks worldwide. The company's
product line includes digital and analog systems for telephones and
networks, microwave radio links, radar surveillance systems and business
systems.
Motorola, Inc., headquartered in Schaumburg, Illinois, designs, makes
and sells, mainly under the "Motorola" brand name, two-way land mobile
communication systems, paging and wireless data systems, personal
communications equipment and systems; semiconductors; and electronic
equipment for military and aerospace use.
Nokia Oy (ADR), headquartered in Espoo, Finland, supplies
telecommunications systems and equipment, including mobile phones,
battery chargers for mobile phones, computer monitors, multimedia
network terminals and satellite receivers. The company provides its
products and services worldwide.
QUALCOMM Incorporated, headquartered in San Diego, California, designs,
develops, makes, sells, licenses and operates advanced communications
systems and products based on proprietary digital wireless technology.
The company's products include "CDMA" integrated circuits, wireless
phones and infrastructure products, transportation management
information systems and ground stations, and phones for the low-earth-
orbit satellite communications system.
Vodafone AirTouch Plc (ADR), headquartered in Newbury, Berkshire,
England, provides mobile telecommunication services, supplying its
customers with digital and analog cellular telephone, paging and
personal communications services. The company offers its services in
many countries, including Australia, Egypt, Fiji, France, Germany,
Greece, Malta, the Netherlands, New Zealand, South Africa, Sweden,
Uganda and the United States.
We have obtained the foregoing company descriptions from sources we deem
reliable. We have not independently verified the provided information
either in terms of accuracy or completeness.
Page 12
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being
National Union Fire Insurance Company of Pittsburgh.
B. This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
The Registrant, FT 396, hereby identifies The First Trust
Special Situations Trust, Series 4; The First Trust Special
Situations Trust, Series 18; The First Trust Special Situations
Trust, Series 69; The First Trust Special Situations Trust,
Series 108; The First Trust Special Situations Trust, Series 119;
The First Trust Special Situations Trust, Series 190; FT 286; and
The First Trust Combined Series 272 for purposes of the
representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from
those deposited in such previous series;
(2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide
essential financial information for, the series with respect to
the securities of which this Registration Statement is being
filed, this Registration Statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities
Act of 1933.
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 396, has duly caused this Amendment to
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on January 6, 2000.
FT 396
By NIKE SECURITIES L.P.
Depositor
By Robert M. Porcellino
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
David J. Allen Sole Director )
of Nike Securities )
Corporation, the ) January 6, 2000
General Partner of )
Nike Securities L.P. )
)
)
) Robert M. Porcellino
) Attorney-in-Fact**
)
)
* The title of the person named herein represents his
capacity in and relationship to Nike Securities L.P.,
Depositor.
** An executed copy of the related power of attorney
was filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of The
First Trust Combined Series 258 (File No. 33-63483) and
the same is hereby incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated January 6, 2000 in
Amendment No. 1 to the Registration Statement (Form S-6) (File
No. 333-94023) and related Prospectus of FT 396.
ERNST & YOUNG LLP
Chicago, Illinois
January 6, 2000
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement
will be filed as Exhibit 4.1 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and First Trust
Advisors L.P. as Portfolio Supervisor (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
43693] filed on behalf of The First Trust Special
Situations Trust, Series 22).
1.1.1 Form of Trust Agreement for FT 396 among Nike Securities
L.P., as Depositor, The Chase Manhattan Bank, as
Trustee, First Trust Advisors L.P., as Evaluator, and
First Trust Advisors L.P., as Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities
L.P., Depositor (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-
6 [File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42755] filed on
behalf of The First Trust Special Situations Trust,
Series 19).
2.1 Copy of Certificate of Ownership (included in Exhibit
1.1 filed herewith on page 2 and incorporated herein by
reference).
S-5
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion of counsel as to New York income tax status of
securities being registered.
3.4 Opinion of counsel as to advancement of funds by
Trustee.
4.1 Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on
page S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
63483] filed on behalf of The First Trust Combined
Series 258).
MEMORANDUM
FT 396
File No. 333-94023
The Prospectus and the Indenture filed with Amendment No. 1
of the Registration Statement on Form S-6 have been revised to
reflect information regarding the execution of the Indenture and
the deposit of Securities on January 6, 2000 and to set forth
certain statistical data based thereon. In addition, there are a
number of other changes described below.
THE PROSPECTUS
Cover Page The date of the Trusts has been added.
Pages 3-4 The following information for the Trusts appears:
The Aggregate Value of Securities initially
deposited have been added.
The initial number of units of the Trusts
Sales charge
The Public Offering Price per Unit as of the
business day before the Initial Date of Deposit
The Mandatory Termination Dates have been added.
Page 8 The Report of Independent Auditors has been
completed.
Pages 8-9 The Statements of Net Assets have been completed.
Pages 10-16 The Schedules of Investments have been completed.
THE TRUST AGREEMENT AND STANDARD TERMS AND CONDITIONS OF TRUST
The Trust Agreement has been conformed to reflect
the execution thereof.
CHAPMAN AND CUTLER
January 6, 2000
FT 396
TRUST AGREEMENT
Dated: January 6, 2000
The Trust Agreement among Nike Securities L.P., as
Depositor, The Chase Manhattan Bank, as Trustee and First Trust
Advisors L.P., as Evaluator and Portfolio Supervisor, sets forth
certain provisions in full and incorporates other provisions by
reference to the document entitled "Standard Terms and Conditions
of Trust for The First Trust Special Situations Trust, Series 22
and certain subsequent Series, Effective November 20, 1991"
(herein called the "Standard Terms and Conditions of Trust"), and
such provisions as are incorporated by reference constitute a
single instrument. All references herein to Articles and
Sections are to Articles and Sections of the Standard Terms and
Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and the Portfolio Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II and Part III hereof,
all the provisions contained in the Standard Terms and Conditions
of Trust are herein incorporated by reference in their entirety
and shall be deemed to be a part of this instrument as fully and
to the same extent as though said provisions had been set forth
in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR THE DOWsm DIVIDEND AND REPURCHASE TARGET 10 FLEXPORTFOLIO,
1st QUARTER 2000 SERIES ("TARGET 10 FLEXPORTFOLIO")
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0025 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Evaluator provides services during less than the whole of
such year). Such fee may exceed the actual cost of providing
such evaluation services for the Trust, but at no time will the
total amount received for evaluation services rendered to unit
investment trusts of which Nike Securities L.P. is the sponsor in
any calendar year exceed the aggregate cost to the Evaluator of
supplying such services in such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0065 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Trustee provides services during less than the whole of such
year). However, in no event, except as may otherwise be provided
in the Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less than
$2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is January 6,
2000.
J. The minimum amount of Securities to be sold by the
Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
K. The Depositors compensation for providing bookkeeping
and other administrative services as described in Section 3.14 of
the Standard Terms and Conditions of Trust shall be an annual fee
in the amount of $.0015 per Unit.
L. The Depositors compensation for providing portfolio
supervisory services as described in Section 3.13 of the Standard
Terms and Conditions of Trust shall be an annual fee in the
amount of $.0025 per Unit.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR THE NASDAQ TARGET 15 FLEXPORTFOLIO, 1ST QUARTER 2000 SERIES
("TARGET 15 FLEXPORTFOLIO")
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0025 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Evaluator provides services during less than the whole of
such year). Such fee may exceed the actual cost of providing
such evaluation services for the Trust, but at no time will the
total amount received for evaluation services rendered to unit
investment trusts of which Nike Securities L.P. is the sponsor in
any calendar year exceed the aggregate cost to the Evaluator of
supplying such services in such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0065 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Trustee provides services during less than the whole of such
year). However, in no event, except as may otherwise be provided
in the Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less than
$2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is January 6,
2000.
J. The minimum amount of Securities to be sold by the
Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
K. The Depositors compensation for providing bookkeeping
and other administrative services as described in Section 3.14 of
the Standard Terms and Conditions of Trust shall be an annual fee
in the amount of $.0015 per Unit.
L. The Depositors compensation for providing portfolio
supervisory services as described in Section 3.13 of the Standard
Terms and Conditions of Trust shall be an annual fee in the
amount of $.0025 per Unit.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR THE S&P TARGET 10 FLEXPORTFOLIO, 1ST QUARTER 2000 SERIES
("S&P TARGET 10 FLEXPORTFOLIO")
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0025 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Evaluator provides services during less than the whole of
such year). Such fee may exceed the actual cost of providing
such evaluation services for the Trust, but at no time will the
total amount received for evaluation services rendered to unit
investment trusts of which Nike Securities L.P. is the sponsor in
any calendar year exceed the aggregate cost to the Evaluator of
supplying such services in such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0065 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Trustee provides services during less than the whole of such
year). However, in no event, except as may otherwise be provided
in the Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less than
$2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is January 6,
2000.
J. The minimum amount of Securities to be sold by the
Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
K. The Depositors compensation for providing bookkeeping
and other administrative services as described in Section 3.14 of
the Standard Terms and Conditions of Trust shall be an annual fee
in the amount of $.0015 per Unit.
L. The Depositors compensation for providing portfolio
supervisory services as described in Section 3.13 of the Standard
Terms and Conditions of Trust shall be an annual fee in the
amount of $.0025 per Unit.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR BANDWIDTH FLEXPORTFOLIO SERIES ("BANDWIDTH FLEXPORTFOLIO")
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0030 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Evaluator provides services during less than the whole of
such year). Such fee may exceed the actual cost of providing
such evaluation services for the Trust, but at no time will the
total amount received for evaluation services rendered to unit
investment trusts of which Nike Securities L.P. is the sponsor in
any calendar year exceed the aggregate cost to the Evaluator of
supplying such services in such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0096 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Trustee provides services during less than the whole of such
year). However, in no event, except as may otherwise be provided
in the Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less than
$2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is January 6,
2000.
J. The minimum amount of Securities to be sold by the
Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
K. The Depositors compensation for providing bookkeeping
and other administrative services as described in Section 3.14 of
the Standard Terms and Conditions of Trust shall be an annual fee
in the amount of $.0033 per Unit.
L. The Depositors compensation for providing portfolio
supervisory services as described in Section 3.13 of the Standard
Terms and Conditions of Trust shall be an annual fee in the
amount of $.0035 per Unit.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR e-BUSINESS FLEXPORTFOLIO SERIES ("e-BUSINESS FLEXPORTFOLIO")
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0030 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Evaluator provides services during less than the whole of
such year). Such fee may exceed the actual cost of providing
such evaluation services for the Trust, but at no time will the
total amount received for evaluation services rendered to unit
investment trusts of which Nike Securities L.P. is the sponsor in
any calendar year exceed the aggregate cost to the Evaluator of
supplying such services in such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0096 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Trustee provides services during less than the whole of such
year). However, in no event, except as may otherwise be provided
in the Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less than
$2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is January 6,
2000.
J. The minimum amount of Securities to be sold by the
Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
K. The Depositors compensation for providing bookkeeping
and other administrative services as described in Section 3.14 of
the Standard Terms and Conditions of Trust shall be an annual fee
in the amount of $.0033 per Unit.
L. The Depositors compensation for providing portfolio
supervisory services as described in Section 3.13 of the Standard
Terms and Conditions of Trust shall be an annual fee in the
amount of $.0035 per Unit.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR NEW e-CONOMY FLEXPORTFOLIO SERIES
("NEW e-CONOMY FLEXPORTFOLIO")
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0030 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Evaluator provides services during less than the whole of
such year). Such fee may exceed the actual cost of providing
such evaluation services for the Trust, but at no time will the
total amount received for evaluation services rendered to unit
investment trusts of which Nike Securities L.P. is the sponsor in
any calendar year exceed the aggregate cost to the Evaluator of
supplying such services in such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0096 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Trustee provides services during less than the whole of such
year). However, in no event, except as may otherwise be provided
in the Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less than
$2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is January 6,
2000.
J. The minimum amount of Securities to be sold by the
Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
K. The Depositors compensation for providing bookkeeping
and other administrative services as described in Section 3.14 of
the Standard Terms and Conditions of Trust shall be an annual fee
in the amount of $.0033 per Unit.
L. The Depositors compensation for providing portfolio
supervisory services as described in Section 3.13 of the Standard
Terms and Conditions of Trust shall be an annual fee in the
amount of $.0035 per Unit.
PART III
A. Notwithstanding anything to the contrary in the
Standard Terms and Conditions of Trust, references to subsequent
Series established after the date of effectiveness of the First
Trust Special Situations Trust, Series 24 shall include FT 397.
B. Notwithstanding anything to the contrary in the
Prospectus, parties to the trust agreement are hereby advised:
The Trusts are not sponsored, endorsed, sold or
promoted by Dow Jones & Company, Inc. ("Dow Jones"). Dow
Jones makes no representation or warranty, express or
implied, to the owners of the Trusts or any member of the
public regarding the advisability of investing in securities
generally or in the Trusts particularly. Dow Jones' only
relationship to the Sponsor is the licensing of certain
trademarks, trade names and service marks of Dow Jones and
of the Dow Jones Industrial AverageSM , which is determined,
composed and calculated by Dow Jones without regard to the
Sponsor or the Trusts. Dow Jones has no obligation to take
the needs of the Sponsor or the owners of the Trusts into
consideration in determining, composing or calculating to
Dow Jones Industrial AverageSM. Dow Jones is not
responsible for and has not participated in the
determination of the timing of, prices at, or quantities of
the Trusts to be issued or in the determination or
calculation of the equation by which the Trusts are to be
converted into cash. Dow Jones has no obligation or
liability in connection with the administration, marketing
or trading of the Trusts.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE DOW JONES INDUSTRIAL AVERAGESM OR ANY
DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW
JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY THE SPONSOR, OWNERS OF THE TRUSTS, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES
INDUSTRIAL AVERAGESM OR ANY DATA INCLUDED THEREIN. DOW
JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES
INDUSTRIAL AVERAGESM OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES
HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT,
PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED
OF THE POSSIBILITY THEREOF.
C. The term "Principal Account" as set forth in the
Standard Terms and Conditions of Trust shall be replaced with the
term "Capital Account."
D. Section 1.01(2) shall be amended to read as follows:
"(2) "Trustee" shall mean The Chase Manhattan Bank, or
any successor trustee appointed as hereinafter provided."
All references to United States Trust Company of New York in
the Standard Terms and Conditions of Trust shall be amended to
refer to The Chase Manhattan Bank.
E. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean First Trust Advisors L.P.
and its successors in interest, or any successor evaluator
appointed as hereinafter provided."
F. Section 1.01(4) shall be amended to read as follows:
"(4) "Portfolio Supervisor" shall mean First Trust
Advisors L.P. and its successors in interest, or any
successor portfolio supervisor appointed as hereinafter
provided."
G. Section 1.01(26) shall be added to read as follows:
"(26) The term "Rollover Unit holder" shall be defined
as set forth in Section 5.05, herein."
H. Section 1.01(27) shall be added to read as follows:
"(27) The "Rollover Notification Date" shall be
defined as set forth in the Prospectus under "Summary of
Essential Information."
I. Section 1.01(28) shall be added to read as follows:
"(28) The term "Rollover Distribution" shall be
defined as set forth in Section 5.05, herein."
J. Section 1.01(29) shall be added to read as follows:
"(29) The term "Distribution Agent" shall refer to the
Trustee acting in its capacity as distribution agent
pursuant to Section 5.05 herein."
K. Section 1.01(30) shall be added to read as follows:
"(30) The term "Special Redemption and Liquidation
Period" shall be as set forth in the Prospectus under
"Summary of Essential Information."
L. Paragraph (b) of Section 2.01 shall be restated in its
entirety as follows:
(b)(1)From time to time following the Initial Date of
Deposit, the Depositor is hereby authorized, in its
discretion, to assign, convey to and deposit with the
Trustee (i) additional Securities, duly endorsed in blank or
accompanied by all necessary instruments of assignment and
transfer in proper form, (ii) Contract Obligations relating
to such additional Securities, accompanied by cash and/or
Letter(s) of Credit as specified in paragraph (c) of this
Section 2.01, or (iii) cash (or a Letter of Credit in lieu
of cash) with instructions to purchase additional
Securities, in an amount equal to the portion of the Unit
Value of the Units created by such deposit attributable to
the Securities to be purchased pursuant to such
instructions. Except as provided in the following
subparagraphs (2), (3) and (4) the Depositor, in each case,
shall ensure that each deposit of additional Securities
pursuant to this Section shall maintain, as nearly as
practicable, the Percentage Ratio. Each such deposit of
additional Securities shall be made pursuant to a Notice of
Deposit of Additional Securities delivered by the Depositor
to the Trustee. Instructions to purchase additional
Securities shall be in writing, and shall specify the name
of the Security, CUSIP number, if any, aggregate amount,
price or price range and date to be purchased. When
requested by the Trustee, the Depositor shall act as broker
to execute purchases in accordance with such instructions;
the Depositor shall be entitled to compensation therefor in
accordance with applicable law and regulations. The Trustee
shall have no liability for any loss or depreciation
resulting from any purchase made pursuant to the Depositor's
instructions or made by the Depositor as broker.
(2) Additional Securities (or Contract Obligations
therefor) may, at the Depositor's discretion, be deposited
or purchased in round lots. If the amount of the deposit is
insufficient to acquire round lots of each Security to be
acquired, the additional Securities shall be deposited or
purchased in the order of the Security in the Trust most
under-represented immediately before the deposit with
respect to the Percentage Ratio.
(3) If at the time of a deposit of additional
Securities, Securities of an issue deposited on the Initial
Date of Deposit (or of an issue of Replacement Securities
acquired to replace an issue deposited on the Initial Date
of Deposit) are unavailable, cannot be purchased at
reasonable prices or their purchase is prohibited or
restricted by applicable law, regulation or policies, the
Depositor may (i) deposit, or instruct the Trustee to
purchase, in lieu thereof, another issue of Securities or
Replacement Securities or (ii) deposit cash or a letter of
credit in an amount equal to the valuation of the issue of
Securities whose acquisition is not feasible with
instructions to acquire such Securities of such issue when
they become available.
(4) Any contrary authorization in the preceding
subparagraphs (1) through (3) notwithstanding, deposits of
additional Securities made after the 90-day period
immediately following the Initial Date of Deposit (except
for deposits made to replace Failed Contract Obligations if
such deposits occur within 20 days from the date of a
failure occurring within such initial 90-day period) shall
maintain exactly the Percentage Ratio existing immediately
prior to such deposit.
(5) In connection with and at the time of any deposit
of additional Securities pursuant to this Section 2.01(b),
the Depositor shall exactly replicate Cash (as defined
below) received or receivable by the Trust as of the date of
such deposit. For purposes of this paragraph, "Cash" means,
as to the Capital Account, cash or other property (other
than Securities) on hand in the Capital Account or
receivable and to be credited to the Capital Account as of
the date of the deposit (other than amounts to be
distributed solely to persons other than holders of Units
created by the deposit) and, as to the Income Account, cash
or other property (other than Securities) received by the
Trust as of the date of the deposit or receivable by the
Trust in respect of a record date for a payment on a
Security which has occurred or will occur before the Trust
will be the holder of record of a Security, reduced by the
amount of any cash or other property received or receivable
on any Security allocable (in accordance with the Trustee's
calculations of distributions from the Income Account
pursuant to Section 3.05) to a distribution made or to be
made in respect of a Record Date occurring prior to the
deposit. Such replication will be made on the basis of a
fraction, the numerator of which is the number of Units
created by the deposit and the denominator of which is the
number of Units which are outstanding immediately prior to
the deposit. Cash represented by a foreign currency shall
be replicated in such currency or, if the Trustee has
entered into a contract for the conversion thereof, in U.S.
dollars in an amount replicating the dollars to be received
on such conversion."
M. The following shall be added immediately following the
first sentence of paragraph (c) of Section 2.01:
"The Trustee may allow the Depositor to substitute for
any Letter(s) of Credit deposited with the Trustee in
connection with the deposits described in Section 2.01(a)
and (b) cash in an amount sufficient to satisfy the
obligations to which the Letter(s) of Credit relates. Any
substituted Letter(s) of Credit shall be released by the
Trustee."
N. Section 2.03(a) of the Standard Terms and Conditions of
Trust shall be amended by adding the following sentence after the
first sentence of such section:
"The number of Units may be increased through a split
of the Units or decreased through a reverse split thereof,
as directed in writing by the Depositor, at any time when
the Depositor is the only beneficial holder of Units, which
revised number of Units shall be recorded by the Trustee on
its books. The Trustee shall be entitled to rely on the
Depositor's direction as certification that no person other
than the Depositor has a beneficial interest in the Units
and the Trustee shall have no liability to any person for
action taken pursuant to such direction."
O. Section 3.01 of the Standard Terms and Conditions of
Trust shall be replaced in its entirety with the following:
"Section 3.01. Initial Cost. Subject to reimbursement
as hereinafter provided, the cost of organizing the Trust
and the sale of the Trust Units shall be borne by the
Depositor, provided, however, that the liability on the part
of the Depositor under this section shall not include any
fees or other expenses incurred in connection with the
administration of the Trust subsequent to the deposit
referred to in Section 2.01. At the earlier of six months
after the Initial Date of Deposit or the conclusion of the
primary offering period (as certified by the Depositor to
the Trustee), the Trustee shall withdraw from the Account or
Accounts specified in the Prospectus or, if no Account is
therein specified, from the Capital Account, and pay to the
Depositor the Depositor's reimbursable expenses of
organizing the Trust in an amount certified to the Trustee
by the Depositor. In no event shall the amount paid by the
Trustee to the Depositor for the Depositors reimbursable
expenses of organizing the Trust exceed the estimated per
Unit amount of organization costs set forth in the
Prospectus for the Trust multiplied by the number of Units
of the Trust outstanding at the earlier of six months after
the Initial Date of Deposit or the conclusion of the primary
offering period; nor shall the Depositor be entitled to or
request reimbursement for expenses of organizing the Trust
incurred after the earlier of six months after the Initial
Date of Deposit or the conclusion of the primary offering
period. If the cash balance of the Capital Account is
insufficient to make such withdrawal, the Trustee shall, as
directed by the Depositor, sell Securities identified by the
Depositor, or distribute to the Depositor Securities having
a value, as determined under Section 4.01 as of the date of
distribution, sufficient for such reimbursement. Securities
sold or distributed to the Depositor to reimburse the
Depositor pursuant to this Section shall be sold or
distributed by the Trustee, to extent practicable, in the
percentage ratio then existing. The reimbursement provided
for in this section shall be for the account of the Unit
holders of record at the earlier of six months after the
Initial Date of Deposit or the conclusion of the primary
offering period. Any assets deposited with the Trustee in
respect of the expenses reimbursable under this Section 3.01
shall be held and administered as assets of the Trust for
all purposes hereunder. The Depositor shall deliver to the
Trustee any cash identified in the Statement of Net Assets
of the Trust included in the Prospectus not later than the
expiration of the Delivery Period and the Depositors
obligation to make such delivery shall be secured by the
letter of credit deposited pursuant to Section 2.01. Any
cash which the Depositor has identified as to be used for
reimbursement of expenses pursuant to this Section 3.01
shall be held by the Trustee, without interest, and reserved
for such purpose and, accordingly, prior to the earlier of
the six months after the Initial Date of Deposit or the
conclusion of the primary offering period, shall not be
subject to distribution or, unless the Depositor otherwise
directs, used for payment of redemptions in excess of the
per Unit amount payable pursuant to the next sentence. If a
Unit holder redeems Units prior to the earlier of six months
after the Initial Date of Deposit or the conclusion of the
primary offering period, the Trustee shall pay to the Unit
holder, in addition to the Redemption Value of the tendered
Units, unless otherwise directed by the Depositor, an amount
equal to the estimated per Unit cost of organizing the Trust
set forth in the Prospectus, or such lower revision thereof
most recently communicated to the Trustee by the Depositor
pursuant to Section 5.01, multiplied by the number of Units
tendered for redemption; to the extent the cash on hand in
the Trust is insufficient for such payment, the Trustee
shall have the power to sell Securities in accordance with
Section 5.02. As used herein, the Depositor's reimbursable
expenses of organizing the Trust shall include the cost of
the initial preparation and typesetting of the registration
statement, prospectuses (including preliminary
prospectuses), the indenture, and other documents relating
to the Trust, SEC and state blue sky registration fees, the
cost of the initial valuation of the portfolio and audit of
the Trust, the initial fees and expenses of the Trustee, and
legal and other out-of-pocket expenses related thereto, but
not including the expenses incurred in the printing of
preliminary prospectuses and prospectuses, expenses incurred
in the preparation and printing of brochures and other
advertising materials and any other selling expenses."
P. The second paragraph of Section 3.02 of the Standard
Terms and Conditions is hereby deleted and replaced with the
following sentence:
"Any non-cash distributions (other than a non-taxable
distribution of the shares of the distributing corporation
which shall be retained by a Trust) received by a Trust
shall be dealt with in the manner described at Section 3.11,
herein, and shall be retained or disposed of by such Trust
according to those provisions. The proceeds of any
disposition shall be credited to the Income Account of a
Trust. Neither the Trustee nor the Depositor shall be
liable or responsible in any way for depreciation or loss
incurred by reason of any such sale."
Q. Section 3.05.II(a) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as follows:
"II. (a) On each Distribution Date, the Trustee shall
distribute to each Unit holder of record at the close of
business on the Record Date immediately preceding such
Distribution Date an amount per Unit equal to such Unit
holder's Income Distribution (as defined below), plus such
Unit holder's pro rata share of the balance of the Capital
Account (except for monies on deposit therein required to
purchase Contract Obligations) computed as of the close of
business on such Record Date after deduction of any amounts
provided in Subsection I, provided, however, that the
Trustee shall not be required to make a distribution from
the Capital Account unless the amount available for
distribution shall equal $1.00 per 100 Units.
Each Trust shall provide the following distribution
elections: (1) distributions to be made by check mailed to
the post office address of the Unit holder as it appears on
the registration books of the Trustee, or (2) the following
reinvestment option:
The Trustee will, for any Unit holder who provides
the Trustee written instruction, properly executed and
in form satisfactory to the Trustee, received by the
Trustee no later than its close of business 10 business
days prior to a Record Date (the "Reinvestment Notice
Date"), reinvest such Unit holder's distribution from
the Income and Capital Accounts in Units of the Trust,
purchased from the Depositor, to the extent the
Depositor shall make Units available for such purchase,
at the Depositor's offering price as of the third
business day prior to the following Distribution Date,
and at such reduced sales charge as may be described in
the prospectus for the Trusts. If, for any reason, the
Depositor does not have Units of the Trust available
for purchase, the Trustee shall distribute such Unit
holder's distribution from the Income and Capital
Accounts in the manner provided in clause (1) of the
preceding paragraph. The Trustee shall be entitled to
rely on a written instruction received as of the
Reinvestment Notice Date and shall not be affected by
any subsequent notice to the contrary. The Trustee
shall have no responsibility for any loss or
depreciation resulting from any reinvestment made in
accordance with this paragraph, or for any failure to
make such reinvestment in the event the Depositor does
not make Units available for purchase.
Any Unit holder who does not effectively elect
reinvestment in Units of their respective Trust pursuant to
the preceding paragraph shall receive a cash distribution in
the manner provided in clause (1) of the second preceding
paragraph."
R. Section 3.05.II(b) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as follows:
"II. (b) For purposes of this Section 3.05, the Unit
holder's Income Distribution shall be equal to such Unit
holder's pro rata share of the cash balance in the Income
Account computed as of the close of business on the Record
Date immediately preceding such Income Distribution after
deduction of (i) the fees and expenses then deductible
pursuant to Section 3.05.I. and (ii) the Trustee's estimate
of other expenses properly chargeable to the Income Account
pursuant to the Indenture which have accrued, as of such
Record Date, or are otherwise properly attributable to the
period to which such Income Distribution relates."
S. Paragraph (c) of Subsection II of Section 3.05 of the
Standard Terms and Conditions of Trust is hereby amended to read
as follows:
"On each Distribution Date the Trustee shall distribute
to each Unit holder of record at the close of business on
the Record Date immediately preceding such Distribution Date
an amount per Unit equal to such Unit holder's pro rata
share of the balance of the Capital Account (except for
monies on deposit therein required to purchase Contract
Obligations) computed as of the close of business on such
Record Date after deduction of any amounts provided in
Subsection I."
T. Section 3.05 of Article III of the Standard Terms and
Conditions of Trust is hereby amended to include the following
subsection:
"Section 3.05.I.(e) deduct from the Income Account or,
to the extent funds are not available in such Account, from
the Capital Account and pay to the Depositor the amount that
it is entitled to receive pursuant to Section 3.14."
U. Section 3.11 of the Standard Terms and Conditions of
Trust is hereby deleted in its entirety and replaced with the
following language:
"Section 3.11. Notice to Depositor.
In the event that the Trustee shall have been notified
at any time of any action to be taken or proposed to be
taken by at least a legally required number of holders of
any Securities deposited in a Trust, the Trustee shall take
such action or omit from taking any action, as appropriate,
so as to insure that the Securities are voted as closely as
possible in the same manner and the same general proportion
as are the Securities held by owners other than such Trust.
In the event that an offer by the issuer of any of the
Securities or any other party shall be made to issue new
securities, or to exchange securities, for Trust Securities,
the Trustee shall reject such offer. However, should any
issuance, exchange or substitution be effected
notwithstanding such rejection or without an initial offer,
any securities, cash and/or property received shall be
deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee pursuant to the
Depositor's direction, unless the Depositor advises the
Trustee to keep such securities or property. The Depositor
may rely on the Portfolio Supervisor in so advising the
Trustee. The cash received in such exchange and cash
proceeds of any such sales shall be distributed to Unit
holders on the next distribution date in the manner set
forth in Section 3.05 regarding distributions from the
Capital Account. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by
reason of any such sale.
Neither the Depositor nor the Trustee shall be liable
to any person for any action or failure to take action
pursuant to the terms of this Section 3.11.
Whenever new securities or property is received and
retained by a Trust pursuant to this Section 3.11, the
Trustee shall provide to all Unit holders of such Trust
notices of such acquisition in the Trustee's annual report
unless prior notice is directed by the Depositor."
V. The first sentence of Section 3.13. shall be amended to
read as follows:
"As compensation for providing supervisory portfolio
services under this Indenture, the Portfolio Supervisor
shall receive, in arrears, against a statement or statements
therefor submitted to the Trustee monthly or annually an
aggregate annual fee in the amount per Unit set forth in
Part II of the Trust Agreement, calculated based on the
largest number of Units outstanding during the calendar year
except during the initial offering period as determined in
Section 4.01 of this Indenture, in which case the fee is
calculated based on the largest number of Units outstanding
during the period for which the compensation is paid (such
annual fee to be pro rated for any calendar year in which
the Portfolio Supervisor provides services during less than
the whole of such year). Such fee may exceed the actual
cost of providing such portfolio supervision services for
the Trust, but at no time will the total amount received for
portfolio supervision services rendered to unit investment
trusts of which Nike Securities L.P. is the sponsor in any
calendar year exceed the aggregate cost to the Portfolio
Supervisor of supplying such services in such year."
W. Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraphs
which shall be entitled Section 3.14.:
"Section 3.14. Bookkeeping and Administrative Expenses.
As compensation for providing bookkeeping and other
administrative services of a character described in
26(a)(2)(C) of the Investment Company Act of 1940 to the
extent such services are in addition to, and do not
duplicate, the services to be provided hereunder by the
Trustee or the Portfolio Supervisor, the Depositor shall
receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee
in the per Unit amount set forth in Part II of the Trust
Agreement, calculated based on the largest number of Units
outstanding during the calendar year except during the
initial offering period as determined in Section 4.01 of
this Indenture, in which case the fee is calculated based on
the largest number of Units outstanding during the period
for which the compensation is paid (such annual fee to be
pro rated for any calendar year in which the Depositor
provides services during less than the whole of such year).
Such fee may exceed the actual cost of providing such
bookkeeping and administrative services for the Trust, but
at not time will the total amount received for bookkeeping
and administrative services rendered to unit investment
trusts of which Nike Securities L.P. is the sponsor in any
calendar year exceed the aggregate cost to the Depositor of
supplying such services in such year. Such compensation
may, from time to time, be adjusted provided that the total
adjustment upward does not, at the time of such adjustment,
exceed the percentage of the total increase, after the date
hereof, in consumer prices for services as measured by the
United States Department of Labor consumer Price Index
entitled "All Services Less Rent of Shelter" or similar
index, if such index should no longer be published. The
consent or concurrence of any Unit holder hereunder shall
not be required for any such adjustment or increase. Such
compensation shall be paid by the Trustee, upon receipt of
an invoice therefor from the Depositor, upon which, as to
the cost incurred by the Depositor of providing services
hereunder the Trustee may rely, and shall be charged against
the Income and Capital Accounts on or before the
Distribution Date following the Monthly Record Date on which
such period terminates. The Trustee shall have no liability
to any Certificateholder or other person for any payment
made in good faith pursuant to this Section.
If the cash balance in the Income and Capital Accounts
shall be insufficient to provide for amounts payable
pursuant to this Section 3.14, the Trustee shall have the
power to sell (i) Securities from the current list of
Securities designated to be sold pursuant to Section 5.02
hereof, or (ii) if no such Securities have been so
designated, such Securities as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds of any
such sale in payment of the amounts payable pursuant to this
Section 3.14.
Any moneys payable to the Depositor pursuant to this
Section 3.14 shall be secured by a prior lien on the Trust
Fund except that no such lien shall be prior to any lien in
favor of the Trustee under the provisions of Section 6.04
herein."
X. Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraph
which shall be entitled Section 3.15:
"Section 3.15. Deferred Sales Charge. If the
prospectus related to the Trust specifies a deferred sales
charge, the Trustee shall, on the dates specified in and as
permitted by such Prospectus (the "Deferred Sales Charge
Payment Dates"), withdraw from the Capital Account, an
amount per Unit specified in such Prospectus and credit such
amount to a special non-Trust account designated by the
Depositor out of which the deferred sales charge will be
distributed to or on the order of the Depositor on such
Deferred Sales Charge Payment Dates (the "Deferred Sales
Charge Account"). If the balance in the Capital Account is
insufficient to make such withdrawal, the Trustee shall, as
directed by the Depositor, advance funds in an amount
required to fund the proposed withdrawal and be entitled to
reimbursement of such advance upon the deposit of additional
monies in the Capital Account, and/or sell Securities and
credit the proceeds thereof to the Deferred Sales Charge
Account, provided, however, that the aggregate amount
advanced by the Trustee at any time for payment of the
deferred sales charge shall not exceed $15,000. Such
direction shall, if the Trustee is directed to sell a
Security, identify the Security to be sold and include
instructions as to the execution of such sale. In the
absence of such direction by the Depositor, the Trustee
shall sell Securities sufficient to pay the deferred sales
charge (and any unreimbursed advance then outstanding) in
full, and shall select Securities to be sold in such manner
as will maintain (to the extent practicable) the relative
proportion of number of shares of each Security then held.
The proceeds of such sales, less any amounts paid to the
Trustee in reimbursement of its advances, shall be credited
to the Deferred Sales Charge Account. If a Unit holder
redeems Units prior to full payment of the deferred sales
charge, the Trustee shall, if so provided in the related
Prospectus, on the Redemption Date, withhold from the
Redemption Price payable to such Unit holder an amount equal
to the unpaid portion of the deferred sales charge and
distribute such amount to the Deferred Sales Charge Account.
If the Trust is terminated for reasons other than that set
forth in Section 6.01(g), the Trustee shall, if so provided
in the related Prospectus, on the termination of the Trust,
withhold from the proceeds payable to Unit holders an amount
equal to the unpaid portion of the deferred sales charge and
distribute such amount to the Deferred Sales Charge Account.
If the Trust is terminated pursuant to Section 6.01(g), the
Trustee shall not withhold from the proceeds payable to Unit
holders any amounts of unpaid deferred sales charges. If
pursuant to Section 5.02 hereof, the Depositor shall
purchase a Unit tendered for redemption prior to the payment
in full of the deferred sales charge due on the tendered
Unit, the Depositor shall pay to the Unit holder the amount
specified under Section 5.02 less the unpaid portion of the
deferred sales charge. All advances made by the Trustee
pursuant to this Section shall be secured by a lien on the
Trust prior to the interest of the Unit holders. If the
related Prospectus provides that the deferred sales charge
shall accrue on a daily basis, the "unpaid portion of the
deferred sales charge" as used in this paragraph shall mean
the accrued and unpaid deferred sales charge as of the date
of redemption or termination, as appropriate."
Y. Notwithstanding anything to the contrary in Sections
3.15 and 4.05 of the Standard Terms and Conditions of Trust, so
long as Nike Securities L.P. is acting as Depositor, the Trustee
shall have no power to remove the Portfolio Supervisor.
Z. The first sentence of Section 4.03. shall be amended to
read as follows:
"As compensation for providing evaluation services under
this Indenture, the Evaluator shall receive, in arrears, against
a statement or statements therefor submitted to the Trustee
monthly or annually an aggregate annual fee equal to the amount
specified as compensation for the Evaluator in the Trust
Agreement, calculated based on the largest number of Units
outstanding during the calendar year except during the initial
offering period as determined in Section 4.01 of this Indenture,
in which case the fee is calculated based on the largest number
of Units outstanding during the period for which the compensation
is paid (such annual fee to be pro rated for any calendar year in
which the Evaluator provides services during less than the whole
of such year). Such compensation may, from time to time, be
adjusted provided that the total adjustment upward does not, at
the time of such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for services
as measured by the United States Department of Labor Consumer
Price Index entitled "All Services Less Rent of Shelter" or
similar index, if such index should no longer be published. The
consent or concurrence of any Unit holder hereunder shall not be
required for any such adjustment or increase. Such compensation
shall be paid by the Trustee, upon receipt of invoice therefor
from the Evaluator, upon which, as to the cost incurred by the
Evaluator of providing services hereunder the Trustee may rely,
and shall be charged against the Income and/or Capital Accounts,
in accordance with Section 3.05."
AA. Section 5.01 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The second sentence of the first paragraph of Section
5.01 shall be amended by deleting the phrase "and (iii)" and
adding the following "(iii) amounts representing unpaid accrued
organizational and offering costs, (iv) if the Prospectus for the
Trust provides that the deferred sales charge shall accrue on a
daily basis, amounts representing unpaid accrued deferred sales
charge, and (v)"; and
(ii) The following text shall immediately precede the last
sentence of the first paragraph of Section 5.01:
"Prior to the payment to the Depositor of its
reimbursable organization costs to be made at the
earlier of six months after the Initial Date of Deposit
or the conclusion of the primary offering period in
accordance with Section 3.01, for purposes of
determining the Trust Fund Evaluation under this
Section 5.01, the Trustee shall rely upon the amounts
representing unpaid accrued organization costs in the
estimated amount per Unit set forth in the Prospectus
until such time as the Depositor notifies the Trustee
in writing of a revised estimated amount per Unit
representing unpaid accrued organization costs. Upon
receipt of such notice, the Trustee shall use this
revised estimated amount per Unit representing unpaid
accrued organization costs in determining the Trust
Fund Evaluation but such revision of the estimated
expenses shall not effect calculations made prior
thereto and no adjustment shall be made in respect
thereof."
BB. Section 5.02 of the Standard Terms and Conditions of
Trust is amended by adding the following after the second
paragraph of such section:
"Notwithstanding anything herein to the contrary, in
the event that any tender of Units pursuant to this Section
5.02 would result in the disposition by the Trustee of less
than a whole Security, the Trustee shall distribute cash in
lieu thereof and sell such Securities as directed by the
Sponsors as required to make such cash available.
Subject to the restrictions set forth in the
prospectus, Unit holders may redeem 1,000 Units or more of
such Trust and request a distribution in kind of (i) such
Unit holder's pro rata portion of each of the Securities in
such Trust, in whole shares, and (ii) cash equal to such
Unit holder's pro rata portion of the Income and Capital
Accounts as follows: (x) a pro rata portion of the net
proceeds of sale of the Securities representing any
fractional shares included in such Unit holder's pro rata
share of the Securities and (y) such other cash as may
properly be included in such Unit holder's pro rata share of
the sum of the cash balances of the Income and Principal
Accounts in an amount equal to the Unit Value determined on
the basis of a Trust Fund Evaluation made in accordance with
Section 5.01 determined by the Trustee on the date of tender
less amounts determined in clauses (i) and (ii)(x) of this
Section. Subject to Section 5.05 with respect to Rollover
Unit holders, to the extent possible, distributions of
Securities pursuant to an in kind redemption of Units shall
be made by the Trustee through the distribution of each of
the Securities in book-entry form to the account of the Unit
holder's bank or broker-dealer at the Depository Trust
Company. Any distribution in kind will be reduced by
customary transfer and registration charges."
CC. The following Section 5.05 shall be added:
"Section 5.05. Rollover of Units. (a) If the
Depositor shall offer a subsequent series of the Trust (the
"New Series"), the Trustee shall, at the Depositor's sole
cost and expense, include in the notice sent to Unit holders
specified in Section 8.02 a form of election whereby Unit
holders, whose redemption distribution would be in an amount
sufficient to purchase at least one Unit of the New Series,
may elect to have their Unit(s) redeemed in kind in the
manner provided in Section 5.02, the Securities included in
the redemption distribution sold, and the cash proceeds
applied by the Distribution Agent to purchase Units of a New
Series, all as hereinafter provided. The Trustee shall
honor properly completed election forms returned to the
Trustee, accompanied by any Certificate evidencing Units
tendered for redemption or a properly completed redemption
request with respect to uncertificated Units, by its close
of business on the Rollover Notification Date. The notice
and form of election to be sent to Unit holders in respect
of any redemption and purchase of Units of a New Series as
provided in this section shall be in such form and shall be
sent at such time or times as the Depositor shall direct the
Trustee in writing and the Trustee shall have no
responsibility therefor. The Distributions Agent acts
solely as disbursing agent in connection with purchases of
Units pursuant to this Section and nothing herein shall be
deemed to constitute the Distribution Agent a broker in such
transactions
All Units so tendered by a Unit holder (a "Rollover
Unit holder") shall be redeemed and cancelled during the
Special Redemption and Liquidation Period on such date or
dates specified by Depositor. Subject to payment by such
Rollover Unit holder of any tax or other governmental
charges which may be imposed thereon, such redemption is to
be made in kind pursuant to Section 5.02 by distribution of
cash and/or Securities to the Distribution Agent on the
redemption date equal to the net asset value (determined on
the basis of the Trust Fund Evaluation as of the redemption
date in accordance with Section 4.01) multiplied by the
number of Units being redeemed (herein called the "Rollover
Distribution"). Any Securities that are made part of the
Rollover Distribution shall be valued for purposes of the
redemption distribution as of the redemption date.
All Securities included in a Unit holder's Rollover
Distribution shall be sold by the Distribution Agent during
the Special Redemption and Liquidation Period specified in
the Prospectus pursuant to the Depositor's direction, and
the Distribution Agent shall, unless directed otherwise by
the Depositor, employ the Depositor as broker in connection
with such sales. For such brokerage services, the Depositor
shall be entitled to compensation at its customary rates,
provided however, that its compensation shall not exceed the
amount authorized by applicable securities laws and
regulations. The Depositor shall direct that sales be made
in accordance with the guidelines set forth in the
Prospectus under the heading "Special Redemption,
Liquidation and Investment in a New Trust." Should the
Depositor fail to provide direction, the Distribution Agent
shall sell the Securities in the manner provided in the
prospectus. The Distribution Agent shall have no
responsibility for any loss or depreciation incurred by
reason of any sale made pursuant to this Section.
Upon completion of all sales of Securities included in
the Rollover Unit holder's Rollover Distribution, the
Distribution Agent shall, as agent for such Rollover Unit
holder, enter into a contract with the Depositor to purchase
from the Depositor Units of a New Series (if any), at the
Depositor's public offering price for such Units on such
day, and at such reduced sales charge as shall be described
in the prospectus for such Trust. Such contract shall
provide for purchase of the maximum number of Units of a New
Series whose purchase price is equal to or less than the
cash proceeds held by the Distribution Agent for the Unit
holder on such day (including therein the proceeds
anticipated to be received in respect of Securities traded
on such day net of all brokerage fees, governmental charges
and any other expenses incurred in connection with such
sale), to the extent Units are available for purchase from
the Depositor. In the event a sale of Securities included
in the Rollover Unit holder's redemption distribution shall
not be consummated in accordance with its terms, the
Distribution Agent shall apply the cash proceeds held for
such Unit holder as of the settlement date for the purchase
of Units of a New Series to purchase the maximum number of
Units which such cash balance will permit, and the Depositor
agrees that the settlement date for Units whose purchase was
not consummated as a result of insufficient funds will be
extended until cash proceeds from the Rollover Distribution
are available in a sufficient amount to settle such
purchase. If the Unit holder's Rollover Distribution will
produce insufficient cash proceeds to purchase all of the
Units of a New Series contracted for, the Depositor agrees
that the contract shall be rescinded with respect to the
Units as to which there was a cash shortfall without any
liability to the Rollover Unit holder or the Distribution
Agent. Any cash balance remaining after such purchase shall
be distributed within a reasonable time to the Rollover Unit
holder by check mailed to the address of such Unit holder on
the registration books of the Trustee. Units of a New Series
will be uncertificated unless and until the Rollover Unit
holder requests a certificate. Any cash held by the
Distribution Agent shall be held in a non-interest bearing
account which will be of benefit to the Distribution Agent
in accordance with normal banking procedures. Neither the
Trustee nor the Distribution Agent shall have any
responsibility or liability for loss or depreciation
resulting from any reinvestment made in accordance with this
paragraph, or for any failure to make such reinvestment in
the event the Depositor does not make Units available for
purchase.
(b) Notwithstanding the foregoing, the Depositor may,
in its discretion at any time, decide not to offer any new
Trust Series in the future, and if so, this Section 5.05
concerning the Rollover of Units shall be inoperative.
(c) The Distribution Agent shall receive no fees for
performing its duties hereunder. The Distribution Agent
shall, however, be entitled to receive indemnification and
reimbursement from the Trust for any and all expenses and
disbursements to the same extent as the Trustee is permitted
reimbursement hereunder."
DD. Paragraph (g) of Section 6.01 of the Standard Terms and
Conditions of Trust is hereby amended by inserting the following
after the first word thereof:
"(i) the value of any Trust as shown by an evaluation
by the Trustee pursuant to Section 5.01 hereof shall be less
than the lower of $2,000,000 or 20% of the total value of
Securities deposited in such Trust during the initial
offering period, or (ii)"
EE. The third paragraph of Section 6.02 of the Standard
Terms and Conditions of Trust shall be deleted in its entirety
and replaced with the following:
"The Trustee shall pay, or reimburse to the Depositor, the
expenses related to the updating of the Trusts registration
statement, to the extent of legal fees, typesetting fees,
electronic filing expenses and regulatory filing fees. Such
expenses shall be paid from the Income Account, or to the extent
funds are not available in such Account, from the Capital
Account, against an invoice or invoices therefor presented to the
Trustee by the Depositor. By presenting such invoice or
invoices, the Depositor shall be deemed to certify, upon which
certification the Trustee is authorized conclusively to rely,
that the amounts claimed therein are properly payable pursuant to
this paragraph. The Depositor shall provide the Trustee, from
time to time as requested, an estimate of the amount of such
expenses, which the Trustee shall use for the purpose of
estimating the accrual of Trust expenses. The amount paid by the
Trust pursuant to this paragraph in each year shall be separately
identified in the annual statement provided to Unitholders. The
Depositor shall assure that the Prospectus for the Trust contains
such disclosure as shall be necessary to permit payment by the
Trust of the expenses contemplated by this paragraph under
applicable laws and regulations.
The provisions of this paragraph shall not limit the
authority of the Trustee to pay, or reimburse to the Depositor or
others, such other or additional expenses as may be determined to
be payable from the Trust as provided in Section 6.02 of the
Standard Terms and Conditions of Trust."
FF. The first sentence of the second paragraph of Section
6.04 shall be amended to include the phrase "license fees, if
any," immediately after the reference to legal and auditing
expenses.
GG. The third sentence of paragraph (a) of Section 6.05 of
the Standard Terms and Conditions of Trust shall be replaced in
its entirety by the following:
"The Depositor may remove the Trustee at any time with or
without cause and appoint a successor Trustee by written
instrument or instruments delivered not less than sixty days
prior to the effective date of such removal and appointment to
the Trustee so removed and to the successor Trustee."
HH. Section 8.02 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The fourth sentence of the second paragraph shall
be deleted and replaced with the following:
"The Trustee will honor duly executed requests for in-
kind distributions received (accompanied by the electing
Unit holder's Certificate, if issued) by the close of
business ten business days prior to the Mandatory
Termination Date."
(ii) The first sentence of the fourth paragraph shall
be deleted and replaced with the following:
"Commencing no earlier than the business day following
that date on which Unit holders must submit to the Trustee
notice of their request to receive an in-kind distribution
of Securities at termination, the Trustee will liquidate the
Securities not segregated for in-kind distributions during
such period and in such daily amounts as the Depositor shall
direct."
IN WITNESS WHEREOF, Nike Securities L.P., The Chase
Manhattan Bank and First Trust Advisors L.P. have each caused
this Trust Agreement to be executed and the respective corporate
seal to be hereto affixed and attested (if applicable) by
authorized officers; all as of the day, month and year first
above written.
NIKE SECURITIES L.P.,
Depositor
By Robert M. Porcellino
Senior Vice President
THE CHASE MANHATTAN BANK,
Trustee
By Rosalia Raviele
Vice President
[SEAL]
ATTEST:
Joan Currie
Assistant Treasurer
FIRST TRUST ADVISORS L.P.,
Evaluator
By Robert M. Porcellino
Senior Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Robert M. Porcellino
Senior Vice President
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
FT 396
(Note: Incorporated herein and made a part hereof for the
Trust is the "Schedule of Investments" for the Trust as set forth
in the Prospectus.)
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
January 6, 2000
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: FT 396
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of FT 396 in connection with the January 6,
2000 among Nike Securities L.P., as Depositor, The Chase
Manhattan Bank, as Trustee and First Trust Advisors L.P. as
Evaluator and Portfolio Supervisor, pursuant to which the
Depositor has delivered to and deposited the Securities listed in
Schedule A to the Trust Agreement with the Trustee and pursuant
to which the Trustee has issued to or on the order of the
Depositor a certificate or certificates representing units of
fractional undivided interest in and ownership of the Fund
created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. the certificates evidencing the Units in the Fund when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-94023)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF:erg
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
January 6, 2000
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Re: FT 396
Gentlemen:
We have acted as counsel for Nike Securities L.P., Depositor
of FT 396 (the "Fund"), in connection with the issuance of units
of fractional undivided interest in certain of the Trusts of said
Fund (the "Trust"), under a Trust Agreement, dated January 6,
2000 (the "Indenture"), among Nike Securities L.P., as Depositor,
The Chase Manhattan Bank, as Trustee and First Trust Advisors
L.P., as Evaluator and Portfolio Supervisor.
In this connection, we have examined the Registration
Statement, the form of Prospectus proposed to be filed with the
Securities and Exchange Commission, the Indenture and such other
instruments and documents we have deemed pertinent. The opinions
expressed herein assume that the Trusts will be administered, and
investments by a Trust from proceeds of subsequent deposits, if
any, will be made, in accordance with the terms of the Indenture.
Each Trust holds Equity Securities as such term is defined in the
Prospectus. For purposes of the following discussion and
opinion, it is assumed that each Equity Security is equity for
Federal income tax purposes.
Based upon the foregoing and upon an investigation of such
matters of law as we consider to be applicable, we are of the
opinion that, under existing United States Federal income tax
law:
I. Each 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 Internal Revenue Code of 1986 (the
"Code") in the proportion that the number of Units held by him
bears to the total number of Units outstanding; under Subpart E,
Subchapter J of Chapter 1 of the Code, income of a Trust will be
treated as income of the Unit holders in the proportion described
above; and an item of Trust income will have the same character
in the hands of a Unit holder as it would have in the hands of
the Trustee. Each Unit holder will be considered to have
received his pro rata share of income derived from each Trust
asset when such income is considered to be received by a Trust.
II. The price a Unit holder pays for his Units, generally
including sales charges, is allocated among his pro rata portion
of each Equity Security held by a Trust (in proportion to the
fair market values thereof on the valuation date closest to the
date the Unit holder purchases his Units) in order to determine
his tax basis for his pro rata portion of each Equity Security
held by a Trust. For Federal income tax purposes, a Unit
holder's pro rata portion of distributions of cash or property by
a corporation with respect to an Equity Security ("dividends" as
defined by Section 316 of the Code) is taxable as ordinary income
to the extent of such corporation's current and accumulated
"earnings and profits." A Unit holder's pro rata portion of
dividends paid on such Equity Security which exceeds such current
and accumulated earnings and profits will first reduce a Unit
holder's tax basis in such Equity Security, and to the extent
that such dividends exceed a Unit holder's tax basis in such
Equity Security shall be treated as gain from the sale or
exchange of property.
III. Gain or loss will be recognized to a Unit holder
(subject to various nonrecognition provisions under the Code)
upon redemption or sale of his Units, except to the extent an in
kind distribution of stock is received by such Unit holder from a
Trust as discussed below. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the
adjusted basis of his Units. Before adjustment, such basis would
normally be cost if the Unit holder had acquired his Units by
purchase. Such basis will be reduced, but not below zero, by the
Unit holder's pro rata portion of dividends with respect to each
Equity Security which is not taxable as ordinary income.
IV. If the Trustee disposes of a Trust asset (whether by
sale, taxable exchange, liquidation, redemption, payment on
maturity or otherwise) gain or loss will be recognized to the
Unit holder (subject to various nonrecognition provisions under
the Code) and the amount thereof will be measured by comparing
the Unit holder's aliquot share of the total proceeds from the
transaction with his basis for his fractional interest in the
asset disposed of. Such basis is ascertained by apportioning the
tax basis for his Units (as of the date on which his Units were
acquired) among each of a Trust's assets (as of the date on which
his Units were acquired) ratably according to their values as of
the valuation date nearest the date on which he purchased such
Units. A Unit holder's basis in his Units and of his fractional
interest in each Trust asset must be reduced, but not below zero,
by the Unit holder's pro rata portion of dividends with respect
to each Equity Security which is not taxable as ordinary income.
V. Under the Indenture, under certain circumstances, a
Unit holder tendering Units for redemption may request an in kind
distribution of Equity Securities upon the redemption of Units or
upon the termination of a Trust. As previously discussed, prior
to the redemption of Units or the termination of a Trust, a Unit
holder is considered as owning a pro rata portion of each of a
Trust's assets. The receipt of an in kind distribution will
result in a Unit holder receiving an undivided interest in whole
shares of stock and possibly cash. The potential federal income
tax consequences which may occur under an in kind distribution
with respect to each Equity Security owned by a Trust will depend
upon whether or not a Unit holder receives cash in addition to
Equity Securities. An "Equity Security" for this purpose is a
particular class of stock issued by a particular corporation. A
Unit holder will not recognize gain or loss if a Unit holder only
receives Equity Securities in exchange for his or her pro rata
portion of the Equity Securities held by a Trust. However, if a
Unit holder also receives cash in exchange for a fractional share
of an Equity Security held by a Trust, such Unit holder will
generally recognize gain or loss based upon the difference
between the amount of cash received by the Unit holder and his
tax basis in such fractional share of an Equity Security held by
a Trust. The total amount of taxable gains (or losses)
recognized upon such redemption will generally equal the sum of
the gain (or loss) recognized under the rules described above by
the redeeming Unit holder with respect to each Equity Security
owned by a Trust.
A domestic corporation owning Units in a Trust may be
eligible for the 70% dividends received deduction pursuant to
Section 243(a) of the Code with respect to such Unit holder's pro
rata portion of dividends received by such Trust (to the extent
such dividends are taxable as ordinary income, as discussed
above, and are attributable to domestic corporations), subject to
the limitations imposed by Sections 246 and 246A of the Code.
To the extent dividends received by a Trust are attributable
to foreign corporations, a corporation that owns Units will not
be entitled to the dividends received deduction with respect to
its pro rata portion of such dividends since the dividends
received deduction is generally available only with respect to
dividends paid by domestic corporations.
Section 67 of the Code provides that certain miscellaneous
itemized deductions, such as investment expenses, tax return
preparation fees and employee business expenses will be
deductible by an individual only to the extent they exceed 2% of
such individual's adjusted gross income. Unit holders may be
required to treat some or all of the expenses of a Trust as
miscellaneous itemized deductions subject to this limitation.
A Unit holder will recognize taxable gain (or loss) when all
or part of the pro rata interest in an Equity Security is either
sold by a Trust or redeemed or when a Unit holder disposes of his
Units in a taxable transaction, in each case for an amount
greater (or less) than his tax basis therefor; subject to various
nonrecognition provisions of the Code.
It should be noted that payments to a Trust of dividends on
Equity Securities that are attributable to foreign corporations
may be subject to foreign withholding taxes and Unit holders
should consult their tax advisers regarding the potential tax
consequences relating to the payment of any such withholding
taxes by a Trust. Any dividends withheld as a result thereof
will nevertheless be treated as income to the Unit holders.
Because under the grantor trust rules, an investor is deemed to
have paid directly his share of foreign taxes that have been paid
or accrued, if any, an investor may be entitled to a foreign tax
credit or deduction for United States tax purposes with respect
to such taxes. The Taxpayer Relief Act of 1997 imposes a required
holding period for such credits.
Any gain or loss recognized on a sale or exchange will,
under current law, generally be capital gain or loss.
The scope of this opinion is expressly limited to the
matters set forth herein, and, except as expressly set forth
above, we express no opinion with respect to any other taxes,
including foreign, state or local taxes or collateral tax
consequences with respect to the purchase, ownership and
disposition of Units.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-94023)
relating to the Units referred to above and to the use of our
name and to the reference to our firm in said Registration
Statement and in the related Prospectus.
Very truly yours,
CHAPMAN AND CUTLER
EFF/erg
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 6, 2000
The Chase Manhattan Bank, as Trustee of
FT 396
4 New York Plaza, 6th Floor
New York, New York 10004-3113
Attention: Mr. Thomas Porazzo
Vice President
Re: FT 396
Dear Sirs:
We are acting as special counsel with respect to New York
tax matters for the unit investment trust or trusts included in
FT 396 (each, a "Trust"), which will be established under a
certain Standard Terms and Conditions of Trust dated November 20,
1991, and a related Trust Agreement dated as of today
(collectively, the "Indenture") among Nike Securities L.P., as
Depositor (the "Depositor"), First Trust Advisors L.P., as
Evaluator, First Trust Advisors L.P., as Portfolio Supervisor,
and The Chase Manhattan Bank as Trustee (the "Trustee").
Pursuant to the terms of the Indenture, units of fractional
undivided interest in the Trust (the "Units") will be issued in
the aggregate number set forth in the Indenture.
We have examined and are familiar with originals or
certified copies, or copies otherwise identified to our
satisfaction, of such documents as we have deemed necessary or
appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each dated today
and addressed to the Trustee, of Chapman and Cutler, counsel for
the Depositor, with respect to the matters of law set forth
therein.
Based upon the foregoing, we are of the opinion that the
Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the
New York State franchise tax or the New York City general
corporation tax.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 333-94023) filed with the
Securities and Exchange Commission with respect to the
registration of the sale of the Units and to the references to
our name in such Registration Statement and the preliminary
prospectus included therein.
Very truly yours,
CARTER, LEDYARD & MILBURN
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 6, 2000
The Chase Manhattan Bank, as Trustee of
FT 396
4 New York Plaza, 6th Floor
New York, New York 10004-3113
Attention: Mr. Thomas Porazzo
Vice President
Re: FT 396
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank
("Chase") in connection with the execution and delivery of a
Trust Agreement ("the Trust Agreement") dated today's date (which
Trust Agreement incorporates by reference certain Standard Terms
and Conditions of Trust dated November 20, 1991, and the same are
collectively referred to herein as the "Indenture") among Nike
Securities L.P., as Depositor (the "Depositor"), First Trust
Advisors L.P., as Evaluator, First Trust Advisors L.P., as
Portfolio Supervisor, and Chase, as Trustee (the "Trustee"),
establishing the unit investment trust or trusts included in FT
396 (each, a "Trust"), and the confirmation by Chase, as Trustee
under the Indenture, that it has registered on the registration
books of the Trust the ownership by the Depositor of a number of
units constituting the entire interest in the Trust (such
aggregate units being herein called "Units"), each of which
represents an undivided interest in the respective Trust which
consists of common stocks (including, confirmations of contracts
for the purchase of certain stocks not delivered and cash, cash
equivalents or an irrevocable letter of credit or a combination
thereof, in the amount required for such purchase upon the
receipt of such stocks), such stocks being defined in the
Indenture as Securities and referenced in the Schedule to the
Indenture.
We have examined the Indenture, a specimen of the
certificates to be issued thereunder (the "Certificates"), the
Closing Memorandum dated todays date, and such other documents
as we have deemed necessary in order to render this opinion.
Based on the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing corporation
having the powers of a Trust Company under the laws of the State
of New York.
2. The Trust Agreement has been duly executed and
delivered by Chase and, assuming due execution and delivery by
the other parties thereto, constitutes the valid and legally
binding obligation of Chase.
3. The Certificates are in proper form for execution and
delivery by Chase, as Trustee.
4. Chase, as Trustee, has registered on the registration
books of the Trust the ownership of the Units by the Depositor.
Upon receipt of confirmation of the effectiveness of the
registration statement for the sale of the Units filed with the
Securities and Exchange Commission under the Securities Act of
1933, the Trustee may deliver Certificates for such Units, in
such names and denominations as the Depositor may request, to or
upon the order of the Depositor as provided in the Closing
Memorandum.
In rendering the foregoing opinion, we have not considered,
among other things, whether the Securities have been duly
authorized and delivered.
Very truly yours,
CARTER, LEDYARD & MILBURN
First Trust Advisors L.P.
1001 Warrenville Road
Lisle, Illinois 60532
January 6, 2000
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: FT 396
Gentlemen:
We have examined the Registration Statement File No.
333-94023 for the above captioned fund. We hereby consent to the
use in the Registration Statement of the references to First
Trust Advisors L.P. as evaluator.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
First Trust Advisors L.P.
Robert M. Porcellino
Senior Vice President
