FT 1197
TRUST AGREEMENT
Dated: July 10, 2006
The Trust Agreement among First Trust Portfolios L.P., as
Depositor, The Bank of New York, 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 FT 785 and certain subsequent Series, Effective
December 9, 2003" (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
SELECT DIVIDEND TRUST, 2006 SERIES
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust pursuant
to Section 2.01 of the Standard Terms and Conditions of Trust are
set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
set forth in Schedule B to the Trust Agreement attached hereto.
D. The Record Date shall be as set forth in the prospectus
under "Summary of Essential Information." For purposes of the
deductions and payments specified in Part I of Section 3.05,
Record Date shall mean the last Business Day of each month.
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. First Trust Advisors L.P.'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 $.0080 per Unit.
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 July 10,
2006.
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 minimum number of Units a Unit holder must redeem in
order to be eligible for an in-kind distribution of Securities
pursuant to Section 5.02 shall be 2,500 Units of the Trust.
L. The minimum number of Units a Unit holder must tender in
order to be eligible for an in-kind distribution of Securities
pursuant to Section 8.02 shall be 2,500 Units of the Trust.
PART III
A. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, Section 2.01(e) shall be amended
to read as follows:
"The Trustee is hereby irrevocably authorized to effect
registration or transfer of the Securities in fully
registered form to the name of the Trustee or to the name of
its nominee or to hold the Securities in a clearing agency
registered with the Securities and Exchange Commission, in a
book entry system operated by the Federal Reserve Board,
with an Eligible Foreign Custodian or in an Eligible
Securities Depository."
B. Section 2.01 of the Standard Terms and Conditions of
Trust shall be amended to include the following section at the
end of Section 2.01:
"(g) Notwithstanding anything to the contrary herein,
subject to the requirements set forth in this Section
2.01(g) and unless the Prospectus otherwise requires, the
Depositor may, on any Business Day (the "Trade Date"),
subscribe for additional Units as follows:
(i) Prior to the Evaluation Time on such Business Day,
the Depositor shall provide notice (the "Subscription
Notice") to the Trustee, by telephone or by written
communication, of the Depositor's intention to subscribe for
additional Units. The Subscription Notice shall identify the
additional Securities to be acquired (which will be a
precise replication of the then existing portfolio, as
consistent with the provisions of Section 2,01(b)) and shall
either (a) specify the quantity of additional Securities to
be deposited by the Depositor on the settlement date for
such subscription or (b) instruct the Trustee to purchase
additional Securities with an aggregate value as specified
in the Subscription Notice.
(ii) Promptly following the Evaluation Time on such
Business Day, the Depositor shall verify with the Trustee
the number of additional Units to be created.
(iii) Not later than the time on the settlement date for
such subscription when the Trustee is to deliver or assign
the additional Units created hereby, the Depositor shall
deposit with the Trustee (a) any additional Securities
specified in the Subscription Notice (or contracts to
purchase such additional Securities together with cash or a
Letter of Credit in the amount necessary to settle such
contracts) or (b) cash or a Letter of Credit in an amount
equal to the aggregate value of the additional Securities
specified in the Subscription Notice to be purchased by the
Trustee, and adding and subtracting the amounts specified in
the first and second sentences of Section 5.01, computed as
of the Evaluation Time on the Business Day preceding the
Trade Date divided by the number of Units outstanding as of
the Evaluation Time on the Business Day preceding the Trade
Date, times the number of additional Units to be created.
(iv) On the settlement date for such subscription, the
Trustee shall, in exchange for the Securities and cash, cash
or Letter of Credit described above, deliver to, or assign
in the name of or on the order of, the Depositor the number
of Units verified by the Depositor with the Trustee.
(v) In the event the Depositor fails to take such action
required by paragraph (iii) above, the Trustee shall, on the
settlement date for such subscription, settle the securities
transactions specified in the Subscription Notice.
(vi) Neither the Trust nor Unit holders of the Trust will be
responsible for any loss resulting from the failure of the
Depositor to take such action required by paragraph (iii)
above."
C. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, Section 6.01(e) shall be
amended to read as follows:
"(e) (1) Subject to the provisions of subparagraph (2) of
this paragraph, the Trustee may employ agents, sub-
custodians, attorneys, accountants and auditors and shall
not be answerable for the default or misconduct of any such
agents, sub-custodians, attorneys, accountants or auditors
if such agents, sub-custodians, attorneys, accountants or
auditors shall have been selected with reasonable care. The
Trustee shall be fully protected in respect of any action
under this Indenture taken or suffered in good faith by the
Trustee in accordance with the opinion of counsel, which may
be counsel to the Depositor acceptable to the Trustee,
provided, however that this disclaimer of liability shall
not excuse the Trustee from the responsibilities specified
in subparagraph (2) below. The fees and expenses charged by
such agents, sub-custodians, attorneys, accountants or
auditors shall constitute an expense of the Trust
reimbursable from the Income and Capital Accounts of the
Trust as set forth in section 7.04 hereof.
(2)To the extent permitted under the Investment Company
Act of 1940 as evidenced by an opinion of counsel to the
Depositor satisfactory to the Trustee or "no-action" letters
or exemptive orders issued by the Securities and Exchange
Commission or its staff, the Trustee may place and maintain
in the care of an Eligible Foreign Custodian (which is
employed by the Trustee as a sub-custodian as contemplated
by subparagraph (1) of this paragraph (e) and which may be
an affiliate or subsidiary of the Trustee or any other
entity in which the Trustee may have an ownership interest)
or an Eligible Securities Depository the Trust's investments
(including foreign currencies) for which the primary market
is outside the United States, and such cash and cash
equivalents in amounts reasonably necessary to effect the
Trust's transactions in such investments, provided that:
(A) The Trustee shall indemnify the Trust and hold the
Trust harmless from and against any risk of loss of Trust
assets held with an Eligible Foreign Custodian in
accordance with the foreign custody contract.
(B) The Trustee shall exercise reasonable care,
prudence and diligence such as a person having
responsibility for the safekeeping of Trust assets would
exercise, and shall be liable to the Trust for any loss
occurring as a result of its failure to do so.
(C) The Trustee shall perform all duties assigned to
the Foreign Custody Manager by Rule 17f-5 under the
Investment Company Act of 1940 (17 CFR ss. 270.17f-5), as
now in effect or as such rule may be amended in the future
("Rule 17f-5"). The Trustee shall not delegate such
duties.
(D) The Trustee shall (i) provide the Depositor with
an analysis of the custody risks associated with
maintaining assets with an Eligible Securities Depository;
(ii) monitor the custody risks associated with maintaining
assets with the Eligible Securities Depository on a
continuing basis and promptly notify the Depositor of any
material change in such risks; and (iii) exercise
reasonable care, prudence and diligence in performing the
foregoing duties. The Depositor shall instruct the Trustee
to take such action as the Depositor deems appropriate in
response to a notification by the Trustee provided
pursuant to (ii) in the preceding sentence.
(E) The Trust's Prospectus shall contain such
disclosure regarding foreign securities and foreign
custody as is required for management investment companies
by Forms N-1A and N-2. Such Prospectus shall also contain
disclosure concerning the Depositor's responsibilities
described in (C) above.
(F) The Trustee shall maintain and keep current
written records regarding the basis for the choice or
continued use of a particular Eligible Foreign Custodian
pursuant to this subparagraph for a period of not less
than six years from the end of the fiscal year in which
the Trust was terminated, the first two years in an easily
accessible place. Such records shall be available for
inspection by Unitholders and the Securities and Exchange
Commission at the Trustee's corporate trust office during
its usual business hours."
D. Section 4.05 shall be amended to add the following
paragraph as the third paragraph of Section 4.05 of the Standard
Terms and Conditions of Trust:
The Portfolio Supervisor may employ one or more sub-
Portfolio Supervisors to assist in performing the services
set forth in this Section 4.05 and shall not be answerable
for the default of any such sub-Portfolio Supervisors if
such sub-Portfolio Supervisors shall have been selected with
reasonable care, provided, however, that the Portfolio
Supervisor will indemnify and hold the Trust harmless from
and against any loss occurring as a result of a sub-
Portfolio Supervisor's willful misfeasance, reckless
disregard, bad faith, or gross negligence in performing
supervisory duties. The fees and expenses charged by such
sub-Portfolio Supervisors shall be paid by the Portfolio
Supervisor out of proceeds received by the Portfolio
Supervisor in accordance with Section 4.03 hereof.
E. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the second paragraph in Section
8.02 shall be amended to read as follows:
In the event of any termination of the Trust prior to the
Mandatory Termination Date, the Trustee shall proceed to
liquidate the Securities then held and make the payments and
distributions provided for hereinafter in this Section 8.02,
except that in such event, the distribution to each Unit
holder shall be made in cash and shall be such Unit holder's
pro rata interest in the balance of the principal and income
accounts after the deductions herein provided. In the event
that the Trust shall terminate on or after the Mandatory
Termination Date, the Trustee shall, at least thirty days
prior to the Mandatory Termination Date, send a written
notice to all Unit holders of record. If such Unit holder
owns at least the minimum number of Units of the Trust set
forth in Part II of the Trust Agreement, such notice shall
further indicate that such Unit holder may elect to receive
an in-kind distribution of their pro rata share of the
Securities, to the extent of whole shares. 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 fifteen
business days prior to the Mandatory Termination Date. Unit
holders who do not effectively request an in-kind
distribution shall receive their distribution upon
termination in cash.
IN WITNESS WHEREOF, First Trust Portfolios L.P., The Bank of
New York 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.
FIRST TRUST PORTFOLIOS L.P.,
Depositor
By ▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
THE BANK OF NEW YORK,
Trustee
By ▇▇▇▇ ▇▇▇▇▇▇
Vice President
[SEAL]
ATTEST:
▇▇▇▇▇▇▇ ▇▇▇▇
Assistant Vice President
FIRST TRUST ADVISORS L.P.,
Evaluator
By ▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By ▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
FT 1197
(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.)
Select Dividend Trust, 2006 Series
Number
of Percentage
Shares Name of Issuer of Equity Securities Ratio
52 HBC HSBC Holdings Plc (ADR) 1.4456%
81 AVY ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Corporation 2.2519%
72 AT ALLTEL Corporation 2.0017%
87 DDR Developers Diversified Realty Corporation 2.4187%
84 ALL The Allstate Corporation 2.3353%
109 JPM JPMorgan Chase & Co. 3.0303%
▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇.▇▇▇▇%
▇▇ ▇▇ ▇▇ ▇▇▇ (▇▇▇) 1.8071%
169 CBS CBS Corporation 4.6984%
228 RGC Regal Entertainment Group (Class A) 6.3386%
69 COP ConocoPhillips 1.9183%
234 MOT Motorola, Inc. 6.5054%
98 SHW The ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company 2.7245%
101 ▇▇ ▇▇▇▇▇▇▇▇▇▇ Mutual, Inc. 2.8079%
166 MAS Masco Corporation 4.6150%
47 ACL Alcon, Inc. 1.3066%
196 PFE Pfizer Inc. 5.4490%
206 UN Unilever N.V. 5.7270%
134 IFF International Flavors & Fragrances Inc. 3.7253%
280 TTM Tata Motors Limited (ADR) 7.7843%
150 USB U.S. Bancorp 4.1701%
77 PEP PepsiCo, Inc. 2.1407%
98 CINF Cincinnati Financial Corporation 2.7245%
103 WWY Wm. Wrigley Jr. Company 2.8635%
93 TEF Telefonica, S.A. (ADR) 2.5855%
119 ING ING Groep N.V. (ADR) 3.3083%
58 BDK The Black & ▇▇▇▇▇▇ Corporation 1.6125%
60 MO Altria Group, Inc. 1.6681%
77 JNJ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ 2.1407%
63 MMM 3M Company 1.7515%
70 HET ▇▇▇▇▇▇'▇ Entertainment, Inc. 1.9461%
62 D Dominion Resources, Inc. 1.7237%
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3597 100.0000%
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