File No. 333-04931
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 4
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
The First Trust Special Situations Trust 150
REAL ESTATE TRUST, SERIES 1
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : April 28, 2000
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 150
REAL ESTATE TRUST, SERIES 1
4,447,124 UNITS
PROSPECTUS
Part One
Dated April 26, 2000
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two and Part Three.
The Trust
The Real Estate Trust, Series 1 (the "Trust") is a unit investment trust
consisting of a portfolio containing common stocks issued by publicly traded
real estate investment trusts, known as REITs. At March 16, 2000, each Unit
represented a 1/4,447,124 undivided interest in the principal and net income
of the Trust (see "The Trust" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price per Unit is equal to the aggregate value of the
Securities in the Portfolio of the Trust, plus or minus cash, if any, in the
Income and Capital Accounts of the Trust divided by the number of Units
outstanding, plus a sales charge of 3.4% of the Public Offering Price (3.520%
of the net amount invested) excluding income and principal cash. At March 16,
2000, the Public Offering Price per Unit was $7.7984 (see "Public Offering" in
Part Two). The minimum purchase is $2,000 ($1,000 for Individual Retirement
Accounts or other retirement plans).
Please retain all parts of this Prospectus for future reference.
_____________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
_____________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 150
REAL ESTATE TRUST, SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF MARCH 16, 2000
Sponsor: Nike Securities L.P.
Evaluator: First Trust Advisors L.P.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Number of Units 4,447,124
Fractional Undivided Interest in the Trust per Unit 1/4,447,124
Public Offering Price:
Aggregate Value of Securities in the Portfolio $31,113,930
Aggregate Value of Securities per Unit $6.9964
Income and Principal cash in the Portfolio $2,471,197
Income and Principal cash per Unit $.5557
Sales Charge 3.520% (3.4% of Public Offering Price,
excluding income and principal cash) $.2463
Public Offering Price per Unit $7.7984
Redemption Price and Sponsor's Repurchase Price per Unit
($.2463 less than the Public Offering Price per Unit) $7.5521
</TABLE>
Date Trust Established June 20, 1996
Mandatory Termination Date September 1, 2002
Evaluator's Annual Fee: $2,500 per year. Evaluations for purposes of sale,
purchase or redemption of Units are made as of the close of trading (4:00 p.m.
Eastern time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to Maximum of $.0035 per
an affiliate of the Sponsor Unit outstanding annually
Bookkeeping and administrative expenses Maximum of $.0005 per
payable to the Sponsor Unit outstanding annually
Annual amortization of organization
and offering costs $4,602 annually
Trustee's Annual Fee: $.0074 per Unit outstanding.
Capital Distribution Record Date and Distribution Date: Distributions from
the Capital Account will be made monthly payable on the fifteenth day of the
month to Unit holders of record on the first day of such month if the amount
available for distribution equals at least $.01 per Unit. Notwithstanding,
distributions of funds in the Capital Account, if any, will be made in
December of each year.
Income Distribution Record Date: First day of each month.
Income Distribution Date: Fifteenth day of each month.
A Unit holder who owns at least 2,500 Units may request an "In-Kind
Distribution" upon redemption or upon termination of the Trust. See "Rights
of Unit Holders - How are Income and Capital Distributed?" in Part Two.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust
Special Situations Trust, Series 150,
Real Estate Trust, Series 1
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Special Situations Trust, Series
150, Real Estate Trust, Series 1 as of December 31, 1999, and the related
statements of operations and changes in net assets for each of the three years
in the period then ended. These financial statements are the responsibility
of the Trust's Sponsor. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the Trustee. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsor, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Special
Situations Trust, Series 150, Real Estate Trust, Series 1 at December 31,
1999, and the results of its operations and changes in its net assets for each
of the three years in the period then ended in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
April 7, 2000
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 150
REAL ESTATE TRUST, SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Securities, at market value (cost, $44,885,556)
(Note 1) $36,511,581
Dividends receivable 402,518
Cash 81,477
Receivable from investment transactions 228,691
Unamortized deferred organization and offering costs 6,744
___________
37,231,011
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Accrued liabilities 4,874
Unit redemptions payable 111,048
__________
115,922
__________
Net assets, applicable to 4,728,895 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $44,885,556
Net unrealized depreciation (Note 2) (8,373,975)
Distributable funds 603,508
___________
$37,115,089
===========
Net asset value per unit $7.8486
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 150
REAL ESTATE TRUST, SERIES 1
PORTFOLIO - See notes to portfolio.
December 31, 1999
<TABLE>
<CAPTION>
Number of Market
shares Name of Issuer of Equity Securities value
<C> <S> <C>
Retail
73,859 CBL & Associates Properties, Inc. $1,523,342
131,320 Glimcher Realty Trust 1,690,745
157,224 JDN Realty Corporation 2,535,237
74,090 Simon Property Group 1,699,476
Multifamily
105,576 Associated Estates Realty Corporation 824,865
73,126 Camden Property Trust 2,001,824
64,374 Equity Residential Properties Trust 2,747,997
52,011 Essex Property Trust, Inc. 1,768,374
73,789 Gables Residential Trust 1,770,936
107,844 Walden Residential Properties, Inc. 2,332,127
25,819 Wellsford Real Property Trust 219,461
Office/Industrial
73,716 First Industrial Realty Trust 2,022,620
80,657 Liberty Property Trust 1,955,932
Health Care
100,937 (1) HRPT Properties Trust 908,433
199,461 Healthcare Realty Trust 3,116,578
66,348 National Health Investors, Inc. 986,927
78,097 Omega Healthcare Investors, Inc. 990,895
21,630 Omega Worldwide, Inc. 100,709
10,801 (1) Senior Housing Properties Trust 134,343
Hotel
187,180 Equity Inns, Inc. 1,263,465
88,395 Hospitality Properties Trust 1,685,074
Diversified
75,231 Eastgroup Properties 1,391,773
Triple Net Lease
171,539 Commercial Net Lease Realty 1,704,755
67,050 (2) Starwood Financial Inc. 1,135,693
___________
Total investments $36,511,581
===========
</TABLE>
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 150
REAL ESTATE TRUST, SERIES 1
NOTES TO PORTFOLIO
December 31, 1999
(1) In October 1999, HRPT Properties Trust (HRPT), one of the Trust's
original holdings, spun off Senior Housing Properties Trust (Senior
Housing). Each shareholder of HRPT received .10 shares of Senior
Housing for each share of HRPT held.
(2) In October 1999, TriNet Corporate Realty Trust, Inc. (TriNet), one of
the Trust's original holdings, was acquired by Starwood Financial Inc.
(Starwood). Each shareholder of TriNet received 1.15 shares of Starwood
for each share of TriNet held.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 150
REAL ESTATE TRUST, SERIES 1
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended Dec. 31,
1999 1998 1997
<S> <C> <C> <C>
Dividends $4,439,738 5,147,718 5,504,838
Expenses:
Trustee's fees and related
expenses (52,448) (66,527) (106,485)
Evaluator's fees (2,500) (2,500) (2,500)
Supervisory fees (18,187) (23,298) (23,337)
Administrative fees (2,835) (3,328) (3,337)
Amortization of organization
and offering costs (4,602) (4,602) (4,602)
___________________________________________
Total expenses (80,572) (100,255) (140,261)
___________________________________________
Investment income - net 4,359,166 5,047,463 5,364,577
Net gain (loss) on investments:
Net realized gain (loss) (1,115,589) 135,576 64,785
Change in net unrealized
appreciation or
depreciation (7,320,665) (16,719,785) 6,670,993
___________________________________________
(8,436,254) (16,584,209) 6,735,778
___________________________________________
Net increase (decrease) in
net assets resulting from
operations $(4,077,088) (11,536,746) 12,100,355
===========================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 150
REAL ESTATE TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Dec. 31,
1999 1998 1997
<S> <C> <C> <C>
Net increase (decrease) in net
assets resulting from
operations:
Investment income - net $4,359,166 5,047,463 5,364,577
Net realized gain (loss) on
investments (1,115,589) 135,576 64,785
Change in net unrealized
appreciation or
depreciation on investments (7,320,665) (16,719,785) 6,670,993
___________________________________________
(4,077,088) (11,536,746) 12,100,355
Units issued (644,662 units
in 1997) - - 7,077,034
Unit redemptions (943,398,
1,170,777 and 98,659 units
in 1999, 1998 and 1997,
respectively) (8,051,886) (11,862,337) (1,170,611)
Distributions to unit holders:
Investment income - net (4,433,435) (5,014,651) (5,289,297)
Principal from investment
transactions - - -
___________________________________________
(4,433,435) (5,014,651) (5,289,297)
___________________________________________
Total increase (decrease) in
net assets (16,562,409) (28,413,734) 12,717,481
Net assets:
At the beginning of the year
(representing 5,672,293,
6,743,070 and 6,197,067
units outstanding at
December 31, 1998, 1997
and 1996, respectively) 53,677,498 82,091,232 69,373,751
___________________________________________
At the end of the year
(including distributable
funds applicable to Trust
units of $603,508,
$816,145 and $876,911
at December 31, 1999, 1998
and 1997, respectively) $37,115,089 53,677,498 82,091,232
===========================================
Trust units outstanding at
the end of the year 4,728,895 5,672,293 6,743,070
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 150
REAL ESTATE TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
The equity securities are stated at the closing sale prices of listed equity
securities and the bid prices of over-the-counter traded equity securities as
reported by First Trust Advisors L.P. (the Evaluator), an affiliate of the
Sponsor.
Dividend income -
Dividends on each equity security are recognized on such equity security's ex-
dividend date.
Security cost -
Cost of the equity securities is based on the market value of such securities
on the dates the securities were deposited in the Trust. The cost of
securities sold is determined using the average cost method. Sales of
securities are recorded on the trade date.
Federal income taxes -
The Trust, which is an association taxable as a corporation under the Internal
Revenue Code, intends to qualify for and elect tax treatment as a "regulated
investment company" under the Internal Revenue Code of 1986. By qualifying
for and electing such treatment, the Fund will not be subject to Federal
income tax on net investment income or net capital gains distributed to its
unit holders. As the Trust distributes its entire net capital gains, if any,
and net investment income each year, no Federal income tax provision is
required.
Expenses of the Trust -
The Trust pays a fee for Trustee services to The Chase Manhattan Bank, which
is based on $.0074 per annum per unit outstanding based on the largest
aggregate number of units outstanding during the year. In addition, beginning
in 1998, the Evaluator will receive an annual fee of $2,500; previously, the
Evaluator's fee was based on $.0017 per unit outstanding. The Trust also pays
recurring financial reporting costs, an annual supervisory fee payable to an
affiliate of the Sponsor and an annual administrative fee payable to the
Sponsor.
Organization and offering costs -
The Trust has paid a portion of its organization and offering costs, including
costs of preparing the registration statement, the Trust indenture and other
closing documents, registering units with the Securities and Exchange
Commission and states, the initial audit of the Trust's portfolio, legal fees
and the initial fees and expenses of the Trustee. Such costs, totaling
$23,008, have been deferred and are being amortized over five years from the
Initial Date of Deposit.
<PAGE>
2. Unrealized appreciation and depreciation
An analysis of net unrealized depreciation at December 31, 1999 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(10,380,671)
Unrealized appreciation 2,006,696
____________
$(8,373,975)
============
</TABLE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
underlying value of the equity securities on the date of an investor's
purchase, plus a sales charge of 3.9% of the public offering price which is
equivalent to approximately 4.603% of the net amount invested.
Distributions to unit holders -
Income distributions to unit holders are made monthly on the fifteenth day of
each month to unit holders of record on the first day of each month. Capital
distributions to unit holders, if any, are made on the fifteenth day of each
month to unit holders of record on the first day of such month if the amount
available for distribution equals at least $.01 per unit. Notwithstanding,
capital distributions, if any, will be made in December of each year.
Selected data per unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended Dec, 31,
1999 1998 1997
<S> <C> <C> <C>
Dividend income $.8271 .8326 .8307
Expenses (.0150) (.0162) (.0211)
_______________________________________
Investment income - net .8121 .8164 .8096
Distributions to unit holders:
Investment income - net (.8259) (.8095) (.7989)
Principal from investment
transactions - - -
Net gain (loss) on investments (1.6007) (2.7180) .9689
_______________________________________
Total increase (decrease)
in net assets (1.6145) (2.7111) .9796
Net assets:
Beginning of the year 9.4631 12.1742 11.1946
_______________________________________
End of the year $7.8486 9.4631 12.1742
=======================================
</TABLE>
<PAGE>
Dividend income, Expenses and Investment income - net per unit have been
calculated based on the weighted-average number of units outstanding during
each year (5,367,672, 6,182,756 and 6,626,392 units in 1999, 1998 and 1997,
respectively). Distributions to unit holders of Investment income - net per
unit reflects the Trust's actual distributions during the period. The Net
gain (loss) on investments per unit during the year ended December 31, 1997
includes the effects of changes arising from issuance of additional units
during the year at net asset values which differed from the net asset value
per unit at the beginning of the year.
<PAGE>
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 150
REAL ESTATE TRUST, SERIES 1
PART ONE
Must be Accompanied by Part Two and Part Three
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
THE FIRST TRUST(REGISTERED TRADEMARK) SPECIAL SITUATIONS TRUST
FT SERIES
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated April 28, 2000 AND PART THREE
The Trust. FT Series (formerly known as The First Trust Special
Situations Trust) (the "Trusts" and each a "Trust") are unit investment
trusts consisting of portfolios of one or more of the following: common
stock ("Equity Securities"), preferred stock ("Preferred Stocks"), trust
preferred securities ("Trust Preferred Securities") or zero coupon U.S.
Treasury bonds ("Treasury Obligations"). Collectively, the Equity
Securities, Preferred Stocks and Trust Preferred Securities may be
referred to as the "Securities." See Parts One and Three for a more
complete description of the portfolio for each Trust, including whether
the portfolio of a Trust includes zero coupon U.S. Treasury bonds.
For a specific description of the objective of each Trust, see "The
Objective of the Trusts" in Part Three of this Prospectus. See
"Portfolio" appearing in Part One for each Trust. Each Trust has a
Mandatory Termination Date as indicated in Part One of this Prospectus.
The Treasury Obligations evidence the right to receive a fixed payment
at a future date from the U.S. Government and are backed by the full
faith and credit of the U.S. Government. The guarantee of the U.S.
Government does not apply to the market value of the Treasury
Obligations or the Units of the Growth and Treasury Trusts, whose net
asset values will fluctuate and, prior to maturity, may be worth more or
less than a purchaser's acquisition cost. There is, of course, no
guarantee that the objectives of the Trusts will be achieved.
Each Unit of a Trust represents an undivided fractional interest in all
the Securities and Treasury Obligations deposited in the Trust. The
Growth and Treasury Trusts have been organized so that purchasers of
Units should receive, at the termination of a Trust, an amount per Unit
at least equal to $1.00, or $10.00 for certain Trusts (which is equal to
the per Unit value upon maturity of the Treasury Obligations), even if
the Growth and Treasury Trusts never paid a dividend and the value of
the Securities were to decrease to zero, which the Sponsor considers
highly unlikely. This feature of the Growth and Treasury Trusts provides
Unit holders who purchase Units at a price of $1.00, or $10.00 for
certain Growth and Treasury Trusts, or less per Unit with total
principal protection, including any sales charges paid, although they
might forego any earnings on the amount invested. To the extent that
Units are purchased at a price less than $1.00, or $10.00 for certain
Growth and Treasury Trusts, per Unit, this feature may also provide a
potential for capital appreciation. See Part One for each Growth and
Treasury Trust to determine those Trusts for which information is based
on $1.00 per Unit or $10.00 per Unit. UNIT HOLDERS DISPOSING OF THEIR
UNITS PRIOR TO THE MATURITY OF A GROWTH AND TREASURY TRUST MAY RECEIVE
MORE OR LESS THAN $1.00 PER UNIT (OR $10.00 PER UNIT FOR CERTAIN TRUSTS)
DEPENDING ON MARKET CONDITIONS ON THE DATE UNIT ARE SOLD OR REDEEMED.
The Treasury Obligations deposited in a Growth and Treasury Trust on the
Initial Date of Deposit will mature as listed in the "Portfolio"
appearing in Part One for each Trust. The Treasury Obligations in a
Growth and Treasury Trust have a maturity value equal to or greater than
the aggregate Public Offering Price (which includes the sales charge) of
the Units of the Growth and Treasury Trust on the Initial Date of
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
Deposit. Although the Equity Securities and Preferred Stocks have no
stated maturity date and the Trust Preferred Securities each have fixed
maturity dates occurring after the Mandatory Termination Dates of their
respective Trusts, certain of the Securities may be called, or may be
redeemed pursuant to extraordinary redemption provisions, prior to the
Mandatory Termination Date of their respective Trusts. The value of the
Equity Securities will fluctuate with changes in the value of common
stocks in general and with changes in the conditions and performance of
the specific Equity Securities owned by the Trusts. The value of the
Preferred Stocks and Trust Preferred Securities will fluctuate with
changes in the value of preferred stocks in general, with changes in the
financial condition of the issuers, and with changes in interest rates
and market liquidity. In particular, increasing interest rates will
reduce the value of the Preferred Stocks and Trust Preferred Securities
held in the Trusts, as well as the value of the Units. See "Portfolio"
appearing in Part One for each Trust.
Public Offering Price. The secondary market Public Offering Price per
Unit will be based upon a pro rata share of the bid prices of the
Treasury Obligations (if applicable) and the aggregate underlying value
of the Securities in the Trusts (generally determined by the closing
sale prices of listed Securities and the bid prices of over-the-counter
traded Securities) plus or minus a pro rata share of cash, if any, in
the Capital and Income Accounts of the Trust plus a sales charge as
indicated in Part One for each Trust. The minimum purchase of each Trust
is that amount as set forth in Part One for each Trust. For certain
Trusts, the sales charge is reduced on a graduated scale for sales
involving at least a minimum number of Units or a minimum dollar amount.
See "Public Offering-How is the Public Offering Price Determined?"
Dividend and Capital Distributions. Distributions of dividends and
capital received, if any, by a Trust will be paid in cash on the
Distribution Date to Unit holders of record on the Record Date as set
forth in the "Summary of Essential Information" in Part One for each
Trust. Any distribution of income and/or capital will be net of the
expenses of the Trust. Distributions of funds in the Capital Account, if
any, will be made at least annually in December of each year. INCOME
WITH RESPECT TO THE ACCRUAL OF ORIGINAL ISSUE DISCOUNT ON THE TREASURY
OBLIGATIONS (IF APPLICABLE) WILL NOT BE DISTRIBUTED CURRENTLY, ALTHOUGH
UNIT HOLDERS OF A GROWTH AND TREASURY TRUST WILL BE SUBJECT TO INCOME
TAX AT ORDINARY INCOME RATES AS IF A DISTRIBUTION HAD OCCURRED. See
"What is the Federal Tax Status of Unit Holders?" Additionally, upon
termination of a Trust, the Trustee will distribute, upon surrender of
Units for redemption, to each Unit holder his or her pro rata share of
the Trust's assets, less expenses, in the manner set forth under "Rights
of Unit Holders-How are Income and Capital Distributed?"
Secondary Market for Units. The Sponsor may maintain a market for Units
of the Trusts and offer to repurchase such Units at prices which are
based on the aggregate bid side evaluation of the Treasury Obligations
(if applicable) and the aggregate underlying value of Securities in a
Trust (generally determined by the closing sale prices of listed
Securities and the bid prices of over-the-counter traded Securities)
plus or minus cash, if any, in the Capital and Income Accounts of the
Trusts. If a secondary market is not maintained, a Unit holder may
redeem Units through redemption at prices based upon the aggregate bid
price of the Treasury Obligations (if applicable) plus the aggregate
underlying value of the Securities in a Trust (generally determined by
the closing sale prices of listed Securities and the bid prices of over-
the-counter traded Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of such Trust. See "Rights of
Unit Holders-How May Units be Redeemed?" For certain Trusts, a Unit
holder tendering the minimum amount specified in "Summary of Essential
Information" appearing in Part One for such Trust for redemption may
request a distribution of shares of Securities (reduced by customary
transfer and registration charges) (an "In-Kind Distribution") in lieu
of payment in cash. See "Rights of Unit Holders-How May Units be
Redeemed?"
Termination. Commencing no later than the Mandatory Termination Date,
Securities will begin to be sold as prescribed by the Sponsor. The
Trustee shall provide written notice of any termination of a Trust to
Unit holders which will specify when Unit holders may surrender their
certificates for cancellation and will include a form to enable Unit
holders to elect an In-Kind Distribution if such Unit holder owns at
least that minimum amount specified in "Summary of Essential
Information," in Part One for each Trust, rather than to receive payment
in cash for such Unit holder's pro rata share of the amounts realized
upon the disposition by the Trustee of Securities. All Unit holders of a
Growth and Treasury Trust will receive their pro rata portion of the
Treasury Obligations in cash upon the termination of such Trust. To be
effective, the election form, together with surrendered certificates and
other documentation required by the Trustee, must be returned to the
Trustee at least ten business days prior to the Mandatory Termination
Date. Unit holders not electing a distribution of shares of Securities
will receive a cash distribution from the sale of the remaining
Page 2
Securities and Treasury Obligations (if applicable) within a reasonable
time after a Trust is terminated. See "Rights of Unit Holders-How are
Income and Capital Distributed?" and "Other Information-How May the
Indenture be Amended or Terminated?"
Page 3
THE FIRST TRUST SPECIAL SITUATIONS TRUST
FT Series
What is the FT Series?
FT Series (formerly known as The First Trust Special Situations Trust)
(the "Trusts" and each a "Trust") is one of a series of investment
companies created by the Sponsor under the name of the FT Series, all of
which are generally similar but each of which is separate and is
designated by a different series number (the "Trust"). Beginning on
October 31, 1997 with the deposit of FT 211, the name of the series was
changed from The First Trust Special Situations Trust to the FT Series.
All Trusts were created under the laws of the State of New York pursuant
to a Trust Agreement (the "Indenture"), dated the Initial Date of
Deposit, with Nike Securities L.P. as Sponsor, The Chase Manhattan Bank,
as Trustee, Securities Evaluation Service, Inc., as Evaluator for
certain Trusts, First Trust Advisors L.P., as Evaluator for certain
Trusts, and First Trust Advisors L.P. as Portfolio Supervisor. See "The
Trusts" in Part Three for a more complete description of the portfolio
for each Trust.
See "The Objective of the Trusts" in Part Three for each Trust for a
specific description of the Trust's objective. The Treasury Obligations
in the Growth and Treasury Trusts evidence the right to receive a fixed
payment at a future date from the U.S. Government and are backed by the
full faith and credit of the U.S. Government. The guarantee of the U.S.
Government does not apply to the market value of the Treasury
Obligations or the Units of a Growth and Treasury Trust, whose net asset
value will fluctuate and, prior to maturity, may be more or less than a
purchaser's acquisition cost. There is, of course, no guarantee that the
objectives of the Trusts will be achieved.
The Growth and Treasury Trusts have been organized so that purchasers of
Units should receive, at the termination of a Growth and Treasury Trust,
an amount per Unit at least equal to $1.00 per Unit, or $10.00 per Unit
for certain Trusts (which is equal to the per Unit value upon maturity
of the Treasury Obligations), even if the Securities never paid a
dividend and the value of the Securities in a Growth and Treasury Trust
were to decrease to zero, which the Sponsor considers highly unlikely.
The receipt of only $1.00 per Unit, or $10.00 per Unit for certain
Trusts, upon termination of a Growth and Treasury Trust (an event which
the Sponsor believes is unlikely) represents a substantial loss on a
present value basis. Furthermore, the $1.00 per Unit, or $10.00 per Unit
for certain Trusts, in no respect protects investors against diminution
in the purchasing power of their investment due to inflation (although
expectations concerning inflation are a component in determining
prevailing interest rates, which in turn determine present values). To
the extent that Units of a Trust are redeemed, the aggregate value of
the Securities and Treasury Obligations (if applicable) in the Trust
will be reduced and the undivided fractional interest represented by
each outstanding Unit of the Trusts will increase. See "Rights of Unit
Holders-How May Units be Redeemed?" Each Trust has a Mandatory
Termination Date as set forth under "Summary of Essential Information,"
appearing in Part One for each Trust.
What are the Expenses and Charges?
With the exception of brokerage fees for certain trusts discussed in
"Rights of Unit Holders-How May Securities be Removed from the Trusts?"
and bookkeeping and other administrative services provided to certain
Trusts, for which the Sponsor will be reimbursed in amounts as set forth
under "Summary of Essential Information" in Part One (if applicable),
the Sponsor will not receive any fees in connection with its activities
relating to the Trusts. Legal and regulatory filing fees and expenses
associated with annually updating the Trusts' registration statements
are also now chargeable to each Trust. Historically, the Sponsor paid
these fees and expenses.
First Trust Advisors L.P., an affiliate of the Sponsor, will receive an
annual supervisory fee set forth under "Summary of Essential
Information" in Part One of this Prospectus, for providing portfolio
supervisory services for each Trust. Such fee is based on the number of
Units outstanding in a Trust on January 1 of each year, except for the
year or years in which an initial offering period occurs in which case
the fee for a month is based on the number of Units outstanding at the
end of such month. In providing such supervisory services, the Portfolio
Supervisor may purchase research services from a variety of sources
which may include underwriters or dealers of the Trusts.
Page 4
First Trust Advisors L.P. or Securities Evaluation Service, Inc. (as
applicable), the Evaluator for the respective Trusts, will receive a fee
as set forth under "Summary of Essential Information" in Part One of
this Prospectus for providing evaluation services for each Trust. Such
fee is based on the largest aggregate number of Units of such Trust
outstanding during the calendar year, except during the initial offering
period, in which case the fee is calculated based on the largest number
of Units outstanding during the period for which compensation is paid.
The Trustee pays certain expenses of a Trust for which it is reimbursed
by such Trust. The Trustee will receive for its ordinary recurring
services to a Trust an annual fee as indicated in the "Summary of
Essential Information" in Part One of this Prospectus. Such fee is based
upon the largest aggregate number of Units of such Trust outstanding
during the calendar year, except during an initial offering period, in
which case the fee is calculated based on the largest number of Units
outstanding during the period for which compensation is paid. For a
discussion of the services performed by the Trustee pursuant to its
obligations under the Indenture, see "Rights of Unit Holders." Because
the above fees are generally calculated based on the largest aggregate
number of Units of the Trust outstanding during a calendar year, the per
Unit amounts set forth under "Summary of Essential Information" in Part
One of this Prospectus will be higher during any year in which
redemptions of Units occur.
The Trustee's and the above described fees are payable from the Income
Account of a Trust to the extent funds are available, and then from the
Capital Account of such Trust. Since funds being held in the Capital and
Income Accounts are for payment of expenses and redemptions and since
such Accounts are noninterest-bearing to Unit holders, the Trustee
benefits thereby. Part of the Trustee's compensation for its services to
a Trust is expected to result from the use of these funds.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services,
supervisory services and evaluation services, such individual fees may
exceed the actual costs of providing such services for a Trust, but at
no time will the total amount received for such services rendered to all
unit investment trusts of which Nike Securities L.P. is the Sponsor in
any calendar year exceed the actual cost to the Sponsor or its affiliate
of supplying such services in such year.
For certain Trusts, as set forth in the "Summary of Essential
Information" appearing in Part One for such Trusts, expenses incurred in
establishing such Trusts, including costs of preparing the registration
statement, the trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio and the initial fees and expenses
of the Trustee and any other out-of-pocket expenses, have been paid by
the Trust and are being charged off over a period not to exceed five
years from such Trust's Initial Date of Deposit, or over a period not to
exceed the life of the Trust, if shorter than five years.
The following additional charges are or may be incurred by the Trusts:
all legal and annual auditing expenses of the Trustee incurred by or in
connection with its responsibilities under the Indenture; the expenses
and costs of any action undertaken by the Trustee to protect the Trusts
and the rights and interests of the Unit holders; fees of the Trustee
for any extraordinary services performed under the Indenture;
indemnification of the Trustee for any loss, liability or expense
incurred by it without negligence, bad faith or willful misconduct on
its part, arising out of or in connection with its acceptance or
administration of the Trusts; for certain Trusts, any offering costs
incurred after the earlier of six months after the Initial Date of
Deposit or the end of the initial offering period; indemnification of
the Sponsor for any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct in acting as Depositor of
the Trusts; all taxes and other government charges imposed upon the
Securities or Treasury Obligations (if applicable) or any part of the
Trusts (no such taxes or charges are being levied or made or, to the
knowledge of the Sponsor, contemplated). The above expenses and the
Trustee's annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trusts. In addition, the Trustee is empowered to sell
Securities or Treasury Obligations (if applicable) in a Trust in order
to make funds available to pay all these amounts if funds are not
otherwise available in the Income and Capital Accounts of the Trust
except that the Trustee shall not sell Treasury Obligations in a Growth
and Treasury Trust to pay Trust expenses. Since the income stream
produced by dividend payments is unpredictable, the Sponsor cannot
provide any assurance that dividends will be sufficient to meet any or
Page 5
all expenses of the Trusts. As described above, if dividends are
insufficient to cover expenses, it is likely that Securities will have
to be sold to meet Trust expenses. These sales may result in capital
gains or losses to Unit holders. See "What is the Federal Tax Status of
Unit Holders?"
The Indenture requires a Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. So
long as the Sponsor is making a secondary market for the Units, the
Sponsor is required to bear the cost of such annual audits to the extent
such cost exceeds $.50 per 1,000 Units if information is based on $1.00
per Unit (or per 100 Units if information is based on $10.00 per Unit).
Unit holders of a Trust covered by an audit may obtain a copy of the
audited financial statements upon request.
What is the Federal Tax Status of Unit Holders?
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trust. 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 state or foreign taxes. As with
any investment, you should consult your own tax professional about your
particular consequences.
Assets of the Trust. Each Trust may hold (i) stock in domestic and
foreign corporations (the "Stocks"), (ii) interests in real estate
investment trusts (the "REIT Shares"), (iii) Trust Preferred Securities
(the "Debt Obligations"), (iv) shares in funds qualifying as regulated
investment companies (the "RIC Shares") and/or (v) zero coupon U.S.
Treasury bonds (the "Treasury Obligations"). All of the foregoing assets
constitute the "Trust Assets." For purposes of this federal tax
discussion, it is assumed that the Stocks constitute equity, the Debt
Obligations constitute debt and that the RIC Shares and the REIT Shares
constitute qualifying shares in regulated investment companies and real
estate investment trusts, respectively, for federal income tax purposes.
Trust Status. The Trust will not be taxed as a corporation for federal
income tax purposes. As a Unit owner, you will be treated as the owner
of a pro rata portion of each of the Trust Assets, and as such you will
be considered to have received a pro rata share of income (i.e.,
interest, dividends, accruals of original issue discount and market
discount, and capital gains, if any) from each Trust Asset when such
income is considered to be received by the 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 by
amounts used to pay a deferred sales charge.
Your Tax Basis and Income or Loss upon Disposition. If the Trust
disposes of Trust Assets, 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 Trust Assets
from your share of the total proceeds received in the transaction. You
can generally determine your initial tax basis in each Trust Asset by
apportioning the cost of your Units, generally including sales charges,
among each Trust Asset ratably according to its value on the date you
acquire your Units. In certain circumstances, however, you may have to
adjust your tax basis after you acquire your Units (for example, in the
case of certain dividends that exceed a corporation's accumulated
earnings and profits or in the case of original issue discount, market
discount, premium and accrued interest with regard to the Debt
Obligations, as discussed below).
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 or the date the
Trust purchases a Trust Asset to determine the holding period. The tax
rates for capital gains realized from assets held for one year or less
are generally the same as for ordinary income. The Code may, however,
treat certain capital gains as ordinary income in special situations
(for example, in the case of gain on the Debt Obligations attributable
to market discount). In addition, capital gain received from assets held
for more than one year that is considered "unrecaptured section 1250
gain" (which may be the case, for example, with some capital gains
attributable to the REIT Shares) is taxed at a maximum stated tax rate
of 25%.
Page 6
Dividends from RIC Shares and REIT Shares. Some dividends on the REIT
Shares or the RIC Shares may qualify as "capital gain dividends,"
taxable to you as long-term capital gains. If you hold a Unit for six
months or less or if the Trust holds a RIC Share or REIT Share for six
months or less, any loss incurred by you related to the disposition of
such RIC Share or REIT Share will be treated as a long-term capital loss
to the extent of any long-term capital gain distributions received (or
deemed to have been received) with respect to such RIC Share or REIT
Share. Distributions of income or capital gains declared on the REIT
Shares or the RIC Shares in October, November or December will be deemed
to have been paid to you on December 31 of the year they are declared,
even when paid by the REIT or the RIC during the following January.
Discount, Accrued Interest and Premium on Debt Obligations. Debt
Obligations and Treasury Obligations may have been sold with original
issue discount. This generally means that the Debt Obligations and
Treasury Obligations were originally issued at a price below their face
(or par) value. Original issue discount accrues on a daily basis and
generally is treated as interest income for federal income tax purposes.
The basis of your Unit and of each Debt Obligation or Treasury
Obligation which was issued with original issue discount must be
increased as original issue discount accrues.
Some Debt Obligations may have been purchased by you or the Trust at a
market discount. Market discount is generally the excess of the stated
redemption price at maturity for the Debt Obligation over the purchase
price of the Debt Obligation (not including unaccrued original issue
discount). Market discount can arise based on the price the Trust pays
for a Debt Obligation or on the price you pay for your Units. Market
discount is taxed as ordinary income. You will recognize this income
when the Trust receives principal payments on the Debt Obligation, when
the Debt Obligation is sold or redeemed, or when you sell or redeem your
Units. Alternatively, you may elect to include market discount in
taxable income as it accrues. Whether or not you make this election will
affect how you calculate your basis and the timing of certain interest
expense deductions.
Alternatively, some Debt Obligations may have been purchased by you or
the Trust at a premium. Generally, if the tax basis of your pro rata
portion of any Debt Obligation exceeds the amount payable at maturity,
such excess is considered premium. You may elect to amortize premium. If
you make this election, you may reduce your interest income received on
the Debt Obligation by the amount of the premium that is amortized and
your tax basis will be reduced.
If the price of your Units included accrued interest on a Debt
Obligation, you must include the accrued interest in your tax basis in
that Debt Obligation. When the Trust receives this accrued interest, you
must treat it as a return of capital and reduce your tax basis in the
Debt Obligation.
This discussion provides only the general rules with respect to the tax
treatment of original issue discount, market discount and premium. The
rules, however, are complex and special rules apply in certain
circumstances. For example, the accrual of market discount or premium
may differ from the discussion set forth above in the case of Debt
Obligations that were issued with original issue discount.
Dividends Received Deduction. A corporation that owns Units will
generally not be entitled to the dividends received deduction with
respect to many dividends received by the Trust, because the dividends
received deduction is not available for dividends from most foreign
corporations or from REITs. Distributions on a RIC Share are eligible
for the dividends received deduction only to the extent that the
dividends received by the Unit owner are attributable to dividends
received by the RIC itself from certain domestic corporations and are
designated by the RIC as being eligible for the dividends received
deduction. Finally, because the Debt Obligations are treated as debt
(not equity) for federal income tax purposes, distributions from the
Debt Obligations are not eligible for the dividends received deduction.
In-Kind Distributions. Under certain circumstances, you may request an
In-Kind Distribution of Trust Assets when you redeem your Units or at
the Trust's termination. By electing to receive an In-Kind Distribution,
you will receive an undivided interest in Trust Assets plus, possibly,
cash. You will not recognize gain or loss if you only receive Trust
Assets in exchange for your pro rata portion of the Trust Assets held by
the Trust. However, if you also receive cash in exchange for a
fractional portion of a Trust Asset, 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 portion of the Trust Asset.
Limitations on the Deductibility of Trust Expenses. Generally, for
federal income tax purposes, you must take into account your full pro
rata share of the Trust's income, even if some of that income is used to
Page 7
pay Trust expenses. You may deduct your pro rata share of each expense
paid by the Trust to the same extent as if you directly paid the
expense. You may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions. However, individuals may
only deduct certain miscellaneous itemized deductions to the extent they
exceed 2% of adjusted gross income.
Foreign, State and Local Taxes. Interest and dividend payments on the
Trust Assets of foreign companies that are paid to the Trust may be
subject to foreign withholding taxes. Any income withheld will still be
treated as income to you. Under the grantor trust rules, you are
considered to have paid directly your share of foreign taxes. Therefore,
for U.S. tax purposes, you may be entitled to a foreign tax credit or
deduction for those foreign taxes.
If you are a foreign investor (i.e., an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or
trust), you will not be subject to U.S. federal income taxes, including
withholding taxes, on some of the income from the Trust or on any gain
from the sale or redemption of your Units, provided that certain
conditions are met. You should consult your tax advisor with respect to
the conditions you must meet in order to be exempt for U.S. tax purposes.
Under the existing income tax laws of the State and City of New York,
the Trust will not be taxed as a corporation, and the income of the
Trust will be treated as the income of the Unit holders in the same
manner as for federal income tax purposes. You should consult your tax
advisor regarding potential foreign, state or local taxation with
respect to your Units.
Are Investments in the Trusts Eligible for Retirement Plans?
Units of the Trusts are eligible for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other tax-deferred retirement
plans. Generally, the Federal income tax relating to capital gains and
income received in each of the foregoing plans is deferred until
distributions are received. Distributions from such plans are generally
treated as ordinary income but may, in some cases, be eligible for
special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisors
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
PORTFOLIO
What are Treasury Obligations?
The Treasury Obligations deposited in the Growth and Treasury Trusts
consist of U.S. Treasury bonds which have been stripped of their
unmatured interest coupons. The Treasury Obligations evidence the right
to receive a fixed payment at a future date from the U.S. Government,
and are backed by the full faith and credit of the U.S. Government.
Treasury Obligations are purchased at a deep discount because the buyer
obtains only the right to a fixed payment at a fixed date in the future
and does not receive any periodic interest payments. The effect of
owning deep discount bonds which do not make current interest payments
(such as the Treasury Obligations) is that a fixed yield is earned not
only on the original investment, but also, in effect, on all earnings
during the life of the discount obligation. This implicit reinvestment
of earnings at the same rate eliminates the risk of being unable to
reinvest the income on such obligations at a rate as high as the
implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the
future. For this reason, the Treasury Obligations are subject to
substantially greater price fluctuations during periods of changing
interest rates than are securities of comparable quality which make
regular interest payments. The effect of being able to acquire the
Treasury Obligations at a lower price is to permit more of a Growth and
Treasury Trust's portfolio to be invested in Securities.
What are the Securities?
Each Trust contains different issues of Securities as described in "The
Trusts" in Part Three for each Trust and "Portfolio" appearing in Part
One for each Trust. An investment in Units of the Trusts should be made
with an understanding of the risks such an investment may entail.
Although actions have been taken to provide diversified portfolios of
Securities, some inherent risks exist due to the concentration in
certain Trusts of the Securities within a specific country, state or
geographic area or within specific industries, although a number of
Page 8
companies have significant business activities outside the specific
country, state or geographic area. Unpredictable factors include
governmental, political, economic and fiscal policies of the specific
country, state, geographic area or industry which may have an adverse
effect on the performance of the issuers which have significant business
activities within the specific country, state, geographic area or
industry. In addition, regional influences may affect the performance of
the issuers, particularly if an economic downturn or contraction occurs
throughout the area. See "Portfolio" in Part Three for each Trust for
additional considerations for investors, if applicable.
Each Trust consists of Securities listed under "Portfolio" appearing in
Part One for each Trust as may continue to be held from time to time in
such Trust together with cash held in the Income and Capital Accounts.
Neither the Sponsor nor the Trustee shall be liable in any way for any
failure in any of the Securities.
Because certain of the Securities from time to time may be sold under
certain circumstances described herein, and because the proceeds from
such events will be distributed to Unit holders and will not be
reinvested, no assurance can be given that the Trusts will retain for
any length of time their present size and composition. Although a
Portfolio is not managed, the Sponsor may instruct the Trustee to sell
Securities under certain limited circumstances. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell or keep any
securities or other property acquired in exchange for Securities such as
those acquired in connection with a merger or other transaction. See
"Rights of Unit Holders-How May Securities be Removed from the Trusts?"
Securities, however, will not be sold by a Trust to take advantage of
market fluctuations or changes in anticipated rates of appreciation or
depreciation.
Whether or not the Securities are listed on a national securities
exchange, the principal trading market for the Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading
market for the Securities may depend on whether dealers will make a
market in the Securities. There can be no assurance that a market will
be made for any of the Securities, that any market for the Securities
will be maintained or of the liquidity of the Securities in any markets
made. The investigation by the Securities and Exchange Commission of
illegal insider trading in connection with corporate takeovers, and
possible congressional inquiries and legislation relating to this
investigation, may adversely affect the ability of certain dealers to
remain market makers. In addition, the Trusts may be restricted under
the Investment Company Act of 1940 from selling Securities to the
Sponsor. The price at which the Securities may be sold to meet
redemptions, and the value of the Trusts, will be adversely affected if
trading markets for the Securities are limited or absent.
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails, including the risk that
the financial condition of the issuers of the Securities or the general
condition of the common 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. 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. The value of common stocks is subject to
market fluctuations for as long as the common stocks remain outstanding,
and thus the value of the Securities in a Portfolio may be expected to
fluctuate over the life of a Trust to values higher or lower than those
prevailing on a Unit holder's purchase date.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners of
Page 9
the entity, have generally inferior rights to receive payments from the
issuer in comparison with the rights of creditors of, or holders of debt
obligations or preferred stocks issued by, the issuer. Cumulative
preferred stock dividends must be paid before common stock dividends and
any cumulative preferred stock dividend omitted is added to future
dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights on
liquidation which are senior to those of common stockholders.
Holders of preferred stocks have the right to receive dividends, when
and as declared by the issuer's Board of Directors but do not
participate in other amounts available for distribution by the issuing
corporation. Issues of preferred stock generally provide that the
preferred stock may be liquidated, either by a partial scheduled
redemption pursuant to a sinking fund or by a refunding redemption
pursuant to which, at the option of the issuer, all or part of the issue
can be retired from any available funds, at prices which may or may not
include a premium over the involuntary liquidation preference, which
generally is the same as the par or stated value of the preferred stock.
In general, optional redemption provisions are more likely to be
exercised when the preferred stocks are valued at a premium over par or
stated value than when they are valued at a discount from par or stated
value.
An investment in Units should be made with an understanding of the risks
which an investment in preferred stocks entails, including the risk that
the financial condition of the issuers of the Securities or the general
condition of the preferred stock market may worsen, and the value of the
preferred stocks and therefore the value of the Units may decline.
Preferred stocks may be susceptible to general stock market movements
and to volatile increases and decreases of value as market confidence in
and perceptions of the issuers change. These perceptions are based on
unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates,
economic expansion or contraction, market liquidity, and global or
regional political, economic or banking crises. Preferred stocks are
also vulnerable to Congressional reductions in the dividends-received
deduction which would adversely affect the after-tax return to the
investors who can take advantage of the deduction. Such a reduction
might adversely affect the value of preferred stocks in general. Holders
of preferred stocks, as owners of the entity, have rights to receive
payments from the issuers of those preferred stocks that are generally
subordinate to those of creditors of, or holders of debt obligations or,
in some cases, other senior preferred stocks of, such issuers. Preferred
stocks do not represent an obligation of the issuer and, therefore, do
not offer any assurance of income or provide the same degree of
protection of capital as do debt securities. The issuance of additional
debt securities or senior preferred stocks will create prior claims for
payment of principal and interest and senior dividends which could
adversely affect the ability and inclination of the issuer to declare or
pay dividends on its preferred stock or the rights of holders of
preferred stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of preferred stocks is subject to market
fluctuations for as long as the preferred stocks remain outstanding, and
thus the value of the Securities may be expected to fluctuate over the
life of the Trust to values higher or lower than those prevailing on the
Initial Date of Deposit.
Holders of Trust Preferred Securities incur risks in addition to or
slightly different than the typical risks of holding preferred stocks.
Trust Preferred Securities are limited-life preferred securities that
are typically issued by corporations, generally in the form of interest-
bearing notes or preferred securities issued by corporations, or by an
affiliated business trust of a corporation, generally in the form of
beneficial interests in subordinated debentures issued by the
corporation, or similarly structured securities. The maturity and
dividend rate of the Trust Preferred Securities are structured to match
the maturity and coupon interest rate of the interest-bearing notes,
preferred securities or subordinated debentures. Trust Preferred
Securities usually mature on the stated maturity date of the interest-
bearing notes, preferred securities or subordinated debentures and may
be redeemed or liquidated prior to the stated maturity date of such
instruments for any reason on or after their stated call date or upon
the occurrence of certain extraordinary circumstances at any time. Trust
Preferred Securities generally have a yield advantage over traditional
preferred stocks, but unlike preferred stocks, distributions on the
Trust Preferred Securities are treated as interest rather than dividends
for Federal income tax purposes. Unlike most preferred stocks,
distributions received from Trust Preferred Securities are not eligible
for the dividends-received deduction. Certain of the risks unique to
Trust Preferred Securities include: (i) distributions on Trust Preferred
Securities will be made only if interest payments on the interest-
bearing notes, preferred securities or subordinated debentures are made;
Page 10
(ii) a corporation issuing the interest-bearing notes, preferred
securities or subordinated debentures may defer interest payments on
these instruments for up to 20 consecutive quarters and if such election
is made, distributions will not be made on the Trust Preferred
Securities during the deferral period; (iii) certain tax or regulatory
events may trigger the redemption of the interest-bearing notes,
preferred securities or subordinated debentures by the issuing
corporation and result in prepayment of the Trust Preferred Securities
prior to their stated maturity date; (iv) future legislation may be
proposed or enacted that may prohibit the corporation from deducting its
interest payments on the interest-bearing notes, preferred securities or
subordinated debentures for tax purposes, making redemption of these
instruments likely; (v) a corporation may redeem the interest-bearing
notes, preferred securities or subordinated debentures in whole at any
time or in part from time to time on or after a stated call date; (vi)
Trust Preferred Securities holders have very limited voting rights; and
(vii) payment of interest on the interest-bearing notes, preferred
securities or subordinated debentures, and therefore distributions on
the Trust Preferred Securities, is dependent on the financial condition
of the issuing corporation.
Since certain of the Securities in the Trusts may consist of securities
of foreign issuers, an investment in these Trusts involves some
investment risks that are different in some respects from an investment
in a trust that invests entirely in securities of domestic issuers.
Those investment risks include future political and governmental
restrictions which might adversely affect the payment or receipt of
payment of dividends on the relevant Securities. In addition, for the
foreign issuers that are not subject to the reporting requirements of
the Securities Exchange Act of 1934, there may be less publicly
available information than is available from a domestic issuer. Also,
foreign issuers are not necessarily subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. However, due to the
nature of the issuers of Securities included in the Trusts, the Sponsor
believes that adequate information will be available to allow the
Portfolio Supervisor to provide portfolio surveillance.
The securities of certain of the foreign issuers in the Trusts are in
ADR form. ADRs evidence American Depositary Receipts which represent
common stock deposited with a custodian in a depositary. American
Depositary Shares, and receipts therefor (ADRs), are issued by an
American bank or trust company to evidence ownership of underlying
securities issued by a foreign corporation. These instruments may not
necessarily be denominated in the same currency as the securities into
which they may be converted. For purposes of the discussion herein, the
term ADR generally includes American Depositary Shares.
ADRs may be sponsored or unsponsored. In an unsponsored facility, the
depositary initiates and arranges the facility at the request of market
makers and acts as agent for the ADR holder, while the company itself is
not involved in the transaction. In a sponsored facility, the issuing
company initiates the facility and agrees to pay certain administrative
and shareholder-related expenses. Sponsored facilities use a single
depositary and entail a contractual relationship between the issuer, the
shareholder and the depositary; unsponsored facilities involve several
depositaries with no contractual relationship to the company. The
depositary bank that issues an ADR generally charges a fee, based on the
price of the ADR, upon issuance and cancellation of the ADR. This fee
would be in addition to the brokerage commissions paid upon the
acquisition or surrender of the security. In addition, the depositary
bank incurs expenses in connection with the conversion of dividends or
other cash distributions paid in local currency into U.S. dollars and
such expenses are deducted from the amount of the dividend or
distribution paid to holders, resulting in a lower payout per underlying
share represented by the ADR than would be the case if the underlying
share were held directly. Certain tax considerations, including tax rate
differentials and withholding requirements, arising from applications of
the tax laws of one nation to nationals of another and from certain
practices in the ADR market may also exist with respect to certain ADRs.
In varying degrees, any or all of these factors may affect the value of
the ADR compared with the value of the underlying shares in the local
market. In addition, the rights of holders of ADRs may be different than
those of holders of the underlying shares, and the market for ADRs may
be less liquid than that for the underlying shares. ADRs are registered
securities pursuant to the Securities Act of 1933 and may be subject to
the reporting requirements of the Securities Exchange Act of 1934.
For those Securities that are ADRs, currency fluctuations will affect
the U.S. dollar equivalent of the local currency price of the underlying
domestic share and, as a result, are likely to affect the value of the
ADRs and consequently the value of the Securities. The foreign issuers
of securities that are ADRs may pay dividends in foreign currencies
Page 11
which must be converted into dollars. Most foreign currencies have
fluctuated widely in value against the United States dollar for many
reasons, including supply and demand of the respective currency, the
soundness of the world economy and the strength of the respective
economy as compared to the economies of the United States and other
countries. Therefore, for any securities of issuers (whether or not they
are in ADR form) whose earnings are stated in foreign currencies, or
which pay dividends in foreign currencies or which are traded in foreign
currencies, there is a risk that their United States dollar value will
vary with fluctuations in the United States dollar foreign exchange
rates for the relevant currencies.
On the basis of the best information available to the Sponsor at the
present time, none of the Securities are subject to exchange control
restrictions under existing law which would materially interfere with
payment to the Trusts of dividends due on, or proceeds from the sale of,
the Securities. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely
affect payment to the Trusts. In addition, the adoption of exchange
control regulations and other legal restrictions could have an adverse
impact on the marketability of international securities in the Trusts
and on the ability of the Trusts to satisfy their obligation to redeem
Units tendered to the Trustee for redemption.
Unit holders will be unable to dispose of any of the Securities in a
Portfolio, as such, and will not be able to vote the Securities. As the
holder of the Securities, the Trustee will have the right to vote all of
the voting stocks in a Trust and will vote such stocks in accordance
with the instructions of the Sponsor.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before making
a decision to invest in a Trust.
The value of the Securities, like the value of the Treasury Obligations
in Growth and Treasury Trusts, will fluctuate over the life of a Trust
and may be more or less than the price at which they were deposited in
the Trust. The Securities may appreciate or depreciate in value (or pay
dividends) depending on the full range of economic and market influences
affecting these securities. However, the Sponsor believes that, upon
termination of a Growth and Treasury Trust, even if the Securities
deposited in the Trust are worthless, an event which the Sponsor
considers highly unlikely, the Treasury Obligations will provide
sufficient principal to at least equal $1.00 per Unit, or $10.00 per
Unit for certain Growth and Treasury Trusts (which is equal to the per
Unit value upon maturity of the Treasury Obligations). This feature of
the Growth and Treasury Trusts provides Unit holders with principal
protection, although they might forego any earnings on the amount
invested. To the extent that Units are purchased at a price less than
$1.00 per Unit (or less than $10.00 per Unit for certain Trusts) this
feature may also provide a potential for capital appreciation.
Unless a Unit holder purchases Units of a Growth and Treasury Trust on a
date when the value of the Units is $1.00 or less (or $10.00 or less for
certain Trusts), total distributions, including distributions made upon
termination of the Trust, may be less than the amount paid for a Unit.
The Trustee will have no power to vary the investments of the Trusts,
i.e., the Trustee will have no managerial power to take advantage of
market variations to improve a Unit holder's investment, but may dispose
of Securities only under limited circumstances. See "How May Securities
be Removed from the Trusts?"
To the best of the Sponsor's knowledge, there is no litigation pending
as of the date of this Part Two Prospectus in respect of any Security
which might reasonably be expected to have a material adverse effect on
the Trusts. Litigation may be instituted on a variety of grounds with
respect to the Securities. The Sponsor is unable to predict whether any
such litigation will be instituted, or if instituted, whether such
litigation might have a material adverse effect on the Trusts. See Part
Three for additional considerations, if applicable.
Legislation. Legislation may be enacted that could negatively affect the
Securities in a Trust or the issuers of the Securities. Changing
approaches to regulation may have a negative impact on certain companies
represented in a Trust. There can be no assurance that future
legislation, regulation or deregulation will not have a material adverse
effect on a Trust or will not impair the ability of the issuers of the
Securities to achieve their business goals.
Page 12
PUBLIC OFFERING
How is the Public Offering Price Determined?
Although not obligated to do so, the Sponsor intends to maintain a
market for the Units and continuously offer to purchase Units at prices,
subject to change at any time, based upon the aggregate underlying value
of the Securities in the Trust plus or minus cash, if any, in the Income
and Capital Accounts of the Trust. All expenses incurred in maintaining
a secondary market, other than the fees of the Evaluator, the costs of
the Trustee in transferring and recording the ownership of Units and
costs incurred in annually updating the Trusts' registration statements,
will be borne by the Sponsor. If the supply of Units exceeds demand, or
for some other business reason, the Sponsor may discontinue purchases of
Units at such prices. IF A UNIT HOLDER WISHES TO DISPOSE OF HIS UNITS,
HE SHOULD INQUIRE OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR TO
MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. Units subject to a
deferred sales charge which are sold or tendered for redemption prior to
such time as the entire deferred sales charge on such Units has been
collected will be assessed the amount of the remaining deferred sales
charge at the time of sale or redemption.
Units are offered at the Public Offering Price. The Public Offering
Price is based on the aggregate bid side evaluation of the Treasury
Obligations (if applicable) and the aggregate underlying value of the
Securities in the Trust, plus or minus cash, if any, in the Income and
Capital Accounts of the Trust, plus the applicable sales charge.
The Public Offering Price of Units on the date of this Part Two
Prospectus may vary from the amount stated under "Summary of Essential
Information" appearing in Part One for each Trust in accordance with
fluctuations in the prices of the underlying Securities. The aggregate
value of the Units of a Trust shall be determined (a) on the basis of
the bid prices of the Treasury Obligations (if applicable) and the
aggregate underlying value of the Securities therein plus or minus cash,
if any, in the Income and Capital Accounts of a Trust, (b) if bid prices
are not available for the Treasury Obligations (if applicable), on the
basis of bid prices for comparable securities, (c) by determining the
value of the Treasury Obligations (if applicable) on the bid side of the
market by appraisal, or (d) by any combination of the above.
The aggregate value of the Securities will be determined in the
following manner: if the Securities are listed, this evaluation is
generally based on the closing sale prices on that exchange or that
system (unless it is determined that these prices are inappropriate as a
basis for valuation) or, if there is no closing sale price on that
exchange or system, at the closing bid prices. If the Securities are not
so listed or, if so listed and the principal market therefore is other
than on the exchange, the evaluation shall generally be based on the
current bid price on the over-the-counter market (unless these prices
are inappropriate as a basis for evaluation). If current bid prices are
unavailable, the evaluation is generally determined (a) on the basis of
current bid prices for comparable securities, (b) by appraising the
value of the Securities on the bid side of the market or (c) by any
combination of the above.
Although payment is normally made three business days following the
order for purchase, payment may be made prior thereto. A person will
become owner of the Units on the date of settlement provided payment has
been received. Cash, if any, made available to the Sponsor prior to the
date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor,
subject to the limitations of the Securities Exchange Act of 1934.
Delivery of Certificates representing Units so ordered will be made five
business days following such order or shortly thereafter. See "Rights of
Unit Holders-How May Units be Redeemed?" for information regarding the
ability to redeem Units ordered for purchase.
See "Public Offering" in Part Three for additional information for each
Trust.
How are Units Distributed?
Units repurchased in the secondary market may be offered by this Part
Two Prospectus at the secondary market public offering price determined
in the manner described above.
The Sponsor reserves the right to change the amount of the concession or
agency commission from time to time. Certain commercial banks may be
making Units of the Trusts available to their customers on an agency
basis. A portion of the sales charge paid by these customers is retained
by or remitted to the banks.
Page 13
From time to time the Sponsor may implement programs under which
broker/dealers, banks or other selling agents of a Trust may receive
nominal awards from the Sponsor for each of their registered
representatives who have sold a minimum number of UIT Units during a
specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales force of a broker/dealer,
bank or other selling agent may be eligible to win other nominal awards
for certain sales efforts, or under which the Sponsor will reallow to
any such dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Sponsor, or participates in
sales programs sponsored by the Sponsor, an amount not exceeding the
total applicable sales charges on the sales generated by such person at
the public offering price during such programs. Also, the Sponsor, in
its discretion, may from time to time pursuant to objective criteria
established by the Sponsor, pay fees to qualifying dealers for certain
services or activities which are primarily intended to result in sales
of Units of a Trust. Such payments are made by the Sponsor out of its
own assets, and not out of the assets of a Trust. These programs will
not change the price Unit holders pay for their Units or the amount that
a Trust will receive from the Units sold.
The Sponsor may, from time to time in its advertising and sales
materials, compare the then current estimated returns on a Trust and
returns over specified periods on other similar trusts sponsored by Nike
Securities L.P. with returns on other taxable investments such as
corporate or U.S. Government bonds, bank CDs and money market accounts
or money market funds, each of which has investment characteristics that
may differ from those of the respective Trust. U.S. Government bonds,
for example, are backed by the full faith and credit of the U.S.
Government, and bank CDs and money market accounts are insured by an
agency of the federal government. Money market accounts and money market
funds provide stability of principal, but pay interest at rates that
vary with the condition of the short-term debt market. The investment
characteristics of each respective Trust are described more fully
elsewhere in this Prospectus and in Part Three for each Trust.
Trust performance may be compared to performance on a total return basis
with the Dow Jones Industrial Average, the S&P 500 Composite Stock Price
Index, or performance data from Lipper Analytical Services, Inc. and
Morningstar Publications, Inc. or from publications such as Money, The
New York Times, U.S. News and World Report, BusinessWeek, Forbes or
Fortune. As with other performance data, performance comparisons should
not be considered representative of a Trust's relative performance for
any future period.
What are the Sponsor's Profits?
In maintaining a market for the Units, the Sponsor will realize profits
or sustain losses in the amount of any difference between the price at
which Units are purchased and the price at which Units are resold (which
price includes a sales charge as indicated in Part One for each Trust)
or redeemed. The secondary market public offering price of Units may be
greater or less than the cost of such Units to the Sponsor.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units may be evidenced by registered certificates executed
by the Trustee and the Sponsor. Delivery of certificates representing
Units ordered for purchase is normally made three business days
following such order or shortly thereafter. Certificates are
transferable by presentation and surrender to the Trustee properly
endorsed or accompanied by a written instrument or instruments of
transfer. Certificates to be redeemed must be properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unit
holder must sign exactly as his name appears on the face of the
certificate with the signature guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guaranty program in addition to, or in substitution for,
STAMP, as may be accepted by the Trustee. In certain instances the
Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification.
Page 14
Unit holders may elect to hold their Units in uncertificated form. The
Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of the Trust; the number of Units issued or transferred; the
name, address and taxpayer identification number, if any, of the new
registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such Units are or may be subject or a
statement that there are no such liens, restrictions or adverse claims;
and the date the transfer was registered. Uncertificated Units are
transferable through the same procedures applicable to Units evidenced
by certificates (described above), except that no certificate need be
presented to the Trustee and no certificate will be issued upon the
transfer unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income (other than accreted
interest) received with respect to any of the Securities in a Trust on
or about the Income Distribution Dates to Unit holders of record on the
preceding Income Distribution Record Date. See "Summary of Essential
Information" appearing in Part One of this Prospectus. Persons who
purchase Units will commence receiving distributions only after such
person becomes a record owner. Notification to the Trustee of the
transfer of Units is the responsibility of the purchaser, but in the
normal course of business such notice is provided by the selling
broker/dealer. The pro rata share of cash in the Capital Account of each
Trust will be computed as of the date indicated in Part One for each
Trust. Capital Account distributions to the Unit holders of record of a
Trust as of the date indicated in Part One for each Trust will be made
on the date indicated in Part One for each Trust. The Trustee is not
required to pay interest on funds held in the Capital Account of a Trust
(but may itself earn interest thereon and therefore benefit from the use
of such funds) nor to make a distribution from the Capital Account of a
Trust unless the amount available for distribution shall equal at least
$1.00 per 1000 Units (if $1.00 per Unit) or $1.00 per 100 Units (if
$10.00 per Unit). Proceeds received on the sale of any Securities or
Treasury Obligations (if applicable) in a Trust, to the extent not used
to meet redemptions of Units or pay expenses, will however be
distributed to Unit holders of record as indicated in Part One for each
Trust. Income with respect to the original issue discount on the
Treasury Obligations in a Growth and Treasury Trust will not be
distributed currently, although Unit holders will be subject to Federal
income tax as if a distribution had occurred. See "What is the Federal
Tax Status of Unit Holders?"
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
a Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder under certain circumstances by
contacting the Trustee, otherwise the amount may be recoverable only
when filing a tax return. Under normal circumstances the Trustee obtains
the Unit holder's tax identification number from the selling broker.
However, a Unit holder should examine his or her statements from the
Trustee to make sure that the Trustee has been provided a certified tax
identification number in order to avoid this possible "back-up
withholding." In the event the Trustee has not been previously provided
such number, one should be provided as soon as possible.
Within a reasonable time after a Trust is terminated, each Unit holder
who is not a Rollover Unit holder, if applicable, will, upon surrender
of his Units for redemption, receive: (i) the pro rata share of the
amounts realized upon the disposition of Securities, unless he or she
elects an In-Kind Distribution as described under "Other Information-How
May the Indenture be Amended or Terminated?", (ii) a pro rata share of
the amounts realized upon the disposition of the Treasury Obligations
(if applicable) and (iii) a pro rata share of any other assets of the
Trust, less expenses of the Trust, subject to the limitation that
Treasury Obligations (if applicable) may not be sold to pay for Trust
expenses.
Page 15
The Trustee will credit to the Income Account of a Trust any dividends
received on the Securities therein. All other receipts (e.g. return of
principal, capital gains, etc.) are credited to the Capital Account of a
Trust.
The Trustee may establish reserves (the "Reserve Account") within a
Trust for state and local taxes, if any, and any governmental charges
payable out of such Trust.
Distribution Reinvestment Option. Eligible Unit holders may elect to
have each distribution of income or capital on his or her Units, other
than the final liquidating distribution in connection with the
termination of the Trust, automatically reinvested in additional Units
of an eligible Trust. See Part III of this Prospectus to determine
whether the distribution reinvestment option is available for a
particular Trust. Each person who purchases Units of an eligible Trust
may elect to become a participant in the Distribution Reinvestment
Option by notifying the Trustee of their election. The Distribution
Reinvestment Option may not be available in all states. In order to
enable a Unit holder to participate in the Distribution Reinvestment
Option with respect to a particular distribution on his or her Units,
the card must be received by the Trustee within 10 days prior to the
Record Date for such distribution. Each subsequent distribution of
income or capital on the participant's Units will be automatically
applied by the Trustee to purchase additional Units of the Trust. IT
SHOULD BE REMEMBERED THAT EVEN IF DISTRIBUTIONS ARE REINVESTED, THEY ARE
STILL TREATED AS DISTRIBUTIONS FOR INCOME TAX PURPOSES.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and the amount
of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per 1,000 Units if $1.00 per Unit (or per
100 Units if $10.00 per Unit). Within a reasonable period of time after
the end of each calendar year, the Trustee shall furnish to each person
who at any time during the calendar year was a Unit holder of a Trust
the following information in reasonable detail: (1) a summary of
transactions in the Trust for such year; (2) any Securities sold during
the year and the Securities held at the end of such year by the Trust;
(3) the redemption price per 1,000 Units if $1.00 per Unit (or per 100
Units if $10.00 per Unit) based upon a computation thereof on the 31st
day of December of such year (or the last business day prior thereto);
and (4) amounts of income and capital distributed during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trusts furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender to the
Trustee at its unit investment trust office in the City of New York of
the certificates representing the Units to be redeemed, or in the case
of uncertificated Units, delivery of a request for redemption, duly
endorsed or accompanied by proper instruments of transfer with signature
guaranteed as explained above (or by providing satisfactory indemnity,
as in connection with lost, stolen or destroyed certificates), and
payment of applicable governmental charges, if any. No redemption fee
will be charged. On the third business day following such tender, the
Unit holder will be entitled to receive in cash an amount for each Unit
equal to the Redemption Price per Unit next computed after receipt by
the Trustee of such tender of Units. The "date of tender" is deemed to
be the date on which Units are received by the Trustee (if such day is a
day on which the New York Stock Exchange is open for trading), except
that as regards Units received after 4:00 p.m. Eastern time (or as of
any earlier closing time on a day on which the New York Stock Exchange
is scheduled in advance to close at such earlier time), the date of
tender is the next day on which the New York Stock Exchange is open for
trading and such Units will be deemed to have been tendered to the
Trustee on such day for redemption at the redemption price computed on
that day. Units so redeemed shall be cancelled.
For certain Equity Trusts, any Unit holder tendering at least the
minimum amount specified in "Summary of Essential Information" appearing
in Part One for each Trust for redemption may request by written notice
submitted at the time of tender from the Trustee in lieu of a cash
redemption a distribution of shares of Securities in an amount and value
of Securities per Unit equal to the Redemption Price Per Unit as
determined as of the evaluation next following tender. However, no In-
Kind Distribution requests submitted during the nine business days prior
to the Mandatory Termination Date will be honored. To the extent
possible, In-Kind Distributions shall be made by the Trustee through the
distribution of each of the Securities in book-entry form to the account
Page 16
of the Unit holder's bank or broker/dealer at the Depository Trust
Company. An In-Kind Distribution will be reduced by customary transfer
and registration charges. The tendering Unit holder will receive his pro
rata number of whole shares of each of the Securities comprising the
portfolio and cash from the Capital Account equal to the fractional
shares to which the tendering Unit holder is entitled. The Trustee may
adjust the number of shares of any issue of Securities included in a
Unit holder's In-Kind Distribution to facilitate the distribution of
whole shares, such adjustment to be made on the basis of the value of
Securities on the date of tender. If funds in the Capital Account are
insufficient to cover the required cash distribution to the tendering
Unit holder, the Trustee may sell Securities in the manner described
above.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unit
holder's tax identification number in the manner required by such
regulations. For further information regarding this withholding, see
"Rights of Unit Holders-How are Income and Capital Distributed?" In the
event the Trustee has not been previously provided such number, one must
be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of a Trust to the extent that funds are
available for such purpose, or from the Capital Account. All other
amounts paid on redemption shall be withdrawn from the Capital Account
of a Trust.
The Trustee is empowered to sell Securities and/or Treasury Obligations
(if applicable) of a Trust in order to make funds available for
redemption. To the extent that Securities and/or Treasury Obligations
(if applicable) are sold, the size and diversity of the Trust will be
reduced. Such sales may be required at a time when Securities and/or
Treasury Obligations (if applicable) would not otherwise be sold and
might result in lower prices than might otherwise be realized. For
Growth and Treasury Trusts, Securities will be sold to meet redemptions
of Units before Treasury Obligations, although Treasury Obligations may
be sold if the Growth and Treasury Trust is assured of retaining a
sufficient principal amount of Treasury Obligations to provide funds
upon maturity of the Trust at least equal to $1.00 per Unit, or $10.00
per Unit for certain Trusts.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Treasury Obligations (if applicable) and the aggregate underlying value
of the Securities in the Trust, plus or minus cash, if any, in the
Income and Capital Accounts of a Trust. The Redemption Price per Unit is
the pro rata share of each Unit determined by the Trustee by adding: (1)
the cash on hand in a Trust; (2) the aggregate value of the Securities
held in a Trust, as determined by the Evaluator on the basis of bid
prices of the Treasury Obligations (if applicable) and the aggregate
underlying value of the Securities in a Trust next computed; and (3)
dividends receivable on Securities trading ex-dividend as of the date of
computation; and deducting therefrom: (1) amounts representing any
applicable taxes or governmental charges payable out of a Trust; (2) any
amounts owing to the Trustee for its advances; (3) an amount
representing estimated accrued expenses of a Trust, including but not
limited to fees and expenses of the Trustee (including legal and
auditing fees), the Evaluator and supervisory fees, if any; (4) cash
held for distribution to Unit holders of record of a Trust as of the
business day prior to the evaluation being made; and (5) other
liabilities incurred by a Trust; and finally dividing the results of
such computation by the number of Units of the Trust outstanding as of
the date thereof.
The aggregate value of the Securities will be determined in the
following manner: if the Securities are listed, this evaluation is
generally based on the closing sale prices on that exchange or that
system (unless it is determined that these prices are inappropriate as a
basis for valuation) or, if there is no closing sale price on that
exchange or system, at the closing bid prices. If the Securities are not
so listed or, if so listed and the principal market therefore is other
than on the exchange, the evaluation shall generally be based on the
current bid price on the over-the-counter market (unless these prices
are inappropriate as a basis for evaluation). If current bid prices are
unavailable, the evaluation is generally determined (a) on the basis of
current bid prices for comparable securities, (b) by appraising the
value of the Securities on the bid side of the market or (c) by any
combination of the above.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on the New
York Stock Exchange is restricted or any emergency exists, as a result
Page 17
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances, the
Sponsor may apply to the Securities and Exchange Commission for an order
permitting a full or partial suspension of the right of Unit holders to
redeem their Units. The Trustee is not liable to any person in any way
for any loss or damage which may result from any such suspension or
postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before 1:00 p.m. Eastern time on the same
business day and by making payment therefor to the Unit holder not later
than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units. In the event the Sponsor does not
purchase Units, the Trustee may sell Units tendered for redemption in
the over-the-counter market, if any, as long as the amount to be
received by the Unit holder is equal to the amount he or she would have
received on redemption of the Units.
The offering price of any Units acquired by the Sponsor will be in
accord with the Public Offering Price described in the then effective
prospectus describing such Units. Any profit or loss resulting from the
resale or redemption of such Units will belong to the Sponsor.
How May Securities be Removed from the Trusts?
The Portfolio of each Trust is not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of a Security in the event
that an issuer defaults in the payment of a dividend that has been
declared, that any action or proceeding has been instituted restraining
the payment of dividends or there exists any legal question or
impediment affecting such Security, that the issuer of the Security has
breached a covenant which would affect the payments of dividends, the
credit standing of the issuer or otherwise impair the sound investment
character of the Security, that the issuer has defaulted on the payment
on any of its outstanding obligations, that the price of the Security
has declined to such an extent or other such credit factors exist so
that in the opinion of the Sponsor, the retention of such Securities
would be detrimental to a Trust. Treasury Obligations in Growth and
Treasury Trusts may be sold by the Trustee only pursuant to the
liquidation of a Growth and Treasury Trust or to meet redemption
requests. Pursuant to the Indenture and with limited exceptions, the
Trustee may sell any securities or other property acquired in exchange
for Securities such as those acquired in connection with a merger or
other transaction. If offered such new or exchanged securities or
property, the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by a Trust, they may be
accepted for deposit in such Trust and either sold by the Trustee or
held in the Trust pursuant to the direction of the Sponsor (who may rely
on the advice of the Portfolio Supervisor). Proceeds from the sale of
Securities by the Trustee are credited to the Capital Account of a Trust
for distribution to Unit holders or to meet redemptions. The Trustee may
from time to time retain and pay compensation to the Sponsor (or an
affiliate of the Sponsor) to act as agent for a Trust with respect to
selling Securities from such Trust. In acting in such capacity the
Sponsor or its affiliate will be held subject to the restrictions under
the Investment Company Act of 1940, as amended.
The Trustee may also sell Securities designated by the Sponsor, or if
not so directed, in its own discretion, for the purpose of redeeming
Units of the Trust tendered for redemption and the payment of expenses;
provided, however, that in the case of Securities sold to meet
redemption requests, Treasury Obligations in Growth and Treasury Trusts
may only be sold if the Trust is assured of retaining a sufficient
principal amount of Treasury Obligations to provide funds upon maturity
of a Growth and Treasury Trust at least equal to $1.00 per Unit, or
$10.00 per Unit for certain Trusts. Treasury Obligations may not be sold
by the Trustee to meet Trust expenses.
The Sponsor, in designating Securities to be sold by the Trustee, will
generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares
of individual issues of Securities. To the extent this is not
practicable, the composition and diversity of the Securities may be
Page 18
altered. In order to obtain the best price for a Trust, it may be
necessary for the Sponsor to specify minimum amounts (generally 100
shares) in which blocks of Securities are to be sold. The Sponsor may
consider sales of Units of unit investment trusts which it sponsors in
making recommendations to the Trustee as to the selection of
broker/dealers to execute the Trusts' portfolio transactions.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, FT Series (formerly known as The First Trust Special Situations
Trust), The First Trust Insured Corporate Trust, The First Trust of
Insured Municipal Bonds, The First Trust GNMA, Templeton Growth and
Treasury Trust, Templeton Foreign Fund & U.S. Treasury Securities Trust
and The Advantage Growth and Treasury Securities Trust. First Trust
introduced the first insured unit investment trust in 1974 and to date
more than $27 billion in First Trust unit investment trusts have been
deposited. The Sponsor's employees include a team of professionals with
many years of experience in the unit investment trust industry. The
Sponsor is a member of the National Association of Securities Dealers,
Inc. and Securities Investor Protection Corporation and has its
principal offices at 1001 Warrenville Road, Lisle, Illinois 60532;
telephone number (630) 241-4141. As of December 31, 1999, the total
partners' capital of Nike Securities L.P. was $19,881,035 (audited).
This paragraph relates only to the Sponsor and not to the Trusts or to
any series thereof or to any other Underwriter. The information is
included herein only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be
made available by the Sponsor upon request.
Code of Ethics. The Sponsor and each Trust have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to a Trust.
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The Trustee
is subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the Securities. For information
relating to the responsibilities of the Trustee under the Indenture,
reference is made to the material set forth under "Rights of Unit
Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Page 19
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Securities. In the event of the failure of the
Sponsor to act under the Indenture, the Trustee may act thereunder and
shall not be liable for any action taken by it in good faith under the
Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of a Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is either Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187 or First Trust
Advisors L.P., an Illinois limited partnership formed in 1991 and an
affiliate of the Sponsor. The address of First Trust Advisors L.P. is
1001 Warrenville Road, Lisle, Illinois 60532. See Part One for each
Trust to determine if Securities Evaluation Service, Inc. or First Trust
Advisors L.P. is evaluating such Trust. The Evaluator may resign or may
be removed by the Sponsor and the Trustee, in which event the Sponsor
and the Trustee are to use their best efforts to appoint a satisfactory
successor. Such resignation or removal shall become effective upon the
acceptance of appointment by the successor Evaluator. If upon
resignation of the Evaluator no successor has accepted appointment
within 30 days after notice of resignation, the Evaluator may apply to a
court of competent jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that a Trust shall terminate upon the maturity,
redemption or other disposition of the last of the Treasury Obligations
held in a Growth and Treasury Trust, but in no event beyond the
Mandatory Termination Date indicated in Part One for each Trust under
"Summary of Essential Information." A Trust may be liquidated at any
time by consent of 100% of the Unit holders of the Trust, by the Trustee
in the event that Units of a Trust not yet sold aggregating more than
60% of the Units of the Trust are tendered for redemption by an
Underwriter, including the Sponsor or, for Equity Trusts, by the Trustee
when the principal amount of the Securities owned by a Trust as shown by
any evaluation, is less than the amount specified in Part One for each
Trust. In the event of termination, written notice thereof will be sent
by the Trustee to all Unit holders of a Trust. Within a reasonable
period after termination, the Trustee will follow the procedures set
Page 20
forth under "Rights of Unit Holders-How are Income and Capital
Distributed?"
Commencing during the period beginning nine business days prior to and
no later than the Mandatory Termination Date, Securities will begin to
be sold in connection with the termination of a Trust. The Sponsor will
determine the manner, timing and execution of the sale of the
Securities. Written notice of any termination of a Trust specifying the
time or times at which Unit holders may surrender their certificates for
cancellation shall be given by the Trustee to each Unit holder at his
address appearing on the registration books of a Trust maintained by the
Trustee. Not less than 60 days prior to the Mandatory Termination Date,
the Trustee will provide written notice thereof to all Unit holders and
will include with such notice a form to enable Unit holders to elect a
distribution of shares of Securities (an "In-Kind Distribution"), if
such Unit holder owns at least that minimum amount as set forth in
"Summary of Essential Information" in Part One for each Trust, rather
than receive payment in cash for such Unit holder's pro rata share of
the amounts realized upon the disposition by the Trustee of Securities.
An In-Kind Distribution will be reduced by customary transfer and
registration charges. To be effective, the election form, together with
surrendered certificates and other documentation required by the
Trustee, must be returned to the Trustee at least ten business days
prior to the Mandatory Termination Date. Not less than 60 days prior to
the termination of the Trust, those Unit holders with at least that
minimum amount as set forth in "Summary of Essential Information" in
Part One for each Trust, will be offered the option of having the
proceeds from the Securities distributed "In-Kind," or they will be paid
in cash, as indicated above. For Growth and Treasury Trusts, all Unit
holders will receive their pro rata portion of the Treasury Obligations
in cash upon the termination of a Trust. A Unit holder may, of course,
at any time after the Securities are distributed, sell all or a portion
of the shares. Unit holders not electing a distribution of shares of
Securities will receive a cash distribution from the sale of the
remaining Securities and Treasury Obligations (if applicable) within a
reasonable time after a Trust is terminated. Regardless of the
distribution involved, the Trustee will deduct from the funds of the
Trust any accrued costs, expenses, advances or indemnities provided by
the Trust Agreement, including estimated compensation of the Trustee and
costs of liquidation and any amounts required as a reserve to provide
for payment of any applicable taxes or other governmental charges. Any
sale of Securities in a Trust upon termination may result in a lower
amount than might otherwise be realized if such sale were not required
at such time. In addition, to the extent that Securities are sold prior
to the Mandatory Termination Date, Unit holders will not benefit from
any stock appreciation they would have received had the Securities not
been sold at such time. The Trustee will then distribute to each Unit
holder his pro rata share of the balance of the Income and Capital
Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn, acted as counsel for the Trustee and as
special New York tax counsel for the Trust.
Experts
The financial statements of the various Series of the Trust appearing in
Part One of this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere therein and in the Registration
Statement, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
Page 21
DESCRIPTION OF BOND RATINGS*
Standard & Poor's. A brief description of the applicable Standard & Poor's
rating symbols and their meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current assessment
of the creditworthiness of an obligor with respect to a specific debt
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.
BB, B, CCC, CC - Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is provisional.
A provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his/her own judgment with respect to such likelihood
and risk.
Credit Watch: Credit Watch highlights potential changes in ratings of bonds
and other fixed income securities. It focuses on events and trends which
place companies and government units under special surveillance by S&P's
180-member analytical staff. These may include mergers, voter referendums,
actions by regulatory authorities, or developments gleaned from analytical
reviews. Unless otherwise noted, a rating decision will be made within 90
days. Issues appear on Credit Watch where an event, situation, or deviation
from trends occurred and needs to be evaluated as to its impact on credit
ratings. A listing, however, does not mean a rating change is inevitable.
_______________
* As published by the rating companies.
Page 22
Since S&P continuously monitors all of its ratings, Credit Watch is not
intended to include all issues under review. Thus, rating changes will
occur without issues appearing on Credit Watch.
Moody's. A brief description of the applicable Moody's rating symbols and
their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat large than in Aaa securities. Their market value is virtually
immune to all but money market influences, with the occasional exception
of oversupply in a few specific instances.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future. The market value of A-rated bonds may be influenced
to some degree by economic performance during a sustained period of
depressed business conditions, but, during periods of normalcy, A-rated
bonds frequently move in parallel with Aaa and Aa obligations, with the
occasional exception of oversupply in a few specific instances.
A 1 and Baa 1 - Bonds which are rated A 1 and Baa 1 offer the maximum in
security within their quality group, can be bought for possible upgrading
in quality, and additionally, afford the investor an opportunity to gauge
more precisely the relative attractiveness of offerings in the market place.
Baa - Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. The
market value of Baa-rated bonds is more sensitive to changes in economic
circumstances, and aside from occasional speculative factors applying to
some bonds of this class, Baa market valuations will move in parallel with
Aaa, Aa, and A obligations during periods of economic normalcy, except in
instances of oversupply.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the
high end of its category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
Con.(- - -) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals which
begin when facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.) A brief
description of the applicable Fitch rating symbols and their meanings follows:
AAA - These bonds are considered to be investment grade and of the highest
quality. The obligor has an extraordinary ability to pay interest and repay
Page 23
principal, which is unlikely to be affected by reasonably foreseeable events.
AA - These bonds are considered to be investment grade and of high quality.
The obligor's ability to pay interest and repay principal, which is very
strong, is somewhat less than for AAA-rated securities or more subject to
possible change over the term of the issue.
A - These bonds are considered to be investment grade and of good quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB - These bonds are considered to be investment grade and of satisfactory
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to weaken this ability than bonds
with higher ratings.
BB - These bonds are considered speculative and of low investment grade.
The obligor's ability to pay interest and repay principal is not strong and
is considered likely to be affected over time by adverse economic changes.
B - These bonds are considered highly speculative. Bonds in this class are
lightly protected as to the obligor's ability to pay interest over the life
of the issue and repay principal when due.
A "+" or a "-" sign after a rating symbol indicates relative standing in its
rating.
Page 23
CONTENTS:
The First Trust Special Situations Trust
FT Series:
What is the FT Series? 4
What are the Expenses and Charges? 4
What is the Federal Tax Status of Unit Holders? 6
Are Investments in the Trusts Eligible for
Retirement Plans? 8
Portfolio:
What are Treasury Obligations? 8
What are the Securities? 8
What are Some Additional Considerations for
Investors? 12
Public Offering:
How is the Public Offering Price Determined? 13
How are Units Distributed? 13
What are the Sponsor's Profits? 14
Rights of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 14
How are Income and Capital Distributed? 15
What Reports will Unit Holders Receive? 16
How May Units be Redeemed? 16
How May Units be Purchased by the Sponsor? 18
How May Securities be Removed
from the Trusts? 18
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 19
Who is the Trustee? 19
Limitations on Liabilities of Sponsor and Trustee 20
Who is the Evaluator? 20
Other Information:
How May the Indenture be Amended or
Terminated? 20
Legal Opinions 21
Experts 21
Description of Bond Ratings 22
___________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE FUND
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
The First Trust
Special Situations Trust
FT Series
Prospectus
Part Two
April 28, 2000
First Trust (registered trademark)
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
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE AND PART THREE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 24
REAL ESTATE TRUST SERIES
The First Trust(registered trademark) Special Situations Trust
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated April 28, 2000 PART ONE AND PART TWO
The Trusts. The Trusts consist of a diversified portfolio of common
stocks issued by publicly traded equity real estate investment trusts,
known as REITs. See "Portfolio" appearing in Part One for each Trust.
The Objective of the Trusts. The objective of each Trust is to provide
for potential capital appreciation and potential dividend income by
investing a Trust's portfolio in common stocks issued by publicly traded
equity real estate investment trusts ("Equity Securities").
Additionally, the Trusts allow individual investors the opportunity to
invest in the real estate market in a more affordable, practical and
liquid alternative to purchasing individual properties. There is, of
course, no guarantee that the objective of the Trusts will be achieved.
Federal Tax Status of Unit Holders. Notwithstanding anything to the
contrary in Part Two of the Prospectus, the following discussion is
limited to investors who own Units of the Real Estate Trust Series,
which Trusts are structured to qualify as regulated investment companies
for Federal tax purposes.
Each Trust, which is an association taxable as a corporation under the
Internal Revenue Code, intends to elect and qualify on a continuing
basis for special Federal income tax treatment as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the
"Code"). If a Trust so qualifies and timely distributes to Unit holders
90% or more of its taxable income (without regard to its net capital
gain, i.e., the excess of its long-term capital gain over its net short-
term capital loss), it will not be subject to Federal income tax on the
portion of its taxable income (including any net capital gain) that it
distributes to Unit holders. In addition, to the extent a Trust
distributes to Unit holders at least 98% of its taxable income
(including any net capital gain), it will not be subject to the 4%
excise tax on certain undistributed income of "regulated investment
companies." Each Trust intends to timely distribute its taxable income
(including any net capital gains) to avoid the imposition of Federal
income tax or the excise tax.
In any taxable year of a Trust, the distributions of each Trust's
income, other than distributions which are designated as capital gain
dividends, will be taxable as ordinary income to the Unit holders,
except that, to the extent that distributions to a Unit holder in any
year exceed a Trust's current and accumulated earnings and profits, they
will be treated as a return of capital and will reduce the Unit holder's
basis in his Units, and to the extent that they exceed his basis, will
be treated as a gain from the sale of his Units as discussed below.
Distributions from a Trust will not be eligible for the dividends
received deduction for corporations. Although distributions generally
will be treated as distributed when paid, distributions declared in
October, November or December, payable to Unit holders of record on a
specified date in one of those months and paid during January of the
following year will be treated as having been distributed by a Trust
(and received by the Unit holders) on December 31 of the year such
distributions are declared.
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
Distributions of a Trust's net capital gain which are properly
designated as capital gain dividends by the Trust will be taxable to
Unit holders as long-term capital gain, regardless of the length of time
the Units have been held by a Unit holder. A Unit holder may recognize a
taxable gain or loss if the Unit holder sells or redeems his Units. Any
gain or loss arising from (or treated as arising from) the sale or
redemption of Units will generally be a capital gain or loss, except in
the case of a dealer or financial institution. The Internal Revenue
Service Restructuring and Reform Act of 1998 (the "1998 Tax Act")
provides that for taxpayers other than corporations, net capital gain
(which is defined as net long-term capital gain over net short-term
capital loss for the taxable year) realized from property (with certain
exclusions) is generally subject to a maximum marginal stated tax rate
of 20% (10% in the case of certain taxpayers in the lowest tax bracket).
However, capital gain realized from assets held more than one year that
is considered unrecaptured section 1250 gain is taxed at a maximum
marginal stated tax rate of 25%. Capital gain or loss is long-term if
the holding period for the asset is more than one year, and is short-
term if the holding period for the asset is one year or less. The date
on which a Unit is acquired (i.e., the "trade date") is excluded for
purposes for determining the holding period of the Unit. The legislation
is generally effective retroactively for amounts properly taken into
account on or after January 1, 1998. Capital gains realized from assets
held for one year or less are taxed at the same rates as ordinary income.
Note, however, that the 1998 Tax Act (and the Taxpayer Relief Act of
1997 (the "1997 Act")) provide that the application of the rules
described above in the case of pass-through entities such as the Trusts
will be prescribed in future Treasury Regulations. The Internal Revenue
Service has released preliminary guidance which provides that, in
general, pass-through entities such as the Trusts may designate their
capital gains dividends as either a 20% rate gain distribution, an
unrecaptured section 1250 gain distribution, or a 28% rate gain
distribution, depending on the nature of the gain received by the pass-
through entity. Unit holders should consult their own tax advisors as to
the tax rate applicable to capital gain dividends. Note that, if a Unit
holder holds Units for six months or less and subsequently sells such
Units at a loss, the loss will be treated as a long-term capital loss to
the extent that any long-term capital gain distribution is made with
respect to such Units during the six-month period or less that the Unit
holder owns the Units. Distributions in partial liquidation reflecting
the proceeds of prepayments, redemptions, maturities (including monthly
mortgage payments of principal) or sales of Securities (exclusive of net
capital gain) will not be taxable to Unit holders of such Trust to the
extent that they represent a return of capital for tax purposes. The
portion of distributions which represents a return of capital will,
however, reduce a Unit holder's basis in his Units, and to the extent
they exceed the basis of his Units will be taxable as a capital gain.
The 1997 Act includes other provisions that treat certain other
transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g., short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisers with regard to any such constructive
sales rules.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after
April 30, 1993. Unit holders and prospective investors should consult
with their tax advisors regarding the potential effect of this provision
on their investment in Units.
Under the Code, certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee business
expenses, will be deductible by individuals only to the extent they
exceed 2% of adjusted gross income. Miscellaneous itemized deductions
subject to this limitation under present law do not include expenses
incurred by a Trust as long as the Units of a Trust are held by or for
500 or more persons at all times during the taxable year or another
exception is met. In the event the Units of a Trust are held by fewer
than 500 persons, additional taxable income may be realized by the
individual and Unit holders in excess of the distributions received from
a Trust.
Each Unit holder of a Trust shall receive an annual statement describing
the tax status of the distributions paid by a Trust.
Each Unit holder will be requested to provide the Unit holder's taxpayer
identification number to the Trustee and to certify that the Unit holder
has not been notified that payments to the Unit holder are subject to
back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions
Page 2
by a Trust to such Unit holder (including amounts received upon the
redemption of Units) will be subject to back-up withholding.
Distributions by a Trust will generally be subject to United States
income taxation and withholding in the case of Units held by non-
resident alien individuals, foreign corporations or other non-United
States persons. Such persons should consult their tax advisors.
As discussed in "Rights of Unit holders-How May Units be Redeemed?",
under certain circumstances a Unit holder who owns at least 2,500 Units
may request an In Kind Distribution upon the redemption of Units or the
termination of a Trust. Unit holders electing an In Kind Distribution of
shares of the Securities should be aware that the exchange is subject to
taxation and Unit holders will recognize gain or loss based on the value
of the Securities received.
A Unit holder who is a foreign investor (i.e., an investor other than a
United States citizen or resident or a United States corporation,
partnership, estate or trust) should be aware that, generally, subject
to applicable tax treaties, distributions from a Trust which constitute
dividends for Federal income tax purposes (other than dividends which a
Trust designates as capital gain dividends) will be subject to United
States income taxes, including withholding taxes. However, distributions
received by a foreign investor from a Trust that are designated by that
Trust as capital gain dividends should not be subject to United States
Federal income taxes, including withholding taxes, if all of the
following conditions are met: (i) the capital gain dividend is not
effectively connected with the conduct by the foreign investor of a
trade or business within the United States, (ii) the foreign investor
(if an individual) is not present in the United States for 183 days or
more during his or her taxable year, and (iii) the foreign investor
provides all certification which may be required of his status (foreign
investors may contact the Sponsor to obtain a Form W-8 which must be
filed with the Trustee and refiled every three calendar years
thereafter). Foreign investors should consult their tax advisors with
respect to United States tax consequences of ownership of Units. Units
in a Trust and Trust distributions may also be subject to state and
local taxation and Unit holders should consult their tax advisors in
this regard.
Distributions reinvested into additional Units of a Trust will be taxed
to a Unit holder in the manner described above (i.e., as ordinary
income, long-term capital gain or as a return of capital).
The Federal tax status of each year's distributions will be reported to
Unit holders and to the Internal Revenue Service. The foregoing
discussion relates only to the Federal income tax status of a Trust and
to the tax treatment of distributions by a Trust to United States Unit
holders. Distributions by a Trust will generally be subject to United
States income taxation and withholding in the case of Units held by non-
resident alien individuals, foreign corporations or other non-United
States persons. Such persons should consult their tax advisors. Units in
a Trust and Trust distributions may also be subject to state and local
taxation and Unit holders should consult their tax advisor in this regard.
Investment in a Trust may be particularly well suited for purchase by
funds and accounts of individual investors that are exempt from Federal
income taxes such as Individual Retirement Accounts, Keogh Plans,
pension funds and other tax-deferred retirement plans. (See "Why are
Investments in the Trust Suitable for Retirement Plans?")
Portfolio. The Trusts consist of different issues of Securities issued
by publicly traded equity real estate investment trusts, known as REITs,
and which are listed on a national securities exchange or The Nasdaq
Stock Market or are traded in the over-the-counter market.
The Trusts were designed to provide a unique, simple way to invest in
one of the greatest wealth-producing assets in history-real estate. This
opportunity is made possible because of an exciting transformation in
the way American real estate is financed, owned and managed. Through
REITs, ownership of commercial real estate is affordable and liquid. A
REIT is a corporation or business trust which combines the capital of
many investors to acquire real estate. REITs act much like a mutual fund
for real estate. REITs make investments in a diverse array of real
estate, from shopping centers and office buildings to apartment
complexes, hotels, hospitals and healthcare facilities. Investors can
enjoy the benefits of a diversified portfolio managed by real estate
professionals, receive income from rents, and achieve capital
appreciation if the properties are sold at a profit. In addition, REITs
are traded on major stock exchanges, making them more liquid than a
direct investment in real estate.
REITs do not pay Federal corporate income tax and often are excluded
from state taxation. This advantaged tax treatment means there is no
double taxation of income to the shareholders. REITs are legally
Page 3
required to distribute 95% of net income and dividends to investors, in
this case, the Trusts. Distributions from the Trusts will consist of
ordinary income, capital gains and/or return of principal. The amount of
these distributions will vary, according to the type of distribution
that is made.
All REITs selected for these Trusts were listed NYSE or Nasdaq
securities and had an average capitalization of $400 million at the
Initial Date of Deposit. This assures daily liquidity of Trust Units
which is a key benefit not generally available with direct ownership of
real estate.
This evolution in the real estate market, which is still largely
undiscovered by the investing public, provides superior opportunities
for above-average total returns from relatively high monthly dividend
income, capital gains, and some tax advantaged treatment. REIT share
values are likely to continue their trend higher, in the opinion of the
Sponsor, driven by improving real estate values, good operating results,
consolidation and increased demand for REIT shares as this improved
vehicle for ownership is discovered by individuals and corporations.
The Sponsor believed, as of the Initial Date of Deposit, that the Trusts
offer a vehicle for investors to participate financially in the real
estate market through a diversified portfolio. The diversification of
assets in the Trusts, however, does not eliminate the risk of loss
always inherent in the ownership of securities.
Other than owning a primary residence, individual investors often have
few practical opportunities to invest in the real estate market. The
Trusts seek to offer a more affordable, practical and liquid alternative
to owning individual properties. Each Trust's portfolio seeks to provide
greater diversification in several respects: each REIT in a portfolio is
operated by a different management team; various regions of the country,
each with its own economic conditions and cycles, are represented in the
Trusts' portfolios; and different REITs specialize in different sectors,
such as apartment complexes, office buildings, shopping malls,
industrial parks and hotels. The Sponsor believes that income-oriented
investors should consider a diversified portfolio of REITs, such as the
Trusts, for a variety of reasons: potential for high current yields are
available providing dividend income and a degree of protection in
declining markets; solid dividend growth is possible due to recent
strength in industry earnings (funds from operations); and REIT stock
valuations are currently low relative to the yield on U.S. Treasury
securities, providing the potential for capital appreciation. In
addition, in the Sponsor's opinion, the following factors should also be
considered: REITs should rise in value as general investor skepticism
about real estate shifts to optimism; well-capitalized REITs are often
buying properties or mortgages at discounts to their book value
providing upside potential; during inflationary periods, both real
estate values and rents typically rise, benefiting the REIT investor;
and long-term capital earmarked for REITs is expected to grow separately
in coming years due to relaxed barriers for pension plan investing.
An investment in the Trusts should be made with an understanding of the
risks inherent in an investment in REITs specifically and in real estate
generally (in addition to securities market risks). Generally, these
include economic recession, the cyclical nature of real estate markets,
competitive overbuilding, unusually adverse weather conditions, changing
demographics, changes in governmental regulations (including tax laws
and environmental, building, zoning and sales regulations), increases in
real estate taxes or costs of material and labor, the inability to
secure performance guarantees or insurance as required, the
unavailability of investment capital and the inability to obtain
construction financing or mortgage loans at rates acceptable to builders
and purchasers of real estate. Additional risks include an inability to
reduce expenditures associated with a property (such as mortgage
payments and property taxes) when rental revenue declines, and possible
loss upon foreclosure of mortgaged properties if mortgage payments are
not paid when due.
REITs are financial vehicles that have as their objective the pooling of
capital from a number of investors in order to participate directly in
real estate ownership or financing. REITs are generally fully integrated
operating companies that have interests in income-producing real estate.
REITs are differentiated by the types of real estate properties held and
the actual geographic location of properties and fall into two major
categories: equity REITs emphasize direct property investment, holding
their invested assets primarily in the ownership of real estate or other
equity interests, while mortgage REITs concentrate on real estate
financing, holding their assets primarily in mortgages secured by real
estate. REITs obtain capital funds for investment in underlying real
estate assets by selling debt or equity securities in the public or
institutional capital markets or by bank borrowing. Thus, the returns on
common equities of the REITs in which a Trust invests will be
significantly affected by changes in costs of capital and, particularly
in the case of highly "leveraged" REITs (i.e., those with large amounts
of borrowings outstanding), by changes in the level of interest rates.
Page 4
The objective of an equity REIT is to purchase income-producing real
estate properties in order to generate high levels of cash flow from
rental income and a gradual asset appreciation, and they typically
invest in properties such as office, retail, industrial, hotel and
apartment buildings and healthcare facilities.
REITs are a creation of the tax law. REITs essentially operate as a
corporation or business trust with the advantage of exemption from
corporate income taxes provided the REIT satisfies the requirements of
Sections 856 through 860 of the Internal Revenue Code. The major tests
for tax-qualified status are that the REIT (i) be managed by one or more
trustees or directors, (ii) issue shares of transferable interest to its
owners, (iii) have at least 100 shareholders, (iv) have no more than 50%
of the shares held by five or fewer individuals, (v) invest
substantially all of its capital in real estate related assets and
derive substantially all of its gross income from real estate related
assets and (vi) distributed at least 95% of its taxable income to its
shareholders each year. If any REIT in a Trust's portfolio should fail
to qualify for such tax status, the related shareholders (including the
Trust) could be adversely affected by the resulting tax consequences.
The underlying value of the Securities and a Trust's ability to make
distributions to Unit holders may be adversely affected by changes in
national economic conditions, changes in local market conditions due to
changes in general or local economic conditions and neighborhood
characteristics, increased competition from other properties,
obsolescence of property, changes in the availability, cost and terms of
mortgage funds, the impact of present or future environmental
legislation and compliance with environmental laws, the ongoing need for
capital improvements, particularly in older properties, changes in real
estate tax rates and other operating expenses, regulatory and economic
impediments to raising rents, adverse changes in governmental rules and
fiscal policies, dependency on management skill, civil unrest, acts of
God, including earthquakes and other natural disasters (which may result
in uninsured losses), acts of war, adverse changes in zoning laws, and
other factors which are beyond the control of the issuers of the REITs
in a Trust.
The value of the REITs may at times be particularly sensitive to
devaluation in the event of rising interest rates. Equity REITs are less
likely to be affected by interest rate fluctuations than mortgage REITs
and the nature of the underlying assets of an equity REIT may be
considered more tangible than that of a mortgage REIT. Equity REITs are
more likely to be adversely affected by changes in the value of the
underlying property it owns than mortgage REITs.
REITs may concentrate investments in specific geographic areas or in
specific property types, i.e., hotels, shopping malls, residential
complexes and office buildings. The impact of economic conditions on
REITs can also be expected to vary with geographic location and property
type. Investors should be aware the REITs may not be diversified and are
subject to the risks of financing projects. REITs are also subject to
defaults by borrowers, self-liquidation, the market's perception of the
REIT industry generally, and the possibility of failing to qualify for
pass-through of income under the Internal Revenue Code, and to maintain
exemption from the Investment Company Act of 1940. A default by a
borrower or lessee may cause the REIT to experience delays in enforcing
its right as mortgagee or lessor and to incur significant costs related
to protecting its investments. In addition, because real estate
generally is subject to real property taxes, the REITs in a Trust may be
adversely affected by increases or decreases in property tax rates and
assessments or reassessments of the properties underlying the REITs by
taxing authorities. Furthermore, because real estate is relatively
illiquid, the ability of REITs to vary their portfolios in response to
changes in economic and other conditions may be limited and may
adversely affect the value of the Units. There can be no assurance that
any REIT will be able to dispose of its underlying real estate assets
when advantageous or necessary.
The issuer of REITs generally maintains comprehensive insurance on
presently owned and subsequently acquired real property assets,
including liability, fire and extended coverage. However, certain types
of losses may be uninsurable or not be economically insurable as to
which the underlying properties are at risk in their particular locales.
There can be no assurance that insurance coverage will be sufficient to
pay the full current market value or current replacement cost of any
lost investment. Various factors might make it impracticable to use
insurance proceeds to replace a facility after it has been damaged or
destroyed. Under such circumstances, the insurance proceeds received by
a REIT might not be adequate to restore its economic position with
respect to such property.
Under various environmental laws, a current or previous owner or
operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under or in such
Page 5
property. Such laws often impose liability whether or not the owner or
operator caused or knew of the presence of such hazardous or toxic
substances and whether or not the storage of such substances was in
violation of a tenant's lease. In addition, the presence of hazardous or
toxic substances, or the failure to remediate such property properly,
may adversely affect the owner's ability to borrow using such real
property as collateral. No assurance can be given that one or more of
the REITs in a Trust may not be presently liable or potentially liable
for any such costs in connection with real estate assets they presently
own or subsequently acquire while such REITs are held in a Trust.
Public Offering Price. The applicable sales charge is reduced by a
discount as indicated below for volume purchases (except for sales made
pursuant to a "wrap fee account" or similar arrangements as set forth
below):
Number of Units Discount Sales Charge
_______________ ________ ____________
10,000 to 24,999 0.90% 4.00%
25,000 to 49,999 1.90% 3.00%
50,000 to 99,999 2.90% 2.00%
100,000 or more 3.65% 1.25%
Sales will be made to dealers and other selling agents at prices which
reflect a concession or agency commission of 65% of the maximum sales
charge.
Any such reduced sales charge shall be the responsibility of the selling
broker/dealer, bank or other selling agent. The reduced sales charge
structure will apply on all purchases of Units in a Trust by the same
person on any one day from any one broker/dealer, bank or other selling
agent. Additionally, Units purchased in the name of the spouse of a
purchaser or in the name of a child of such purchaser under 21 years of
age will be deemed, for the purposes of calculating the applicable sales
charge, to be additional purchases by the purchaser. The reduced sales
charges will also be applicable to a trustee or other fiduciary
purchasing securities for a single trust estate or single fiduciary
account. The purchaser must inform the broker/dealer, bank or other
selling agent of any such combined purchase prior to the sale, in order
to obtain the indicated discount. In addition, with respect to the
employees, officers and directors (including their immediate family
members, defined as spouses, children, grandchildren, parents,
grandparents, siblings, mothers-in-law, fathers-in-law, sons-in-law and
daughters-in-law, and trustees, custodians or fiduciaries for the
benefit of such persons) of the Sponsor and broker/dealers, banks or
other selling agents and their subsidiaries, the sales charge is reduced
by 3.75% of the Public Offering Price. In addition, Unit holders of any
utility trusts or any other trusts with similar objectives to such
trusts can exchange any Units they hold of such trusts for Units of the
Trusts subject only to a sales charge of 3.9% of the Public Offering
Price. Investors should contact their broker to see if they are eligible
for this discount.
Investors who purchase Units through registered broker/dealers who
charge periodic fees for financial planning, investment advisory or
asset management services, or provide such services in connection with
the establishment of an investment account for which a comprehensive
"wrap fee" charge is imposed may purchase Units at the Public Offering
Price less the concession the Sponsor typically would allow such
broker/dealer. See "Public Offering-How are Units Distributed?"
How May Units be Redeemed? Unit holders electing a distribution of
shares of Securities should be aware that the transaction is subject to
taxation and Unit holders will recognize gain based on the appreciation
in value of the Securities received. See "Federal Tax Status of Unit
Holders."
How May Securities be Removed from a Trust? The Sponsor will instruct
the Trustee to dispose of certain Securities and to take such further
action as may be needed from time to time to ensure that the Trusts
continue to satisfy the qualifications of a regulated investment
company, including the requirements with respect to diversification
under Section 851 of the Internal Revenue Code. Except as stated under
"Portfolio-What are Some Additional Considerations for Investors?" in
Part Two of the Prospectus for Failed Obligations, the acquisition by
the Trusts of any securities or other property other than the Securities
is prohibited.
Page 6
REAL ESTATE TRUST SERIES
The First Trust(registered trademark) Special Situations Trust
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 7
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES
150 REAL ESTATE TRUST, SERIES 1, certifies that it meets all of
the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post-Effective Amendment of its Registration
Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the Village of Lisle and State of Illinois on
April 28, 2000.
THE FIRST TRUST SPECIAL SITUATIONS TRUST,
SERIES 150
REAL ESTATE TRUST, SERIES 1
(Registrant)
ByNIKE SECURITIES L.P.
(Depositor)
ByRobert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title Date
David J. Allen Sole Director of )
Nike Securities )
Corporation, ) April 28, 2000
the 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-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated April 7, 2000 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Special Situations Trust
dated April 26, 2000.
ERNST & YOUNG LLP
Chicago, Illinois
April 25, 2000
