File No. 333-33455
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 3
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD) INTERMEDIATE
SERIES 14
(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 : December 29, 2000
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
989,582 UNITS
PROSPECTUS
Part One
Dated December 27, 2000
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.
The Trust
The First Trust Corporate Income Trust (High Yield), Intermediate Series 14
(the "Trust") is a fixed portfolio of interest-bearing corporate debt
obligations of domestic and foreign companies. At November 16, 2000, each
Unit represented a 1/989,582 undivided interest in the principal and net
income of the Trust (see "The Fund" in Part Two).
A significant portion of the Bonds in the Trust is lower rated bonds, commonly
known as "junk bonds," that entail greater risks, including default risks,
than those found in higher rated securities. A portion of the Trust's
investment in junk bonds has been issued by foreign issuers, which carry the
additional risks of untimely interest and principal payments and price
volatility than higher rated securities, and may present problems of liquidity
and valuation. Investors should carefully consider these risks before
investing. See "Bond Portfolio Selection" and "Risk Factors" 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 of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.5% of the Public Offering Price (4.712%
of the amount invested). At November 16, 2000, the Public Offering Price per
Unit was $8.1261 plus net interest accrued to date of settlement (three
business days after such date) of $.0023 and $.3635 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
Please retain both 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>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 9.76% per annum on November 16, 2000, and 9.72% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 11.59% per annum on November 16, 2000, and 11.53%
under the monthly distribution plan. Estimated Current Return is calculated
by dividing the Estimated Net Annual Interest Income per Unit by the Public
Offering Price. Estimated Long-Term Return is calculated using a formula
which (1) takes into consideration and determines and factors in the relative
weightings of the market values, yields (which take into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Bonds in the Trust and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 16, 2000
Sponsor: Nike Securities L.P.
Evaluator: Muller Data Corporation
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $9,275,000
Number of Units 989,582
Fractional Undivided Interest in the Trust per Unit 1/989,582
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $7,679,554
Aggregate Value of Bonds per Unit $7.7604
Sales Charge 4.712% (4.5% of Public Offering Price) $.3657
Public Offering Price per Unit $8.1261*
Redemption Price and Sponsor's Repurchase Price per Unit
($.3657 less than the Public Offering Price per Unit) $7.7604*
</TABLE>
Date Trust Established September 18, 1997
Mandatory Termination Date August 31, 2007
Evaluator's Fee: $25 per evaluation. 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 an affiliate Maximum of $.0050
of the Sponsor per Unit annually
Administrative fee payable to Maximum of $.0010
the Sponsor per Unit annually
Annual amortization of organization costs $8,241 annually
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 16, 2000
Sponsor: Nike Securities L.P.
Evaluator: Muller Data Corporation
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $.8491 $.8491
Less: Estimated Annual Expense $.0596 $.0561
Estimated Net Annual Interest Income $.7895 $.7930
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $.7895 $.7930
Divided by 12 and 2, Respectively $.0658 $.3965
Estimated Daily Rate of Net Interest Accrual $.0022 $.0022
Estimated Current Return Based on Public
Offering Price 9.72% 9.76%
Estimated Long-Term Return Based on Public
Offering Price 11.53% 11.59%
</TABLE>
Trustee's Annual Fee: $.0182 and $.0137 per Unit for those portions of the
Trust under the monthly and semi-annual distribution plans, respectively.
Computation Dates: Fifteenth day of the month as follows: monthly--each
month; semi-annual--June and December.
Distribution Dates: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of FT 213,
The First Trust Corporate Income Trust
(High Yield), Intermediate Series 14
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of FT 213, The First Trust Corporate Income Trust
(High Yield), Intermediate Series 14 as of August 31, 2000, and the related
statements of operations and changes in net assets for each of the two years
in the period then ended and for the period from the Initial Date of Deposit,
September 18, 1997, to August 31, 1998. 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
August 31, 2000, 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 FT 213, The First Trust
Corporate Income Trust (High Yield), Intermediate Series 14 at August 31,
2000, and the results of its operations and changes in its net assets for each
of the two years in the period then ended and for the period from the Initial
Date of Deposit, September 18, 1997, to August 31, 1998, in conformity with
accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
December 11, 2000
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Bonds, at market value (cost $9,807,653)
(Note 1) $8,235,215
Accrued interest 207,011
Unamortized deferred organization costs 16,896
___________
8,459,122
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 185,354
Accrued liabilities 2,019
Distributions payable and accrued to unit holders 10,708
Unit redemptions payable 4,080
___________
202,161
___________
Net assets, applicable to 1,015,814 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $9,807,653
Net unrealized depreciation (Note 2) (1,572,438)
Distributable funds 21,746
___________
$8,256,961
===========
Net asset value per unit $8.1284
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
PORTFOLIO - See notes to portfolio.
August 31, 2000
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Issue and country of issuer(d) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Adelphia Communications (United States),
Senior Notes 9.875% 3/01/2007 B(c) $585,000 563,794
Century Communications (United States),
Senior Notes 8.875 1/15/2007 BB-(c) 1,265,000 1,166,963
Chesapeake Energy Corporation (United States),
Company Guarantee 9.125 4/15/2006 2001 @ 104.560 B(c) 695,000 679,362
Cole National Group, Inc. (United States),
Senior Subordinate Notes 8.625 8/15/2007 2002 @ 104.310 B+(c) 1,500,000 990,000
Hollinger International Publishing (United States),
Company Guarantee 8.625 3/15/2005 BB+(c) 330,000 331,650
Hovnanian Enterprises, Inc. (United States),
Subordinate Notes 9.75 6/01/2005 2001 @ 103.25 B(c) 1,360,000 1,285,200
K Mart Corporation (United States),
Notes 8.125 12/01/2006 B+(c) 1,135,000 1,007,767
Lenfest Communications (United States),
Senior Notes 8.375 11/01/2005 BB+(c) 590,000 610,125
Niagara Mohawk Power (United States),
1st Mortgage 7.75 5/15/2006 BB(c) 250,000 251,882
RJR Nabisco, Inc. (United States),
Notes 8.75 8/15/2005 BBB- 270,000 255,722
Transportacion Martima ADS (Mexico),
Senior Notes 10.00 11/15/2006 BB-(c) 1,410,000 1,092,750
_______________________
$9,390,000 8,235,215
=======================
</TABLE>
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
NOTES TO PORTFOLIO
August 31, 2000
(a) Shown under this heading are the year in which each issue of Bonds is
initially redeemable and the redemption price in that year. Unless
otherwise indicated, each issue continues to be redeemable at declining
prices thereafter (but not below par value). In addition, certain bonds
are sometimes redeemable in whole or in part other than by operation of
the stated redemption or sinking fund provisions under specified unusual
or extraordinary circumstances. Approximately 44% of the aggregate
principal amount of the Bonds in the Trust is subject to call, or will
mature, within five years.
(b) The ratings shown are those effective at August 31, 2000. A significant
portion of the Bonds in the Trust is lower rated bonds, commonly known
as "junk bonds," that entail greater risks, including default risks,
than those found in higher rated securities (see (c) below). A portion
of the Trust's investment in junk bonds has been issued by foreign
issuers, which carry the additional risks of untimely interest and
principal payments and price volatility than higher rated securities,
and may present problems of liquidity and valuation.
(c) Standard & Poor's Corporation states: "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."
(d) The Trust consists of eleven obligations. One obligation representing
15% of the aggregate principal amount of the Bonds in the Trust consists
of foreign Corporate Bonds. Ten obligations representing 85% of the
aggregate principal amount of the Bonds in the Trust consist of domestic
Corporate Bonds. Of the Bonds included in the Trust, 27% will mature in
2005, 37% will mature in 2006 and 36% will mature in 2007.
<TABLE>
<CAPTION>
Number of Country Portfolio
Issues of Issuer Percentage
<C> <S> <C>
10 United States of America 85%
1 Mexico 15%
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period
from the
Initial
Date of
Deposit,
Sept. 18,
1997, to
Year ended Aug. 31, Aug. 31,
2000 1999 1998
<S> <C> <C> <C>
Interest income $944,132 1,277,749 655,873
Expenses:
Trustee's fees and related expenses (25,860) (24,078) (14,922)
Evaluators' fees (6,250) (5,729) (5,729)
Supervisory fee (6,283) (4,234) (3,888)
Administrative fees (1,257) (1,470) (752)
Amortization or organization costs (8,241) (8,241) (7,829)
________________________________
Investment income - net 896,241 1,233,997 622,753
Net gain (loss) on investments:
Net realized gain (loss) (1,398,613) (223,645) -
Change in net unrealized appreciation
or depreciation 600,251 (1,090,823)(1,081,866)
________________________________
(798,362) (1,314,468)(1,081,866)
________________________________
Net increase (decrease) in net assets
resulting from operations $97,879 (80,471) (459,113)
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period
from the
Initial
Date of
Deposit,
Sept. 18,
1997, to
Year ended Aug. 31, Aug. 31,
2000 1999 1998
<S> <C> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $896,241 1,233,997 622,753
Net realized gain (loss) on investments (1,398,613) (223,645) -
Change in net unrealized appreciation
or depreciation on investments 600,251 (1,090,823 )(1,081,866)
__________________________________
97,879 (80,471) (459,113)
Distributions to unit holders:
Investment income - net (911,250) (1,205,841) (563,251)
Principal from investment transactions - - -
__________________________________
(911,250) (1,205,841) (563,251)
Units issued (200,000 and 1,250,000 units
in 1999 and 1998, respectively) - 2,011,767 13,233,303
Unit redemptions (240,849 and 243,337 units
in 2000 and 1999, respectively):
Principal portion (1,976,417) (2,370,246) -
Net interest accrued (11,840) (18,122) -
__________________________________
(1,988,257) (2,388,368) -
__________________________________
Total increase (decrease) in net assets (2,801,628) (1,662,913) 12,210,939
Net assets:
At the beginning of the period
(representing 1,256,663, 1,300,000
and 50,000 units outstanding at
August 31, 1999 and 1998
and September 18, 1997, respectively) 11,058,589 12,721,502 510,563
__________________________________
At the end of the period (including
distributable funds applicable to
Trust units of $21,746, $56,489 and
$59,502 at August 31, 2000, 1999 and
1998, respectively) $8,256,961 11,058,589 12,721,502
==================================
Trust units outstanding at the end of
the period 1,015,814 1,256,663 1,300,000
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
Bonds are stated at values as determined by Muller Data Corporation (the
Evaluator). The bond values are based on (1) current bid prices for the bonds
obtained from dealers or brokers who customarily deal in bonds comparable to
those held by the Trust, (2) current bid prices for comparable bonds, (3)
appraisal or (4) any combination of the above.
Security cost -
The Trust's cost of its portfolio is based on the offering prices of the bonds
on the dates the bonds were deposited in the Trust. The premium or discount
(including original issue discount) existing at the dates the bonds were
deposited is not being amortized. Realized gain (loss) from bond transactions
is reported on an identified cost basis. Sales and redemptions of bonds are
recorded on the trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
The Trust pays a fee for Trustee services to The Chase Manhattan Bank which is
based on $.0182 and $.0137 per unit for those portions of the Trust under the
monthly and semi-annual distribution plans, respectively. Additionally, a fee
of $25 per evaluation is payable to the Evaluator and the Trust pays all
related expenses of the Trustee, 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 costs -
The Trust has paid a portion of the costs incurred to organize the Trust,
including costs of preparing the registration statement, the trust indenture
and other closing documents, registering units with the Securities and
Exchange Commission and states, the initial audit of the Trust's portfolio and
the initial fees and expenses of the Trustee. Such costs, totaling $41,207,
have been deferred and are being amortized over five years from the Initial
Date of Deposit.
2. Unrealized appreciation and depreciation
An analysis of net unrealized depreciation at August 31, 2000 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(1,572,438)
Unrealized appreciation -
___________
$(1,572,438)
===========
</TABLE>
<PAGE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
offering price of the bonds on the date of an investor's purchase, plus a
sales charge of 4.5% of the public offering price which is equivalent to
approximately 4.712% of the net amount invested.
Distributions of net interest income -
Distributions of net interest income to unit holders are made monthly or semi-
annually. Such income distributions per unit, on an accrual basis, were as
follows:
<TABLE>
<CAPTION>
Period from
the Initial
Date of
Deposit,
Sept. 18,
Type of 1997, to
distribution Year ended Aug. 31, Aug. 31,
plan 2000 1999 1998
<S> <C> <C> <C>
Monthly $.7976 .8167 .7707*
Semi-annual .8017 .8667 .7751
</TABLE>
*Excludes $.0096 per unit distributed to the Sponsor as discussed below.
Accrued interest to the Date of Deposit and to each supplemental Date of
Deposit, totaling $278,921, plus net interest accruing to the first settlement
date and to the settlement date of each supplemental Date of Deposit, totaling
$12,446, were distributed to the Sponsor as the unit holder of record. The
initial subsequent distribution, $.0527 and $.0530 per unit for those portions
of the Trust under the monthly and semi-annual distribution plans,
respectively, was paid on October 31, 1997 to all unit holders of record on
October 15, 1997.
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from
the Initial
Date of
Deposit,
Sept. 18,
1997, to
Year ended Aug. 31, Aug. 31,
2000 1999 1998
<S> <C> <C> <C>
Interest income $.8241 .8597 .8705
Expenses (.0418) (.0294) (.0440)
____________________________
Investment income - net .7823 .8303 .8265
Distributions to unit holders:
Investment income - net (.7979) (.8207) (.7807)
Principal from investment transactions - - -
Net gain (loss) on investments (.6560) (.9954) (.4713)
____________________________
Total increase (decrease) in net assets (.6716) (.9858) (.4255)
Net assets:
Beginning of the period 8.8000 9.7858 10.2113
____________________________
End of the period $8.1284 8.8000 9.7858
============================
</TABLE>
<PAGE>
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD),
INTERMEDIATE SERIES 14
PART ONE
Must be Accompanied by Part Two
____________________
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 CORPORATE INCOME TRUST (HIGH YIELD)
INTERMEDIATE SERIES
THE FIRST TRUST SPECIAL SITUATIONS TRUST
FT SERIES
PROSPECTUS
Part Two NOTE: THIS PART TWO PROSPECTUS MAY
Dated December 29, 2000 ONLY BE USED WITH PART ONE
The FT Series (formerly known as The First Trust Special Situations
Trust), The First Trust Corporate Income Trust (High Yield),
Intermediate Series (the "High Yield Series") is a unit investment
trust. The High Yield Series has many separate series. The Part One
which accompanies this Part Two describes one such series of the High
Yield Series. Each series of the High Yield Series consists of a
portfolio of interest-bearing corporate debt obligations of domestic and
foreign companies (the "Securities"). See Part One for a more complete
description of the portfolio for each Trust.
All Parts of the Prospectus Should be Retained for Future Reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First Trust (R)
1-800-621-9533
Page 1
Table of Contents
The FT Series 3
Portfolio 3
Risk Factors 3
Public Offering 5
Distribution of Units 6
The Sponsor's Profits 6
The Secondary Market 7
How We Purchase Units 7
Expenses and Charges 7
Tax Status 8
Retirement Plans 10
Rights of Unit Holders 10
Distributions 11
Redeeming Your Units 11
Removing Securities from a Trust 12
Amending or Terminating the Indenture 13
Description of Bond Ratings 13
Information on the Sponsor, Trustee and Evaluator 15
Other Information 16
Page 2
The FT Series
The FT Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created hundreds of
similar yet separate series of a unit investment trust which we have
named the FT Series or its predecessor, The First Trust Special
Situations Trust. See Part One for a description of the series and
Trusts for which this Part Two Prospectus relates.
Each Trust was created under the laws of the State of New York by a
Trust Agreement (the "Indenture") dated the Initial Date of Deposit.
This agreement, entered into among Nike Securities L.P., as Sponsor, The
Chase Manhattan Bank as Trustee and First Trust Advisors L.P. as
Portfolio Supervisor and Evaluator, governs the operation of the Trusts.
How We Created the Trusts.
On the Initial Date of Deposit for each Trust, we deposited the
Securities with the Trustee and in turn, the Trustee delivered documents
to us representing our ownership of the Trusts in the form of units
("Units").
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Since the prices of the underlying
Securities will fluctuate daily, the ratio of Securities in a Trust, on
a market value basis, will also change daily. Securities may
periodically be redeemed or sold under certain circumstances, and the
proceeds from these sales will be used to meet Trust obligations or
distributed to Unit holders, but will not be reinvested. The Trusts will
not, however, sell Securities to take advantage of market fluctuations
or changes in anticipated rates of appreciation or depreciation, or if
the Securities no longer meet the criteria by which they were selected.
You will not be able to dispose of or vote the Securities in the Trusts.
As the holder of the Securities, the Trustee will vote all of the
Securities and will do so based on our instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities.
Portfolio
Objectives
Each Trust's objective is to provide investors with a high level of
current income through an investment in a fixed portfolio of both
domestic and foreign high-yield, high risk corporate debt obligations. A
diversified portfolio helps to offset the risks normally associated with
such an investment, although it does not eliminate them entirely. See
"Risk Factors" for a discussion of the risks of investing in a Trust.
Securities Selection
At the Initial Date of Deposit, we considered the following factors,
among others, in selecting the Securities for each Trust:
- The price of the Securities relative to other issues of similar
quality and maturity;
- The present rating and credit quality of the issuer of the Security
and potential for improvement;
- The diversification of the Securities as to location of issuer;
- The income to the Trust;
- Whether the Securities were issued after July 18, 1984; and
- The stated maturity of the Securities.
As of the Initial Date of Deposit, all of the Securities were rated "B3"
or better by Moody's Investors Service, Inc. ("Moody's"), or "B-" or
better by Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc. ("Standard & Poor's"). See "Description of Bond
Ratings." After the Initial Date of Deposit, a Security's rating may be
lowered. This would not immediately cause the Security to be removed
from a Trust, but may be considered by us in determining whether to
direct the Trustee to dispose of such Security. See "Removing Securities
from the Trust."
Risk Factors
Price Volatility. Each Trust invests in domestic and foreign high-yield,
high risk corporate debt obligations. High-yield, high risk corporate
bonds are subject to greater market fluctuations and risk of loss than
corporate bonds with higher investment ratings. The value of the
Securities will decline significantly with increases in interest rates,
not only because increases in rates generally decrease values, but also
because increased rates may indicate an economic slowdown. An economic
slowdown, or a reduction in an issuer's creditworthiness, may result in
the issuer being unable to maintain earnings at a level sufficient to
maintain interest and principal payments. The value of the Securities
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will also fluctuate with changes in investors' perceptions of an
issuer's financial condition or the general condition of the high-yield
bond market, changes in inflation rates or when political or economic
events affecting the issuers occur.
Because the Trusts are not managed, the Trustee will not sell Securities
in response to or in anticipation of market fluctuations, as is common
in managed investments. As with any investment, we cannot guarantee that
the performance of a Trust will be positive over any period of time or
that you won't lose money. Units of a Trust are not deposits of any bank
and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Interest. There is no guarantee that the issuers of the Securities will
be able to satisfy their interest payment obligations to a Trust over
the life of such Trust.
High-Yield Obligations. "High-yield" or "junk" bonds, the generic names
for corporate bonds rated below "Triple B" by Standard & Poor's or
Moody's, are frequently issued by corporations in the growth stage of
their development or by established companies who are highly leveraged
or whose operations or industries are depressed. Obligations rated below
"Triple B" should be considered speculative as these ratings indicate a
quality of less than investment grade. Because high-yield bonds are
generally subordinated obligations and are perceived by investors to be
riskier than higher rated bonds, their prices tend to fluctuate more
than higher rated bonds and are affected by short-term credit
developments to a greater degree. In addition, in many cases high-yield
bonds do not have covenants which would prevent the issuer from entering
into capital restructurings or borrowing transactions which could have
the effect of reducing the ability of the issuer to meets its high-yield
debt obligations or result in a reduction of its high-yield bond ratings.
The market for high-yield bonds is smaller and less liquid than that for
investment grade bonds. High-yield bonds are generally not listed on a
national securities exchange but trade in the over-the-counter markets.
Due to the smaller, less liquid market for high-yield bonds, the bid-
offer spread on such bonds is generally greater than it is for
investment grade bonds and the purchase or sale of such bonds may take
longer to complete.
Certain Securities in the Trusts may have been purchased on the Initial
Date of Deposit at prices of less than their par value at maturity,
indicating a market discount. Other Securities in the Trusts may have
been purchased on the Initial Date of Deposit at prices greater than
their par value at maturity, indicating a market premium. The coupon
interest rate of bonds purchased at a market discount was lower than
current market interest rates of newly issued bonds of comparable rating
and type and the coupon interest rate of bonds purchased at a market
premium was higher than current market interest rates of newly issued
bonds of comparable rating and type. Generally, the value of bonds
purchased at a market discount will increase in value faster than bonds
purchased at a market premium if interest rates decrease. Conversely, if
interest rates increase, the value of bonds purchased at a market
discount will decrease faster than bonds purchased at a market premium.
However, premium bonds are more likely to be called or redeemed with
declines in interest rates.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed in the United States and abroad which may have
a negative impact on certain companies represented in a Trust. In
addition, litigation regarding any of the issuers of the Securities or
their respective industries may negatively impact the share prices of
these Securities. We cannot predict what impact any pending or proposed
legislation or pending or threatened litigation will have on the value
of the Securities.
Foreign Securities. Each Trust contains Securities that are U.S. dollar
denominated corporate debt obligations issued by foreign companies,
which makes each Trust subject to more risks than if they invested
solely in domestic obligations. Risks of foreign corporate bonds include
losses due to future political and economic developments, the possible
seizure or nationalization of foreign deposits, foreign currency
devaluations, restrictions on foreign investments and exchange of
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securities, inadequate financial information and lack of U.S.
jurisdiction over foreign issuers.
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the per Unit price of
which is comprised of the following:
- The aggregate underlying value of the Securities;
- The amount of any cash in the Interest and Principal Accounts; and
- The sales charge.
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" in Part One of this prospectus
due to various factors, including fluctuations in the offering prices of
the Securities, changes in the value of the Interest and/or Principal
Accounts and as interest on the Securities accrues.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Accrued Interest.
Accrued interest represents unpaid interest on a bond from the last day
it paid interest. Interest on the Securities generally is paid semi-
annually, although the Trusts accrue such interest daily. Because each
Trust always has an amount of interest earned but not yet collected, the
Public Offering Price of Units will have added to it the proportionate
share of accrued interest to the date of settlement. You will receive
the amount, if any, of accrued interest you paid for on the next
distribution date. In addition, if you sell or redeem your Units you
will be entitled to receive your proportionate share of the accrued
interest from the purchaser of your Units.
Sales Charges.
The maximum sales charge is determined based upon the number of years
remaining to the maturity of each Security in a Trust, but in no event
will the secondary market sales charge exceed 5.0% of the Public
Offering Price (equivalent to 5.263% of the net amount invested). For
purposes of computation, Securities will be deemed to mature either on
their expressed maturity dates, or an earlier date if: (a) they have
been called for redemption or funds have been placed in escrow to redeem
them on an earlier call date; or (b) such Securities are subject to a
"mandatory tender." The effect of this method of sales charge
computation will be that different sales charge rates will be applied to
each of the Securities, in accordance with the following schedule:
Secondary
Market
Years to Maturity Sales Charge
_________________ ____________
Less than 1 1.00%
1 but less than 2 1.50%
2 but less than 3 2.00%
3 but less than 4 2.50%
4 but less than 5 3.00%
5 but less than 6 3.50%
6 but less than 7 4.00%
7 but less than 8 4.50%
8 or more 5.00%
The following persons may purchase Units at the Public Offering Price
less the applicable dealer concession:
- Employees, officers and directors of the Sponsor, our related
companies, dealers and their affiliates, and vendors providing services
to us.
- Immediate family members of the above (spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law, daughters-in-law, brothers-in-law and sisters-in-
law, and trustees, custodians or fiduciaries for the benefit of such
persons).
If you purchase Units through registered broker/dealers who charge
periodic fees in lieu of commissions or who charge for financial
planning, investment advisory or asset management services or provide
these services as part of an investment account where a comprehensive
"wrap fee" charge is imposed, your Units will only be assessed that
portion of the sales charge retained by the Sponsor.
The Value of the Securities.
The aggregate underlying value of the Securities in a Trust will be
determined by the Evaluator as follows:
Page 5
a) On the basis of current market bid prices for the Securities obtained
from dealers or brokers who customarily deal in bonds comparable to
those held by a Trust;
b) If such prices are not available for any of the Securities, on the
basis of current market bid prices of comparable bonds;
c) By determining the value of the Securities on the bid side of the
market by appraisal; or
d) By any combination of the above.
The Evaluator will appraise the aggregate underlying value of the
Securities in a Trust as of the Evaluation Time on each business day and
will adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and certain national holidays
on which the NYSE is closed.
The Public Offering Price will be determined based on the aggregate
underlying value of the Securities in a Trust, plus or minus cash, if
any, in the Interest and Principal Accounts of such Trust plus interest
accrued but unpaid on the Securities to the date of settlement plus the
applicable sales charge.
Distribution of Units
We intend to qualify Units of the Trust for sale in a number of states.
Units will be sold at the current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
represent a concession or agency commission of 70% of the maximum sales
charge for secondary market sales. Dealers and other selling agents will
receive an additional volume concession or agency commission of 0.30% of
the Public Offering Price if they purchase $250,000 worth of Units on
any day or if they were eligible to receive a similar concession in
connection with sales of similarly structured trusts sponsored by us.
We reserve the right to change the amount of concessions or agency
commissions from time to time. Certain commercial banks may be making
Units of the Trust available to their customers on an agency basis. A
portion of the sales charge paid by these customers is kept by or given
to the banks in the amounts shown above.
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trusts. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable sales charge on Units sold by such person during such
programs. We make these payments out of our own assets, and not out of
Trust assets. These programs will not change the price you pay for your
Units.
Investment Comparisons.
From time to time we may compare the then current estimated returns of a
Trust (which may show performance net of the expenses and charges such
Trust would have incurred) and returns over specified periods of other
similar trusts we sponsor in our advertising and sales materials, with
(1) returns on other taxable investments such as the common stocks
comprising various market indexes, corporate or U.S. Government bonds,
bank CDs and money market accounts or funds, (2) performance data from
Morningstar Publications, Inc. or (3) information from publications such
as Money, The New York Times, U.S. News and World Report, BusinessWeek,
Forbes or Fortune. The investment characteristics of each Trust differ
from other comparative investments. You should not assume that these
performance comparisons will be representative of a Trust's future
relative performance.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum sales
charge per Unit less any reduced sales charge as stated in "Public
Offering." In maintaining a market for the Units, any difference between
the price at which Units are purchased and the price at which they are
sold (which includes a maximum sales charge for each Trust) or redeemed
Page 6
will be a profit or loss to us. The Public Offering Price of Units may
be more or less than the cost of those Units to us.
The Secondary Market
Although we are not obligated to, we intend to maintain a market for the
Units and continuously offer to purchase Units at prices based on the
Redemption Price per Unit.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees and Trustee costs to transfer and record the ownership of
Units and costs incurred in annually updating each Trust's registration
statement. We may discontinue purchases of Units at any time. IF YOU
WISH TO DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET
PRICES BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid at that time is equal to or greater than the Redemption Price per
Unit, we may purchase the Units. You will receive the proceeds from the
sale of Units we purchase no later than if they were redeemed by the
Trustee. We may tender Units we hold to the Trustee for redemption as
any other Units. If we elect not to purchase Units, the Trustee may sell
tendered Units in the over-the-counter market, if any. However, the
amount you will receive is the same as you would have received on
redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trust are set forth under "Summary
of Essential Information" in Part One of this prospectus. If actual
expenses exceed the estimate, that Trust will bear the excess. The
Trustee will pay operating expenses of a Trust from the Interest Account
of such Trust if funds are available, and then from the Principal
Account. The Interest and Principal Accounts are noninterest-bearing to
Unit holders, so the Trustee benefits from the use of these funds.
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to each Trust, and will receive brokerage fees
when a Trust uses us (or our affiliates) as agent in selling Securities.
Legal, typesetting, electronic filing and regulatory filing fees and
expenses associated with updating each Trust's registration statement
annually are also now chargeable to such Trusts. Historically, we paid
these fees and expenses. First Trust Advisors L.P., an affiliate of
ours, acts as Portfolio Supervisor and will receive the fee set forth
under "Summary of Essential Information" in Part One of this prospectus
for providing portfolio supervisory services to the Trusts. In providing
portfolio supervisory services, the Portfolio Supervisor may purchase
research services from a number of sources, which may include dealers of
the Trusts.
The fees payable to the Portfolio Supervisor and Trustee are based on
the largest aggregate number of Units of a Trust outstanding at any time
during the calendar year. These fees may be adjusted for inflation
without Unit holders' approval, but in no case will the annual fees paid
to us or our affiliates for providing a given service to all unit
investment trusts for which we provide such services exceed the actual
cost of providing such services in such year. Muller Data Corporation
acts as Evaluator and will receive a fee of $25 per day per Trust for
providing evaluation services to the Trusts.
A Trust may also incur the following charges:
- All legal and annual auditing expenses of the Trustee according to
its responsibilities under the Indenture;
- The expenses and costs incurred by the Trustee to protect a Trust and
the rights and interests of the Unit holders;
- Fees for any extraordinary services the Trustee performed under the
Indenture;
- Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of a Trust;
- Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of a
Trust; and/or
- All taxes and other government charges imposed upon the Securities or
any part of a Trust (no such taxes or charges are now in place or
planned as far as we know).
Page 7
The above expenses and the Trustee's annual fee are secured by a lien on
the Trusts. We cannot guarantee that the interest received will be
sufficient to meet any or all expenses of a Trust. If there is not
enough cash in the Interest or Principal Accounts of a Trust, the
Trustee has the power to sell Securities in that Trust to make cash
available to pay these charges. These sales may result in capital gains
or losses to you. See "Tax Status."
The Trusts will be audited on an annual basis. So long as we are making
a secondary market for Units, we will bear the cost of these annual
audits to the extent the cost exceeds $0.0050 per Unit. Otherwise, each
Trust will pay for the audit. You can receive a copy of the audited
financial statements by notifying the Trustee.
Tax Status
Federal Tax Status.
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of a 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.
Trust Status.
Each 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 the Securities and other assets held by your Trust, and
as such you will be considered to have received a pro rata share of
income (i.e., interest, accruals of original issue discount and market
discount, and capital gains, if any) from each Security when such income
is considered to be received by your Trust. This is true even if you
elect to have your distributions automatically reinvested into another
existing investment account.
Your Tax Basis and Income or Loss upon Disposition.
If your Trust disposes of Securities, you will generally recognize gain
or loss. If you dispose of your Units or redeem your Units for cash, you
will also generally recognize gain or loss. To determine the amount of
this gain or loss, you must subtract your tax basis in the related
Securities from your share of the total proceeds received in the
transaction. You can generally determine your initial tax basis in each
Security or other Trust asset by apportioning the cost of your Units,
generally including sales charges, among each Security or other Trust
asset ratably according to their value on the date you 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
original issue discount, premium and accrued interest, 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). For tax years beginning after December 31, 2000, the 20%
rate is reduced to 18% and the 10% rate is reduced to 8% for long-term
gains from most property held for more than five years. However, the
reduction of the 20% rate to 18% applies only if the holding period for
the property begins after December 31, 2000. Therefore, you will not be
eligible for the 18% capital gain rate on assets for which your holding
period began before January 1, 2001. However, if you are an individual,
you may elect to treat certain assets you hold on January 1, 2001 as
having been sold for their fair market value on the next business day
after January 1, 2001 for purposes of this holding period requirement.
If you make this election for an asset, the asset would be eligible for
the 18% rate if it is held by you for more than five years after this
deemed sale. If you make this election, you must recognize any gain from
this deemed sale, but any loss is not recognized. 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 your Trust purchases a Security
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 Tax Code may, however, treat certain capital
gains as ordinary income in special situations (for example, in the case
of gain attributable to market discount).
Discount, Accrued Interest and Premium.
Some Securities may have been sold with original issue discount. This
Page 8
generally means that the Securities 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 Units and of each Security which
was issued with original issue discount must be increased as original
issue discount accrues.
Some Securities may have been purchased at a market discount. Market
discount is generally the excess of the stated redemption price at
maturity for the Security over the purchase price of the Security (not
including unaccrued original issue discount). Market discount can arise
based on the price your Trust pays for a Security or on the price you
pay for your Units. Market discount is taxed as ordinary income. You
will recognize this income when your Trust receives principal payments
on the Security, when the Security 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 Securities may have been purchased at a premium.
Generally, if the tax basis of your pro rata portion of any Security
exceeds the amount payable at maturity, such excess is considered
premium. You may elect to amortize bond premium. If you make this
election, you may reduce your interest income received on the Security
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 Security, you
must include the accrued interest in your tax basis in that Security.
When your Trust receives this accrued interest, you must treat it as a
return of capital and reduce your tax basis in the Security.
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 Securities
that were issued with original issue discount.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of your Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by your 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 your 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 payments on the Securities of foreign companies that are paid
to your Trust may be subject to foreign withholding taxes. Any interest
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. Certain issuers
of the Securities which are subject to foreign withholding taxes may
have agreed, with certain exceptions, to make additional payments to
your Trust to compensate you for your foreign tax liability. These
payments will vary from Security to Security, and any additional
payments received will be treated as taxable income to you. The
additional payment will not necessarily be based upon a formula which
would otherwise compensate you for the entire tax liability triggered by
your receipt of an additional payment. Therefore, you may not be
completely compensated for the actual foreign withholding tax liability.
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 interest income 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,
your Trust will not be taxed as a corporation, and the income of your
Trust will be treated as the income of the Unit holders in the same
manner as for Federal income tax purposes.
Page 9
Retirement Plans
You may purchase Units of the Trusts for:
- Individual Retirement Accounts,
- Keogh Plans,
- Pension funds, and
- Other tax-deferred retirement plans.
Generally, the federal income tax on capital gains and income received
in each of the above plans is deferred until you receive distributions.
These distributions are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred rollover
treatment. Before participating in a plan like this, you should consult
your attorney or tax advisor. Brokerage firms and other financial
institutions offer these plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
you become Record Owner, but normally your broker/dealer provides this
notice. You may elect to hold your Units in either certificated or
uncertificated form.
Certificated Units. When you purchase your Units you can request that
they be evidenced by certificates, which will be delivered shortly after
your order. 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. You can transfer or redeem your
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with your
signature guaranteed by an eligible institution. In certain cases the
Trustee may require additional documentation before they will transfer
or redeem your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- A written initial transaction statement containing a description of
your Trust;
- A list of the number of Units issued or transferred;
- Your name, address and Taxpayer Identification Number ("TIN");
- A notation of any liens or restrictions of the issuer and any adverse
claims; and
- The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of interest (if any)
distributed. After the end of each calendar year, the Trustee will
provide you with the following information:
- The amount of interest received by a Trust less deductions for
payment of applicable taxes, fees and Trust expenses, redemption of
Units and the balance remaining on the last business day of the calendar
year;
- The dates Securities were sold and the net proceeds received from
such sales less deduction for payment of applicable taxes, fees and
Trust expenses, redemption of Units and the balance remaining on the
last business day of the calendar year;
- The Securities held and the number of Units outstanding on the last
business day of the calendar year;
- The Redemption Price per Unit on the last business day of the
calendar year; and
- The amounts actually distributed during the calendar year from the
Interest and Principal Accounts, separately stated.
Page 10
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit any interest received on
a Trust's Securities to the Interest Account of such Trust. All other
receipts, such as return of capital, are credited to the Principal
Account of such Trust.
After deducting the amount of accrued interest the Trustee advanced to
us as Unit holder of record as of the First Settlement Date, the Trustee
will distribute an amount substantially equal to your pro rata share of
the balance of the Interest Account calculated on the basis of one-
twelfth (one-half in the case of Unit holders electing semi-annual
distributions) of the estimated annual amount of interest received in
the Income Account after deducting estimated expenses on or near the
Distribution Dates to Unit holders of record on the preceding
Distribution Record Date. See "Summary of Essential Information" in Part
One of this prospectus. Because interest is not received by a Trust at a
constant rate throughout the year, the distributions you receive may be
more or less than the amount credited to the Interest Account as of the
Distribution Record Date. In order to minimize fluctuations in
distributions, the Trustee is authorized to advance such amounts as may
be necessary to provide distributions of approximately equal amounts.
The Trustee will be reimbursed, without interest, for any such advances
from funds in the Interest Account at the next Distribution Record Date.
The Trustee will distribute amounts in the Principal Account on the last
day of each month to Unit holders of record on the fifteenth day of each
month provided the amount equals at least $1.00 per 100 Units. However,
amounts in the Principal Account from the sale of Securities designated
to meet redemptions of Units or to pay expenses will not be distributed.
You will receive interest distributions monthly unless you elect to
receive them semi-annually. Your plan of distribution will remain in
effect until changed. During May of each year the Trustee will provide
you with information on how to change your distribution election.
If the Trustee does not have your TIN, it is required to withhold a
certain percentage of your distribution and deliver such amount to the
Internal Revenue Service ("IRS"). You may recover this amount by giving
your TIN to the Trustee, or when you file a tax return. However, you
should check your statements to make sure the Trustee has your TIN to
avoid this "back-up withholding."
Within a reasonable time after your Trust is terminated you will receive
the pro rata share of the money from the disposition of the Securities.
The Trustee may establish reserves (the "Reserve Account") within a
Trust for any state and local taxes and any governmental charges to be
paid out of such Trust.
Universal Distribution Option. You may elect to have your principal and
interest distributions automatically distributed to any other investment
vehicle of which you have an existing account. If you elect this option,
the Trustee will notify you of each distribution made pursuant to this
option. You may elect to terminate your participation at any time by
notifying the Trustee in writing.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by sending the
certificates representing the Units you want to redeem to the Trustee at
its unit investment trust office. If your Units are held in
uncertificated form, you need only to deliver a request for redemption
to the Trustee. In either case, the certificates or the redemption
request you send to the Trustee must be properly endorsed with proper
instruments of transfer and signature guarantees as explained in "Rights
of Unit Holders-Unit Ownership" (or by providing satisfactory indemnity
if the certificates were lost, stolen, or destroyed). No redemption fee
will be charged, but you are responsible for any governmental charges
that apply. Three business days after the day you tender your Units (the
"Date of Tender") you will receive cash in an amount for each Unit equal
to the Redemption Price per Unit calculated at the Evaluation Time on
the Date of Tender.
The Date of Tender is considered to be the date on which the Trustee
receives your certificates or redemption request (if such day is a day
the NYSE is open for trading). However, if your certificates or
redemption request are received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
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advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing interest will be withdrawn
from the Interest Account of the Trust if funds are available for that
purpose, or from the Principal Account. All other amounts paid on
redemption will be taken from the Principal Account of the Trust.
The IRS will require the Trustee to withhold a portion of your
redemption proceeds if it does not have your TIN, as generally discussed
under "Distributions." If the Trustee does not have your TIN, you must
provide it at the time of the redemption request.
The Trustee may sell Securities in a Trust to make funds available for
redemption. If Securities are sold, the size and diversification of such
Trust will be reduced. These sales may result in lower prices than if
the Securities were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- If the NYSE is closed (other than customary weekend and holiday
closings);
- If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Interest and Principal Accounts not designated to
purchase Securities;
2. the aggregate value of the Securities held in a Trust; and
3. accrued interest on the Securities.
deducting
1. any applicable taxes or governmental charges that need to be paid out
of a Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of a Trust, if any;
4. cash held for distribution to Unit holders of record of a Trust as of
the business day before the evaluation being made; and
5. other liabilities incurred by a Trust; and
dividing
1. the result by the number of outstanding Units of a Trust.
Removing Securities from a Trust
The portfolio of a Trust is not managed. However, we may, but are not
required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- The issuer of the Security has defaulted in the payment of principal
or interest on the Securities;
- Any action or proceeding seeking to restrain or enjoin the payment of
principal or interest on the Securities has been instituted;
- The issuer of the Security has breached a covenant which would affect
the payment of principal or interest on the Security, the issuer's
credit standing, or otherwise damage the sound investment character of
the Security;
- The issuer has defaulted on the payment of any other of its
outstanding obligations;
- Such Securities are the subject of an advanced refunding;
- Such factors arise which, in our opinion, adversely affect the tax or
exchange control status of the Securities;
- There has been a public tender offer made for a Security or a merger
or acquisition is announced affecting a Security, and that in our
opinion the sale or tender of the Security is in the best interest of
Unit holders; or
- The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to a Trust.
If a Security defaults in the payment of principal or interest and no
provision for payment is made, the Trustee must notify us of this fact
within 30 days. If we fail to instruct the Trustee whether to sell or
hold the Security within 30 days of our being notified, the Trustee may,
in its discretion, sell any defaulted Securities and will not be liable
for any depreciation or loss incurred thereby.
A Trust may not acquire any securities or other property other than the
Securities. The Trustee, on behalf of a Trust, will reject any offer for
new or exchanged securities or property in exchange for a Security,
except that we may instruct the Trustee to accept such an offer or to
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take any other action with respect thereto as we may deem proper if the
issuer is in default with respect to such Securities or in our written
opinion the issuer will likely default in respect to such Securities in
the foreseeable future. Any obligations received in exchange or
substitution will be held by the Trustee subject to the terms and
conditions in the Indenture to the same extent as Securities originally
deposited in a Trust. We may get advice from the Portfolio Supervisor
before reaching a decision regarding the receipt of new or exchanged
securities or property. The Trustee may retain and pay us or an
affiliate of ours to act as agent for a Trust to facilitate selling
Securities, exchanged securities or property from a Trust. If we or our
affiliate act in this capacity, we will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Securities that we designate; or, without our
direction, in its own discretion, in order to meet redemption requests
or pay expenses. We will maintain a list with the Trustee of which
Securities should be sold. We may consider sales of units of unit
investment trusts which we sponsor in making recommendations to the
Trustee on the selection of broker/dealers to execute a Trust's
portfolio transactions, or when acting as agent for a Trust in acquiring
or selling Securities on behalf of a Trust.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- To cure ambiguities;
- To correct or supplement any defective or inconsistent provision;
- To make any amendment required by any governmental agency; or
- To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, the Trust will terminate on
the Mandatory Termination Date. The Trust may be terminated prior to the
Mandatory Termination Date:
- Upon the consent of 100% of the Unit holders;
- If the value of the Securities owned by a Trust as shown by any
evaluation is less than 20% of the aggregate principal amount of
Securities deposited in a Trust during the initial offering period (the
"Discretionary Liquidation Amount"); or
- In the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination, the Trustee will send written notice to all Unit
holders which will specify how you should tender your certificates, if
any, to the Trustee. For various reasons, a Trust may be reduced below
the Discretionary Liquidation Amount and could therefore be terminated
before the Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of each Trust during the period
beginning nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner, timing and execution of
the sale of Securities as part of the termination of a Trust. Because
the Trustee must sell the Securities within a relatively short period of
time, the sale of Securities as part of the termination process may
result in a lower amount than might otherwise be realized if such sale
were not required at this time.
You will receive a cash distribution from the sale of the remaining
Securities, along with your interest in the Interest and Principal
Accounts of the Trust, within a reasonable time after your Trust is
terminated. Regardless of the distribution involved, the Trustee will
deduct from such Trust any accrued costs, expenses, advances or
indemnities provide by the Indenture, including estimated compensation
of the Trustee and costs of liquidation and any amounts required as a
reserve to pay any taxes or other governmental charges.
Description of Bond Ratings*
*As published by the rating companies.
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
Page 13
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. 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
Page 14
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 larger 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.
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- The First Trust Combined Series
- FT Series (formerly known as The First Trust Special Situations Trust)
- The First Trust Insured Corporate Trust
- The First Trust of Insured Municipal Bonds
- The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
Page 15
To date we have deposited more than $27 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1999, the total partners' capital of
Nike Securities L.P. was $19,881,035 (audited).
This information refers only to us and not to a Trust or to any series
of a Trust or to any other dealer. We are including this information
only to inform you of our financial responsibility and our ability to
carry out our contractual obligations. We will provide more detailed
financial information on request.
Code of Ethics. The Sponsor and the Trusts 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 the Trusts.
The Trustee.
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th Floor, New York, New
York, 10004-2413. If you have questions regarding the Trusts, you may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee for the Trusts has not participated in selecting the
Securities for the Trusts; it only provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC;
- Terminate the Indenture and liquidate the Trusts; or
- Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel, as well as special New York tax
counsel for the Trusts.
Experts.
Ernst & Young LLP, independent auditors, have audited the Trust's
statement of net assets, including the schedule of investments,
appearing in Part One of this prospectus, as set forth in their report.
We've included the Trust's statement of net assets, including the
Page 16
schedule of investments, in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
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Page 19
FIRST TRUST (R)
THE FIRST TRUST CORPORATE INCOME TRUST (HIGH YIELD)
INTERMEDIATE SERIES
THE FIRST TRUST SPECIAL SITUATIONS TRUST
FT SERIES
Prospectus
Part Two
Sponsor:
NIKE SECURITIES L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to the above-mentioned
unit investment trusts, but does not contain all of the information
about this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- Securities Act of 1933 (set forth in Part One for each Trust) and
- Investment Company Act of 1940 (file no. 811-05903)
Information about the Trusts, including their Codes of Ethics, can be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington D.C. Information regarding the operation of
the Commission's Public Reference Room may be obtained by calling the
Commission at 1-202-942-8090.
Information about the Trusts is available on the EDGAR Database on the
Commission's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0102
e-mail address: [email protected]
December 29, 2000
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE
Page 20
First Trust (R)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in The First Trust Corporate Income Trust (High Yield),
Intermediate Series not found in the prospectus. This Information
Supplement is not a prospectus and does not include all of the
information you should consider before investing in a Trust. This
Information Supplement should be read in conjunction with the prospectus
in which you are considering investing.
This Information Supplement is dated December 29, 2000. Capitalized
terms have been defined in the prospectus.
Table of Contents
Risk Factors
High-Yield Obligations 1
Foreign Issuers 2
Liquidity 2
Exchange Controls 3
Jurisdiction Over, and U.S. Judgments Concerning,
Foreign Obligors 3
General 3
Risk Factors
High-Yield Obligations. An investment in Units of a Trust should be made
with an understanding of the risks that an investment in "high-yield,
high-risk," fixed-rate, domestic and foreign corporate debt obligations
or "junk Securities" may entail, including increased credit risks and
the risk that the value of the Units will decline, and may decline
precipitously, with increases in interest rates. In recent years there
have been wide fluctuations in interest rates and thus in the value of
fixed-rate, debt obligations generally. Securities such as those
included in the Trusts are, under most circumstances, subject to greater
market fluctuations and risk of loss of income and principal than are
investments in lower-yielding, higher-rated securities, and their value
may decline precipitously because of increases in interest rates, not
only because the increases in rates generally decrease values, but also
because increased rates may indicate a slowdown in the economy and a
decrease in the value of assets generally that may adversely affect the
credit of issuers of high-yield, high-risk securities resulting in a
higher incidence of defaults among high-yield, high-risk securities. A
slowdown in the economy, or a development adversely affecting an
issuer's creditworthiness, may result in the issuer being unable to
maintain earnings or sell assets at the rate and at the prices,
respectively, that are required to produce sufficient cash flow to meet
its interest and principal requirements. For an issuer that has
outstanding both senior commercial bank debt and subordinated high-
yield, high-risk securities, an increase in interest rates will increase
that issuer's interest expense insofar as the interest rate on the bank
debt is fluctuating. However, many leveraged issuers enter into interest
rate protection agreements to fix or cap the interest rate on a large
portion of their bank debt. This reduces exposure to increasing rates,
but reduces the benefit to the issuer of declining rates. The Sponsor
cannot predict future economic policies or their consequences or,
therefore, the course or extent of any similar market fluctuations in
the future.
"High-yield" or "junk" Securities, the generic names for corporate
Securities rated below BBB by Standard & Poor's, or below Baa by
Moody's, are frequently issued by corporations in the growth stage of
their development, by established companies whose operations or
industries are depressed or by highly leveraged companies purchased in
leveraged buyout transactions. The market for high-yield Securities is
very specialized and investors in it have been predominantly financial
institutions. High-yield Securities are generally not listed on a
national securities exchange. Trading of high-yield Securities,
therefore, takes place primarily in over-the-counter markets which
consist of groups of dealer firms that are typically major securities
firms. Because the high-yield Security market is a dealer market, rather
than an auction market, no single obtainable price for a given Security
prevails at any given time. Prices are determined by negotiation between
traders. 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. Not all dealers
maintain markets in all high-yield Securities. Therefore, since there
are fewer traders in these Securities than there are in "investment
grade" Securities, the bid-offer spread is usually greater for high-
Page 1
yield Securities than it is for investment grade Securities. 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. If the rate of redemptions is great,
the value of the Trusts may decline to a level that requires liquidation.
Lower-rated securities tend to offer higher yields than higher-rated
securities with the same maturities because the creditworthiness of the
issuers of lower-rated securities may not be as strong as that of other
issuers. Moreover, if a Security is recharacterized as equity by the
Internal Revenue Service for federal income tax purposes, the issuer's
interest deduction with respect to the Security will be disallowed and
this disallowance may adversely affect the issuer's credit rating.
Because investors generally perceive that there are greater risks
associated with the lower-rated securities in the Trusts, the yields and
prices of these securities tend to fluctuate more than higher-rated
securities with changes in the perceived quality of the credit of their
issuers. In addition, the market value of high-yield, high-risk, fixed-
income securities may fluctuate more than the market value of higher-
rated securities since high-yield, high-risk, fixed-income securities
tend to reflect short-term credit development to a greater extent than
higher-rated securities. Lower-rated securities generally involve
greater risks of loss of income and principal than higher-rated
securities. Issuers of lower-rated securities may possess fewer
creditworthiness characteristics than issuers of higher-rated securities
and, especially in the case of issuers whose obligations or credit
standing have recently been downgraded, may be subject to claims by
debtholders, owners of property leased to the issuer or others which, if
sustained, would make it more difficult for the issuers to meet their
payment obligations. High-yield, high-risk Securities are also affected
by variables such as interest rates, inflation rates and real growth in
the economy. Therefore, investors should consider carefully the relative
risks associated with investment in securities which carry lower ratings.
The value of the Units reflects the value of the portfolio securities,
including the value (if any) of securities in default. Should the issuer
of any Security default in the payment of principal or interest, the
Trusts may incur additional expenses seeking payment on the defaulted
Security. Because amounts (if any) recovered by the Trusts in payment
under the defaulted Security may not be reflected in the value of the
Units until actually received by the Trusts, and depending upon when a
Unit holder purchases or sells his or her Units, it is possible that a
Unit holder would bear a portion of the cost of recovery without
receiving any portion of the payment recovered.
High-yield, high-risk Securities are generally subordinated obligations.
The payment of principal (and premium, if any), interest and sinking
fund requirements with respect to subordinated obligations of an issuer
is subordinated in right of payment to the payment of senior obligations
of the issuer. Senior obligations generally include most, if not all,
significant debt obligations of an issuer, whether existing at the time
of issuance of subordinated debt or created thereafter. Upon any
distribution of the assets of an issuer with subordinated obligations
upon dissolution, total or partial liquidation or reorganization of or
similar proceeding relating to the issuer, the holders of senior
indebtedness will be entitled to receive payment in full before holders
of subordinated indebtedness will be entitled to receive any payment.
Moreover, generally no payment with respect to subordinated indebtedness
may be made while there exists a default with respect to any senior
indebtedness. Thus, in the event of insolvency, holders of senior
indebtedness of an issuer generally will recover more, ratably, than
holders of subordinated indebtedness of that issuer.
Obligations that are rated lower than BBB by Standard & Poor's, or Baa
by Moody's, respectively, should be considered speculative as such
ratings indicate a quality of less than investment grade. Investors
should carefully review the objective of the Trusts and consider their
ability to assume the risks involved before making an investment in the
Trusts. See "Description of Security Ratings" in the prospectus for a
description of speculative ratings issued by Standard & Poor's and
Moody's.
Foreign Issuers. A portion of the Securities in the Trusts are invested
in securities of foreign issuers. It is appropriate for investors in the
Trusts to consider certain investment risks that distinguish investments
in Securities of foreign issuers from those of domestic issuers. Those
investment risks include future political and economic developments, the
possible imposition of withholding taxes on interest income payable on
the Securities held in the Portfolio, the possible seizure or
nationalization of foreign deposits, the possible establishment of
exchange controls or the adoption of other foreign governmental
restrictions (including expropriation, burdensome or confiscatory
taxation and moratoriums) which might adversely affect the payment or
receipt of payment of amounts due on the Securities. Investors should
realize that, although the Trusts invest in U.S. dollar denominated
investments, the foreign issuers which operate internationally are
subject to currency risks. The value of Securities can be adversely
affected by political or social instability and unfavorable diplomatic
or other negative developments. In addition, because many foreign
issuers are not subject to the reporting requirements of the Securities
Exchange Act of 1934, there may be less publicly available information
about the foreign issuer than a U.S. domestic issuer. Foreign issuers
also are not necessarily subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to
those applicable to U.S. domestic issuers. However, the Sponsor
anticipates that adequate information will be available to allow the
Portfolio Supervisor to provide portfolio surveillance.
Liquidity. The Securities in the Trusts may not have been registered
under the Securities Act of 1933 and may not be exempt from the
registration requirements of the Act. Most of the Securities will not be
Page 2
listed on a securities exchange. Whether or not the Securities are
listed, the principal trading market for the Securities will generally
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 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. The Trust may
also contain non-exempt Securities in registered form which have been
purchased on a private placement basis. Sales of these Securities may
not be practicable outside the United States, but can generally be made
to U.S. institutions in the private placement market which may not be as
liquid as the general U.S. securities market. Since the private
placement market is less liquid, the prices received may be less than
would have been received had the markets been broader.
Exchange Controls. 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 amounts due on the Securities.
However, there can be no assurance that exchange control regulations
might not be adopted in the future which might adversely affect payments
to the Trusts. In addition, the adoption of exchange control regulations
and other legal restrictions could have an adverse impact on the
marketability of the Securities in the Trusts and on the ability of the
Trusts to satisfy its obligation to redeem Units tendered to the Trustee
for redemption.
Jurisdiction Over, and U.S. Judgments Concerning, Foreign Obligors. Non-
U.S. issuers of the Securities will generally not have submitted to the
jurisdiction of U.S. courts for purposes of lawsuits relating to those
Securities. If the Trusts contain Securities of such an issuer, the
Trusts as holders of those obligations may not be able to assert their
rights in U.S. courts under the documents pursuant to which the
Securities are issued. Even if the Trusts obtain a U.S. judgment against
a foreign obligor, there can be no assurance that the judgment will be
enforced by a court in the country in which the foreign obligor is
located. In addition, a judgment for money damages by a court in the
United States if obtained, will ordinarily be rendered only in U.S.
dollars. It is not clear, however, whether, in granting a judgment, the
rate of conversion of the applicable foreign currency into U.S. dollars
would be determined with reference to the due date or the date the
judgment is rendered. Courts in other countries may have rules that are
similar to, or different from, the rules of U.S. courts.
General. The Trust may consist of Securities which, in many cases, do
not have the benefit of covenants which would prevent the issuer from
engaging in capital restructurings or borrowing transactions in
connection with corporate acquisitions, leveraged buyouts or
restructurings which could have the effect of reducing the ability of
the issuer to meet its debt obligations and might result in the ratings
of the Securities and the value of the underlying Trust portfolio being
reduced.
Certain of the Securities in the Trusts may have been acquired at a
market discount from par value at maturity. The coupon interest rates on
the discount Securities at the time they were purchased and deposited in
the Trusts were lower than the current market interest rates for newly
issued Securities of comparable rating and type. If such interest rates
for newly issued comparable Securities increase, the market discount of
previously issued Securities will become greater, and if such interest
rates for newly issued comparable Securities decline, the market
discount of previously issued Securities will be reduced, other things
being equal. Investors should also note that the value of Securities
purchased at a market discount will increase in value faster than
Securities purchased at a market premium if interest rates decrease.
Conversely, if interest rates increase, the value of Securities
purchased at a market discount will decrease faster than Securities
purchased at a market premium. In addition, if interest rates rise, the
prepayment risk of higher yielding, premium Securities and the
prepayment benefit for lower yielding, discount Securities will be
reduced. A discount Security held to maturity will have a larger portion
of its total return in the form of capital gain and less in the form of
interest income than a comparable Security newly issued at current
market rates. Market discount attributable to interest changes does not
indicate a lack of market confidence in the issue. Neither the Sponsor
nor the Trustee shall be liable in any way for any default, failure or
defect in any of the Securities.
Certain of the Securities in the Trusts may be original issue discount
Securities or zero coupon Securities. Under current law, the original
issue discount, which is the difference between the stated redemption
price at maturity and the issue price of the Securities, is deemed to
accrue on a daily basis and the accrued portion is treated as interest
income for Federal income tax purposes. On sale or redemption, any gain
realized that is in excess of the earned portion of original issue
discount will be taxable as capital gain unless the gain is attributable
to market discount in which case the accretion of market discount is
taxable as ordinary income. See "Tax Status" in the prospectus. The
current value of an original discount Security reflects the present
value of its stated redemption price at maturity. The market value tends
to increase in greater increments as the Securities approach maturity.
The effect of owning deep discount zero coupon Securities which do not
make current interest payments 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
Page 3
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 zero coupon Securities are subject to
substantially greater price fluctuations during periods of changing
interest rates than are securities of comparable quality which make
regular interest payments.
Certain of the Securities in the Trusts may have been acquired at a
market premium from par value at maturity. The coupon interest rates on
the premium Securities at the time they were purchased and deposited in
the Trusts were higher than the current market interest rates for newly
issued Securities of comparable rating and type. If such interest rates
for newly issued and otherwise comparable Securities decrease, the
market premium of previously issued Securities will be increased, and if
such interest rates for newly issued comparable Securities increase, the
market premium of previously issued Securities will be reduced, other
things being equal. The current returns of Securities trading at a
market premium are initially higher than the current returns of
comparable Securities of a similar type issued at currently prevailing
interest rates because premium Securities tend to decrease in market
value as they approach maturity when the face amount becomes payable.
Because part of the purchase price is thus returned not at maturity but
through current income payments, early redemption of a premium Security
at par or early prepayments of principal will result in a reduction in
yield. Redemption pursuant to call provisions generally will, and
redemption pursuant to sinking fund provisions may, occur at times when
the redeemed Securities have an offering side valuation which represents
a premium over par or for original issue discount Securities a premium
over the accreted value. To the extent that the Securities were
deposited in the Trusts at a price higher than the price at which they
are redeemed, this will represent a loss of capital when compared to the
original Public Offering Price of the Units. Because premium Securities
generally pay a higher rate of interest than Securities priced at or
below par, the effect of the redemption of premium Securities would be
to reduce Estimated Net Annual Unit Income by a greater percentage than
the par amount of such Securities bears to the total par amount of
Securities in the Trusts. Although the actual impact of any such
redemptions that may occur will depend upon the specific Securities that
are redeemed, it can be anticipated that the Estimated Net Annual Unit
Income will be significantly reduced after the dates on which such
Securities are eligible for redemption.
Because certain of the Securities may from time to time under certain
circumstances be sold or redeemed or will mature in accordance with
their terms 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 its present
size and composition. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any Security.
Certain of the Securities contained in the Trusts may be subject to
being called or redeemed in whole or in part prior to their stated
maturities pursuant to optional redemption provisions, sinking fund
provisions or otherwise. A Security subject to optional call is one
which is subject to redemption or refunding prior to maturity at the
option of the issuer. A refunding is a method by which a Security issue
is redeemed, at or before maturity, by the proceeds of a new Security
issue. A Security subject to sinking fund redemption is one which is
subject to partial call from time to time at par or from a fund
accumulated for the scheduled retirement of a portion of an issue prior
to maturity. The exercise of redemption or call provisions will (except
to the extent the proceeds of the called Securities are used to pay for
Unit redemptions) result in the distribution of principal and may result
in a reduction in the amount of subsequent interest distributions; it
may also affect the Estimated Long-Term Return and the Estimated Current
Return on Units of the Trusts. Redemption pursuant to call provisions is
more likely to occur, and redemption pursuant to sinking fund provisions
may occur, when the Securities have an offering side valuation which
represents a premium over par or for original issue discount Securities
a premium over the accreted value. Unit holders may recognize capital
gain or loss upon any redemption or call.
Page 4
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, FT 213 THE FIRST TRUST CORPORATE INCOME TRUST
(HIGH YIELD) INTERMEDIATE SERIES 14, 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 December 29, 2000.
FT 213
THE FIRST TRUST CORPORATE INCOME TRUST
(HIGH YIELD) INTERMEDIATE SERIES 14
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this 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, ) December 29, 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 December 11, 2000 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of FT Series dated December 27, 2000.
ERNST & YOUNG LLP
Chicago, Illinois
December 26, 2000
