Registration No. 333-69561
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
A. Exact name of trust:
FT 320
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
E. Title of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as
amended
F. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
| |Check box if it is proposed that this filing will become
effective on ____________ at 2:00 p.m. pursuant to Rule
487.
________________________________
High-Yield Corporate Closed-End Portfolio Series
Municipal Closed-End Portfolio Series
FT 320
FT 320 consists of two unit investment trusts known as High-Yield
Corporate Closed-End Portfolio Series and Municipal Closed-End Portfolio
Series, respectively (each, a "Trust" and collectively, the "Trusts").
Each Trust consists of a diversified portfolio of publicly traded common
stocks ("Securities") issued by closed-end investment companies.
High-Yield Corporate Closed-End Portfolio Series invests in a portfolio
of closed-end investment companies, the portfolios of which are
concentrated in high-yield corporate bonds ("Corporate Bonds"). High-
Yield Corporate Closed-End Portfolio Series seeks to provide investors
with high current income, with capital appreciation being a secondary
objective of the Trust.
Municipal Closed-End Portfolio Series invests in a portfolio of closed-
end investment companies, the portfolios of which are concentrated in
tax-exempt municipal bonds ("Municipal Bonds"). Municipal Closed-End
Portfolio Series seeks to provide investors with federally tax-exempt
income and to preserve capital.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First Trust (registered trademark)
1-800-621-9533
The date of this prospectus is May 25, 1999
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statements of Net Assets 6
Schedules of Investments 7
The FT Series 9
Portfolios 10
Risk Factors 11
Public Offering 13
Distribution of Units 15
The Sponsor's Profits 16
The Secondary Market 16
How We Purchase Units 16
Expenses and Charges 17
Tax Status 17
Retirement Plans 19
Rights of Unit Holders 19
Income and Capital Distributions 20
Redeeming Your Units 21
Removing Securities from a Trust 22
Amending or Terminating the Indenture 23
Information on the Sponsor, Trustee and Evaluator 24
Other Information 25
Page 2
Summary of Essential Information
FT 320
At the Opening of Business on the Initial Date of Deposit-May 25, 1999
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
High-Yield Corporate Municipal
Closed-End Closed-End
Portfolio Series Portfolio Series
_______________ _____________
<S> <C> <C>
Initial Number of Units (1) 15,075 15,010
Fractional Undivided Interest in the Trust per Unit (1) 1/15,075 1/15,010
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 9.900 $ 9.900
Maximum Sales Charge of 4.50% of the Public Offering Price
per Unit(4.545% of the net amount invested,
exclusive of the deferred sales charge) (3) $ .450 $ .450
Less Deferred Sales Charge per Unit $ (.350) $ (.350)
Public Offering Price per Unit (4) $10.000 $10.000
Sponsor's Initial Repurchase Price per Unit (5) $ 9.550 $ 9.550
Redemption Price per Unit (based on aggregate underlying
value of Securities less the deferred sales charge) (5) $ 9.550 $ 9.550
Estimated Net Annual Distributions per Unit (6) $ 1.0720 $ .5984
Cash CUSIP Number 30264W 370 30264W 396
Reinvestment CUSIP Number 30264W 388 30264W 404
Security Code 56892 56894
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date May 28, 1999
Mandatory Termination Date (7) May 28, 2004
Income Distribution Record Date Fifteenth day of each month, commencing July 15, 1999.
Income Distribution Date (8) Last day of each month, commencing July 31, 1999.
______________
<FN>
(1) As of the close of business on the Initial Date of Deposit, we may
adjust the number of Units of a Trust so that the Public Offering Price
per Unit will equal approximately $10.00. If we make such an adjustment,
the fractional undivided interest per Unit will vary from the amount
indicated above.
(2) Each Security, if listed on a securities exchange, is valued at its
last closing sale price. If a Security is not listed, or if no closing
sale price exists, it is valued at its closing ask price. Evaluations
for purposes of determining the purchase, sale or redemption price of
Units are made as of the close of trading on the New York Stock Exchange
(generally 4:00 p.m. Eastern time) on each day on which it is open (the
"Evaluation Time").
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" and "Public Offering" for
additional information regarding these charges.
(4) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit. No
investor will purchase Units at this price. Additional Units may be
created during the day of the Initial Date of Deposit which, along with
the Units described above, will be valued as of the Evaluation Time on
the Initial Date of Deposit and sold to investors at the Public Offering
Price per Unit based on this valuation. On the Initial Date of Deposit
the Public Offering Price per Unit will not include any accumulated cash
in the Income Account. After the Initial Date of Deposit, the Public
Offering Price will include a pro rata share of any cash in the Income
Account.
(5) Until the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period the Sponsor's Initial Repurchase
Price per Unit and the Redemption Price per Unit will include the
estimated organization costs per Unit set forth under "Fee Table." After
such date, the Sponsor's Initial Repurchase Price and Redemption Price
per Unit will not include such estimated organization costs. See
"Redeeming Your Units."
(6)The Estimated Net Annual Distribution per Unit set forth above is
based on the most recent monthly ordinary dividend declared with respect
to the Securities in a Trust. This estimate will vary with changes in a
Trust's fees and expenses, actual dividends received, and with the sale
of Securities.
(7) See "Amending or Terminating the Indenture."
(8) Distributions from the Capital Account will be made monthly payable
on the last day of the month to Unit holders of record on the fifteenth
day of such month if the amount available for distribution equals at
least $1.00 per 100 Units. Notwithstanding, distributions of funds in
the Capital Account, if any, will be made in December of each year.
</FN>
</TABLE>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may pay if you
buy and hold Units of a Trust. See "Public Offering" and "Expenses and
Charges." Although the Trusts have a term of approximately five years
and are unit investment trusts rather than mutual funds, this
information allows you to compare fees.
<TABLE>
<CAPTION>
High-Yield Corporate
Closed-End Municipal Closed-End
Portfolio Series Portfolio Series
______________________ ______________________
Amount Amount
per Unit per Unit
________ ________
<S> <C> <C> <C> <C>
Unit Holder Transaction Expenses
(as a percentage of public offering price)
Initial sales charge imposed on purchase 1.00%(a) $ .100 1.00%(a) $ .100
Deferred sales charge 3.50%(b) .350 3.50%(b) .350
________ ________ ________ ________
Maximum Sales Charge 4.50% $ .450 4.50% $ .450
======== ======== ======== ========
Maximum sales charge imposed on reinvested dividends 3.50%(c) $ .350 3.50%(c) $ .350
Organization Costs
(as a percentage of public offering price)
Estimated organization costs .190%(d) $.0190 .190%(d) $.0190
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative and evaluation fees .100% $.0098 .100% $.0098
Trustee's fee and other operating expenses .148% .0145 .148% .0145
Underlying Closed-End Fund Expenses(e) 1.250% .1224 1.140% .1116
________ ________ ________ ________
Total 1.498% $.1467 1.388%(e) $.1359
======== ======== ======== ========
</TABLE>
This example is intended to help you compare the cost of investing in
the Trusts with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trusts for the periods
shown and sell all your Units at the end of those periods. The example
also assumes a 5% return on your investment each year and that the
Trusts' operating expenses stay the same. Although your actual costs may
vary, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years
______ _______ _______
<S> <C> <C> <C>
High-Yield Corporate Closed-End Portfolio Series $619 $920 $1,243
Municipal Closed-End Portfolio Series 608 887 1,187
<FN>
The example will not differ if you hold rather than sell your Units at
the end of each period. The example does not reflect sales charges on
reinvested dividends and other distributions. If these sales charges
were included, your costs would be higher.
(a) The amount of the initial sales charge will vary depending on the
purchase price of your Units. The amount of the initial sales charge is
actually the difference between the maximum sales charge (4.50% of the
Public Offering Price) and the maximum remaining deferred sales charge
(initially $.350 per Unit). When the Public Offering Price exceeds
$10.00 per Unit, the initial sales charge will exceed 1.00% of the
Public Offering Price per Unit.
(b) The deferred sales charge is a fixed dollar amount equal to $.350
per Unit which will be deducted in five monthly installments of $.07 per
Unit beginning December 20, 1999 and on the 20th day of each month
thereafter (or if such day is not a business day, on the previous
business day) through April 20, 2000. If you buy Units at a price of
less than $10.00 per Unit, the dollar amount of the deferred sales
charge will not change but the deferred sales charge on a percentage
basis will be more than 3.5% of the Public Offering Price. If you
purchase Units after the first deferred sales charge payment has been
deducted, your purchase price will include both the initial sales charge
and any remaining deferred sales charge payments.
(c) Reinvested dividends will be subject only to the deferred sales
charge remaining at the time of reinvestment. See "Income and Capital
Distribution."
(d) You will bear all or a portion of the costs incurred in organizing
your respective Trust. These estimated organization costs are included
in the Public Offering Price per Unit and will be deducted from the
assets of a Trust at the earlier of six months after the Initial Date of
Deposit or the end of the initial offering period.
(e) Although not an actual Trust operating expense, each Trust, and
therefore Unit holders, will indirectly bear similar operating expenses
of the closed-end funds in which the Trusts invest in the estimated
amounts set forth in the table. These expenses are estimated based on
the actual closed-end fund expenses charged in a fund's most recent
fiscal year but are subject to change in the future. An investor in a
Trust will therefore indirectly pay higher expenses than if the
underlying closed-end fund shares were held directly.
</FN>
</TABLE>
Page 4
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
FT 320
We have audited the accompanying statements of net assets, including the
schedules of investments, of FT 320, comprised of the High-Yield
Corporate Closed-End Portfolio Series and Municipal Closed-End Portfolio
Series, as of the opening of business on May 25, 1999. These statements
of net assets are the responsibility of the Trusts' Sponsor. Our
responsibility is to express an opinion on these statements of net
assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of net assets
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
statements of net assets. Our procedures included confirmation of the
letter of credit held by the Trustee and allocated among the Trusts on
May 25, 1999. An audit also includes assessing the accounting principles
used and significant estimates made by the Sponsor, as well as
evaluating the overall presentation of the statements of net assets. We
believe that our audit of the statements of net assets provides a
reasonable basis for our opinion.
In our opinion, the statements of net assets referred to above present
fairly, in all material respects, the financial position of FT 320,
comprised of the High-Yield Corporate Closed-End Portfolio Series and
Municipal Closed-End Portfolio Series, at the opening of business on May
25, 1999 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
May 25, 1999
Page 5
Statements of Net Assets
FT 320
At the Opening of Business on the Initial Date of Deposit-May 25, 1999
<TABLE>
<CAPTION>
High-Yield Corporate Municipal
Closed-End Closed-End
Portfolio Series Portfolio Series
_______________ ____________
<S> <C> <C>
NET ASSETS
Investment in Securities represented by purchase contracts (1) (2) $149,244 $148,602
Less liability for reimbursement to Sponsor
for organization costs (3) (286) (285)
Less liability for deferred sales charge (4) (5,276) (5,254)
________ ________
Net assets $143,682 $143,063
======== ========
Units outstanding 15,075 15,010
ANALYSIS OF NET ASSETS
Cost to investors (5) $150,752 $150,103
Less sales charge (5) (6,784) (6,755)
Less estimated reimbursement to Sponsor for organization costs (3) (286) (285)
________ ________
Net assets $143,682 $143,063
======== ========
_____________
<FN>
NOTES TO STATEMENTS OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" for each Trust is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by The Chase Manhattan Bank,
of which $400,000 will be allocated among the two Trusts in FT 320, has
been deposited with the Trustee as collateral, covering the monies
necessary for the purchase of the Securities according to their purchase
contracts.
(3) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trusts. These costs have been estimated at $.0190 per
Unit for each Trust. A payment will be made as of the earlier of six
months after the Initial Date of Deposit or the end of the initial
offering period to an account maintained by the Trustee from which the
obligation of the investors to the Sponsor will be satisfied. To the
extent that actual organization costs are greater than the estimated
amount, only the estimated organization costs added to the Public
Offering Price will be reimbursed to the Sponsor and deducted from the
assets of a Trust.
(4) Represents the amount of mandatory deferred sales charge
distributions from a Trust ($.350 per Unit), payable to us in five equal
monthly installments beginning on December 20, 1999 and on the twentieth
day of each month thereafter (or if such date is not a business day, on
the preceding business day) through April 20, 2000. If you redeem Units
before April 20, 2000 you will have to pay the remaining amount of the
deferred sales charge applicable to such Units when you redeem them.
(5) The aggregate cost to investors in the Trusts includes a maximum
sales charge (comprised of an initial and a deferred sales charge)
computed at the rate of 4.50% of the Public Offering Price per Unit
(equivalent to 4.545% of the net amount invested, exclusive of the
deferred sales charge), assuming no reduction of sales charge as set
forth under "Public Offering."
</FN>
</TABLE>
Page 6
Schedule of Investments
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
FT 320
At the Opening of Business on the Initial Date of Deposit-May 25, 1999
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value Securities to
of Shares Name of Issuer of Securities (1) Offering Price per Share the Trust (2)
_________ ________________________________ ____________ __________ __________
<S> <C> <C> <C> <C>
1,195 AWF Alliance World Dollar Government Fund II 7.91% $ 9.875 $ 11,801
57 CIM CIM High Yield Securities 0.25% 6.500 371
515 HIS Cigna High Income Share 2.63% 7.625 3,927
247 CIF Colonial Intermediate High Income Fund 1.11% 6.688 1,652
309 COY Corporate High Yield Fund 2.50% 12.063 3,727
100 KYT Corporate High Yield Fund II 0.74% 11.063 1,106
537 DBS Debt Strategies Fund 2.81% 7.813 4,196
1,242 DSU Debt Strategies Fund II 6.97% 8.375 10,402
930 DHF Dreyfus High Yield Strategies Fund 7.75% 12.438 11,567
377 EDF Emerging Markets Income Fund II 2.98% 11.813 4,454
236 FT Franklin Universal Trust 1.44% 9.125 2,153
167 GDF Global Partners Income Fund 1.35% 12.063 2,015
933 HIO High Income Opportunity Fund 6.57% 10.500 9,797
54 HYI High Yield Income Fund Inc. 0.25% 6.813 368
383 HYP High Yield Plus Fund Inc. 2.01% 7.813 2,992
424 KHI Kemper High Income Trust 2.50% 8.813 3,737
655 MCR MFS Charter Income Trust 3.98% 9.063 5,936
568 MHY Managed High Income Portfolio Inc. 3.83% 10.063 5,716
72 PHT Managed High Yield Fund 0.55% 11.375 819
386 YLD Morgan Stanley Dean Witter High Income Advantage Trust 1.29% 5.000 1,930
523 YLT Morgan Stanley Dean Witter High Income Advantage Trust II 1.88% 5.375 2,811
147 YLH Morgan Stanley Dean Witter High Income Advantage Trust III 0.60% 6.063 891
119 MSY Morgan Stanley High Yield Fund 1.25% 15.625 1,859
809 HYB New America High Income Fund 2.44% 4.500 3,640
185 PHF Pacholder Fund Inc. 1.84% 14.875 2,752
854 PHY Prospect Street High Income Portfolio 5.22% 9.125 7,793
71 PTM Putnam Managed High Yield Fund 0.65% 13.563 963
1,453 PPT Putnam Premier Income Trust 7.42% 7.625 11,079
37 HIF Salomon Brothers High Income Fund 0.34% 13.875 513
946 HIX Salomon Brothers High Income Fund II 7.96% 12.563 11,885
637 ARK Senior High Income Portfolio 3.39% 7.938 5,057
809 TEI Templeton Emerging Markets Income Fund 5.79% 10.688 8,647
140 VIT Van Kampen High Income Trust 0.60% 6.438 901
82 VLT Van Kampen High Income Trust II 0.45% 8.188 671
188 ZIF Zenix Income Fund 0.75% 5.938 1,116
______ _________
Total Investments 100% $149,244
====== =========
__________
<FN>
See "Notes to Schedules of Investments" on page 8.
</FN>
</TABLE>
Page 7
Schedule of Investments
MUNICIPAL CLOSED-END PORTFOLIO SERIES
FT 320
At the Opening of Business on the Initial Date of Deposit-May 25, 1999
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value Securities to
of Shares Name of Issuer of Securities (1) Offering Price per Share the Trust (2)
_________ ________________________________ ____________ _________ __________
<S> <C> <C> <C> <C>
99 AMU ACM Municipal Securities Income Fund 0.90% $13.438 $ 1,330
279 APX Apex Municipal Fund Inc. 1.89% 10.063 2,808
420 CXE Colonial High Income Municipal Trust 2.30% 8.125 3,413
358 CMU Colonial Municipal Income Trust 1.75% 7.250 2,595
1,038 LEO Dreyfus Strategic Municipals Fund 6.59% 9.438 9,797
1,017 DSM Dreyfus Strategic Municipal Bond Fund 6.29% 9.188 9,344
702 KTF Kemper Municipal Income Trust 5.85% 12.375 8,687
87 KSM Kemper Strategic Municipal Income Trust 0.70% 11.875 1,033
495 MFM MFS Municipal Income Trust 2.79% 8.375 4,146
190 IMT Morgan Stanley Dean Witter Insured Municipal Trust 1.89% 14.813 2,814
267 OIA Morgan Stanley Dean Witter Municipal Income Opportunities Trust 1.70% 9.438 2,520
321 IQI Morgan Stanley Dean Witter Quality Municipal Income Trust 3.20% 14.813 4,755
246 MHF Municipal High Income Fund 1.54% 9.313 2,291
634 MVF MuniVest Fund Inc. 3.92% 9.188 5,825
212 MVT MuniVest Fund II Inc. 1.91% 13.375 2,836
326 MYD MuniYield Fund Inc. 3.21% 14.625 4,768
234 MQT MuniYield Quality Fund II 2.10% 13.313 3,115
428 NQM Nuveen Investment Quality Municipal Fund, Inc. 4.39% 15.250 6,527
431 NMA Nuveen Municipal Advantage Fund 4.50% 15.500 6,680
594 NMO Nuveen Municipal Market Opportunity Fund 6.22% 15.563 9,244
141 NNP Nuveen New York Performance Plus Municipal Fund 1.55% 16.375 2,309
910 NPP Nuveen Performance Plus Municipal Fund 8.76% 14.313 13,025
204 NPF Nuveen Premier Municipal Income Fund 2.15% 15.688 3,200
233 PYM Putnam High Yield Municipal Trust 1.71% 10.875 2,534
337 PGM Putnam Investment Grade Municipal Trust 3.29% 14.500 4,887
147 PMG Putnam Investment Grade Municipal Trust II 1.50% 15.188 2,233
834 PMM Putnam Managed Municipal Income Trust 6.24% 11.125 9,278
162 PMO Putnam Municipal Opportunities Trust 1.55% 14.250 2,308
317 VMT Van Kampen Municipal Income Fund 2.21% 10.375 3,289
348 VKQ Van Kampen Municipal Trust 3.61% 15.438 5,372
358 VGM Van Kampen Trust for Investment Grade Municipals 3.79% 15.750 5,639
______ _________
Total Investments 100% $148,602
====== =========
_____________
<FN>
NOTES TO SCHEDULES OF INVESTMENTS
(1) All Securities are represented by regular way contracts to purchase
such Securities for the performance of which an irrevocable letter of
credit has been deposited with the Trustee. We entered into purchase
contracts for the Securities on May 24, 1999.
(2) The cost of the Securities to a Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the last sale prices of the listed Securities and the ask
prices of the over-the-counter traded Securities on the business day
preceding the Initial Date of Deposit). The valuation of the Securities
has been determined by the Evaluator, an affiliate of ours. The cost of
the Securities to us and our profit or loss (which is the difference
between the cost of the Securities to us and the cost of the Securities
to a Trust) are set forth below:
Cost of
Securities Profit
to Sponsor (Loss)
___________ ________
High-Yield Corporate Closed-End Portfolio Series $149,735 $(491)
Municipal Closed-End Portfolio Series 148,963 (361)
</FN>
</TABLE>
Page 8
The FT Series
The FT Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created several similar
yet separate series of an investment company which we have named the FT
Series. We designate each of these investment company series, the FT
Series, with a different series number.
YOU MAY GET MORE SPECIFIC DETAILS ON SOME OF THE INFORMATION IN THIS
PROSPECTUS IN AN "INFORMATION SUPPLEMENT" BY CALLING THE TRUSTEE AT 1-
800-682-7520.
What We Call the Trusts.
This FT Series consists of two unit investment trusts known as High-
Yield Corporate Closed-End Portfolio Series and Municipal Closed-End
Portfolio Series.
Mandatory Termination Date.
The Trusts will terminate on the Mandatory Termination Date,
approximately five years from the date of this prospectus. This date is
shown in "Summary of Essential Information." Each Trust was created
under the laws of the State of New York by a Trust Agreement (the
"Indenture") dated the Initial Date of Deposit. This agreement, entered
into between Nike Securities L.P., as Sponsor, The Chase Manhattan Bank
as Trustee and First Trust Advisors L.P. as Portfolio Supervisor and
Evaluator, governs the operation of the Trusts.
How We Created the Trusts.
On the Initial Date of Deposit, we deposited contracts to buy the
Securities (fully backed by an irrevocable letter of credit of a
financial institution) with the Trustee. In return for depositing the
Securities, the Trustee delivered documents to us representing our
ownership of the Trusts, in the form of units ("Units").
With the deposit of the contracts to buy the Securities on the Initial
Date of Deposit we established a percentage relationship among the
Securities in each Trust's portfolio, as stated under "Schedule of
Investments." After the Initial Date of Deposit, we may deposit
additional Securities in a Trust, or cash (including a letter of credit)
with instructions to buy more Securities, in order to create new Units
for sale. If we create additional Units, we will attempt, to the extent
practicable, to maintain the original percentage relationship
established among the Securities on the Initial Date of Deposit, and not
the actual percentage relationship existing on the day we are creating
Units, since the two may differ. This difference may be due to the sale,
redemption or liquidation of any of the Securities.
Since the prices of the Securities will fluctuate daily, the ratio of
Securities in a Trust, on a market value basis, will also change daily.
The portion of Securities represented by each Unit will not change as a
result of the deposit of additional Securities or cash in a Trust. If we
deposit cash, you and new investors may experience a dilution of your
investment. This is because prices of Securities will fluctuate between
the time of the cash deposit and the purchase of the Securities, and
because the Trusts will pay brokerage fees to buy Securities. To reduce
this dilution, the Trusts will try to buy the Securities as close to the
Evaluation Time and as close to the evaluation price as possible.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may, from time to time, retain and pay us (or our affiliate) to
act as agent for the Trusts to buy Securities. If we or an affiliate of
ours act as agent to the Trusts we will be subject to the restrictions
under the Investment Company Act of 1940, as amended.
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Securities may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. 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
any of the Securities in a Trust or vote the Securities. As the holder
of the Securities, the Trustee will vote all of the Securities and will
do so based on our instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in a Trust fails, unless we can purchase
substitute Securities ("Replacement Securities") we will refund to you
that portion of the purchase price and sales charge resulting from the
failed contract on the next Income Distribution Date. Any Replacement
Page 9
Security a Trust acquires will be identical to those from the failed
contract. The Trustee must purchase the replacement Securities within 20
days after it receives notice of a failed contract, and the purchase
price may not be more than the amount of funds reserved for the purchase
of the failed contract.
Portfolios
Objectives.
High-Yield Corporate Closed-End Portfolio Series. The objective of the
High-Yield Corporate Closed-End Portfolio Series is to provide investors
with high current income, with capital appreciation being a secondary
objective of the Trust. The High-Yield Corporate Closed-End Portfolio
Series seeks to achieve its objective by investing in a diversified
portfolio of common stocks of closed-end investment companies ("Closed-
End Funds"), the portfolios of which are concentrated in high-yield
corporate bonds. In selecting Securities for the High-Yield Corporate
Closed-End Portfolio Series, we selected those Closed-End Funds which
satisfied most, but not necessarily all, of the following factors:
1. Consistent dividend distributions;
2. Manager's average tenure of more than three years; and
3. Average Morningstar rating of 2 stars or better.
As bond yields have fallen over the past 15 years, one thing that has
not changed is the need for some investors to earn high current income.
Investors willing to assume certain credit and market risks have the
potential to earn a high level of current monthly income by investing in
high-yield corporate bonds. The High-Yield Corporate Closed-End
Portfolio Series invests in a diversified portfolio of high-yield Closed-
End Funds that are further diversified across many industries and
hundreds of companies. The average quality rating of the bonds in these
Closed-End Funds is BB-. The following factors support our positive
outlook for high-yield corporate bonds:
- - Currently, a healthy U.S. economy is generally helping corporations
achieve strong earnings, thereby reducing the likelihood of issuers
defaulting on scheduled interest and principal payments.
- - As a result of lower interest rates, the cost of capital is
significantly lower today than it was in the 1980s.
- - The yield spread between high-yield bonds and other investment grade
bonds, such as treasuries, continues to reflect value in the high-yield
market.
- - The combination of economic prosperity and low inflation makes the
inflation adjusted return on high-yield bonds attractive.
- - Although subject to greater risks, high-yield bond investors have
historically received greater returns from their high-yield investments
than investment grade corporate bond investors.
Municipal Closed-End Portfolio Series. The objective of the Municipal
Closed-End Portfolio Series is to provide investors with federally tax-
exempt income and to preserve capital. The Municipal Closed-End
Portfolio Series seeks to achieve its objective by investing in a
diversified portfolio of common stocks of Closed-End Funds, the
portfolios of which are concentrated in tax-exempt municipal bonds. In
selecting Securities for the Municipal Closed-End Portfolio Series, we
began by eliminating all tax-exempt municipal Closed-End Funds with net
assets under $120 million and an indicated yield of less than 6%. We
then selected those Closed-End Funds which satisfied most, but not
necessarily all, of the following factors:
1. Consistent dividend distributions;
2. Manager's average tenure of more than three years;
3. Average credit quality of the underlying assets of at least
investment grade;
4. Average Morningstar rating of 3 stars or better; and
5. Five-year annualized total market return that is greater than the
total average annual indicated yield.
With the U.S. economy now entering its ninth year of expansion and many
investors having profited from a strong stock market, it might be
prudent for some investors to preserve profits by reallocating gains
into the municipal bond market. For others, tax-free income may be
reason enough to invest. Owning municipal bonds in the current low
inflation environment has the potential to add value to an investment
portfolio. The Municipal Closed-End Portfolio Series invests in a
diversified portfolio of municipal Closed-End Funds that are further
diversified across hundreds of tax-free municipal issues. The average
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quality rating of the bonds in these Closed-End Funds is A+. The
following factors support our positive outlook for municipal bonds:
- - On a taxable equivalent yield basis, the yields available in the
municipal market are currently attractive relative to taxable bonds for
individuals who are in the 28% tax bracket and higher. A large universe
of potential investors.
- - The strong U.S. economy has made a positive impact on municipal
revenues generated from taxes and services. Increased revenues can
enhance the credit-worthiness of the issuers as well as boost the
confidence of investors.
- - As a result of lower interest rates, the cost of capital is
significantly lower today than it was in the 1980s.
Advantages of the Closed-End Fund structure include portfolio control,
diversification and consistent income. Since Closed-End Funds maintain a
relatively fixed pool of investment capital, portfolio managers are
better able to adhere to their investment philosophies through greater
flexibility and control. In addition, Closed-End Funds don't have to
manage fund liquidity to meet potentially large redemptions. Closed-End
Funds are also structured to generally provide a more stable income
stream than other managed fixed-income investment products because they
are not subjected to cash inflows and outflows, which can dilute
dividends over time. However, as a result of bond calls, redemptions and
advanced refundings, which can dilute a fund's income, stable income
cannot be assured.
Of course, as with any similar investments, there can be no guarantee
that the objective of the Trusts will be achieved. See "Risk Factors"
for a discussion of the risks of investing in the Trusts.
Risk Factors
Price Volatility. The Trusts invest in common stocks of Closed-End
Funds. The value of a Trust's Units will fluctuate with changes in the
value of these common stocks. Common stock prices fluctuate for several
reasons including changes in investors' perceptions of the financial
condition of an issuer or the general condition of the relevant stock
market, or when political or economic events affecting the issuers occur.
Because the Trusts are not managed, the Trustee will not sell stocks in
response to or in anticipation of market fluctuations, as is common in
managed investments. As with any investment, we cannot guarantee that
the performance of a Trust will be positive over any period of time or
that you won't lose money. Units of the Trusts are not deposits of any
bank and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Alternative Minimum Tax. While distributions of interest from the
Municipal Closed-End Portfolio Series are generally exempt from federal
income taxes, a portion of such interest may be taken into account in
computing the alternative minimum tax.
Closed-End Funds. Closed-End Funds are actively managed investment
companies which invest in various types of securities. Closed-End Funds
issue shares of common stock that are traded on a securities exchange.
Closed-End Funds are subject to various risks, including management's
ability to meet the Closed-End Fund's investment objective, and to
manage the Closed-End Fund portfolio when the underlying securities are
redeemed or sold, during periods of market turmoil and as investors'
perceptions regarding Closed-End Funds or their underlying investments
change.
Shares of Closed-End Funds frequently trade at a discount from their net
asset value in the secondary market. This risk is separate and distinct
from the risk that the net asset value of Closed-End Fund shares may
decrease. The amount of such discount from net asset value is subject to
change from time to time in response to various factors.
High-Yield Corporate Bonds. Each of the Closed-End Funds held by the
High-Yield Corporate Closed-End Portfolio Series invests in high-yield
corporate bonds. 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 these bonds 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.
High-yield or "junk" bonds, the generic names for corporate bonds rated
Page 11
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.
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.
Municipal Bonds. Each of the Closed-End Funds held by the Municipal
Closed-End Portfolio Series invests in tax-exempt municipal bonds.
Municipal bonds are debt obligations issued by states or political
subdivisions or authorities of states. Municipal bonds are typically
designated as general obligation bonds, which are general obligations of
a governmental entity that are backed by the taxing power of such
entity, or revenue bonds, which are payable from the income of a
specific project or authority and are not supported by the issuer's
power to levy taxes. Municipal bonds are long-term fixed rate debt
obligations that generally decline in value with increases in interest
rates, when an issuer's financial condition worsens or when the rating
on a bond is decreased. Many municipal bonds may be called or redeemed
prior to their stated maturity, an event which is more likely to occur
when interest rates fall. In such an occurrence, a Closed-End Fund may
not be able to reinvest the money it receives in other bonds that have
as high a yield or as long a maturity.
Many municipal bonds are subject to continuing requirements as to the
actual use of the bond proceeds or manner of operation of the project
financed from bond proceeds that may affect the exemption of interest on
such bonds from federal income taxation. The market for municipal bonds
is generally less liquid than for other securities and therefore the
price of municipal bonds may be more volatile and subject to greater
price fluctuations than securities with greater liquidity. In addition,
an issuer's ability to make income distributions generally depends on
several factors including the financial condition of the issuer and
general economic conditions. Any of these factors may negatively impact
the price of municipal bonds held by a Closed-End Fund and would
therefore impact the price of both the Securities and the Units.
Foreign Securities. Certain or all of the underlying bonds held by
certain of the Closed-End Funds in the High-Yield Corporate Closed-End
Portfolio Series are issued by foreign companies, which makes this Trust
subject to more risks than if it only invested in Closed-End Funds which
invest solely in domestic bonds. Risks of foreign bonds include losses
due to future political and economic developments, foreign currency
devaluations, restrictions on foreign investments and exchange of
securities, inadequate financial information and lack of liquidity of
certain foreign markets. In addition, brokerage and other transaction
costs on foreign securities exchanges are often higher than in the U.S.
and there is generally less government supervision and regulation of
exchanges, brokers and issuers in foreign countries.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed which may have a negative impact on the prices
of certain of the corporate or municipal bonds owned by the Closed-End
Funds represented in the Trusts. In addition, litigation regarding any
of the issuers of the corporate or municipal bonds owned by such Closed-
End Funds or of the industries represented by such issuers, such as
litigation affecting the validity of certain municipal bonds or the tax-
free nature of the interest thereon, 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 share prices of the Securities or of the issuers of the underlying
bonds in which they invest.
Year 2000 Problem. Many computer systems were not designed to properly
process information and data involving dates of January 1, 2000 and
thereafter. This is commonly known as the "Year 2000 Problem." We do not
Page 12
expect that any of the computer system changes necessary to prepare for
January 1, 2000 will cause any major operational difficulties for the
Trusts. However, we are unable to predict what impact the Year 2000
Problem will have on any of the issuers of the Securities or on any of
the issuers of the underlying bonds in which they invest. You should
note that issuers of municipal bonds may have greater Year 2000 issues
than other issuers.
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price. The Public Offering
Price per Unit for each Trust is comprised of the following:
- - The aggregate underlying value of the Securities;
- - The amount of any cash in the Income and Capital Accounts of a Trust;
and
- - The total sales charge (which combines an initial up-front sales
charge and a deferred sales charge).
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the prices of the Securities and changes in
the value of the Income and/or Capital Accounts.
Securities purchased with the portion of the Public Offering Price
intended to be used to reimburse the Sponsor for a Trust's organization
costs (including costs of preparing the registration statement, the
Indenture and other closing documents, registering Units with the
Securities and Exchange Commission ("SEC") and states, the initial audit
of the Trust portfolio, legal fees and the initial fees and expenses of
the Trustee) will be purchased in the same proportionate relationship as
all the Securities contained in a Trust. Securities will be sold to
reimburse the Sponsor for a Trust's organization costs at the earlier of
six months after the Initial Date of Deposit or the end of the initial
offering period (a significantly shorter time period than the life of a
Trust). During the period ending with the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period,
there may be a decrease in the value of the Securities. To the extent
the proceeds from the sale of these Securities are insufficient to repay
the Sponsor for the Trust organization costs, the Trustee will sell
additional Securities to allow a Trust to fully reimburse the Sponsor.
In that event, the net asset value per Unit will be reduced by the
amount of additional Securities sold. Although the dollar amount of the
reimbursement will remain fixed and will never exceed the per Unit
amount set forth in "Statements of Net Assets" for such Trust, this will
result in a greater effective cost per Unit to Unit holders for the
reimbursement to the Sponsor. To the extent actual organization costs
are less than the estimated amount, only the actual organization costs
will be deducted from the assets of a Trust. When Securities are sold to
reimburse the Sponsor for organization costs, the Trustee will sell such
Securities, to the extent practicable, which will maintain the same
proportionate relationship among the Securities contained in a Trust as
existed prior to such sale.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Minimum Purchase.
The minimum amount you can purchase of a Trust is $1,000 worth of Units
($500 if you are purchasing Units for your Individual Retirement Account
or any other qualified retirement plan).
Sales Charges.
The maximum sales charge you will pay has both an initial and deferred
component. The initial sales charge, which you will pay at the time of
purchase, is initially equal to approximately 1% of the Public Offering
Price of a Unit. This initial sales charge is actually equal to the
difference between the maximum total sales charge of 4.50% and the
maximum remaining deferred sales charge (initially $.350 per Unit). The
initial sales charge will vary from 1% with changes in the aggregate
underlying value of the Securities, changes in the Income and Capital
Accounts and as deferred sales charge payments are made. In addition,
five monthly deferred sales charges of $.07 per Unit will be deducted
from a Trust's assets on approximately the twentieth day of each month
Page 13
from December 20, 1999 through April 20, 2000. The maximum sales charge
assessed during the initial offering period will be 4.50% of the Public
Offering Price per Unit (equivalent to 4.545% of the net amount
invested, exclusive of the deferred sales charge).
After the initial offering period, if you purchase Units after the last
deferred sales charge payment has been assessed your sales charge will
consist of a one-time initial sales charge of 4.50% of the Public
Offering Price (equivalent to 4.712% of the net amount invested), which
will be reduced by 1/2 of 1% on each subsequent May 31, commencing May
31, 2000 to a minimum sales charge of 3.0%.
Discounts for Certain Persons.
If you invest at least $50,000 (except if you are purchasing for a "wrap
fee account" as described below), the maximum sales charge is reduced,
as follows:
Your maximum
If you invest sales charge
(in thousands):* will be:
______________ ____________
$ 50 but less than $100 4.25%
$100 but less than $150 4.00%
$150 but less than $500 3.50%
$500 or more 2.50%
* The breakpoint sales charges are also applied on a Unit basis
utilizing a breakpoint equivalent in the above table of $10 per Unit and
will be applied on whichever basis is more favorable to the investor.
The breakpoints will be adjusted to take into consideration purchase
orders stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
The reduced sales charge for quantity purchases will apply only to
purchases made by the same person on any one day from any one dealer.
You may combine same day purchases of Units of the Trusts and units of
other similarly structured unit trusts for which we act as Principal
Underwriter and which are currently in the initial offering period to
meet the above volume purchase levels. We will consider Units you
purchase in the name of your spouse or your child under 21 years of age
to be purchases by you for determining the reduced sales charge. The
reduced sales charges will also apply to a trustee or other fiduciary
purchasing Units for a single trust estate or single fiduciary account.
You must inform your dealer of any combined purchases before the sale in
order to be eligible for the reduced sales charge. Any reduced sales
charge is the responsibility of the broker/dealer or other selling agent
making the sale.
If you own units of any other unit investment trusts sponsored by us,
you may use your redemption or termination proceeds from these trusts to
purchase Units of the Trusts subject only to any remaining deferred
sales charge to be collected on such Units. Please note that you will be
charged the amount of any remaining deferred sales charge on the units
you redeem when you redeem them.
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 and daughters-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 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, you may
purchase Units in the primary or secondary market at the Public Offering
Price, subject only to the Sponsor's retention of the sales charge. See
"Distribution of Units-Dealer Concessions."
Every investor will be charged the deferred sales charge per Unit
regardless of any discounts. However, if you are eligible to receive a
discount such that the maximum sales charge you must pay is less than
the applicable maximum deferred sales charge, you will be credited the
difference between your maximum sales charge and the maximum deferred
sales charge at the time you buy your Units.
The Value of the Securities.
The aggregate underlying value of the Securities in a Trust will be
determined as follows: if the Securities are listed on a securities
exchange or The Nasdaq Stock Market, their value is generally based on
the closing sale prices on that exchange or system (unless it is
determined that these prices are not appropriate as a basis for
valuation). However, if there is no closing sale price on that exchange
or system, they are valued based on the closing ask prices. If the
Page 14
Securities are not so listed, or, if so listed and the principal market
for them is other than on that exchange or system, the evaluation will
generally be based on the current ask prices on the over-the-counter
market (unless it is determined that these prices are not appropriate as
a basis for evaluation). If current ask prices are unavailable, the
evaluation is generally determined:
a) On the basis of current ask prices for comparable securities,
b) By appraising the value of the Securities on the ask side of the
market, or
c) By any combination of the above.
The Evaluator will appraise the value of the underlying Securities in
each 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 the following holidays as
observed by the New York Stock Exchange ("NYSE"): New Year's Day, Martin
Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day.
After the initial offering period is over, the secondary market 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
Income and Capital Accounts of such Trust plus the applicable sales
charge. We calculate the aggregate underlying value of the Securities
during the secondary market the same way as described above for sales
made during the initial offering period, except that bid prices are used
instead of ask prices when necessary.
Distribution of Units
We intend to qualify Units of the Trusts for sale in a number of states.
During the initial offering period, Units will be sold at the current
Public Offering Price. When the initial offering period ends, Units we
have reacquired may be offered by this prospectus at the secondary
market Public Offering Price (see "The Secondary Market").
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
represent a concession or agency commission of 3.2% of the Public
Offering Price per Unit (or 65% of the maximum sales charge after May
31, 2000). However, dealers and other selling agents will receive a
concession on the sale of Units subject only to any remaining deferred
sales charge equal to $.22 per Unit on Units sold subject to the maximum
deferred sales charge or 63% of the then current maximum remaining
deferred sales charge on Units sold subject to less than the maximum
deferred sales charge. Dealers and selling agents will receive an
additional volume concession or agency commission of 0.30% of the Public
Offering Price if they purchase at least $100,000 worth of Units of a
Trust on the Initial Date of Deposit or $250,000 on any day thereafter
or if they were eligible to receive a similar concession in connection
with sales of similarly structured trusts sponsored by us which are
currently in the initial offering period.
Dealers and other selling agents who sell Units of a Trust during the
initial offering period in the dollar amounts below will be entitled to
the following additional sales concessions as a percentage of the Public
Offering Price:
Total sales per Trust Additional
(in millions) Concession
_____________________ __________
$ 1 but less than $2 .10%
$ 2 but less than $3 .15%
$ 3 but less than $10 .20%
$10 or more .30%
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 Trusts 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. Under the Glass-Steagall Act,
banks are prohibited from underwriting Trust Units. However, the Glass-
Steagall Act does allow certain agency transactions and these appear to
be permitted under the Act. In Texas and in certain other states, any
banks making Units available must be registered as broker/dealers under
state law.
Page 15
Award Programs.
From time to time we may sponsor programs which award our dealers'
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 criteria we
establish or participate in sales programs we sponsor, amounts equal to
no more than the total applicable sales charges on the unit sales
generated by such persons during such programs. We make these payments
out of our own assets, and not out of a Trust's assets. These programs
will not change the price you pay for your Units or the amount that a
Trust will receive from the Units sold.
Investment Comparisons.
From time to time we may compare the then current estimated returns of
the Trusts (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 or tax-exempt investments such as the
securities comprising various investment indices, corporate or U.S.
Government bonds, bank CDs and money market accounts or funds, (2)
performance data from Morningstar Publications, Inc. or (3) information
from publications such as Money, the New York Times, U.S. News and World
Report, Business Week, Forbes or Fortune. The investment characteristics
of each Trust, which are described more fully elsewhere in this
prospectus, 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 for a Trust less any reduced sales charge as stated in
"Public Offering." Also, any difference between our cost to purchase the
Securities and the price we sell them to a Trust is considered a profit
or loss (see Note 2 of "Notes to Schedules of Investments"). During the
initial offering period, dealers and others may also realize profits or
sustain losses as a result of fluctuations in the Public Offering Price
they receive when they sell the Units.
In maintaining a market for 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 a Trust) or redeemed will be a
profit or loss to us. The secondary market 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 after the initial offering period and continuously offer to
purchase Units at prices based on the Redemption Price per Unit.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees and Trustee costs to transfer and record the ownership of
Units. 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. If you sell Units
for redemption before you have paid the total deferred sales charge on
your Units, you will have to pay the remainder at that time.
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
Units tendered for redemption 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.
The Public Offering Price of any Units we acquire will be consistent
with the Public Offering Price described in the then effective
prospectus. Any profit or loss from the resale or redemption of such
Units will belong to us.
Page 16
Expenses and Charges
The estimated annual expenses of the Trusts are listed under "Fee
Table." If actual expenses exceed the estimate, the appropriate Trust
will bear the excess. The Trustee will pay operating expenses of a Trust
from the Income Account of such Trust if funds are available, and then
from the Capital Account. The Income and Capital Accounts are
noninterest-bearing to Unit holders, so the Trustee benefits from the
use of these funds. In addition, investors will also indirectly pay a
portion of the expenses of the underlying Closed-End Funds.
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to the Trusts, and will receive brokerage fees
when the Trusts use us (or an affiliate of ours) as agent in buying or
selling Securities. First Trust Advisors L.P., an affiliate of ours,
acts as both Portfolio Supervisor and Evaluator to the Trusts and will
receive the fees set forth under "Fee Table." In providing portfolio
supervisory services, the Portfolio Supervisor may purchase research
services from a number of sources, which may include underwriters or
dealers of the Trusts.
The fees payable to the Portfolio Supervisor, Evaluator and Trustee are
based on the largest aggregate number of Units of a Trust outstanding at
any time during the calendar year, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fees paid to us or our
affiliate for providing services to all unit investment trusts for which
we provide such services be more than the actual cost of providing such
services in such year. Because these fees are generally calculated based
on the largest aggregate number of Units outstanding during a calendar
year, the per Unit amounts will be higher during any year in which
redemptions of Units occur.
In addition to a Trust's operating expenses, and the fees set forth
above, each 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.)
The above expenses and the Trustee's annual fee (when paid or owing to
the Trustee) are secured by a lien on the respective Trust. In addition,
if there is not enough cash in the Income or Capital Accounts of a
Trust, the Trustee has the power to sell Securities to make cash
available to pay these charges. We cannot guarantee that distributions
from the Securities will be sufficient to meet any or all expenses of a
Trust. These sales may result in capital gains or losses to the Unit
holders. 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, a
Trust will pay for the audit. You can receive a copy of the audited
financial statements by notifying the Trustee.
Tax Status
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trusts. This section is current as
of the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe your state or foreign taxes. As
with any investment, you should consult your own tax professional about
your particular consequences.
Page 17
Assets of the Trusts.
Each Trust will hold shares of Closed-End Funds qualifying as regulated
investment companies ("RICs"). The High Yield Corporate Closed-End
Portfolio Series is invested in high-yield corporate bonds and the
Municipal Closed-End Portfolio Series is invested in municipal bonds.
For purposes of this federal tax discussion, it is assumed that the
Securities constitute qualifying shares in regulated investment
companies for federal income tax purposes.
Trust Status and Distributions.
The Trusts will not be taxed as corporations for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of the Securities and other assets held by your Trust, and
as such you will be considered to have received a pro rata share of
income (i.e., dividends, interest 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 additional Units. In addition, the income from a Trust
which you must take into account for federal income tax purposes is not
reduced by amounts used to pay a deferred sales charge.
Distributions received by the Trusts from the Securities, other than
distributions which are designated as capital gain dividends or exempt-
interest dividends, will be taxable to you as ordinary income.
Distributions from the Trusts attributable to dividends received from
the Securities will not be eligible for the dividends received deduction
for corporations.
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 purchase your
Units. In certain circumstances, however, you may have to adjust your
tax basis after you purchase your Units (for example, in the case of
certain dividends paid to the Trusts on the Securities that exceed the
RIC's accumulated earnings and profits).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the lowest
tax bracket). Net capital gain equals net long-term capital gain minus
net short-term capital loss for the taxable year. Capital gain or loss
is long-term if the holding period for the asset is more than one year
and is short-term if the holding period for the asset is one year or
less. You must exclude the date you purchase your Units to determine the
holding period of your Units. The tax rates for capital gains realized
from assets held for one year or less are generally the same as for
ordinary income. The tax code may, however, treat certain capital gains
as ordinary income in special situations.
Dividends from Securities.
Some dividends on the Securities may qualify as "capital gain
dividends," taxable to you as long-term capital gains. In addition, some
dividends on the Securities may qualify as "exempt interest dividends,"
which generally are excluded from your gross income for federal income
tax purposes. Some or all of the exempt-interest dividends, however, may
be taken into account in determining your alternative minimum tax, and
may have other tax consequences (e.g., they may affect the amount of
your social security benefits that are taxed).
If you hold a Unit for six months or less or if a Trust holds a Security
for six months or less, any loss incurred by you related to the
disposition of such Security will be disallowed to the extent of the
exempt-interest dividends you received. If such loss is not entirely
disallowed, it will be treated as long-term capital loss to the extent
of any long-term capital gain distributions received (or deemed to have
been received) with respect to such Security. Distributions of income or
capital gains declared on the Securities in October, November, or
December will be deemed to have been paid to you on December 31 of the
year they are declared, even when paid by the RIC during the following
January.
In-Kind Distributions.
Under certain circumstances, you may request an In-Kind Distribution of
Securities when you redeem your Units or at a Trust's termination. If
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you request an In-Kind Distribution you will be responsible for any
expenses related to this distribution. By electing to receive an In-Kind
Distribution, you will receive an undivided interest in the Securities
plus, possibly, cash.
You will not recognize gain or loss if you only receive Securities in
exchange for your pro rata portion of the Securities held by a Trust.
However, if you also receive cash in exchange for a fractional share of
a Security held by a Trust, you will generally recognize gain or loss
based on the difference between the amount of cash you receive and your
tax basis in such fractional share of the Security.
Limitations on the Deductibility of Trust Expenses and Your Interest
Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of a Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by a Trust to the same extent as if you directly
paid the expense. You may, however, be required to treat some or all of
the expenses of the Trusts as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Because some of the Securities pay exempt interest dividends, which are
treated as tax-exempt interest for federal income tax purposes, you will
not be able to deduct some of your share of the Trust expenses. In
addition, you will not be able to deduct some of your interest expense
for debt that you incur or continue to purchase or carry your Units.
Foreign, State and Local Taxes.
Some distributions by a Trust may be subject to foreign withholding
taxes. Any dividends withheld will nevertheless be treated as income to
you. However, because you are deemed to have paid directly your share of
foreign taxes that have been paid or accrued by a Trust, you may be
entitled to a foreign tax credit or deduction for U.S. tax purposes with
respect to such taxes.
If you are a foreign investor (i.e., an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or
trust), you will not be subject to U.S. federal income taxes, including
withholding taxes, on some of the income from a Trust or on any gain
from the sale or redemption of your Units, provided that certain
conditions are met. You should consult your tax advisor with respect to
the conditions you must meet in order to be exempt for U.S. tax
purposes. Under the existing income tax laws of the State and City of
New York, the Trusts will not be taxed as corporations, and the income
of the Trusts will be treated as the income of the Unit holders in the
same manner as for federal income tax purposes. You should consult your
tax advisor regarding potential foreign, state or local taxation with
respect to your Units.
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. If you are considering participating in a plan like this, you
should review the tax laws regarding these plans and consult your
attorney or tax adviser. 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. If you request certificates representing the Units
you ordered for purchase they will be delivered three business days
after your order or shortly thereafter. You may transfer or redeem Units
represented by a certificate by endorsing it and surrendering it to the
Trustee, along with a written instrument(s) 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.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
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thereof, numbered serially for identification purposes.
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 to you, as the Record Owner:
- - A written initial transaction statement containing a description of
your Trust;
- - The number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
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.
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. The Trustee does not
require such charge now, nor are they currently contemplating doing so.
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.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of income (if any)
distributed. After the end of each calendar year, the Trustee will
provide you with the following information:
- - A summary of transactions in your Trust for the year;
- - Any Securities sold during the year and the Securities held at the
end of that year by your Trust;
- - The Redemption Price per Unit, computed on the 31st day of December
of such year (or the last business day before); and
- - Amounts of income and capital distributed during the year.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Income and Capital Distributions
You will begin receiving distributions from your Units only after you
become a Record Owner. It is your responsibility to notify the Trustee
when you become Record Owner of the Units, but normally your
broker/dealer provides this notice. The Trustee will credit any
dividends received on a Trust's Securities to the Income Account of such
Trust. All other receipts, such as return of capital, are credited to
the Capital Account of such Trust.
The Trustee will distribute any net income in the Income Account on or
near the Income Distribution Dates to Unit holders of record on the
preceding Income Distribution Record Date. See "Summary of Essential
Information" for each Trust. Distribution amounts will vary with changes
in the Trust's fees and expenses, in dividends received and with the
sale of Securities. The Trustee will distribute amounts in the Capital
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 Capital Account from the sale of
Securities designated to meet redemptions of Units, to pay the deferred
sales charge or to pay expenses will not be distributed. The Trustee is
not required to pay interest on funds held in the Income or Capital
Accounts of a Trust. However, the Trustee may earn interest on these
funds, thus benefiting from the use of such funds.
We anticipate that the deferred sales charge will be collected from the
Capital Account of a Trust and that the money in the Capital Account
will be sufficient to cover the cost of the deferred sales charge. If
there is not enough money in the Capital Account to pay the deferred
sales charge, the Trustee may sell Securities to meet the shortfall. We
will designate an account where distributions will be made to pay the
deferred sales charge.
The Trustee is required by the Internal Revenue Service to withhold a
certain percentage of any distribution a Trust makes and deliver such
amount to the Internal Revenue Service if the Trustee does not have your
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TIN. You may recover this amount by giving your TIN to the Trustee, or
when you file a tax return. Normally, the selling broker provides the
Trustee your TIN. However, you should check your statements from the
Trustee to make sure they have the number to avoid this "back-up
withholding." If not, you should provide it to the Trustee as soon as
possible.
Within a reasonable time after a Trust is terminated you will receive
the pro rata share of the money from the disposition of the Securities.
However, if you are eligible, you may elect to receive an In-Kind
Distribution as described under "Amending or Terminating the Indenture."
All Unit holders will receive a pro rata share of any other assets
remaining in a Trust, less any unpaid expenses of such Trust.
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.
Distribution Reinvestment Option. You may elect to have each
distribution of income and/or capital reinvested into additional Units
of a Trust by notifying the Trustee at least 10 days before any Record
Date. Each later distribution of income and/or capital on your Units
will be reinvested by the Trustee into additional Units of a Trust. You
will have to pay any remaining deferred sales charge on any Units
acquired pursuant to this distribution reinvestment option. This option
may not be available in all states. PLEASE NOTE THAT EVEN IF YOU
REINVEST DISTRIBUTIONS, THEY ARE STILL CONSIDERED DISTRIBUTIONS FOR
INCOME TAX PURPOSES.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by 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
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing income will be withdrawn
from the Income Account of a Trust if funds are available for that
purpose, or from the Capital Account. All other amounts paid on
redemption will be taken from the Capital Account of a Trust.
If you are tendering 1,000 Units or more of a Trust for redemption,
rather than receiving cash you may elect to receive a distribution of
shares of Securities (an "In-Kind Distribution") in an amount and value
equal to the Redemption Price per Unit by making this request in writing
to the Trustee at the time of tender. However, no In-Kind Distribution
requests submitted during the nine business days prior to a Trust's
Mandatory Termination Date will be honored. Where possible, the Trustee
will make an In-Kind Distribution by distributing each of the Securities
in book-entry form to your bank or broker/dealer account at the
Depository Trust Company. The Trustee will subtract any customary
transfer and registration charges from your In-Kind Distribution. As a
tendering Unit holder, you will receive your pro rata number of whole
shares of the Securities that make up the portfolio, and cash from the
Capital Account equal to the fractional shares to which you are
entitled. If there is not enough money in the Capital Account to pay the
required cash distribution, the Trustee may have to sell Securities.
The Internal Revenue Service will require the Trustee to withhold a
portion of your redemption proceeds if the Trustee has not previously
been provided your TIN. For more information about this withholding, see
"Income and Capital Distribution." 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
Page 21
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 Income and Capital Accounts of a Trust not designated to
purchase Securities;
2. the aggregate underlying value of the Securities held in a Trust; and
3. dividends receivable on the Securities trading ex-dividend as of the
date of computation; and
deducting
1. any applicable taxes or governmental charges that need to be paid out
of 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.
Any remaining deferred sales charge on the Units when you redeem them
will be deducted from your redemption proceeds. In addition, until the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period, the Redemption Price per Unit will include
estimated organization costs as set forth under "Fee Table."
The aggregate underlying value of the Securities for purposes of
calculating the Redemption Price during the secondary market is
determined in the same manner as that used to calculate the Secondary
Market Public Offering Price as discussed in "Public Offering-The Value
of the Securities."
Removing Securities from a Trust
The portfolios of the Trusts are not managed. However, we may, but are
not required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- - The issuer of the Security defaults in the payment of a declared
dividend;
- - Any action or proceeding prevents the payment of dividends;
- - There is any legal question or impediment affecting the Security;
- - The issuer of the Security has breached a covenant which would affect
the payment of dividends or the issuer's credit standing, or otherwise
damage the sound investment character of the Security; or
- - The issuer has defaulted on the payment of any other of its
outstanding obligations; or
- - The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to a Trust.
Except in the limited instance in which a Trust acquires Replacement
Securities to replace failed contracts to purchase Securities, as
described in "The FT Series," a Trust may not acquire any securities or
other property other than the Securities. The Trustee, on behalf of a
Trust, will reject any offer for new or exchanged securities or property
in exchange for a Security, such as those acquired in a merger or other
transaction. If such exchanged securities or property are nevertheless
acquired by a Trust, at our instruction, they will either be sold or
held in such Trust. In making the determination as to whether to sell or
hold the exchanged securities or property we may get advice from the
Portfolio Supervisor. Any proceeds received from the sale of Securities,
exchanged securities or property will be credited to the Capital Account
of a Trust for distributions to Unit holders or to meet redemption
requests. The Trustee may retain and pay us or an affiliate of ours to
act as agent for a Trust to facilitate selling Securities, exchanged
securities or property from a Trust. If we or our affiliate act in this
Page 22
capacity, we will be held subject to the restrictions under the
Investment Company Act of 1940, as amended.
The Trustee may also sell Securities that we designate; or, without our
direction, in its own discretion, in order to meet redemption requests
or pay expenses.
In designating which Securities should be sold, we will try to maintain
the proportionate relationship among the Securities. If this is not
possible, the composition and diversification of the Securities in a
Trust may be changed. To get the best price for a Trust we may have to
specify minimum amounts (generally 100 shares) in which blocks of
Securities are to be sold. We may consider sales of units of unit
investment trusts which we sponsor 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 such 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, a 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 the lower of $2,000,000 or 20% of the total
value of Securities deposited in such Trust during the initial offering
period ("Discretionary Liquidation Amount"); or
- - In the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
In the event of termination, the Trustee will send prior written notice
thereof to all Unit holders which will specify how you should tender
your certificates, if any, to the Trustee. If a Trust is terminated due
to this last reason, we will refund to each purchaser of Units of such
Trust the entire sales charge paid by such purchaser; however,
termination of a Trust prior to the Mandatory Termination Date for any
other stated reason will result in all remaining unpaid deferred sales
charges on your Units being deducted from your termination proceeds. For
various reasons, a Trust may be reduced below the Discretionary
Liquidation Amount and could therefore be terminated prior to the
Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of a Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner, 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.
If you own at least 1,000 Units of a Trust, the Trustee will send you a
form at least 30 days prior to the Mandatory Termination Date which will
enable you to receive an In-Kind Distribution of Securities (reduced by
customary transfer and registration charges) rather than the typical
cash distribution representing your pro rata interest in a Trust. You
must notify the Trustee at least ten business days prior to the
Mandatory Termination Date if you elect this In-Kind Distribution
option. If you do not elect to participate in the In-Kind Distribution
option for eligible Unit holders you will receive a cash distribution
from the sale of the remaining Securities, along with your interest in
the Income and Capital Accounts of a Trust, within a reasonable time
after such Trust is terminated. Regardless of the distribution involved,
the Trustee will deduct from a Trust any accrued costs, expenses,
advances or indemnities provided by the Indenture, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to pay any taxes or other governmental charges.
Page 23
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- - The First Trust Combined Series
- - FT Series (formerly known as The First Trust Special Situations Trust)
- - The First Trust Insured Corporate Trust
- - The First Trust of Insured Municipal Bonds
- - The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $25 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1998, the total partners' capital of
Nike Securities L.P. was $18,506,548 (audited).
This information refers only to the Sponsor and not to the Trusts or to
any series of the Trusts or to any other dealer. We are including this
information only to inform you of our financial responsibility and our
ability to carry out our contractual obligations. We will provide more
detailed financial information on request.
The Trustee.
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th Floor, New York, New
York, 10004-2413. If you have questions regarding the Trust, 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 has not participated in selecting the Securities; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable to Unit holders 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.
However, the Evaluator will not be liable to the Trustee, Sponsor or
Unit holders for errors in judgment.
Page 24
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel, as well as special New York tax
counsel for the Trusts.
Experts.
Ernst & Young LLP, independent auditors, have audited the Trusts'
statements of net assets, including the schedules of investments, at the
opening of business on the Initial Date of Deposit, as set forth in
their report. We've included the Trusts' statements of net assets,
including the schedules of investments, in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific risk information about the Trusts.
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Page 27
FIRST TRUST (registered trademark)
High-Yield Corporate Closed-End Portfolio Series
Municipal Closed-End Portfolio Series
FT 320
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 High-Yield Corporate
Closed-End Portfolio Series and Municipal Closed-End Portfolio Series,
but does not contain all of the information about this investment
company as filed with the Securities and Exchange Commission in
Washington, D.C. under the:
- Securities Act of 1933 (file no. 333-69561) and
- Investment Company Act of 1940 (file no. 811-05903)
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W., Washington, D.C. 20549-6009
Call: 1-800-SEC-0330
Visit: http://www.sec.gov
May 25, 1999
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 28
First Trust (registered trademark)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trusts
contained in FT 320 not found in the prospectus for the Trusts. This
Information Supplement is not a prospectus and does not include all of
the information that you should consider before investing in the Trusts.
This Information Supplement should be read in conjunction with the
prospectus for the Trusts in which you are considering investing.
This Information Supplement is dated May 25, 1999. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors 1
Securities 1
High-Yield Corporate Bonds 2
High-Yield Obligations 2
Municipal Bonds 3
Healthcare Revenue Bonds 4
Single Family Mortgage Revenue Bonds 4
Multi-Family Mortgage Revenue Bonds 4
Water and Sewerage Revenue Bonds 5
Electric Utility Revenue Bonds 5
Lease Obligation Revenue Bonds 5
Industrial Revenue Bonds 5
Transportation Facility Revenue Bonds 6
Educational Obligation Revenue Bonds 6
Resource Recovery Facility Revenue Bonds 6
Discount Bonds 6
Original Issue Discount Bonds 7
Zero Coupon Bonds 7
Premium Bonds 7
Portfolio Securities Descriptions 7
High-Yield Corporate Closed-End Portfolio Series 7
Municipal Closed-End Portfolio Series 10
Risk Factors.
Securities. The Securities in the Trusts represent shares of closed-end
mutual funds which invest in either tax-exempt municipal bonds or high-
yield corporate debt obligations. As such, an investment in Units of the
Trusts should be made with an understanding of the risks of investing in
both closed-end fund shares and municipal bonds or high-yield corporate
debt obligations.
Closed-end mutual funds' portfolios are managed and their shares are
generally listed on a securities exchange. The net asset value of closed-
end fund shares will fluctuate with changes in the value of the
underlying securities which the closed-end fund owns. In addition, for
various reasons closed-end fund shares frequently trade at a discount
from their net asset value in the secondary market. The amount of such
discount from net asset value is subject to change from time to time in
response to various factors. Closed-end funds' articles of incorporation
may contain certain anti-takeover provisions that may have the effect of
inhibiting a fund's possible conversion to open-end status and limiting
the ability of other persons to acquire control of a fund. In certain
circumstances, these provisions might also inhibit the ability of
stockholders (including the Trusts) to sell their shares at a premium
over prevailing market prices. This characteristic is a risk separate
Page 1
and distinct from the risk that a fund's net asset value will decrease.
In particular, this characteristic would increase the loss or reduce the
return on the sale of those closed-end fund shares which were purchased
by a Trust at a premium. In the unlikely event that a closed-end fund
converts to open-end status at a time when its shares are trading at a
premium there would be an immediate loss in value to the Trust since
shares of open-end funds trade at net asset value. Certain closed-end
funds may have in place or may put in place in the future plans pursuant
to which the fund may repurchase its own shares in the marketplace.
Typically, these plans are put in place in an attempt by a fund's board
of directors to reduce a discount on its share price. To the extent such
a plan was implemented and shares owned by a Trust are repurchased by a
fund, the Trust's position in that fund would be reduced and the cash
would be distributed.
The Trusts are prohibited from subscribing to a rights offering for
shares of any of the closed-end funds in which they invest. In the event
of a rights offering for additional shares of a fund, Unit holders
should expect that their Trust will, at the completion of the offer, own
a smaller proportional interest in such fund that would otherwise be the
case. It is not possible to determine the extent of this dilution in
share ownership without knowing what proportion of the shares in a
rights offering will be subscribed. This may be particularly serious
when the subscription price per share for the offer is less than the
fund's net asset value per share. Assuming that all rights are exercised
and there is no change in the net asset value per share, the aggregate
net asset value of each shareholder's shares of common stock should
decrease as a result of the offer. If a fund's subscription price per
share is below that fund's net asset value per share at the expiration
of the offer, shareholders would experience an immediate dilution of the
aggregate net asset value of their shares of common stock as a result of
the offer, which could be substantial.
Closed-end funds may utilize leveraging in their portfolios. Leveraging
can be expected to cause increased price volatility for those fund's
shares, and as a result, increased volatility for the price of the Units
of a Trust. There can be no assurance that a leveraging strategy will be
successful during any period in which it is employed.
The following is a discussion of certain of the risks associated with
specific types of bonds.
High-Yield Corporate Bonds.
High-Yield Obligations. An investment in Units of the High-Yield
Corporate Closed-End Portfolio Series 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 bonds" 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. Bonds such as those included in the funds in the
Trust are, under most circumstances, subject to greater market
fluctuations and risk of loss of income and principal than are
investments in lower-yielding, higher-rated bonds, 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 bonds resulting in a higher
incidence of defaults among high-yield, high-risk bonds. 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
bonds, 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" bonds, the generic names for corporate bonds
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 bonds is very specialized and
investors in it have been predominantly financial institutions. High-
yield bonds are generally not listed on a national securities exchange.
Trading of high-yield bonds, 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 bond market is
a dealer market, rather than an auction market, no single obtainable
price for a given bond prevails at any given time. Prices are determined
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by negotiation between traders. The existence of a liquid trading market
for the bonds may depend on whether dealers will make a market in the
bonds. There can be no assurance that a market will be made for any of
the bonds, that any market for the bonds will be maintained or of the
liquidity of the bonds in any markets made. Not all dealers maintain
markets in all high-yield bonds. Therefore, since there are fewer
traders in these bonds than there are in "investment grade" bonds, the
bid-offer spread is usually greater for high-yield bonds than it is for
investment grade bonds. The price at which the bonds may be sold to meet
redemptions and the value of the Trust will be adversely affected if
trading markets for the bonds are limited or absent. If the rate of
redemptions is great, the value of the Trust may decline to a level that
requires liquidation.
Lower-rated bonds tend to offer higher yields than higher-rated bonds
with the same maturities because the creditworthiness of the issuers of
lower-rated bonds may not be as strong as that of other issuers.
Moreover, if a bond is recharacterized as equity by the Internal Revenue
Service for federal income tax purposes, the issuer's interest deduction
with respect to the bond 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
bonds in the High-Yield Corporate Closed-End Portfolio Series, the
yields and prices of these bonds tend to fluctuate more than higher-
rated bonds with changes in the perceived quality of the credit of their
issuers. In addition, the market value of high-yield, high-risk, fixed-
income bonds may fluctuate more than the market value of higher-rated
bonds since high-yield, high-risk, fixed-income bonds tend to reflect
short-term credit development to a greater extent than higher-rated
bonds. Lower-rated bonds generally involve greater risks of loss of
income and principal than higher-rated bonds. Issuers of lower-rated
bonds may possess fewer creditworthiness characteristics than issuers of
higher-rated bonds 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
bonds 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
bonds which carry lower ratings.
The value of the Units reflects the value of the portfolio bonds,
including the value (if any) of bonds in default. Should the issuer of
any bond default in the payment of principal or interest, the funds in
the Trust may incur additional expenses seeking payment on the defaulted
bond. Because amounts (if any) recovered by the funds in payment under
the defaulted bond may not be reflected in the value of the fund shares
until actually received by the funds, 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 bonds 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 High-Yield Corporate Closed-
End Portfolio Series and consider their ability to assume the risks
involved before making an investment in such Trust.
Municipal Bonds.
Certain of the bonds held by the Securities in the Municipal Closed-End
Portfolio Series may be general obligations of a governmental entity
that are backed by the taxing power of such entity. Other bonds in the
funds may be revenue bonds payable from the income of a specific project
or authority and are not supported by the issuer's power to levy taxes.
General obligation bonds are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and
interest. Revenue bonds, on the other hand, are payable only from the
revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other
Page 3
specific revenue source. There are, of course, variations in the
security of the different bonds in the funds, both within a particular
classification and between classifications, depending on numerous
factors. A description of certain types of revenue bonds follows.
Healthcare Revenue Bonds. Certain of the bonds may be healthcare revenue
bonds. Ratings of bonds issued for healthcare facilities are sometimes
based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and net
income available for debt service may be affected by future events and
conditions including among other things, demand for services, the
ability of the facility to provide the services required, physicians'
confidence in the facility, management capabilities, competition with
other hospitals, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses,
government regulation, the cost and possible unavailability of
malpractice insurance and the termination or restriction of governmental
financial assistance, including that associated with Medicare, Medicaid
and other similar third party payor programs. Pursuant to recent Federal
legislation, Medicare reimbursements are currently calculated on a
prospective basis utilizing a single nationwide schedule of rates. Prior
to such legislation Medicare reimbursements were based on the actual
costs incurred by the health facility. The current legislation may
adversely affect reimbursements to hospitals and other facilities for
services provided under the Medicare program.
Single Family Mortgage Revenue Bonds. Certain of the bonds may be single
family mortgage revenue bonds, which are issued for the purpose of
acquiring from originating financial institutions notes secured by
mortgages on residences located within the issuer's boundaries and owned
by persons of low or moderate income. Mortgage loans are generally
partially or completely prepaid prior to their final maturities as a
result of events such as sale of the mortgaged premises, default,
condemnation or casualty loss. Because these bonds are subject to
extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will
probably be redeemed prior to their scheduled maturities or even prior
to their ordinary call dates. The redemption price of such issues may be
more or less than the offering price of such bonds. Extraordinary
mandatory redemption without premium could also result from the failure
of the originating financial institutions to make mortgage loans in
sufficient amounts within a specified time period or, in some cases,
from the sale by the bond issuer of the mortgage loans. Failure of the
originating financial institutions to make mortgage loans would be due
principally to the interest rates on mortgage loans funded from other
sources becoming competitive with the interest rates on the mortgage
loans funded with the proceeds of the single family mortgage revenue
bonds. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of
principal of or interest on such mortgage revenue bonds. Single family
mortgage revenue bonds issued after December 31, 1980 were issued under
Section 103A of the Internal Revenue Code, which Section contains
certain ongoing requirements relating to the use of the proceeds of such
bonds in order for the interest on such bonds to retain its tax-exempt
status. In each case, the issuer of the bonds has covenanted to comply
with applicable ongoing requirements and bond counsel to such issuer has
issued an opinion that the interest on the bonds is exempt from Federal
income tax under existing laws and regulations. There can be no
assurances that the ongoing requirements will be met. The failure to
meet these requirements could cause the interest on the bonds to become
taxable, possibly retroactively from the date of issuance.
Multi-Family Mortgage Revenue Bonds. Certain of the bonds may be
obligations of issuers whose revenues are primarily derived from
mortgage loans to housing projects for low to moderate income families.
The ability of such issuers to make debt service payments will be
affected by events and conditions affecting financed projects,
including, among other things, the achievement and maintenance of
sufficient occupancy levels and adequate rental income, increases in
taxes, employment and income conditions prevailing in local labor
markets, utility costs and other operating expenses, the managerial
ability of project managers, changes in laws and governmental
regulations, the appropriation of subsidies and social and economic
trends affecting the localities in which the projects are located. The
occupancy of housing projects may be adversely affected by high rent
levels and income limitations imposed under Federal and state programs.
Like single family mortgage revenue bonds, multi-family mortgage revenue
bonds are subject to redemption and call features, including
extraordinary mandatory redemption features, upon prepayment, sale or
non-origination of mortgage loans as well as upon the occurrence of
other events. Certain issuers of single or multi-family housing bonds
have considered various ways to redeem bonds they have issued prior to
the stated first redemption dates for such bonds. In one situation the
New York City Housing Development Corporation, in reliance on its
interpretation of certain language in the indenture under which one of
its bond issues was created, redeemed all of such issue at par in spite
of the fact that such indenture provided that the first optional
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redemption was to include a premium over par and could not occur prior
to 1992.
Water and Sewerage Revenue Bonds. Certain of the bonds may be
obligations of issuers whose revenues are derived from the sale of water
and/or sewerage services. Water and sewerage bonds are generally payable
from user fees. Problems faced by such issuers include the ability to
obtain timely and adequate rate increases, population decline resulting
in decreased user fees, the difficulty of financing large construction
programs, the limitations on operations and increased costs and delays
attributable to environmental considerations, the increasing difficulty
of obtaining or discovering new supplies of fresh water, the effect of
conservation programs and the impact of "no-growth" zoning ordinances.
All of such issuers have been experiencing certain of these problems in
varying degrees.
Electric Utility Revenue Bonds. Certain of the bonds may be obligations
of issuers whose revenues are primarily derived from the sale of
electric energy. Utilities are generally subject to extensive regulation
by state utility commissions which, among other things, establish the
rates which may be charged and the appropriate rate of return on an
approved asset base. The problems faced by such issuers include the
difficulty in obtaining approval for timely and adequate rate increases
from the governing public utility commission, the difficulty in
financing large construction programs, the limitations on operations and
increased costs and delays attributable to environmental considerations,
increased competition, recent reductions in estimates of future demand
for electricity in certain areas of the country, the difficulty of the
capital market in absorbing utility debt, the difficulty in obtaining
fuel at reasonable prices and the effect of energy conservation. All of
such issuers have been experiencing certain of these problems in varying
degrees. In addition, Federal, state and municipal governmental
authorities may from time to time review existing and impose additional
regulations governing the licensing, construction and operation of
nuclear power plants, which may adversely affect the ability of the
issuers of such bonds to make payments of principal and/or interest on
such bonds.
Lease Obligation Revenue Bonds. Certain of the bonds may be lease
obligations issued for the most part by governmental authorities that
have no taxing power or other means of directly raising revenues.
Rather, the governmental authorities are financing vehicles created
solely for the construction of buildings (schools, administrative
offices, convention centers and prisons, for example) or the purchase of
equipment (police cars and computer systems, for example) that will be
used by a state or local government (the "lessee"). Thus, these
obligations are subject to the ability and willingness of the lessee
government to meet its lease rental payments which include debt service
on the obligations. Lease obligations are subject, in almost all cases,
to the annual appropriation risk, i.e., the lessee government is not
legally obligated to budget and appropriate for the rental payments
beyond the current fiscal year. These obligations are also subject to
construction and abatement risk in many states-rental obligations cease
in the event that delays in building, damage, destruction or
condemnation of the project prevents its use by the lessee. In these
cases, insurance provisions designed to alleviate this risk become
important credit factors. In the event of default by the lessee
government, there may be significant legal and/or practical difficulties
involved in the re-letting or sale of the project. Some of these issues,
particularly those for equipment purchase, contain the so-called
"substitution safeguard," which bars the lessee government, in the event
it defaults on its rental payments, from the purchase or use of similar
equipment for a certain period of time. This safeguard is designed to
insure that the lessee government will appropriate, even though it is
not legally obligated to do so, but its legality remains untested in
most, if not all, states.
Industrial Revenue Bonds. Certain of the bonds may be industrial revenue
bonds ("IRBs"), including pollution control revenue bonds, which are tax-
exempt securities issued by states, municipalities, public authorities
or similar entities to finance the cost of acquiring, constructing or
improving various industrial projects. These projects are usually
operated by corporate entities. Issuers are obligated only to pay
amounts due on the IRBs to the extent that funds are available from the
unexpended proceeds of the IRBs or receipts or revenues of the issuer
under an arrangement between the issuer and the corporate operator of a
project. The arrangement may be in the form of a lease, installment sale
agreement, conditional sale agreement or loan agreement, but in each
case the payments to the issuer are designed to be sufficient to meet
the payments of amounts due on the IRBs. Regardless of the structure,
payment of IRBs is solely dependent upon the creditworthiness of the
corporate operator of the project or corporate guarantor. Corporate
operators or guarantors may be affected by many factors which may have
an adverse impact on the credit quality of the particular company or
industry. These include cyclicality of revenues and earnings, regulatory
and environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from a complete restructuring pursuant to a
leveraged buy-out, takeover or otherwise. Such a restructuring may
result in the operator of a project becoming highly leveraged which may
impact on such operator's creditworthiness, which in turn would have an
adverse impact on the rating and/or market value of such bonds. Further,
Page 5
the possibility of such a restructuring may have an adverse impact on
the market for and consequently the value of such bonds, even though no
actual takeover or other action is ever contemplated or affected. The
IRBs in a fund may be subject to special or extraordinary redemption
provisions which may provide for redemption at par or, with respect to
original issue discount bonds, at issue price plus the amount of
original issue discount accreted to the redemption date plus, if
applicable, a premium. The Sponsor cannot predict the causes or
likelihood of the redemption of IRBs or other bonds in the funds prior
to the stated maturity of such bonds.
Transportation Facility Revenue Bonds. Certain of the bonds may be
obligations which are payable from and secured by revenues derived from
the ownership and operation of facilities such as airports, bridges,
turnpikes, port authorities, convention centers and arenas. The major
portion of an airport's gross operating income is generally derived from
fees received from signatory airlines pursuant to use agreements which
consist of annual payments for leases, occupancy of certain terminal
space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under
the use agreements. The air transport industry is experiencing
significant variations in earnings and traffic, due to increased
competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing
severe financial difficulties. The Sponsor cannot predict what effect
these industry conditions may have on airport revenues which are
dependent for payment on the financial condition of the airlines and
their usage of the particular airport facility. Similarly, payment on
bonds related to other facilities is dependent on revenues from the
projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected
by reduction in revenues due to such factors as increased cost of
maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents.
Educational Obligation Revenue Bonds. Certain of the bonds may be
obligations of issuers which are, or which govern the operation of,
schools, colleges and universities and whose revenues are derived mainly
from ad valorem taxes, or for higher education systems, from tuition,
dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the state constitutionality
of financing public education in part from ad valorem taxes, thereby
creating a disparity in educational funds available to schools in
wealthy areas and schools in poor areas. Litigation or legislation on
this issue may affect the sources of funds available for the payment of
school bonds in the funds. General problems relating to college and
university obligations would include the prospect of a declining
percentage of the population consisting of "college" age individuals,
possible inability to raise tuitions and fees sufficiently to cover
increased operating costs, the uncertainty of continued receipt of
Federal grants and state funding and new government legislation or
regulations which may adversely affect the revenues or costs of such
issuers. All of such issuers have been experiencing certain of these
problems in varying degrees.
Resource Recovery Facility Revenue Bonds. Certain of the bonds may be
obligations which are payable from and secured by revenues derived from
the operation of resource recovery facilities. Resource recovery
facilities are designed to process solid waste, generate steam and
convert steam to electricity. Resource recovery bonds may be subject to
extraordinary optional redemption at par upon the occurrence of certain
circumstances, including but not limited to: destruction or condemnation
of a project; contracts relating to a project becoming void,
unenforceable or impossible to perform; changes in the economic
availability of raw materials, operating supplies or facilities
necessary for the operation of a project or technological or other
unavoidable changes adversely affecting the operation of a project;
administrative or judicial actions which render contracts relating to
the projects void, unenforceable or impossible to perform; or impose
unreasonable burdens or excessive liabilities. The Sponsor cannot
predict the causes or likelihood of the redemption of resource recovery
bonds in the funds prior to the stated maturity of the Bonds.
Discount Bonds. Certain of the bonds held by the Securities in the
Municipal Closed-End Portfolio Series may have been acquired at a market
discount from par value at maturity. The coupon interest rates on the
discount bonds at the time they were purchased and deposited in the
funds were lower than the current market interest rates for newly issued
bonds of comparable rating and type. If such interest rates for newly
issued comparable bonds increase, the market discount of previously
issued bonds will become greater, and if such interest rates for newly
issued comparable bonds decline, the market discount of previously
issued bonds will be reduced, other things being equal. Investors should
also note that 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. In addition, if interest rates
rise, the prepayment risk of higher yielding, premium bonds and the
prepayment benefit for lower yielding, discount bonds will be reduced. A
Page 6
discount bond held to maturity will have a larger portion of its total
return in the form of taxable income and capital gain and less in the
form of tax-exempt interest income than a comparable bond 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 bonds.
Original Issue Discount Bonds. Certain of the bonds held by the
Securities in the Municipal Closed-End Portfolio Series may be original
issue discount bonds. Under current law, the original issue discount,
which is the difference between the stated redemption price at maturity
and the issue price of the bonds, is deemed to accrue on a daily basis
and the accrued portion is treated as tax-exempt 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. The current value of an original issue discount bond
reflects the present value of its stated redemption price at maturity.
The market value tends to increase in greater increments as the bonds
approach maturity.
Zero Coupon Bonds. Certain of the original issue discount bonds may be
zero coupon bonds (including bonds known as multiplier bonds, money
multiplier bonds, capital appreciation bonds, capital accumulator bonds,
compound interest bonds and money discount maturity payment bonds). Zero
coupon bonds do not provide for the payment of any current interest and
generally provide for payment at maturity at face value unless sooner
sold or redeemed. Zero coupon bonds may be subject to more price
volatility than conventional bonds. While some types of zero coupon
bonds, such as multipliers and capital appreciation bonds, define par as
the initial offering price rather than the maturity value, they share
the basic zero coupon bond features of (1) not paying interest on a semi-
annual basis and (2) providing for the reinvestment of the bond's semi-
annual earnings at the bond's stated yield to maturity. While zero
coupon bonds are frequently marketed on the basis that their fixed rate
of return minimizes reinvestment risk, this benefit can be negated in
large part by weak call protection, i.e., a bond's provision for
redemption at only a modest premium over the accreted value of the bond.
Premium Bonds. Certain of the bonds held by the Securities in the
Municipal Closed-End Portfolio Series may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the
premium bonds at the time they were purchased by the fund were higher
than the current market interest rates for newly issued bonds of
comparable rating and type. If such interest rates for newly issued and
otherwise comparable bonds decrease, the market premium of previously
issued bonds will be increased, and if such interest rates for newly
issued comparable bonds increase, the market premium of previously
issued bonds will be reduced, other things being equal. The current
returns of bonds trading at a market premium are initially higher than
the current returns of comparable bonds of a similar type issued at
currently prevailing interest rates because premium bonds 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 bond 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 bonds have an offering side valuation which
represents a premium over par or for original issue discount bonds a
premium over the accreted value.
Portfolios
High-Yield Corporate Closed-End Portfolio Series
Alliance World Dollar Government Fund II, headquartered in New York, New
York, is a closed-end mutual fund whose primary investment objective of
high current income is pursued by investing in U.S. dollar-denominated
debt obligations issued or guaranteed by foreign governments and high-
yielding, high-risk U.S. corporate fixed-income securities. Capital
appreciation is a secondary objective of the fund.
CIM High Yield Securities, headquartered in New York, New York, is a
diversified, closed-end mutual fund whose primary objectives of high
current income and preservation of capital are pursued by investing in
fixed-income securities of domestic corporate issuers, mostly in the
lower rating categories of the established rating services or non-rated.
Cigna High Income Share, headquartered in Waltham, Massachusetts, is a
diversified, closed-end mutual fund whose primary investment objective
of high current income while preserving shareholders' capital is pursued
by investing in a professionally-managed, diversified portfolio of high-
Page 7
yield, fixed-income securities. The fund's secondary objective is
capital appreciation when consistent with its first objective.
Colonial Intermediate High Income Fund, headquartered in Boston,
Massachusetts, is a closed-end, diversified mutual fund whose primary
investment objective of high current income is pursued by investing in
high-yield fixed income securities. The fund's debt securities have a
dollar-weighted average maturity of between three and ten years, with at
least 80% of total assets invested in the lower rating categories.
Corporate High Yield Fund, headquartered in Princeton, New Jersey, is a
closed-end mutual fund whose primary investment objective is to seek as
high a level of current income as is consistent with reasonable risk as
determined by the fund's investment advisor. This objective is pursued
by investing primarily in fixed-income securities which are rated in the
lower rating categories.
Corporate High Yield Fund II, headquartered in Princeton, New Jersey, is
a closed-end mutual fund whose primary investment objective is to seek
as high a level of current income as is consistent with reasonable risk
as determined by the fund's investment advisor. This objective is
pursued by investing primarily in fixed-income securities which are
rated in the lower rating categories.
Debt Strategies Fund, headquartered in Princeton, New Jersey, is a
closed-end mutual fund whose primary investment objective to provide
current income is pursued by investing in a diversified portfolio of
U.S. companies' debt instruments, including corporate loans which are
rated in the lower rating categories or unrated debt securities of
comparable quality.
Debt Strategies Fund II, headquartered in Princeton, New Jersey, is a
closed-end mutual fund whose primary investment objective to provide
current income is pursued by investing in a diversified portfolio of
U.S. companies' debt instruments, including corporate loans which are
rated in the lower rating categories or unrated debt securities of
comparable quality.
Dreyfus High Yield Strategies Fund, headquartered in New York, New York,
is a diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing primarily in
income securities of U.S. issuers rated below investment-grade quality.
The fund's secondary objective is capital growth.
Emerging Markets Income Fund II, headquartered in New York, New York, is
a non-diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in debt
securities of government issuers located in emerging market countries
and of entities organized to restructure the outstanding debt of such
issuers. The fund's secondary objective is capital appreciation.
Franklin Universal Trust, headquartered in San Mateo, California, is a
closed-end mutual fund whose primary investment objective to provide
high current income consistent with preservation of capital is pursued
by investing primarily in utilities securities and lower-rated, higher
yielding corporate bonds. The fund's secondary objective is growth of
income.
Global Partners Income Fund, headquartered in New York, New York, is a
non-diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in a portfolio
of U.S. dollar-denominated high-yield U.S. and non-U.S. corporate debt
securities and high-yielding foreign sovereign debt securities. The
fund's secondary objective is capital appreciation.
High Income Opportunity Fund, headquartered in New York, New York, is a
non-diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in high-
yielding corporate bonds, debentures and notes. The fund may also invest
in common stock or other equity-related securities, including warrants
and rights, with capital appreciation its secondary objective.
High Yield Income Fund Inc., headquartered in Newark, New Jersey, is a
closed-end mutual fund whose primary investment objective of maximizing
current income is pursued by investing in a portfolio of non-investment-
grade bonds rated BB or below. The fund's secondary objective is capital
appreciation.
High Yield Plus Fund Inc., headquartered in Newark, New Jersey, is a
diversified, closed-end management investment company whose primary
objective of high current income is pursued by investing primarily in
publicly or privately offered high-yield debt securities rated in the
medium to lower categories. The fund's secondary objective is capital
appreciation.
Kemper High Income Trust, headquartered in Chicago, Illinois, is a
closed-end mutual fund whose primary investment objective of seeking the
highest current income obtainable consistent with reasonable risk is
pursued by investing in fixed-income securities, debt obligations of the
U.S. government and debt obligations of foreign countries. The fund's
secondary objective is capital gains.
MFS Charter Income Trust, headquartered in Boston, Massachusetts, is a
closed-end non-diversified mutual fund whose primary objective of
Page 8
maximum current income is pursued by investing equally in the three
sectors of fixed-income securities-debt securities issued by foreign
governments, securities issued by the U.S. government and high-yielding
corporate fixed-income securities.
Managed High Income Portfolio Inc., headquartered in New York, New York,
is a diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in high-
yielding corporate bonds, debentures and notes. The fund's secondary
objective is capital appreciation.
Managed High Yield Fund, headquartered in New York, New York, is a
closed-end mutual fund whose primary investment objective of high
current income is pursued by investing in a diversified portfolio of
high-yield, high-risk income securities with at least 80% of total
assets in securities rated BB, B or the equivalent.
Morgan Stanley Dean Witter High Income Advantage Trust, headquartered in
New York, New York, is a closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in a
diversified portfolio of fixed-income securities rated in the lower
rating categories. The fund's secondary objective is capital appreciation.
Morgan Stanley Dean Witter High Income Advantage Trust II, headquartered
in New York, New York, is a closed-end mutual fund whose investment
objectives of high current income and capital appreciation are pursued
by investing in lower-rated, fixed-income securities.
Morgan Stanley Dean Witter High Income Advantage Trust III,
headquartered in New York, New York, is a closed-end mutual fund whose
investment objectives of high current income and capital appreciation
are pursued by investing in lower-rated, fixed-income securities.
Morgan Stanley High Yield Fund, headquartered in New York, New York, is
a non-diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing primarily in
debt securities that are rated below investment-grade or are unrated and
considered to have a credit quality below investment-grade. The fund's
secondary objective is capital appreciation.
New America High Income Fund, headquartered in Boston, Massachusetts, is
a diversified, closed-end mutual fund whose investment objective of high
current income while seeking to preserve shareholders' capital is
pursued by investing in a portfolio of high-yield, fixed-income
securities which are principally lower or non-rated.
Pacholder Fund Inc., headquartered in Cincinnati, Ohio, is a closed-end
mutual fund whose investment objective of providing a high level of
total return through current income and capital appreciation is pursued
by investing primarily in high-yield, lower-rated fixed-income
securities of domestic companies.
Prospect Street High Income Portfolio, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective of high current income consistent with preservation of
shareholders' capital is pursued by investing in a professionally
managed portfolio of high-yield securities rated mainly in the lower
rating categories.
Putnam Managed High Yield Fund, headquartered in Boston, Massachusetts,
is a closed-end mutual fund whose primary investment objective of high
current income is pursued by investing primarily in higher risk
securities rated BB or B, or non-rated income securities of comparable
quality. The fund's secondary objective is capital growth.
Putnam Premier Income Trust, headquartered in Boston, Massachusetts, is
a non-diversified, closed-end mutual fund whose investment objective of
high current income is pursued by investing primarily in fixed income
and debt securities among three sectors-U.S. government, high yield and
international.
Salomon Brothers High Income Fund, headquartered in New York, New York,
is a closed-end mutual fund whose primary investment objective of high
current income is pursued by investing primarily in a diversified
portfolio of high-yield, U.S. corporate debt securities. The fund only
invests in U.S. dollar-denominated securities, and capital appreciation
is its secondary objective.
Salomon Brothers High Income Fund II, headquartered in New York, New
York, is a diversified, closed-end mutual fund whose primary investment
objective of maximizing current income is pursued by investing in a
portfolio of high-yield debt securities rated in the lower to medium
rating categories. The fund may also invest in unrated fixed income
securities, and capital appreciation is its secondary objective.
Senior High Income Portfolio, headquartered in Princeton, New Jersey, is
a closed-end mutual fund whose investment objective of high current
income is pursued by investing in a portfolio of senior debt
obligations, including corporate loans made by banks and other financial
institutions.
Templeton Emerging Markets Income Fund, headquartered in San Mateo,
California, is a non-diversified, closed-end mutual fund whose primary
investment objective of high current income is pursued by investing in a
Page 9
portfolio of high-yielding debt obligations of sovereign-related
entities and private sector companies in emerging market countries. The
fund's secondary objective is capital appreciation.
Van Kampen High Income Trust, headquartered in Oakbrook Terrace,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of high current income is pursued by investing in a portfolio
consisting of high-yield, fixed-income securities. The fund's
investments have a dollar-weighted average maturity of approximately ten
years and are mainly from the medium and lower ratings categories.
Van Kampen High Income Trust II, headquartered in Oakbrook Terrace,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of high current income while seeking to preserve shareholders'
capital is pursued by investing primarily in a portfolio of high income-
producing fixed-income securities.
Zenix Income Fund, headquartered in New York, New York, is a
diversified, closed-end mutual fund whose investment objective of high
current income is pursued by investing primarily in a professionally
managed portfolio of fixed-income securities rated in the lower
categories.
Municipal Closed-End Portfolio Series
ACM Municipal Securities Income Fund, headquartered in New York, New
York, is a closed-end mutual fund whose investment objective of high
current income that is exempt from federal income taxes is pursued by
investing in investment-grade municipal securities with up to 20% of
total assets invested in unrated municipal securities or equivalent
credit quality.
Apex Municipal Fund Inc., headquartered in Princeton, New Jersey, is a
closed-end mutual fund whose investment objective of high current income
that is exempt from federal income taxes is pursued by investing in a
portfolio of medium- to lower-grade or unrated municipal obligations.
Options and futures transactions may be used by the fund to hedge its
portfolio.
Colonial High Income Municipal Trust, headquartered in Boston,
Massachusetts, is a closed-end mutual fund whose investment objective of
high current income that is generally exempt from federal income taxes
is pursued by investing in medium- and lower-quality bonds and notes
issued by or on behalf of state and local governmental units whose
interest is exempt from federal income tax.
Colonial Municipal Income Trust, headquartered in Boston, Massachusetts,
is a closed-end mutual fund whose primary investment objective of high
current income that is exempt from federal income taxes is pursued by
investing in medium- and lower-quality bonds and notes issued by or on
behalf of state and local governmental units. The fund's secondary
objective is capital preservation.
Dreyfus Strategic Municipals Fund, headquartered in New York, New York,
is a closed-end mutual fund whose investment objective of maximizing
current income that is exempt from federal income tax to the extent
consistent with capital appreciation is pursued by investing in a
diversified portfolio of municipal obligations.
Dreyfus Strategic Municipal Bond Fund, headquartered in New York, New
York, is a closed-end mutual fund whose investment objective of
maximizing current income that is exempt from federal income tax to the
extent consistent with capital appreciation is pursued by investing in a
diversified portfolio of municipal obligations.
Kemper Municipal Income Trust, headquartered in Chicago, Illinois, is a
diversified, closed-end mutual fund whose investment objective of high
current income exempt from federal income tax is pursued by investing in
a portfolio of investment-grade tax-exempt municipal securities.
Kemper Strategic Municipal Income Trust, headquartered in Chicago,
Illinois, is a non-diversified, closed-end mutual fund whose investment
objective of high current income exempt from federal income tax is
pursued by investing primarily in a portfolio of tax-exempt municipal
securities and high-yield municipal securities that are below investment
grade.
MFS Municipal Income Trust, headquartered in Boston, Massachusetts, is a
non-diversified, closed-end mutual fund whose investment objective of
high current income exempt from federal income taxes is pursued by
investing primarily in medium- and lower-quality municipal bonds and
notes.
Morgan Stanley Dean Witter Insured Municipal Trust, headquartered in New
York, New York, is a closed-end mutual fund whose investment objective
of providing current income that is exempt from federal income tax is
pursued by investing primarily in insured tax-exempt municipal
obligations.
Morgan Stanley Dean Witter Municipal Income Opportunities Trust,
headquartered in New York, New York, is a closed-end fund whose
investment objective of optimum current income that is exempt from
federal income taxes is pursued by investing primarily in non-rated,
medium-quality municipal obligations such as bonds, notes and commercial
Page 10
paper.
Morgan Stanley Dean Witter Quality Municipal Income Trust, headquartered
in New York, New York, is a closed-end mutual fund whose investment
objective of current income that is exempt from federal income tax is
pursued by investing in a nationally diversified portfolio of municipal
obligations rated A or better.
Municipal High Income Fund, headquartered in New York, New York, is a
diversified, closed-end mutual fund whose investment objective of high,
tax-exempt current income is pursued by investing primarily in a variety
of obligations issued by states, territories and possessions of the
United States and by the District of Columbia.
MuniVest Fund Inc., headquartered in Princeton, New Jersey, is a non-
diversified, closed-end mutual fund whose investment objective of a high
level of current income that is exempt from federal income taxes is
pursued by investing in long-term, investment-grade municipal
obligations, the interest on which is exempt from federal income taxes.
MuniVest Fund II Inc., headquartered in Princeton, New Jersey, is a non-
diversified, closed-end mutual fund whose investment objective of a high
level of current income that is exempt from federal income taxes is
pursued by investing in long-term municipal obligations which are rated
investment-grade or are of comparable quality.
MuniYield Fund Inc., headquartered in Princeton, New Jersey, is a non-
diversified, closed-end mutual fund whose investment objective of a high
level of current income that is exempt from federal income taxes is
pursued by investing in a portfolio of longer-term municipal obligations.
MuniYield Quality Fund II, headquartered in Princeton, New Jersey, is a
non-diversified, closed-end mutual fund whose investment objective of a
high level of current income that is exempt from federal income taxes is
pursued by investing in a portfolio of long-term, high-grade municipal
obligations that are exempt from federal income taxes.
Nuveen Investment Quality Municipal Fund, Inc., headquartered in
Chicago, Illinois, is a closed-end, diversified management investment
company that invests in tax-exempt municipal obligations rated within
the four highest grades by Standard & Poor's.
Nuveen Municipal Advantage Fund, headquartered in Chicago, Illinois, is
a diversified, closed-end mutual fund whose investment objective of
current income that is exempt from regular federal income tax is pursued
by investing in tax-exempt municipal obligations within the four highest
grades. The fund's secondary objective is enhancement of portfolio value.
Nuveen Municipal Market Opportunity Fund, headquartered in Chicago,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of current income that is exempt from regular federal income
tax is pursued by investing in tax-exempt municipal obligations that are
considered underrated or undervalued. The fund's secondary objective is
enhancement of portfolio value.
Nuveen New York Performance Plus Municipal Fund, headquartered in
Chicago, Illinois, is a diversified, closed-end mutual fund whose
investment objective of current income that is exempt from federal, New
York State and New York City income taxes is pursued by investing in tax-
exempt New York municipal obligations. The fund's secondary objective is
enhancement of portfolio value.
Nuveen Performance Plus Municipal Fund, headquartered in Chicago,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of current income that is exempt from federal income tax is
pursued by investing in tax-exempt municipal obligations that are deemed
underrated or undervalued by the fund's investment advisor. The fund's
secondary objective is enhancement of portfolio value.
Nuveen Premier Municipal Income Fund, headquartered in Chicago,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of current income that is exempt from federal income tax is
pursued by investing in tax-exempt municipal obligations that are deemed
underrated or undervalued by the fund's investment advisor. The fund's
secondary objective is enhancement of portfolio value.
Putnam High Yield Municipal Trust, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective of high current income that is exempt from federal income tax
is pursued by investing primarily in high-yielding, tax-exempt municipal
securities rated Baa or lower by Moody's or BBB or lower by Standard &
Poor's.
Putnam Investment Grade Municipal Trust, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective of current income that is exempt from federal income tax is
pursued by investing primarily in investment-grade municipal securities.
Putnam Investment Grade Municipal Trust II, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective is to seek as high a level of current income that is exempt
from federal income tax as is consistent with preservation of capital.
This objective is pursued by investing in tax-exempt securities rated
Page 11
investment-grade at the time of investment, or of comparable quality.
Putnam Managed Municipal Income Trust, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective of high current income that is exempt from federal income tax
is pursued by investing primarily in a portfolio of tax-exempt municipal
securities.
Putnam Municipal Opportunities Trust, headquartered in Boston,
Massachusetts, is a non-diversified, closed-end mutual fund whose
investment objective is to seek as high a level of current income that
is exempt from federal income tax as is consistent with preservation of
capital. This objective is pursued by investing in tax-exempt securities
rated investment-grade at the time of investment.
Van Kampen Municipal Income Fund, headquartered in Oakbrook Terrace,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of high current income that is exempt from federal income taxes
and consistent with safety of principal is pursued by investing primarily
in a portfolio of investment-grade tax-exempt securities.
Van Kampen Municipal Trust, headquartered in Oakbrook Terrace, Illinois,
is a diversified, closed-end mutual fund whose investment objective of
high current income that is exempt from federal income taxes and
consistent with preservation of capital is pursued by investing in a
portfolio of investment-grade municipal securities.
Van Kampen Trust for Investment Grade Municipals, headquartered in
Oakbrook Terrace, Illinois, is a diversified, closed-end mutual fund
whose investment objective of high current income that is exempt from
federal income taxes and consistent with preservation of capital is
pursued by investing in a portfolio of investment-grade municipal
securities. The fund does not invest in unrated municipal securities.
We have obtained the foregoing descriptions from sources we deem
reliable. We have not independently verified the provided information
either in terms of accuracy or completeness.
Page 12
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being
National Union Fire Insurance Company of Pittsburgh.
B. This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 320, has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on May 25, 1999.
FT 320
By NIKE SECURITIES L.P.
Depositor
By Robert M. Porcellino
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
Robert D. Van Kampen Director of )
Nike Securities )
Corporation, the ) May 25, 1999
General Partner of )
Nike Securities L.P. )
)
)
David J. Allen Director of ) Robert M. Porcellino
Nike Securities ) Attorney-in-Fact**
Corporation, the )
General Partner of )
Nike Securities L.P.
* The title of the person named herein represents his
capacity in and relationship to Nike Securities L.P.,
Depositor.
** An executed copy of the related power of attorney
was filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of The
First Trust Combined Series 258 (File No. 33-63483) and
the same is hereby incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated May 25, 1999 in
Amendment No. 3 to the Registration Statement (Form S-6) (File
No. 333-69561) and related Prospectus of FT 320.
ERNST & YOUNG LLP
Chicago, Illinois
May 25, 1999
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement
will be filed as Exhibit 4.1 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and First Trust
Advisors L.P. as Portfolio Supervisor (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
43693] filed on behalf of The First Trust Special
Situations Trust, Series 22).
1.1.1 Form of Trust Agreement for Series 320 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank,
as Trustee, First Trust Advisors L.P., as Evaluator, and
First Trust Advisors L.P., as Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities
L.P., Depositor (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-
6 [File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42755] filed on
behalf of The First Trust Special Situations Trust,
Series 19).
2.1 Copy of Certificate of Ownership (included in Exhibit
1.1 filed herewith on page 2 and incorporated herein by
reference).
S-5
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion of counsel as to New York income tax status of
securities being registered.
3.4 Opinion of counsel as to advancement of funds by
Trustee.
4.1 Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on
page S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
63483] filed on behalf of The First Trust Combined
Series 258).
S-6
MEMORANDUM
FT 320
File No. 333-69561
The Prospectus and the Indenture filed with Amendment No. 3
of the Registration Statement on Form S-6 have been revised to
reflect information regarding the execution of the Indenture and
the deposit of Securities on May 25, 1999 and to set forth
certain statistical data based thereon. In addition, there are a
number of other changes described below.
THE PROSPECTUS
Cover Page The date of the Trusts has been added.
Page 3 The following information for the Trusts appears:
The Aggregate Value of Securities initially
deposited have been added.
The initial number of units of the Trusts
Sales charge
The Public Offering Price per Unit as of the
business day before the Initial Date of Deposit
The Mandatory Termination Date has been added.
Page 5 The Report of Independent Auditors has been
completed.
Page 6 The Statements of Net Assets have been completed.
Pages 7-8 The Schedules of Investments have been completed.
Back Cover The date of the Prospectus has been included.
THE TRUST AGREEMENT AND STANDARD TERMS AND CONDITIONS OF TRUST
The Trust Agreement has been conformed to reflect
the execution thereof.
CHAPMAN AND CUTLER
May 25, 1999
FT 320
TRUST AGREEMENT
Dated: May 25, 1999
The Trust Agreement among Nike Securities L.P., as Depositor, The
Chase Manhattan Bank, as Trustee and First Trust Advisors L.P.,
as Evaluator and Portfolio Supervisor, sets forth certain
provisions in full and incorporates other provisions by reference
to the document entitled "Standard Terms and Conditions of Trust
for The First Trust Special Situations Trust, Series 22 and
certain subsequent Series, Effective November 20, 1991" (herein
called the "Standard Terms and Conditions of Trust"), and such
provisions as are incorporated by reference constitute a single
instrument. All references herein to Articles and Sections are
to Articles and Sections of the Standard Terms and Conditions of
Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and the Portfolio Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II and Part III hereof,
all the provisions contained in the Standard Terms and Conditions
of Trust are herein incorporated by reference in their entirety
and shall be deemed to be a part of this instrument as fully and
to the same extent as though said provisions had been set forth
in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0030 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of Units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Evaluator provides services during less than the whole of
such year). Such fee may exceed the actual cost of providing
such evaluation services for the Trust, but at no time will the
total amount received for evaluation services rendered to unit
investment trusts of which Nike Securities L.P. is the sponsor in
any calendar year exceed the aggregate cost to the Evaluator of
supplying such services in such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0096 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of Units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Trustee provides services during less than the whole of such
year). However, in no event, except as may otherwise be provided
in the Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less than
$2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is May 25,
1999.
J. The minimum amount of Securities to be sold by the
Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR MUNICIPAL CLOSED-END PORTFOLIO SERIES
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and Conditions of
Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit and the initial fractional
undivided interest in and ownership of the Trust represented by
each Unit thereof are set forth in the Prospectus in the section
"Summary of Essential Information."
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant to
Section 2.03 of the Standard Terms and Conditions of Trust.
C. The Percentage Ratio on the Initial Date of Deposit is
as set forth in the Prospectus under "Schedule of Investments."
D. The Record Date shall be as set forth in the prospectus
under "Summary of Essential Information."
E. The Distribution Date shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
as set forth in the Prospectus under "Summary of Essential
Information."
G. The Evaluator's compensation as referred to in
Section 4.03 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0030 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of Units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Evaluator provides services during less than the whole of
such year). Such fee may exceed the actual cost of providing
such evaluation services for the Trust, but at no time will the
total amount received for evaluation services rendered to unit
investment trusts of which Nike Securities L.P. is the sponsor in
any calendar year exceed the aggregate cost to the Evaluator of
supplying such services in such year.
H. The Trustee's Compensation Rate pursuant to
Section 6.04 of the Standard Terms and Conditions of Trust shall
be an annual fee in the amount of $.0096 per Unit, calculated
based on the largest number of Units outstanding during the
calendar year except during the initial offering period as
determined in Section 4.01 of this Indenture, in which case the
fee is calculated based on the largest number of Units
outstanding during the period for which the compensation is paid
(such annual fee to be pro rated for any calendar year in which
the Trustee provides services during less than the whole of such
year). However, in no event, except as may otherwise be provided
in the Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less than
$2,000 for such annual compensation.
I. The Initial Date of Deposit for the Trust is May 25,
1999.
J. The minimum amount of Securities to be sold by the
Trustee pursuant to Section 5.02 of the Indenture for the
redemption of Units shall be 100 shares.
PART III
A. Notwithstanding anything to the contrary in the
Standard Terms and Conditions of Trust, references to subsequent
Series established after the date of effectiveness of the First
Trust Special Situations Trust, Series 22 shall include FT 320.
B. The term "Principal Account" as set forth in the
Standard Terms and Conditions of Trust shall be replaced with the
term "Capital Account."
C. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean First Trust Advisors L.P.
and its successors in interest, or any successor evaluator
appointed as hereinafter provided."
D. Section 1.01(4) shall be amended to read as follows:
"(4) "Portfolio Supervisor" shall mean First Trust
Advisors L.P. and its successors in interest, or any
successor portfolio supervisor appointed as hereinafter
provided."
E. Paragraph (b) of Section 2.01 shall be restated in its
entirety as follows:
"(b)(1)From time to time following the Initial Date of
Deposit, the Depositor is hereby authorized, in its
discretion, to assign, convey to and deposit with the
Trustee (i) additional Securities, duly endorsed in blank or
accompanied by all necessary instruments of assignment and
transfer in proper form, (ii) Contract Obligations relating
to such additional Securities, accompanied by cash and/or
Letter(s) of Credit as specified in paragraph (c) of this
Section 2.01, and/or (iii) cash (or a Letter of Credit in
lieu of cash) with instructions to purchase additional
Securities, in an amount equal to the portion of the Unit
Value of the Units created by such deposit attributable to
the Securities to be purchased pursuant to such
instructions. Except as provided in the following
subparagraphs (2), (3) and (4) the Depositor, in each case,
shall ensure that each deposit of additional Securities
pursuant to this Section shall maintain, as nearly as
practicable, the Percentage Ratio. Each such deposit of
additional Securities shall be made pursuant to a Notice of
Deposit of Additional Securities delivered by the Depositor
to the Trustee. Instructions to purchase additional
Securities shall be in writing, and shall specify the name
of the Security, CUSIP number, if any, aggregate amount,
price or price range and date to be purchased. When
requested by the Trustee, the Depositor shall act as broker
to execute purchases in accordance with such instructions;
the Depositor shall be entitled to compensation therefor in
accordance with applicable law and regulations. The Trustee
shall have no liability for any loss or depreciation
resulting from any purchase made pursuant to the Depositor's
instructions or made by the Depositor as broker.
(2) Additional Securities (or Contract Obligations
therefor) may, at the Depositor's discretion, be deposited
or purchased in round lots. If the amount of the deposit is
insufficient to acquire round lots of each Security to be
acquired, the additional Securities shall be deposited or
purchased in the order of the Security in the Trust most
under-represented immediately before the deposit with
respect to the Percentage Ratio.
(3) If at the time of a deposit of additional
Securities, Securities of an issue deposited on the Initial
Date of Deposit (or of an issue of Replacement Securities
acquired to replace an issue deposited on the Initial Date
of Deposit) are unavailable, cannot be purchased at
reasonable prices or their purchase is prohibited or
restricted by applicable law, regulation or policies, the
Depositor may (i) deposit, or instruct the Trustee to
purchase, in lieu thereof, another issue of Securities or
Replacement Securities or (ii) deposit cash or a letter of
credit in an amount equal to the valuation of the issue of
Securities whose acquisition is not feasible with
instructions to acquire such Securities of such issue when
they become available.
(4) Any contrary authorization in the preceding
subparagraphs (1) through (3) notwithstanding, deposits of
additional Securities made after the 90-day period
immediately following the Initial Date of Deposit (except
for deposits made to replace Failed Contract Obligations if
such deposits occur within 20 days from the date of a
failure occurring within such initial 90-day period) shall
maintain exactly the Percentage Ratio existing immediately
prior to such deposit.
(5) In connection with and at the time of any deposit
of additional Securities pursuant to this Section 2.01(b),
the Depositor shall exactly replicate Cash (as defined
below) received or receivable by the Trust as of the date of
such deposit. For purposes of this paragraph, "Cash" means,
as to the Capital Account, cash or other property (other
than Securities) on hand in the Capital Account or
receivable and to be credited to the Capital Account as of
the date of the deposit (other than amounts to be
distributed solely to persons other than holders of Units
created by the deposit) and, as to the Income Account, cash
or other property (other than Securities) received by the
Trust as of the date of the deposit or receivable by the
Trust in respect of a record date for a payment on a
Security which has occurred or will occur before the Trust
will be the holder of record of a Security, reduced by the
amount of any cash or other property received or receivable
on any Security allocable (in accordance with the Trustee's
calculations of distributions from the Income Account
pursuant to Section 3.05) to a distribution made or to be
made in respect of a Record Date occurring prior to the
deposit. Such replication will be made on the basis of a
fraction, the numerator of which is the number of Units
created by the deposit and the denominator of which is the
number of Units which are outstanding immediately prior to
the deposit."
F. The following shall be added immediately following the
first sentence of paragraph (c) of Section 2.01:
"The Trustee may allow the Depositor to substitute for any
Letter(s) of Credit deposited with the Trustee in connection with
the deposits described in Section 2.01(a) and (b) cash in an
amount sufficient to satisfy the obligations to which the
Letter(s) of Credit relates. Any substituted Letter(s) of Credit
shall be released by the Trustee."
G. Section 2.03(a) of the Standard Terms and Conditions of
Trust shall be amended by adding the following sentence after the
first sentence of such section:
"The number of Units may be increased through a split
of the Units or decreased through a reverse split thereof,
as directed in writing by the Depositor, at any time when
the Depositor is the only beneficial holder of Units, which
revised number of Units shall be recorded by the Trustee on
its books. The Trustee shall be entitled to rely on the
Depositor's direction as certification that no person other
than the Depositor has a beneficial interest in the Units
and the Trustee shall have no liability to any person for
action taken pursuant to such direction."
H. Section 3.01 of the Standard Terms and Conditions of
Trust shall be replaced in its entirety with the following:
"Section 3.01. Initial Cost. Subject to reimbursement
as hereinafter provided, the cost of organizing the Trust
and the sale of the Trust Units shall be borne by the
Depositor, provided, however, that the liability on the part
of the Depositor under this section shall not include any
fees or other expenses incurred in connection with the
administration of the Trust subsequent to the deposit
referred to in Section 2.01. At the earlier of six months
after the Initial Date of Deposit or the conclusion of the
primary offering period (as certified by the Depositor to
the Trustee), the Trustee shall withdraw from the Account or
Accounts specified in the Prospectus or, if no Account is
therein specified, from the Capital Account, and pay to the
Depositor the Depositor's reimbursable expenses of
organizing the Trust in an amount certified to the Trustee
by the Depositor. In no event shall the amount paid by the
Trustee to the Depositor for the Depositors reimbursable
expenses of organizing the Trust exceed the estimated per
Unit amount of organization costs set forth in the
prospectus for the Trust multiplied by the number of Units
of the Trust outstanding at the earlier of six months after
the Initial Date of Deposit or the conclusion of the primary
offering period; nor shall the Depositor be entitled to or
request reimbursement for expenses of organizing the Trust
incurred after the earlier of six months after the Initial
Date of Deposit or the conclusion of the primary offering
period. If the cash balance of the Capital Account is
insufficient to make such withdrawal, the Trustee shall, as
directed by the Depositor, sell Securities identified by the
Depositor, or distribute to the Depositor Securities having
a value, as determined under Section 4.01 as of the date of
distribution, sufficient for such reimbursement. Securities
sold or distributed to the Depositor to reimburse the
Depositor pursuant to this Section shall be sold or
distributed by the Trustee, to the extent practicable, in
the percentage ratio then existing. The reimbursement
provided for in this section shall be for the account of the
Unit holders of record at the earlier of six months after
the Initial Date of Deposit or the conclusion of the primary
offering period. Any assets deposited with the Trustee in
respect of the expenses reimbursable under this Section 3.01
shall be held and administered as assets of the Trust for
all purposes hereunder. The Depositor shall deliver to the
Trustee any cash identified in the Statement of Net Assets
of the Trust included in the Prospectus not later than the
expiration of the Delivery Period and the Depositors
obligation to make such delivery shall be secured by the
letter of credit deposited pursuant to Section 2.01. Any
cash which the Depositor has identified as to be used for
reimbursement of expenses pursuant to this Section 3.01
shall be held by the Trustee, without interest, and reserved
for such purpose and, accordingly, prior to the earlier of
six months after the Initial Date of Deposit or the
conclusion of the primary offering period, shall not be
subject to distribution or, unless the Depositor otherwise
directs, used for payment of redemptions in excess of the
per Unit amount payable pursuant to the next sentence. If a
Unit holder redeems Units prior to the earlier of six months
after the Initial Date of Deposit or the conclusion of the
primary offering period, the Trustee shall pay to the Unit
holder, in addition to the Redemption Value of the tendered
Units, unless otherwise directed by the Depositor, an amount
equal to the estimated per Unit cost of organizing the Trust
set forth in the Prospectus, or such lower revision thereof
most recently communicated to the Trustee by the Depositor
pursuant to Section 5.01, multiplied by the number of Units
tendered for redemption; to the extent the cash on hand in
the Trust is insufficient for such payment, the Trustee
shall have the power to sell Securities in accordance with
Section 5.02. As used herein, the Depositor's reimbursable
expenses of organizing the Trust shall include the cost of
the initial preparation and typesetting of the registration
statement, prospectuses (including preliminary
prospectuses), the indenture, and other documents relating
to the Trust, SEC and state blue sky registration fees, the
cost of the initial valuation of the portfolio and audit of
the Trust, the initial fees and expenses of the Trustee, and
legal and other out-of-pocket expenses related thereto, but
not including the expenses incurred in the printing of
preliminary prospectuses and prospectuses, expenses incurred
in the preparation and printing of brochures and other
advertising materials and any other selling expenses.
I. The second paragraph of Section 3.02 of the Standard
Terms and Conditions is hereby deleted and replaced with the
following sentence:
"Any non-cash distributions (other than a non-taxable
distribution of the shares of the distributing corporation
which shall be retained by a Trust) received by a Trust
shall be dealt with in the manner described at Section 3.11,
herein, and shall be retained or disposed of by such Trust
according to those provisions. The proceeds of any
disposition shall be credited to the Income Account of a
Trust. Neither the Trustee nor the Depositor shall be
liable or responsible in any way for depreciation or loss
incurred by reason of any such sale."
J. Section 3.05.II(a) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as follows:
"II. (a) On each Distribution Date, the Trustee shall
distribute to each Unit holder of record at the close of
business on the Record Date immediately preceding such
Distribution Date an amount per Unit equal to such Unit
holder's Income Distribution (as defined below), plus such
Unit holder's pro rata share of the balance of the Capital
Account (except for monies on deposit therein required to
purchase Contract Obligations) computed as of the close of
business on such Record Date after deduction of any amounts
provided in Subsection I, provided, however, that the
Trustee shall not be required to make a distribution from
the Capital Account unless the amount available for
distribution shall equal $1.00 per 100 Units.
Each Trust shall provide the following distribution
elections: (1) distributions to be made by check mailed to
the post office address of the Unit holder as it appears on
the registration books of the Trustee, or (2) if provided
for in the Prospectus, the following reinvestment option:
The Trustee will, for any Unit holder who provides
the Trustee written instruction, properly executed and
in form satisfactory to the Trustee, received by the
Trustee no later than its close of business 10 business
days prior to a Record Date (the "Reinvestment Notice
Date"), reinvest such Unit holder's distribution from
the Income and Capital Accounts in Units of the Trust,
purchased from the Depositor, to the extent the
Depositor shall make Units available for such purchase,
at the Depositor's offering price as of the third
business day prior to the following Distribution Date,
and at such reduced sales charge as may be described in
the prospectus for the Trusts. If, for any reason, the
Depositor does not have Units of the Trust available
for purchase, the Trustee shall distribute such Unit
holder's distribution from the Income and Capital
Accounts in the manner provided in clause (1) of the
preceding paragraph. The Trustee shall be entitled to
rely on a written instruction received as of the
Reinvestment Notice Date and shall not be affected by
any subsequent notice to the contrary. The Trustee
shall have no responsibility for any loss or
depreciation resulting from any reinvestment made in
accordance with this paragraph, or for any failure to
make such reinvestment in the event the Depositor does
not make Units available for purchase.
Any Unit holder who does not effectively elect
reinvestment in Units of their respective Trust pursuant to
the preceding paragraph shall receive a cash distribution in
the manner provided in clause (1) of the second preceding
paragraph."
K. Section 3.05.II(b) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as follows:
"II. (b) For purposes of this Section 3.05, the Unit
holder's Income Distribution shall be equal to such Unit
holder's pro rata share of the cash balance in the Income
Account computed as of the close of business on the Record
Date immediately preceding such Income Distribution after
deduction of (i) the fees and expenses then deductible
pursuant to Section 3.05.I. and (ii) the Trustee's estimate
of other expenses properly chargeable to the Income Account
pursuant to the Indenture which have accrued, as of such
Record Date, or are otherwise properly attributable to the
period to which such Income Distribution relates."
L. Paragraph (c) of Subsection II of Section 3.05 of the
Standard Terms and Conditions of Trust is hereby amended to read
as follows:
"On each Distribution Date the Trustee shall distribute
to each Unit holder of record at the close of business on
the Record Date immediately preceding such Distribution Date
an amount per Unit equal to such Unit holder's pro rata
share of the balance of the Capital Account (except for
monies on deposit therein required to purchase Contract
Obligations) computed as of the close of business on such
Record Date after deduction of any amounts provided in
Subsection I."
M. Section 3.05 of Article III of the Standard Terms and
Conditions of Trust is hereby amended to include the following
subsection:
"Section 3.05.I(e) deduct from the Interest Account
or, to the extent funds are not available in such Account,
from the Capital Account and pay to the Depositor the amount
that it is entitled to receive pursuant to Section 3.14.
N. Section 3.11 of the Standard Terms and Conditions of
Trust is hereby deleted in its entirety and replaced with the
following language:
"Section 3.11. Notice to Depositor.
In the event that the Trustee shall have been notified
at any time of any action to be taken or proposed to be
taken by at least a legally required number of holders of
any Securities deposited in a Trust, the Trustee shall take
such action or omit from taking any action, as appropriate,
so as to insure that the Securities are voted as closely as
possible in the same manner and the same general proportion
as are the Securities held by owners other than such Trust.
In the event that an offer by the issuer of any of the
Securities or any other party shall be made to issue new
securities, or to exchange securities, for Trust Securities,
the Trustee shall reject such offer. However, should any
issuance, exchange or substitution be effected
notwithstanding such rejection or without an initial offer,
any securities, cash and/or property received shall be
deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee pursuant to the
Depositor's direction, unless the Depositor advises the
Trustee to keep such securities or property. The Depositor
may rely on the Portfolio Supervisor in so advising the
Trustee. The cash received in such exchange and cash
proceeds of any such sales shall be distributed to Unit
holders on the next distribution date in the manner set
forth in Section 3.05 regarding distributions from the
Capital Account. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by
reason of any such sale.
Neither the Depositor nor the Trustee shall be liable
to any person for any action or failure to take action
pursuant to the terms of this Section 3.11.
Whenever new securities or property is received and
retained by a Trust pursuant to this Section 3.11, the
Trustee shall provide to all Unit holders of such Trust
notices of such acquisition in the Trustee's annual report
unless prior notice is directed by the Depositor."
O. The first sentence of Section 3.13. shall be amended to
read as follows:
"As compensation for providing supervisory portfolio
services under this Indenture, the Portfolio Supervisor
shall receive, in arrears, against a statement or statements
therefor submitted to the Trustee monthly or annually an
aggregate annual fee in the amount of $.0035 per Unit,
calculated based on the largest number of Units outstanding
during the calendar year except during the initial offering
period as determined in Section 4.01 of this Indenture, in
which case the fee is calculated based on the largest number
of Units outstanding during the period for which the
compensation is paid (such annual fee to be pro rated for
any calendar year in which the Portfolio Supervisor provides
services during less than the whole of such year). Such fee
may exceed the actual cost of providing such portfolio
supervision services for the Trust, but at no time will the
total amount received for portfolio supervision services
rendered to unit investment trusts of which Nike Securities
L.P. is the sponsor in any calendar year exceed the
aggregate cost to the Portfolio Supervisor of supplying such
services in such year."
P. Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraphs
which shall be entitled Section 3.14:
"Section 3.14. Bookkeeping and Administrative Expenses.
As compensation for providing bookkeeping and other
administrative services of a character described in Section
26(a)(2)(C) of the Investment Company Act of 1940 to the
extent such services are in addition to, and do not
duplicate, the services to be provided hereunder by the
Trustee or the Portfolio Supervisor, the Depositor shall
receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee
in the amount of $.0033 per Unit, calculated based on the
largest number of Units outstanding during the calendar year
except during the initial offering period as determined in
Section 4.01 of this Indenture, in which case the fee is
calculated based on the largest number of Units outstanding
during the period for which the compensation is paid (such
annual fee to be pro rated for any calendar year in which
the Depositor provides services during less than the whole
of such year). Such fee may exceed the actual cost of
providing such bookkeeping and administrative services for
the Trust, but at no time will the total amount received for
bookkeeping and administrative services rendered to unit
investment trusts of which Nike Securities L.P. is the
sponsor in any calendar year exceed the aggregate cost to
the Depositor of supplying such services in such year. Such
compensation may, from time to time, be adjusted provided
that the total adjustment upward does not, at the time of
such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for
services as measured by the United States Department of
Labor Consumer Price Index entitled "All Services Less Rent
of Shelter" or similar index, if such index should no longer
be published. The consent or concurrence of any Unit holder
hereunder shall not be required for any such adjustment or
increase. Such compensation shall be paid by the Trustee,
upon receipt of an invoice therefor from the Depositor, upon
which, as to the cost incurred by the Depositor of providing
services hereunder the Trustee may rely, and shall be
charged against the Income and Capital Accounts on or before
the Distribution Date following the Monthly Record Date on
which such period terminates. The Trustee shall have no
liability to any Certificateholder or other person for any
payment made in good faith pursuant to this Section.
If the cash balance in the Income and Capital Accounts
shall be insufficient to provide for amounts payable
pursuant to this Section 3.14, the Trustee shall have the
power to sell (i) Securities from the current list of
Securities designated to be sold pursuant to Section 5.02
hereof, or (ii) if no such Securities have been so
designated, such Securities as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds of any
such sale in payment of the amounts payable pursuant to this
Section 3.14.
Any moneys payable to the Depositor pursuant to this
Section 3.14 shall be secured by a prior lien on the Trust
Fund except that no such lien shall be prior to any lien in
favor of the Trustee under the provisions of Section 6.04
herein.
Q. Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraph
which shall be entitled Section 3.15:
"Section 3.15. Deferred Sales Charge. If the
prospectus related to the Trust specifies a deferred sales
charge, the Trustee shall, on the dates specified in and as
permitted by such Prospectus (the "Deferred Sales Charge
Payment Dates"), withdraw from the Capital Account, an
amount per Unit specified in such Prospectus and credit such
amount to a special non-Trust account designated by the
Depositor out of which the deferred sales charge will be
distributed to or on the order of the Depositor on such
Deferred Sales Charge Payment Dates (the "Deferred Sales
Charge Account"). If the balance in the Capital Account is
insufficient to make such withdrawal, the Trustee shall, as
directed by the Depositor, advance funds in an amount
required to fund the proposed withdrawal and be entitled to
reimbursement of such advance upon the deposit of additional
monies in the Capital Account, and/or sell Securities and
credit the proceeds thereof to the Deferred Sales Charge
Account, provided, however, that the aggregate amount
advanced by the Trustee at any time for payment of the
deferred sales charge shall not exceed $15,000. Such
direction shall, if the Trustee is directed to sell a
Security, identify the Security to be sold and include
instructions as to the execution of such sale. In the
absence of such direction by the Depositor, the Trustee
shall sell Securities sufficient to pay the deferred sales
charge (and any unreimbursed advance then outstanding) in
full, and shall select Securities to be sold in such manner
as will maintain (to the extent practicable) the relative
proportion of number of shares of each Security then held.
The proceeds of such sales, less any amounts paid to the
Trustee in reimbursement of its advances, shall be credited
to the Deferred Sales Charge Account. If a Unit holder
redeems Units prior to full payment of the deferred sales
charge, the Trustee shall, if so provided in the related
Prospectus, on the Redemption Date, withhold from the
Redemption Price payable to such Unit holder an amount equal
to the unpaid portion of the deferred sales charge and
distribute such amount to the Deferred Sales Charge Account.
If the Trust is terminated for reasons other than that set
forth in Section 6.01(g), the Trustee shall, if so provided
in the related Prospectus, on the termination of the Trust,
withhold from the proceeds payable to Unit holders an amount
equal to the unpaid portion of the deferred sales charge and
distribute such amount to the Deferred Sales Charge Account.
If the Trust is terminated pursuant to Section 6.01(g), the
Trustee shall not withhold from the proceeds payable to Unit
holders any amounts of unpaid deferred sales charges. If
pursuant to Section 5.02 hereof, the Depositor shall
purchase a Unit tendered for redemption prior to the payment
in full of the deferred sales charge due on the tendered
Unit, the Depositor shall pay to the Unit holder the amount
specified under Section 5.02 less the unpaid portion of the
deferred sales charge. All advances made by the Trustee
pursuant to this Section shall be secured by a lien on the
Trust prior to the interest of the Unit holders. If the
related Prospectus provides that the deferred sales charge
shall accrue on a daily basis, the "unpaid portion of the
deferred sales charge" as used in this paragraph shall mean
the accrued and unpaid deferred sales charge as of the date
of redemption or termination, as appropriate."
R. Notwithstanding anything to the contrary in Sections
3.15 and 4.05 of the Standard Terms and Conditions of Trust, so
long as Nike Securities L.P. is acting as Depositor, the Trustee
shall have no power to remove the Portfolio Supervisor.
S. The first sentence of Section 4.03 shall be amended to
read as follows:
"As compensation for providing evaluation services under
this Indenture, the Evaluator shall receive, in arrears, against
a statement or statements therefor submitted to the Trustee
monthly or annually an aggregate annual fee equal to the amount
specified as compensation for the Evaluator in the Trust
Agreement, calculated based on the largest number of Units
outstanding during the calendar year except during the initial
offering period as determined in Section 4.01 of this Indenture,
in which case the fee is calculated based on the largest number
of Units outstanding during the period for which the compensation
is paid (such annual fee to be pro rated for any calendar year in
which the Evaluator provides services during less than the whole
of such year). Such compensation may, from time to time, be
adjusted provided that the total adjustment upward does not, at
the time of such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for services
as measured by the United States Department of Labor Consumer
Price Index entitled "All Services Less Rent of Shelter" or
similar index, if such index should no longer be published. The
consent or concurrence of any Unit holder hereunder shall not be
required for any such adjustment or increase. Such compensation
shall be paid by the Trustee, upon receipt of invoice therefor
from the Evaluator, upon which, as to the cost incurred by the
Evaluator of providing services hereunder the Trustee may rely,
and shall be charged against the Income and/or Capital Accounts,
in accordance with Section 3.05."
T. Section 5.01 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The second sentence of the first paragraph of Section
5.01 shall be amended by deleting the phrase "and (iii)" and
adding the following "(iii) amounts representing unpaid accrued
organization costs, (iv) if the Prospectus for the Trust provides
that the deferred sales charge shall accrue on a daily basis,
amounts representing unpaid accrued deferred sales charge, and
(v)"; and
(ii) The following text shall immediately precede the last
sentence of the first paragraph of Section 5.01:
"Prior to the payment to the Depositor of its
reimbursable organization costs to be made at the
earlier of six months after the Initial Date of Deposit
or the conclusion of the primary offering period in
accordance with Section 3.01, for purposes of
determining the Trust Fund Evaluation under this
Section 5.01, the Trustee shall rely upon the amounts
representing unpaid accrued organization costs in the
estimated amount per Unit set forth in the Prospectus
until such time as the Depositor notifies the Trustee
in writing of a revised estimated amount per Unit
representing unpaid accrued organization costs. Upon
receipt of such notice, the Trustee shall use this
revised estimated amount per Unit representing unpaid
accrued organization costs in determining the Trust
Fund Evaluation but such revision of the estimated
expenses shall not effect calculations made prior
thereto and no adjustment shall be made in respect
thereof. "
U. Section 5.02 of the Standard Terms and Conditions of
Trust is amended by adding the following after the second
paragraph of such section:
"Notwithstanding anything herein to the contrary, in
the event that any tender of Units pursuant to this Section
5.02 would result in the disposition by the Trustee of less
than a whole Security, the Trustee shall distribute cash in
lieu thereof and sell such Securities as directed by the
Sponsors as required to make such cash available.
Subject to the restrictions set forth in the
Prospectus, Unit holders may redeem 1,000 Units or more of a
Trust and request a distribution in kind of (i) such Unit
holder's pro rata portion of each of the Securities in such
Trust, in whole shares, and (ii) cash equal to such Unit
holder's pro rata portion of the Income and Capital Accounts
as follows: (x) a pro rata portion of the net proceeds of
sale of the Securities representing any fractional shares
included in such Unit holder's pro rata share of the
Securities and (y) such other cash as may properly be
included in such Unit holder's pro rata share of the sum of
the cash balances of the Income and Capital Accounts in an
amount equal to the Unit Value determined on the basis of a
Trust Fund Evaluation made in accordance with Section 5.01
determined by the Trustee on the date of tender less amounts
determined in clauses (i) and (ii)(x) of this Section.
Subject to Section 5.05 with respect to Rollover Unit
holders, if applicable, to the extent possible,
distributions of Securities pursuant to an in kind
redemption of Units shall be made by the Trustee through the
distribution of each of the Securities in book-entry form to
the account of the Unit holder's bank or broker-dealer at
the Depository Trust Company. Any distribution in kind will
be reduced by customary transfer and registration charges."
V. Paragraph (g) of Section 6.01 of the Standard Terms and
Conditions of Trust is hereby amended by inserting the following
after the first word thereof:
"(i) the value of any Trust as shown by an evaluation
by the Trustee pursuant to Section 5.01 hereof shall be less
than the lower of $2,000,000 or 20% of the total value of
Securities deposited in such Trust during the initial
offering period, or (ii)"
W. The third sentence of paragraph (a) of Section 6.05 of
the Standard Terms and Conditions of Trust shall be replaced in
its entirety by the following:
"In case at any time the Trustee shall become incapable
of acting, or if a court having jurisdiction in the premises
shall enter a decree or order for relief in respect of the
Trustee in an involuntary case, or the Trustee shall commence a
voluntary case, under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or any receiver,
liquidator, assignee, custodian, trustee, sequestrator (or
similar official) for the Trustee or for any substantial part of
its property shall be appointed, or the Trustee shall make any
general assignment for the benefit of creditors, or shall
generally fail to pay its debts as they become due, or if the
Sponsor shall determine in good faith that there has occurred
either (1) a material deterioration in the creditworthiness of
the Trustee or (2) one or more negligent acts on the part of the
Trustee having a materially adverse effect, either singly or in
the aggregate, on the Trust or on one or more Trusts of one or
more Funds, such that the replacement of the Trustee is in the
best interests of the Unit holders, the Sponsor may remove the
Trustee and appoint a successor trustee by written instrument, in
duplicate, one copy of which shall be delivered to the Trustee so
removed and one copy to the successor trustee."
X. Section 8.02 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The fourth sentence of the second paragraph shall
be deleted and replaced with the following:
"The Trustee will honor duly executed requests for in-
kind distributions received (accompanied by the electing
Unit holder's Certificate, if issued) by the close of
business ten business days prior to the Mandatory
Termination Date."
(ii) The first sentence of the fourth paragraph shall
be deleted and replaced with the following:
"Commencing no earlier than the business day following
that date on which Unit holders must submit to the Trustee
notice of their request to receive an in-kind distribution
of Securities at termination, the Trustee will liquidate the
Securities not segregated for in-kind distributions during
such period and in such daily amounts as the Depositor shall
direct."
IN WITNESS WHEREOF, Nike Securities L.P., The Chase
Manhattan Bank and First Trust Advisors L.P. have each caused
this Trust Agreement to be executed and the respective corporate
seal to be hereto affixed and attested (if applicable) by
authorized officers; all as of the day, month and year first
above written.
NIKE SECURITIES L.P.,
Depositor
By Robert M. Porcellino
Senior Vice President
THE CHASE MANHATTAN BANK,
Trustee
By Rosalia A. Raviele
Vice President
[SEAL]
ATTEST:
Joan Currie
Assistant Treasurer
FIRST TRUST ADVISORS L.P.,
Evaluator
By Robert M. Porcellino
Senior Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Robert M. Porcellino
Senior Vice President
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
FT 320
(Note: Incorporated herein and made a part hereof for the
Trusts are the "Schedules of Investments" for the Trusts as set forth
in the Prospectus.)
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
May 25, 1999
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: FT 320
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of FT 320 in connection with the
preparation, execution and delivery of a Trust Agreement dated
May 25, 1999 among Nike Securities L.P., as Depositor, The Chase
Manhattan Bank, as Trustee and First Trust Advisors L.P. as
Evaluator and Portfolio Supervisor, pursuant to which the
Depositor has delivered to and deposited the Securities listed in
Schedule A to the Trust Agreement with the Trustee and pursuant
to which the Trustee has issued to or on the order of the
Depositor a certificate or certificates representing units of
fractional undivided interest in and ownership of the Fund
created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. the certificates evidencing the Units in the Fund when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-69561)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF:erg
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
May 25, 1999
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Re: FT 320
Gentlemen:
We have acted as counsel for Nike Securities L.P., Depositor
of FT 320 (the "Fund"), in connection with the issuance of units
of fractional undivided interest in the Trusts of said Fund (the
"Trusts"), under a Trust Agreement, dated May 25, 1999 (the
"Indenture") between Nike Securities L.P., as Depositor, The
Chase Manhattan Bank, as Trustee, and First Trust Advisors L.P.,
as Evaluator and Portfolio Supervisor.
In this connection, we have examined the Registration
Statement, the form of Prospectus proposed to be filed with the
Securities and Exchange Commission, the Indenture and such other
instruments and documents as we have deemed pertinent. The
opinions expressed herein assume that the Trusts will be
administered, and investments by the Trusts from proceeds of
subsequent deposits, if any, will be made in accordance with the
terms of the Indenture. The Trusts hold interests in qualified
regulated investment companies ("RICs") under the Code (the
"Securities"). It is assumed that the Securities constitute
shares in funds qualifying as regulated investment companies for
federal income tax purposes.
Neither the Sponsor nor its counsel has independently
examined the assets to be deposited in and held by the Trusts.
Based upon the foregoing and upon an investigation of such
matters of law as we consider to be applicable, we are of the
opinion that, under existing United States Federal income tax
law:
(i) Each Trust is not an association taxable as a
corporation for Federal income tax purposes, but will be governed
by the provisions of subchapter J (relating to trusts) of chapter
1, of the Code.
(ii) Each Unit holder will be considered the owner of a pro
rata share of each Security of a Trust in the proportion that the
number of Units held by a Unit holder bears to the total number
of Units outstanding. Under subpart E, subchapter J of Chapter 1
of the Code, income of the Trusts will be treated as income of
each Unit holder in the proportion described above; and an item
of Trust income will have the same character in the hands of a
Unit holder as it would have in the hands of the Trustee. Each
Unit holder will be considered to have received his or her pro
rata share of income derived from each Trust asset when such
income is considered to be received by a Trust.
(iii) The price a Unit holder pays for his or her Units,
generally including sales charges, is allocated among his or her
pro rata portion of each Security held by a Trust (in proportion
to the fair market values thereof on the valuation date closest
to the date the Unit holder purchases his or her Units) in order
to determine his or her tax basis for his or her pro rata portion
of each Security held by a Trust. For Federal income tax
purposes, a Unit holder's pro rata portion of distributions
received by the Trusts from the Securities, other than
distributions which are designated as capital gains dividends or
exempt-interest dividends, are taxable as ordinary income to the
extent of the RIC's current and accumulated "earnings and
profits." A Unit holder's pro rata portion of such dividends
which exceeds such current and accumulated earnings and profits
will first reduce a Unit holder's tax basis in such Security, and
to the extent that such dividends exceed a Unit holder's tax
basis in such Security, shall be treated as gain from the sale or
exchange of property. Certain distributions on the Securities
may qualify as "capital gain dividends," taxable to shareholders
(and, accordingly, to the Unit holders as owners of a pro rata
portion of the Securities) as long-term capital gain, regardless
of how long a shareholder has owned such shares. Certain
distributions on the Securities may qualify as "exempt interest
dividends," which generally are excluded from a Unitholder's
gross income for federal income tax purposes. Some or all of the
exempt interest dividends, however, may be taken into account in
determining a Unit holder's alternative minimum tax, and may have
other tax consequences (e.g., they may affect the amount of your
social security benefits that are taxed.) In addition,
distributions of income and capital gains declared on Securities
in October, November, or December will be deemed to have been
paid to the shareholders (and, accordingly, to the Unit holders
as owners of a pro rata portion of the Securities) on December 31
of the year they are declared, even when paid by the RIC during
the following January and received by shareholders or Unit
holders in such following year.
(iv) Gain or loss will be recognized to a Unit holder
(subject to various nonrecognition provisions under the Code)
upon redemption or sale of his or her Units, except to the extent
an in kind distribution of Securities is received by such Unit
holder from a Trust as discussed below. Such gain or loss is
measured by comparing the proceeds of such redemption or sale
with the adjusted basis of his or her Units. Before adjustment,
such basis would normally be cost if the Unit holder had acquired
his or her Units by purchase. Such basis will be reduced, but
not below zero, by the Unit holder's pro rata portion of
dividends except for designated capital gain dividends and exempt
interest dividends paid by the RIC with respect to each Security
which is not taxable as ordinary income. However, any loss
realized by a Unit holder with respect to the disposition of his
or her pro rata portion of Securities, to the extent such Unit
holder has owned his or her Units for less than six months or a
Trust has held the Securities for less than six months, will be
disallowed to the extent of the exempt interest dividends the
Unit holder received. If such loss is not entirely disallowed,
it will be treated as long-term capital loss to the extent of the
Unit holder's pro rata portion of any capital gain dividends
received (or deemed to have been received) with respect to each
Security.
(v) Each Unit holder will have a taxable event when a
Security is disposed of (whether by sale, exchange, liquidation,
redemption, payment on maturity or otherwise), or when a Unit
holder redeems or sells his Units. A Unit holder's tax basis in
his Units will equal his tax basis in his pro rata portion of all
the assets of a Trust. Such basis is ascertained by apportioning
the tax basis for his or her Units (as of the date on which the
Units were acquired) ratably, according to their values as of the
valuation date nearest the date on which he or she purchased such
Units. A Unit holder's basis in his Units and of his fractional
interest in each Trust asset must be reduced, but not below zero,
by the Unit holder's pro rata portion of dividends, except for
designated capital gains and exempt interest dividends paid by a
RIC, with respect to each Security which is not taxable as
ordinary income.
If more than 50% of the value of the total assets of the RIC
consist of stock or securities in foreign corporations, the RIC
may elect to pass through to its shareholders the foreign income
and similar taxes paid by the RIC in order to enable its share
holders to take a credit (or deduction) for foreign income taxes
paid by the RIC. If this election is made, Unit holders of a
Trust, because they are deemed to own a pro rata portion of the
Securities held by such Trust, as described above, must include
in their gross income, for federal income tax purposes, both
their portion of dividends received by such Trust from the RIC
and also their portion of the amount which the RIC deems to be
their portion of foreign income taxes paid with respect to, or
withheld from, dividends, interest, or other income of the RIC
from its foreign investments. Unit holders may then subtract
from their federal income tax the amount of such taxes withheld,
or else treat such foreign taxes as deductions from gross income;
however, as in the case of investors receiving income directly
from foreign sources, the above described tax credit or deduction
is subject to certain limitations.
(vi) Under the Indenture, under certain circumstances, a
Unit holder tendering Units for redemption may request an in kind
distribution of Securities upon the redemption of Units or upon
the termination of a Trust. As previously discussed, prior to
the redemption of Units or the termination of a Trust, a Unit
holder is considered as owning a pro rata portion of each of a
Trust's assets. The receipt of an in kind distribution will
result in a Unit holder receiving an undivided interest in whole
Securities and possibly cash. The potential Federal income tax
consequences which may occur under an in kind distribution will
depend upon whether or not a Unit holder receives cash in
addition to Securities. A Unit holder will not recognize gain or
loss if a Unit holder only receives Securities in exchange for
his or her pro rata portion in the Securities held by a Trust.
However, if a Unit holder also receives cash in exchange for a
fractional share of a Security held by a Trust, such Unit holder
will generally recognize gain or loss based upon the difference
between the amount of cash received by the Unit holder and his or
her tax basis in such fractional share of a Security held by a
Trust. The total amount of taxable gains (or losses) recognized
upon such redemption will generally equal the sum of the gain (or
loss) recognized under the rules described above by the redeeming
Unit holder with respect to each Security owned by a Trust.
Distributions from a Trust attributable to dividends
received by a Trust from the Securities will not be eligible for
the dividends received deduction for corporations.
Section 67 of the Code provides that certain miscellaneous
itemized deductions, such as investment expenses, tax return
preparation fees and employee business expenses will be
deductible by an individual only to the extent they exceed 2% of
such individual's adjusted gross income. Unit holders may be
required to treat some or all of the expenses of a Trust as
miscellaneous itemized deductions subject to this limitation.
However, because some of the Securities pay exempt interest
dividends, which are treated as tax-exempt interest for federal
income tax purposes, Unit holders will not be able to deduct some
of their share of Trust expenses. In addition, Unit holders will
not be able to deduct some of their interest expense for debt
they incurred or continued to purchase or carry Trust Units.
A Unit holder will recognize taxable gain (or loss) when all
or part of his or her pro rata interest in a Trust asset is
disposed of for an amount greater (or less) than his or her tax
basis therefor in a taxable transaction, subject to various non
recognition provisions of the Code.
If a Unit holder disposes of a Unit, he or she is deemed
thereby to have disposed of his or her entire pro rata interest
in all Trust assets including his or her pro rata portion of all
of a Trust's assets represented by the Unit.
In addition it should be noted that capital gains can be
recharacterized as ordinary income in the case of certain
financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993.
It should be noted that payments to a Trust of dividends on
Securities that are attributable to foreign corporations may be
subject to foreign withholding taxes and Unit holders should
consult their tax advisers regarding the potential tax
consequences relating to the payment of any such withholding
taxes by a Trust. Any dividends withheld as a result thereof
will nevertheless be treated as income to the Unit holders.
Because under the grantor trust rules, an investor is deemed to
have paid directly his share of foreign taxes that have been paid
or accrued, if any, an investor may be entitled to a foreign tax
credit or deduction for United States tax purposes with respect
to such taxes. A required holding period is imposed for such
credits.
A Unit holder who is a foreign investor (i.e., an investor
other than a United States citizen or resident or United States
corporation, partnership, estate or trust) may be subject to
United States Federal income taxes, including withholding taxes
on distributions from the Trust relating to such investor's share
of dividend income paid on Securities. A Unit holder who is a
foreign investor will not be subject to United States Federal
income taxes, including withholding taxes on any gain from the
sale or other disposition of, his or her pro rata interest in any
Security held by a Trust or the sale of his or her Units provided
that all of the following conditions are met:
(i) the gain is not effectively connected with the
conduct by the foreign investor of a trade or business
within the United States;
(ii) the foreign investor (if an individual) is not
present in the United States for 183 days or more during his
or her taxable year; and
(iii) the foreign investor provides all certification
which may be required of his status.
The scope of this opinion is expressly limited to the
matters set forth herein, and, except as expressly set forth
above, we express no opinion with respect to any other taxes,
including state or local taxes or collateral tax consequences
with respect to the purchase, ownership and disposition of Units.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-69561)
relating to the Units referred to above and to the use of our
name and to the reference to our firm in said Registration
Statement and in the related Prospectus.
Very truly yours,
CHAPMAN AND CUTLER
EFF/erg
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
May 25, 1999
The Chase Manhattan Bank, as Trustee of
FT 320
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Attention: Mr. Thomas Porrazzo
Vice President
Re: FT 320
Dear Sirs:
We are acting as special counsel with respect to New York
tax matters for the unit investment trust or trusts contained in
FT 320 (each, a "Trust"), which will be established under certain
Standard Terms and Conditions of Trust dated November 20, 1991,
and a related Trust Agreement dated as of today (collectively,
the "Indenture") among Nike Securities L.P., as Depositor (the
"Depositor"), First Trust Advisors L.P., as Evaluator, First
Trust Advisors L.P., as Portfolio Supervisor, and The Chase
Manhattan Bank, as Trustee (the "Trustee"). Pursuant to the
terms of the Indenture, units of fractional undivided interest in
the Trust (the "Units") will be issued in the aggregate number
set forth in the Indenture.
We have examined and are familiar with originals or
certified copies, or copies otherwise identified to our
satisfaction, of such documents as we have deemed necessary or
appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each dated today
and addressed to the Trustee, of Chapman and Cutler, counsel for
the Depositor, with respect to the matters of law set forth
therein.
Based upon the foregoing, we are of the opinion that the
Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the
New York State franchise tax or the New York City general
corporation tax.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 333-69561) filed with the
Securities and Exchange Commission with respect to the
registration of the sale of the Units and to the reference to our
name under the caption "Other Information - Legal Opinions" in
such Registration Statement and the preliminary prospectus
included therein.
Very truly yours,
CARTER, LEDYARD & MILBURN
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
May 25, 1999
The Chase Manhattan Bank, as Trustee of
FT 320
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Attention: Mr. Thomas Porrazzo
Vice President
Re: FT 320
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank
("Chase") in connection with the execution and delivery of a
Trust Agreement ("the Trust Agreement") dated today's date (which
Trust Agreement incorporates by reference certain Standard Terms
and Conditions of Trust dated November 20, 1991, and the same are
collectively referred to herein as the "Indenture") among Nike
Securities L.P., as Depositor (the "Depositor"), First Trust
Advisors L.P., as Evaluator, First Trust Advisors L.P., as
Portfolio Supervisor, and Chase, as Trustee (the "Trustee"),
establishing the unit investment trust or trusts included in FT
320 (each, a "Trust"), and the confirmation by Chase, as Trustee
under the Indenture, that it has registered on the registration
books of the Trust the ownership by the Depositor of a number of
units constituting the entire interest in the Trust (such
aggregate units being herein called "Units"), each of which
represents an undivided interest in the respective Trust which
consists of common stocks of closed-end funds (including,
confirmations of contracts for the purchase of certain stocks not
delivered and cash, cash equivalents or an irrevocable letter of
credit or a combination thereof, in the amount required for such
purchase upon the receipt of such stocks), such stocks being
defined in the Indenture as Securities and referenced in the
Schedule to the Indenture.
We have examined the Indenture, a specimen of the
certificates to be issued hereunder (the "Certificates"), the
Closing Memorandum dated todays date, and such other documents
as we have deemed necessary in order to render this opinion.
Based on the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing corporation
having the powers of a Trust Company under the laws of the State
of New York.
2. The Trust Agreement has been duly executed and
delivered by Chase and, assuming due execution and delivery by
the other parties thereto, constitutes the valid and legally
binding obligation of Chase.
3. The Certificates are in proper form for execution and
delivery by Chase, as Trustee.
4. Chase, as Trustee, has registered on the registration
books of the Trust the ownership of the Units by the Depositor.
Upon receipt of confirmation of the effectiveness of the
registration statement for the sale of the Units filed with the
Securities and Exchange Commission under the Securities Act of
1933, the Trustee may deliver Certificates for such Units, in
such names and denominations as the Depositor may request, to or
upon the order of the Depositor as provided in the Closing
Memorandum.
In rendering the foregoing opinion, we have not considered,
among other things, whether the Securities have been duly
authorized and delivered.
Very truly yours,
CARTER, LEDYARD & MILBURN
First Trust Advisors L.P.
1001 Warrenville Road
Lisle, Illinois 60532
May 25, 1999
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: FT 320
Gentlemen:
We have examined the Registration Statement File No.
333-69561 for the above captioned fund. We hereby consent to the
use in the Registration Statement of the references to First
Trust Advisors L.P. as evaluator.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
First Trust Advisors L.P.
Robert M. Porcellino
Senior Vice President
