File No. 333-69561
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
MUNICIPAL CLOSED-END PORTFOLIO SERIES
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : August 31, 2000
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
<PAGE>
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
5,805,489 UNITS
PROSPECTUS
Part One
Dated August 29, 2000
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two and Part Three.
The Trust
The High-Yield Corporate Closed-End Portfolio Series (the "Trust") is a unit
investment trust consisting of a portfolio containing common stocks issued by
closed-end investment companies whose portfolios are concentrated in high-
yield corporate bonds. At July 17, 2000, each Unit represented a 1/5,805,489
undivided interest in the principal and net income of the Trust (see "The
Trust" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by us, Nike Securities L.P., the Sponsor of the
Trust in the secondary market or from the Trustee after having been tendered
for redemption. The profit or loss resulting from the sale of Units will
accrue to us. No proceeds from the sale of Units will be received by the
Trust.
Public Offering Price
The Public Offering Price per Unit is equal to the aggregate value of the
Securities in the Portfolio of the Trust, plus or minus cash, if any, in the
Income and Capital Accounts of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.0% of the Public Offering Price (4.167%
of the net amount invested) excluding income and principal cash. At July 17,
2000, the Public Offering Price per Unit was $8.447 (see "Public Offering" in
Part Two). The minimum purchase is $1,000 ($500 for Individual Retirement
Accounts or other retirement plans).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 17, 2000
Sponsor: Nike Securities L.P.
Evaluator: First Trust Advisors L.P.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Number of Units 5,805,489
Fractional Undivided Interest in the Trust per Unit 1/5,805,489
Public Offering Price:
Aggregate Value of Securities in the Portfolio $46,728,990
Aggregate Value of Securities per Unit $8.049
Income and Principal cash in the Portfolio $365,747
Income and Principal cash per Unit $.063
Sales Charge 4.167% (4.0% of Public Offering Price,
excluding income and principal cash) $.335
Public Offering Price per Unit $8.447
Redemption Price and our Repurchase Price per
Unit ($.335 less than the Public Offering Price
per Unit) $8.112
</TABLE>
Date Trust Established May 25, 1999
Mandatory Termination Date May 28, 2004
Evaluator's Annual Fee: $.0030 per Unit outstanding. Evaluations for
purposes of sale, purchase or redemption of Units are made as of the close of
trading (4:00 p.m. Eastern time) on the New York Stock Exchange on each day on
which it is open.
Supervisory fee payable to Maximum of $.0035 per
an affiliate of ours Unit outstanding annually
Bookkeeping and administrative expenses Maximum of $.0015 per
payable to us Unit outstanding annually
Trustee's Annual Fee: $.0096 per Unit outstanding.
Capital Distribution Record Date and Distribution Date: 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 $.01 per Unit. Notwithstanding,
distributions of funds in the Capital Account, if any, will be made in
December of each year.
Income Distribution Record Date: Fifteenth day of each month.
Income Distribution Date: The last day of each month.
A Unit holder who owns at least 1,000 Units may request an "In-Kind
Distribution" upon redemption or upon termination of the Trust. See "Rights
of Unit Holders - How are Income and Capital Distributed?" in Part Two.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of FT 320,
High-Yield Corporate Closed-End Portfolio Series
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of FT 320, High-Yield Corporate Closed-End Portfolio
Series at April 30, 2000, and the related statements of operations and changes
in net assets for the period from the Initial Date of Deposit, May 25, 1999,
to April 30, 2000. These financial statements are the responsibility of the
Trust's Sponsor. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
April 30, 2000, by correspondence with the Trustee. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsor, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FT 320, High-Yield Corporate
Closed-End Portfolio Series at April 30, 2000, and the results of its
operations and changes in its net assets for the period from the Initial Date
of Deposit, May 25, 1999, to April 30, 2000, in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 2000
<PAGE>
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Securities, at market value (cost, $52,945,209)
(Note 1) $44,385,282
Cash 1,086,833
Dividends receivable 73,630
Receivable from investment transactions 602,399
___________
46,148,144
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Accrued liabilities 11,533
Unit redemptions payable 610,232
Income distributions payable 615,269
___________
1,237,034
___________
Net assets, applicable to 5,953,105 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $52,945,209
Net unrealized depreciation (Note 2) (8,559,927)
Distributable funds 2,814,427
Less deferred sales charge paid (Note 3) (2,231,479)
Less organization and offering costs
(Note 1) (57,120)
___________
$44,911,110
===========
Net asset value per unit $7.544
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
PORTFOLIO - See notes to financial statements.
April 30, 2000
<TABLE>
<CAPTION>
Number of Market
shares Name of Issuer of Equity Securities value
<C> <S> <C>
441,099 Alliance World Dollar Government Fund II $3,859,616
21,770 CIM High Yield Securities 111,571
189,718 Cigna High Income Share 1,019,734
91,647 Colonial Intermediate High Income Fund 475,465
113,685 Corporate High Yield Fund 1,051,586
37,263 Corporate High Yield Fund II 319,083
197,943 Debt Strategies Fund 1,187,658
455,091 Debt Strategies Fund II 3,157,421
340,485 Dreyfus High Yield Strategies Fund 2,936,683
138,564 Emerging Markets Income Fund II 1,446,331
87,604 Franklin Universal Trust 618,747
61,833 Global Partners Income Fund 626,059
344,061 High Income Opportunity Fund 2,967,526
20,644 High Yield Income Fund Inc. 104,521
141,763 High Yield Plus Fund Inc. 850,578
156,274 Kemper High Income Trust 1,240,503
239,994 MFS Charter Income Trust 1,995,070
209,920 Managed High Income Portfolio Inc. 1,705,600
26,953 Managed High Yield Fund 252,684
143,056 Morgan Stanley Dean Witter High Income
Advantage Trust 500,696
193,846 Morgan Stanley Dean Witter High Income
Advantage Trust II 726,923
54,964 Morgan Stanley Dean Witter High Income
Advantage Trust III 230,189
44,106 Morgan Stanley High Yield Fund 496,192
299,459 New America High Income Fund 879,811
68,524 Pacholder Fund Inc. 805,157
315,607 Prospect Street High Income Portfolio 2,071,329
26,549 Putnam Managed High Yield Fund 263,844
536,607 Putnam Premier Income Trust 3,186,372
13,931 Salomon Brothers High Income Fund 173,523
349,139 Salomon Brothers High Income Fund II 4,102,383
235,302 Senior High Income Portfolio 1,485,462
298,069 Templeton Emerging Markets Income Fund 2,775,917
52,331 Van Kampen High Income Trust 251,869
30,849 Van Kampen High Income Trust II 194,750
69,873 Zenix Income Fund 314,429
___________
Total investments $44,385,282
===========
</TABLE>
<PAGE>
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
STATEMENT OF OPERATIONS
Period from the Initial Date of Deposit,
May 25, 1999, to April 30, 2000
<TABLE>
<S> <C>
Dividends $5,433,100
Expenses:
Trustee's fees and related expenses (49,532)
Evaluator's fees (11,410)
Supervisory fees (17,623)
Administrative fees (6,016)
___________
Total expenses (84,581)
___________
Investment income - net 5,348,519
Net gain (loss) on investments:
Net realized gain (loss) (1,266,401)
Change in net unrealized appreciation
or depreciation (8,559,927)
___________
(9,826,328)
___________
Net increase (decrease) in net assets
resulting from operations $(4,477,809)
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
STATEMENT OF CHANGES IN NET ASSETS
Period from the Initial Date of Deposit,
May 25, 1999, to April 30, 2000
<TABLE>
<S> <C>
Net increase (decrease) in net assets resulting
from operations:
Investment income - net $5,348,519
Net realized gain (loss) on investments (1,266,401)
Change in net unrealized appreciation
or depreciation on investments (8,559,927)
___________
(4,477,809)
Units issued (6,465,571 units, net of deferred
sales charges of $2,226,203 and net of
organization and offering costs of $56,834) 58,103,363
Unit redemptions (527,541 units) (4,053,533)
Distributions to unit holders:
Investment income - net (4,804,593)
Principal from investment transactions -
___________
(4,804,593)
___________
Total increase (decrease) in net assets 44,767,428
Net assets:
At the beginning of the period
(representing 15,075 units outstanding) 143,682
___________
At the end of the period (including
distributable funds applicable to Trust
units of $2,814,427 at April 30, 2000) $44,911,110
===========
Trust units outstanding at the end of
the period 5,953,105
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
The equity securities are stated at the closing sale prices of listed equity
securities and the bid prices of over-the-counter traded equity securities as
reported by First Trust Advisors L.P. (the Evaluator), an affiliate of ours
(Nike Securities L.P., the Sponsor of the Trust).
Dividend income -
Dividends on each equity security are recognized on such equity security's ex-
dividend date.
Security cost -
Cost of the equity securities is based on the market value of such securities
on the dates the securities were deposited in the Trust. The cost of
securities sold is determined using the average cost method. Sales of
securities are recorded on the trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
The Trust pays a fee for Trustee services to The Chase Manhattan Bank, which
is based on $.0096 per annum per unit outstanding based on the largest
aggregate number of units outstanding during the year. In addition, the
Evaluator will receive an annual fee based on $.0030 per unit outstanding.
The Trust also pays recurring financial reporting costs, an annual supervisory
fee payable to an affiliate of ours and an annual administrative fee payable
to us.
Organization and offering costs -
A portion of the Public Offering Price paid by unit holders consisted of
Equity Securities in an amount sufficient to pay for all or a portion of the
costs incurred in establishing the Trust, including costs of preparing the
registration statement, the Trust indenture and other closing documents,
registering units with the Securities and Exchange Commission and states, the
initial audit of the Trust's portfolio, legal fees and the initial fees and
expenses of the Trustee. Such costs, totaling $57,120 were paid at the end of
the Trust's initial offering period.
<PAGE>
2. Unrealized appreciation and depreciation
An analysis of net unrealized depreciation at April 30, 2000 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(8,559,927)
Unrealized appreciation -
___________
$(8,559,927)
===========
</TABLE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
underlying value of the equity securities on the date of an investor's
purchase, plus a deferred sales charge of $.350 per unit which was paid to us
over a five-month period ending on April 20, 2000, plus an initial sales
charge equal to the difference between the deferred sales charge and the total
sales charge of 4.50% of the public offering price which is equivalent to
approximately 4.545% of the net amount invested, exclusive of the deferred
sales charge.
Distributions to unit holders -
Income distributions to unit holders are made on the last day of each month to
unit holders of record on the fifteenth day of each month. Capital
distributions to unit holders, if any, are made on the last day of each month
to unit holders of record on the fifteenth day of such month if the amount
available for distribution equals at least $.01 per unit. Notwithstanding,
capital distributions, if any, will be made in December of each year.
<PAGE>
Selected data per unit of the Trust
outstanding throughout the period -
<TABLE>
<CAPTION>
Period from
the Initial
Date of
Deposit,
May 25,
1999, to
April 30,
2000
<S> <C>
Dividend income $1.063
Expenses (.017)
______
Investment income - net 1.046
Distributions to unit holders:
Investment income - net (.876)
Principal from investment transactions -
Net gain (loss) on investments (2.157)
______
Total increase (decrease) in net assets (1.987)
Net assets:
Beginning of the period 9.531
______
End of the period $7.544
======
</TABLE>
Dividend income, Expenses and Investment income - net per unit have been
calculated based on the weighted-average number of units outstanding during
the period (5,111,140 units). Distributions to unit holders of Investment
income - net per unit reflects the Trust's actual distributions during the
period. The Net gain (loss) on investments per unit includes the effects of
changes arising from issuance of 6,465,571 additional units during the period
at net asset values which differed from the net asset value per unit of the
original 15,075 units ($9.531 per unit) on May 25, 1999.
<PAGE>
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
PART ONE
Must be Accompanied by Part Two and Part Three
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
<PAGE>
FT 320
MUNICIPAL CLOSED-END PORTFOLIO SERIES
4,820,773 UNITS
PROSPECTUS
Part One
Dated August 29, 2000
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two and Part Three.
The Trust
The Municipal Closed-End Portfolio Series (the "Trust") is a unit investment
trust consisting of a portfolio containing common stocks issued by closed-end
investment companies whose portfolios are concentrated in tax-exempt municipal
bonds. At July 17, 2000, each Unit represented a 1/4,820,773 undivided
interest in the principal and net income of the Trust (see "The Trust" in Part
Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by us, Nike Securities L.P., the Sponsor of the
Trust in the secondary market or from the Trustee after having been tendered
for redemption. The profit or loss resulting from the sale of Units will
accrue to us. No proceeds from the sale of Units will be received by the
Trust.
Public Offering Price
The Public Offering Price per Unit is equal to the aggregate value of the
Securities in the Portfolio of the Trust, plus or minus cash, if any, in the
Income and Capital Accounts of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.0% of the Public Offering Price (4.167%
of the net amount invested) excluding income and principal cash. At July 17,
2000, the Public Offering Price per Unit was $8.309 (see "Public Offering" in
Part Two). The minimum purchase is $1,000 ($500 for Individual Retirement
Accounts or other retirement plans).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
FT 320
MUNICIPAL CLOSED-END PORTFOLIO SERIES
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 17, 2000
Sponsor: Nike Securities L.P.
Evaluator: First Trust Advisors L.P.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Number of Units 4,820,773
Fractional Undivided Interest in the Trust per Unit 1/4,820,773
Public Offering Price:
Aggregate Value of Securities in the Portfolio $38,297,130
Aggregate Value of Securities per Unit $7.944
Income and Principal cash in the Portfolio $164,115
Income and Principal cash per Unit $.034
Sales Charge 4.167% (4.0% of Public Offering Price,
excluding income and principal cash) $.331
Public Offering Price per Unit $8.309
Redemption Price and our Repurchase Price per
Unit ($.331 less than the Public Offering Price
per Unit) $7.978
</TABLE>
Date Trust Established May 25, 1999
Mandatory Termination Date May 28, 2004
Evaluator's Annual Fee: $.0030 per Unit outstanding. Evaluations for
purposes of sale, purchase or redemption of Units are made as of the close of
trading (4:00 p.m. Eastern time) on the New York Stock Exchange on each day on
which it is open.
Supervisory fee payable to Maximum of $.0035 per
an affiliate of ours Unit outstanding annually
Bookkeeping and administrative expenses Maximum of $.0015 per
payable to us Unit outstanding annually
Trustee's Annual Fee: $.0096 per Unit outstanding.
Capital Distribution Record Date and Distribution Date: 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 $.01 per Unit. Notwithstanding,
distributions of funds in the Capital Account, if any, will be made in
December of each year.
Income Distribution Record Date: Fifteenth day of each month.
Income Distribution Date: The last day of each month.
A Unit holder who owns at least 1,000 Units may request an "In-Kind
Distribution" upon redemption or upon termination of the Trust. See "Rights
of Unit Holders - How are Income and Capital Distributed?" in Part Two.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of FT 320,
Municipal Closed-End Portfolio Series
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of FT 320, Municipal Closed-End Portfolio Series at
April 30, 2000, and the related statements of operations and changes in net
assets for the period from the Initial Date of Deposit, May 25, 1999, to April
30, 2000. These financial statements are the responsibility of the Trust's
Sponsor. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
April 30, 2000, by correspondence with the Trustee. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsor, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FT 320, Municipal Closed-End
Portfolio Series at April 30, 2000, and the results of its operations and
changes in its net assets for the period from the Initial Date of Deposit, May
25, 1999, to April 30, 2000, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
August 11, 2000
<PAGE>
FT 320
MUNICIPAL CLOSED-END PORTFOLIO SERIES
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Securities, at market value (cost, $41,442,563)
(Note 1) $38,070,522
Dividends receivable 107,919
Cash 477,975
___________
38,656,416
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Accrued liabilities 9,151
Income distributions payable 239,263
__________
248,414
__________
Net assets, applicable to 4,938,908 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $41,442,563
Net unrealized depreciation (Note 2) (3,372,041)
Distributable funds 2,076,930
Less deferred sales charge paid (Note 3) (1,710,093)
Less organization and offering costs
(Note 1) (29,357)
___________
$38,408,002
===========
Net asset value per unit $7.777
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 320
MUNICIPAL CLOSED-END PORTFOLIO SERIES
PORTFOLIO - See notes to financial statements.
April 30, 2000
<TABLE>
<CAPTION>
Number of Market
shares Name of Issuer of Equity Securities value
<C> <S> <C>
30,588 ACM Municipal Securities Income Fund $338,395
85,818 Apex Municipal Fund Inc. 740,180
129,730 Colonial High Income Municipal Trust 810,813
110,717 Colonial Municipal Income Trust 602,079
321,413 Dreyfus Strategic Municipals Fund 2,591,553
315,250 Dreyfus Strategic Municipal Bond Fund 2,443,187
217,351 Kemper Municipal Income Trust 2,309,354
26,895 Kemper Strategic Municipal Income Trust 263,921
152,399 MFS Municipal Income Trust 1,057,344
58,881 Morgan Stanley Dean Witter Insured
Municipal Trust 802,254
82,671 Morgan Stanley Dean Witter Municipal
Income Opportunities Trust 666,576
99,415 Morgan Stanley Dean Witter Quality
Municipal Income Trust 1,348,366
75,868 Municipal High Income Fund 583,273
195,225 Muni Vest Fund Inc. 1,488,591
65,158 Muni Vest Fund II Inc. 720,843
100,688 Muni Yield Fund Inc. 1,195,670
72,569 Muni Yield Quality Fund II 798,259
132,257 Nuveen Investment Quality Municipal
Fund, Inc. 1,645,013
133,638 Nuveen Municipal Advantage Fund 1,637,066
183,847 Nuveen Municipal Market Opportunity Fund 2,286,689
43,563 Nuveen New York Performance Plus Municipal
Fund 577,210
282,088 Nuveen Performance Plus Municipal Fund 3,332,306
63,068 Nuveen Premier Municipal Income Fund 855,390
72,252 Putnam High Yield Municipal Trust 532,858
104,146 Putnam Investment Grade Municipal Trust 1,243,295
45,343 Putnam Investment Grade Municipal Trust II 478,958
258,206 Putnam Managed Municipal Income Trust 2,452,957
50,032 Putnam Municipal Opportunities Trust 581,622
97,637 Van Kampen Municipal Income Fund 805,505
17,924 Van Kampen Municipal Trust 1,403,012
111,018 Van Kampen Trust for Investment Grade
Municipals 1,477,983
___________
Total investments $38,070,522
===========
</TABLE>
<PAGE>
FT 320
MUNICIPAL CLOSED-END PORTFOLIO SERIES
STATEMENT OF OPERATIONS
Period from the Initial Date of Deposit,
May 25, 1999, to April 30, 2000
<TABLE>
<S> <C>
Dividends $2,037,284
Expenses:
Trustee's fees and related expenses (38,026)
Evaluator's fees (7,333)
Supervisory fees (11,425)
Administrative fees (3,844)
___________
Total expenses (60,628)
___________
Investment income - net 1,976,656
Net gain (loss) on investments:
Net realized gain (loss) (347,013)
Change in net unrealized appreciation
or depreciation (3,372,041)
___________
(3,719,054)
___________
Net increase (decrease) in net assets
resulting from operations $(1,742,398)
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 320
MUNICIPAL CLOSED-END PORTFOLIO SERIES
STATEMENT OF CHANGES IN NET ASSETS
Period from the Initial Date of Deposit,
May 25, 1999, to April 30, 2000
<TABLE>
<S> <C>
Net increase (decrease) in net assets resulting
from operations:
Investment income - net $1,976,656
Net realized gain (loss) on investments (347,013)
Change in net unrealized appreciation
or depreciation on investments (3,372,041)
___________
(1,742,398)
Units issued (5,081,855 units, net of deferred
sales charges of $1,704,839 and net of organization
and offering costs of $29,072) 42,910,383
Unit redemptions (157,957 units) (1,222,757)
Distributions to unit holders:
Investment income - net (1,680,289)
Principal from investment transactions -
___________
(1,680,289)
___________
Total increase (decrease) in net assets 38,264,939
Net assets:
At the beginning of the period
(representing 15,010 units outstanding) 143,063
___________
At the end of the period (including
distributable funds applicable to Trust
units of $2,076,930 at April 30, 2000) $38,408,002
===========
Trust units outstanding at the end of
the period 4,938,908
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FT 320
MUNICIPAL CLOSED-END PORTFOLIO SERIES
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
The equity securities are stated at the closing sale prices of listed equity
securities and the bid prices of over-the-counter traded equity securities as
reported by First Trust Advisors L.P. (the Evaluator), an affiliate of ours
(Nike Securities L.P., the Sponsor of the Trust).
Dividend income -
Dividends on each equity security are recognized on such equity security's ex-
dividend date.
Security cost -
Cost of the equity securities is based on the market value of such securities
on the dates the securities were deposited in the Trust. The cost of
securities sold is determined using the average cost method. Sales of
securities are recorded on the trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
The Trust pays a fee for Trustee services to The Chase Manhattan Bank, which
is based on $.0096 per annum per unit outstanding based on the largest
aggregate number of units outstanding during the year. In addition, the
Evaluator will receive an annual fee based on $.0030 per unit outstanding.
The Trust also pays recurring financial reporting costs, an annual supervisory
fee payable to an affiliate of ours and an annual administrative fee payable
to us.
Organization and offering costs -
A portion of the Public Offering Price paid by unit holders consisted of
Equity Securities in an amount sufficient to pay for all or a portion of the
costs incurred in establishing the Trust, including costs of preparing the
registration statement, the Trust indenture and other closing documents,
registering units with the Securities and Exchange Commission and states, the
initial audit of the Trust's portfolio, legal fees and the initial fees and
expenses of the Trustee. Such costs, totaling $29,357 were paid at the end of
the Trust's initial offering period.
<PAGE>
2. Unrealized appreciation and depreciation
An analysis of net unrealized depreciation at April 30, 2000 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(3,372,041)
Unrealized appreciation -
___________
$(3,372,041)
===========
</TABLE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
underlying value of the equity securities on the date of an investor's
purchase, plus a deferred sales charge of $.350 per unit which will be paid to
us over a five-month period ending on April 30, 2000, plus an initial sales
charge equal to the difference between the deferred sales charge and the total
sales charge of 4.50% of the public offering price which is equivalent to
approximately 4.545% of the net amount invested, exclusive of the deferred
sales charge.
Distributions to unit holders -
Income distributions to unit holders are made on the last day of each month to
unit holders of record on the fifteenth day of each month. Capital
distributions to unit holders, if any, are made on the last day of each month
to unit holders of record on the fifteenth day of such month if the amount
available for distribution equals at least $.01 per unit. Notwithstanding,
capital distributions, if any, will be made in December of each year.
<PAGE>
Selected data per unit of the Trust
outstanding throughout the period -
<TABLE>
<CAPTION>
Period from
the Initial
Date of
Deposit,
May 25,
1999, to
April 30,
2000
<S> <C>
Dividend income $.623
Expenses (.019)
______
Investment income - net .604
Distributions to unit holders:
Investment income - net (.473)
Principal from investment transactions -
Net gain (loss) on investments (1.885)
______
Total increase (decrease) in net assets (1.754)
Net assets:
Beginning of the period 9.531
______
End of the period $7.777
======
</TABLE>
Dividend income, Expenses and Investment income - net per unit have been
calculated based on the weighted-average number of units outstanding during
the period (3,270,550 units). Distributions to unit holders of Investment
income - net per unit reflects the Trust's actual distributions during the
period. The Net gain (loss) on investments per unit includes the effects of
changes arising from issuance of 5,081,855 additional units during the period
at net asset values which differed from the net asset value per unit of the
original 15,010 units ($9.531 per unit) on May 25, 1999.
<PAGE>
FT 320
MUNICIPAL CLOSED-END PORTFOLIO SERIES
PART ONE
Must be Accompanied by Part Two and Part Three
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
THE FIRST TRUST SPECIAL SITUATIONS TRUST
FT SERIES
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated May 31, 2000 AND PART THREE
The FT Series (formerly known as The First Trust Special Situations
Trust) is a unit investment trust. The FT Series has many separate
series. The Part One which accompanies this Part Two describes one such
series of the FT Series. Each series of the FT Series consists of one or
more portfolios ("Trust(s)") which invest in one or more of the
following: common stock ("Equity Securities"), preferred stock
("Preferred Stocks"), trust preferred securities ("Trust Preferred
Securities"), real estate investment trusts ("REITs") and/or closed-end
funds ("Closed-End Funds"). See Part One and Part Three for a more
complete description of the portfolio for each Trust.
All Parts of the Prospectus Should be Retained for Future Reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First Trust (registered trademark)
1-800-621-9533
Page 1
Table of Contents
The FT Series 3
Risk Factors 3
Public Offering 4
Distribution of Units 5
The Sponsor's Profits 6
The Secondary Market 6
How We Purchase Units 6
Expenses and Charges 6
Tax Status 7
Retirement Plans 9
Rights of Unit Holders 9
Income and Capital Distributions 10
Redeeming Your Units 11
Removing Securities from a Trust 12
Amending or Terminating the Indenture 13
Information on the Sponsor, Trustee and Evaluator 13
Other Information 14
Page 2
The FT Series
The FT Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created hundreds of
similar yet separate series of a unit investment trust which we have
named the FT Series or its predecessor, The First Trust Special
Situations Trust. See Part One for a description of the series and
Trusts for which this Part Two Prospectus relates.
Each Trust was created under the laws of the State of New York by a
Trust Agreement (the "Indenture") dated the Initial Date of Deposit.
This agreement, entered into among Nike Securities L.P., as Sponsor, The
Chase Manhattan Bank as Trustee and First Trust Advisors L.P. as
Portfolio Supervisor and Evaluator, governs the operation of the Trusts.
How We Created the Trusts.
On the Initial Date of Deposit for each Trust, we deposited a portfolio
or portfolios of one or more of following: Equity Securities, Preferred
Stocks, Trust Preferred Securities, Closed-End Funds and/or REITs,
(collectively, the "Securities") with the Trustee and in turn, the
Trustee delivered documents to us representing our ownership of the
Trusts in the form of units ("Units").
See "The Objective of the Trusts" in Part Three for each Trust for a
specific description of such Trust's objective.
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Since the prices of the Securities
will fluctuate daily, the ratio of Securities in the Trusts, on a market
value basis, will also change daily. Securities may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. However, Securities will not be sold to take
advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation, or if they no longer meet the criteria by
which they were selected. You will not be able to dispose of or vote any
of the Securities in the Trusts. As the holder of the Securities, the
Trustee will vote all of the Securities and will do so based on our
instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities.
Risk Factors
Price Volatility. The Trusts may invest in any of the securities set
forth in "The FT Series." The value of a Trust's Units will fluctuate
with changes in the value of these securities. The prices of securities
fluctuate for several reasons including, the type of security, changes
in investor's perceptions of the financial condition of an issuer or the
general condition of the relevant market, or when political or economic
events effecting the issuers occur. In addition, prices may be
particularly sensitive to rising interest rates, as the cost of capital
rises and borrowing costs increase. However, because preferred stock
dividends are fixed (though not guaranteed) and preferred stocks
typically have superior rights to common stocks in dividend
distributions and liquidation, they are generally less volatile than
common stocks.
Because the Trusts are not managed, the Trustee will not sell securities
in response to or in anticipation of market fluctuations, as is common
in managed investments. As with any investment, we cannot guarantee that
the performance of any 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.
Certain of the Securities in certain of the Trusts may be issued by
companies with market capitalizations of less than $1 billion. The share
prices of these small-cap companies are often more volatile than those
of larger companies as a result of several factors common to many such
issuers, including limited trading volumes, products or financial
resources, management inexperience and less publicly available
information.
Dividends. There is no guarantee that the issuers of the Equity
Securities will declare dividends in the future or that if declared they
will either remain at current levels or increase over time. In addition,
there is no assurance that the issuers of the Preferred Stocks included
in a Trust will be able to pay dividends at their stated rate in the
future.
Trust Preferred Securities. Certain Trusts may contain trust preferred
securities. Trust preferred securities are limited-life preferred
securities typically issued by corporations, generally in the form of
Page 3
interest-bearing notes or preferred securities, or by an affiliated
business trust of a corporation, generally in the form of beneficial
interests in subordinated debentures or similarly structured securities.
Dividend payments of the trust preferred securities generally coincide
with interest payments on the underlying obligations. Trust preferred
securities generally have a yield advantage over traditional preferred
stocks, but unlike preferred stocks, distributions are treated as
interest rather than dividends for federal income tax purposes and
therefore, are not eligible for the dividends-received deduction. Trust
preferred securities are subject to unique risks which include the fact
that dividend payments will only be paid if interest payments on the
underlying obligations are made, which interest payments are dependent
on the financial condition of the issuer and may be deferred for up to
20 consecutive quarters, and that the underlying obligations, and thus
the trust preferred securities, may be prepaid after a stated call date
or as a result of certain tax or regulatory events.
Closed End Funds. Certain Trusts may contain common stocks issued by
closed-end investment companies. The closed-end investment companies in
turn invest in other securities. 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 the 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.
Real Estate Investment Trusts. Certain Trusts may contain securities
issued by Real Estate Investment Trusts ("REITs"). REITs are financial
vehicles that pool investors' capital to purchase or finance real
estate. REITs may concentrate their investments in specific geographic
areas or in specific property types, i.e., hotels, shopping malls,
residential complexes and office buildings. The value of the REITs and
the ability of the REITs to distribute income may be adversely affected
by several factors, including rising interest rates, changes in the
national, state and local economic climate and real estate conditions,
perceptions of prospective tenants of the safety, convenience and
attractiveness of the properties, the ability of the owner to provide
adequate management, maintenance and insurance, the cost of complying
with the Americans with Disabilities Act, increased competition from new
properties, the impact of present or future environmental legislation
and compliance with environmental laws, changes in real estate taxes and
other operating expenses, adverse changes in governmental rules and
fiscal policies, adverse changes in zoning laws, and other factors
beyond the control of the issuers of the REITs.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed in the United States and abroad which may have
a negative impact on certain of the companies represented in the Trusts.
In addition, litigation regarding any of the issuers of the Securities,
or of the industries represented by such issuers 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.
Foreign Stocks. Certain of the Securities in certain of the Trusts may
be issued by foreign companies, which makes the Trusts subject to more
risks than if they invested solely in domestic common stocks. These
Securities are either directly listed on a U.S. securities exchange or
are in the form of American Depositary Receipts ("ADRs") which are
listed on a U.S. securities exchange. Risks of foreign common stocks
include higher brokerage costs; different accounting standards;
expropriation, nationalization or other adverse political or economic
developments; currency devaluations, blockages or transfer restrictions;
restrictions on foreign investments and exchange of securities;
inadequate financial information; and lack of liquidity of certain
foreign markets.
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the per Unit price of
which is comprised of the following:
- The aggregate underlying value of the Securities;
- The amount of any cash in the Income and Capital Accounts;
- Dividends receivable on Securities; and
- The total sales charge.
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" in Part One due to various
Page 4
factors, including fluctuations in the prices of the Securities and
changes in the value of the Income and/or Capital Accounts.
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.
Sales Charges.
The sales charge you will pay will consist of a one-time initial sales
charge as listed in Part One for each Trust. See Part Three "Public
Offering" for additional information for each Trust.
The Value of the Securities.
The Evaluator will appraise the aggregate underlying value of the
Securities in a Trust as of the Evaluation Time on each business day and
will adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and certain national holidays
on which the NYSE is closed.
The aggregate underlying value of the Securities in a Trust will be
determined as follows: if the Securities are listed on a securities
exchange or The Nasdaq Stock Market, their value is generally based on
the closing sale prices on that exchange or system (unless it is
determined that these prices are not appropriate as a basis for
valuation). However, if there is no closing sale price on that exchange
or system, they are valued based on the closing bid prices. If the
Securities are not so listed, or, if so listed and the principal market
for them is other than on that exchange or system, their value will
generally be based on the current bid prices on the over-the-counter
market (unless it is determined that these prices are not appropriate as
a basis for valuation). If current bid prices are unavailable, the
valuation is generally determined:
a) On the basis of current bid prices for comparable securities;
b) By appraising the value of the Securities on the bid side of the
market; or
c) By any combination of the above.
Distribution of Units
We intend to qualify Units of the Trusts for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
Dealer Concessions.
Dealers will receive concessions on the sale of Units in the amounts set
forth in Part Three of this prospectus. 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.
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trusts. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable sales charge on Units sold by such persons during such
programs. We make these payments out of our own assets and not out of
Trust assets. These programs will not change the price you pay for your
Units.
Investment Comparisons.
From time to time we may compare the estimated returns of the Trusts
(which may show performance net of the expenses and charges the Trusts
would have incurred) and returns over specified periods of other similar
trusts we sponsor in our advertising and sales materials, with (1)
returns on other taxable investments such as the common stocks
comprising various market indexes, corporate or U.S. Government bonds,
bank CDs and money market accounts or funds, (2) performance data from
Morningstar Publications, Inc. or (3) information from publications such
as Money, The New York Times, U.S. News and World Report, BusinessWeek,
Page 5
Forbes or Fortune. The investment characteristics of each Trust differ
from other comparative investments. You should not assume that these
performance comparisons will be representative of a Trust's future
performance.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum sales
charge per Unit of a Trust less any reduced sales charge as stated in
Part Three of this prospectus. In maintaining a market for the Units,
any difference between the price at which we purchase Units and the
price at which we sell or redeem them will be a profit or loss to us.
The Secondary Market
Although not obligated, we intend to maintain a market for the Units and
continuously offer to purchase Units at prices based on the Redemption
Price per Unit.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees, Trustee costs to transfer and record the ownership of
Units and costs incurred in annually updating each Trust's registration
statement. We may discontinue purchases of Units at any time. IF YOU
WISH TO DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET
PRICES BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid at that time is equal to or greater than the Redemption Price per
Unit, we may purchase the Units. You will receive your proceeds from the
sale no later than if they were redeemed by the Trustee. We may tender
Units that we hold to the Trustee for redemption as any other Units. If
we elect not to purchase Units, the Trustee may sell tendered Units in
the over-the-counter market, if any. However, the amount you will
receive is the same as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of each Trust are set forth under "Summary
of Essential Information" in Part One of this prospectus. If actual
expenses of a Trust exceed the estimate, that 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 may earn interest on these funds, thus
benefiting from their use.
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to the Trusts, and will receive brokerage fees
when a Trust uses us (or an affiliate of ours) as agent in buying or
selling Securities. Legal, typesetting, electronic filing and regulatory
filing fees and expenses associated with updating those Trusts'
registration statements yearly are also now chargeable to such Trusts.
Historically, we paid these fees and expenses. 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
"Summary of Essential Information" in Part One of this prospectus for
providing portfolio supervisory and evaluation services to the Trusts.
In providing portfolio supervisory services, the Portfolio Supervisor
may purchase research services from a number of sources, which may
include underwriters or dealers of the Trusts.
The fees payable to us, First Trust Advisors L.P. and the Trustee are
based on the largest aggregate number of Units of a Trust outstanding at
any time during the calendar year. These fees may be adjusted for
inflation without Unit holders' approval, but in no case will the annual
fees paid to us or our affiliates for providing a given service to all
unit investment trusts for which we provide such services be more than
the actual cost of providing such services in such year.
For certain Trusts, as set forth in the "Summary of Essential
Information" appearing in Part One for such Trusts, expenses incurred in
establishing such Trusts, including costs of preparing the registration
statement, the trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio and the initial fees and expenses
of the Trustee and any other out-of-pocket expenses, have been paid by
the Trust and are being charged off over a period not to exceed five
years from such Trust's Initial Date of Deposit, or over a period not to
exceed the life of the Trust, if shorter than five years.
Page 6
In addition to a Trust's operating expenses and those fees described
above, each Trust may also incur the following charges:
- License fees payable by a Trust for the use of certain trademarks and
trade names associated with such Trust, if any;
- 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
your rights and interests;
- Fees for any extraordinary services the Trustee performed under the
Indenture;
- Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of a Trust;
- Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of a
Trust; and/or
- All taxes and other government charges imposed upon the Securities or
any part of a Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
the Trusts. Since the dividend income is unpredictable, we cannot
guarantee that dividends will be sufficient to meet any or all expenses
of the Trusts. If there is not enough cash in the Income or Capital
Account, the Trustee has the power to sell Securities in a Trust to make
cash available to pay these charges which may result in capital gains or
losses to you. See "Tax Status."
Each Trust will be audited annually. We will bear the cost of these
annual audits to the extent the costs exceed $0.0050 per Unit.
Otherwise, each Trust will pay for the audit. You can request a copy of
the audited financial statements from the Trustee.
Tax Status
Federal Tax Status.
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of a Trust. This section is current as of
the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe state or foreign taxes. As with
any investment, you should consult your own tax professional about your
particular consequences.
Assets of the Trusts.
Each Trust will hold one or more of the following: (i) stock in domestic
and foreign corporations (the "Stocks"), (ii) interests in real estate
investment trusts (the "REIT Shares"), (iii) Trust Preferred Securities
(the "Debt Obligations") and (iv) shares in funds qualifying as
regulated investment companies (the "RIC Shares"). All of the foregoing
assets constitute the "Trust Assets." For purposes of this federal tax
discussion, it is assumed that the Stocks constitute equity, the Debt
Obligations constitute debt and that the RIC Shares and the REIT Shares
constitute qualifying shares in regulated investment companies and real
estate investment trusts, respectively, for federal income tax purposes.
Trust Status.
Except if indicated otherwise in Part Three of this prospectus, each
Trust will not be taxed as a corporation for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of each of the Trust Assets, and as such you will be
considered to have received a pro rata share of income (i.e., interest,
dividends, accruals of original issue discount and market discount, and
capital gains, if any) from each Trust Asset when such income is
considered to be received by the Trust. This is true even if you elect
to have your distributions automatically reinvested into additional
Units.
Your Tax Basis and Income or Loss upon Disposition.
If your Trust disposes of Trust Assets, you will generally recognize
gain or loss. If you dispose of your Units or redeem your Units for
cash, you will also generally recognize gain or loss. To determine the
amount of this gain or loss, you must subtract your tax basis in the
related Trust Assets from your share of the total proceeds received in
the transaction. You can generally determine your initial tax basis in
each Trust Asset by apportioning the cost of your Units, generally
including sales charges, among each Trust Asset ratably according to its
value on the date you acquire your Units. In certain circumstances,
however, you may have to adjust your tax basis after you acquire your
Page 7
Units (for example, in the case of certain dividends that exceed a
corporation's accumulated earnings and profits or in the case of
original issue discount, market discount, premium and accrued interest
with regard to the Debt Obligations, as discussed below).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the lowest
tax bracket). Net capital gain equals net long-term capital gain minus
net short-term capital loss for the taxable year. Capital gain or loss
is long-term if the holding period for the asset is more than one year
and is short-term if the holding period for the asset is one year or
less. You must exclude the date you purchase your Units or the date your
Trust purchases a Trust Asset to determine the holding period. The tax
rates for capital gains realized from assets held for one year or less
are generally the same as for ordinary income. The Code may, however,
treat certain capital gains as ordinary income in special situations
(for example, in the case of gain on the Debt Obligations attributable
to market discount). In addition, capital gain received from assets held
for more than one year that is considered "unrecaptured section 1250
gain" (which may be the case, for example, with some capital gains
attributable to the REIT Shares) is taxed at a maximum stated tax rate
of 25%.
Dividends from RIC Shares and REIT Shares.
Some dividends on the REIT Shares or the RIC Shares may qualify as
"capital gain dividends," taxable to you as long-term capital gains. If
you hold a Unit for six months or less or if your Trust holds a RIC
Share or REIT Share for six months or less, any loss incurred by you
related to the disposition of such RIC Share or REIT Share will be
treated as a long-term capital loss to the extent of any long-term
capital gain distributions received (or deemed to have been received)
with respect to such RIC Share or REIT Share. Distributions of income or
capital gains declared on the REIT Shares or the RIC Shares in October,
November or December will be deemed to have been paid to you on December
31 of the year they are declared, even when paid by the REIT or the RIC
during the following January.
Discount, Accrued Interest and Premium on Debt Obligations.
Some Debt Obligations may have been sold with original issue discount.
This generally means that the Debt Obligations were originally issued at
a price below their face (or par) value. Original issue discount accrues
on a daily basis and generally is treated as interest income for federal
income tax purposes. The basis of your Unit and of each Debt Obligation
which was issued with original issue discount must be increased as
original issue discount accrues.
Some Debt Obligations may have been purchased by you or your Trust at a
market discount. Market discount is generally the excess of the stated
redemption price at maturity for the Debt Obligation over the purchase
price of the Debt Obligation (not including unaccrued original issue
discount). Market discount can arise based on the price your Trust pays
for a Debt Obligation or on the price you pay for your Units. Market
discount is taxed as ordinary income. You will recognize this income
when your Trust receives principal payments on the Debt Obligation, when
the Debt Obligation is sold or redeemed, or when you sell or redeem your
Units. Alternatively, you may elect to include market discount in
taxable income as it accrues. Whether or not you make this election will
affect how you calculate your basis and the timing of certain interest
expense deductions.
Alternatively, some Debt Obligations may have been purchased by you or
your Trust at a premium. Generally, if the tax basis of your pro rata
portion of any Debt Obligation exceeds the amount payable at maturity,
such excess is considered premium. You may elect to amortize premium. If
you make this election, you may reduce your interest income received on
the Debt Obligation by the amount of the premium that is amortized and
your tax basis will be reduced.
If the price of your Units included accrued interest on a Debt
Obligation, you must include the accrued interest in your tax basis in
that Debt Obligation. When your Trust receives this accrued interest,
you must treat it as a return of capital and reduce your tax basis in
the Debt Obligation.
This discussion provides only the general rules with respect to the tax
treatment of original issue discount, market discount and premium. The
rules, however, are complex and special rules apply in certain
circumstances. For example, the accrual of market discount or premium
Page 8
may differ from the discussion set forth above in the case of Debt
Obligations that were issued with original issue discount.
Dividends Received Deduction.
A corporation that owns Units will generally not be entitled to the
dividends received deduction with respect to many dividends received by
your Trust, because the dividends received deduction is not available
for dividends from most foreign corporations or from REITs.
Distributions on a RIC Share are eligible for the dividends received
deduction only to the extent that the dividends received by the Unit
owner are attributable to dividends received by the RIC itself from
certain domestic corporations and are designated by the RIC as being
eligible for the dividends received deduction. Finally, because the Debt
Obligations are treated as debt (not equity) for federal income tax
purposes, distributions from the Debt Obligations are not eligible for
the dividends received deduction.
In-Kind Distributions.
Under certain circumstances, you may request an In-Kind Distribution of
Trust Assets when you redeem your Units or at your Trust's termination.
By electing to receive an In-Kind Distribution, you will receive an
undivided interest in Trust Assets plus, possibly, cash. You will not
recognize gain or loss if you only receive Trust Assets in exchange for
your pro rata portion of the Trust Assets held by your Trust. However,
if you also receive cash in exchange for a fractional portion of a Trust
Asset, you will generally recognize gain or loss based on the difference
between the amount of cash you receive and your tax basis in such
fractional portion of the Trust Asset.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of your Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by your Trust to the same extent as if you directly
paid the expense. You may be required to treat some or all of the
expenses of your Trust as miscellaneous itemized deductions. However,
individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Foreign, State and Local Taxes.
Interest and dividend payments on your Trust Assets of foreign companies
that are paid to your Trust may be subject to foreign withholding taxes.
Any income withheld will still be treated as income to you. Under the
grantor trust rules, you are considered to have paid directly your share
of foreign taxes. Therefore, for U.S. tax purposes, you may be entitled
to a foreign tax credit or deduction for those foreign taxes.
If you are a foreign investor (i.e., an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or
trust), you will not be subject to U.S. federal income taxes, including
withholding taxes, on some of the income from your 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,
your Trust will not be taxed as a corporation, and the income of your
Trust will be treated as the income of the Unit holders in the same
manner as for federal income tax purposes. 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. Before participating in a plan like this, you should review
the tax laws regarding these plans and consult your attorney or tax
advisor. Brokerage firms and other financial institutions offer these
plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
Page 9
you become Record Owner, but normally your broker/dealer provides this
notice. You may elect to hold your Units in either certificated or
uncertificated form.
Certificated Units. When you purchase your Units you can request that
they be evidenced by certificates, which will be delivered shortly after
your order. Certificates will be issued in fully registered form,
transferable only on the books of the Trustee in denominations of one
Unit or any multiple thereof. You can transfer or redeem your
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with your
signature guaranteed by an eligible institution. In certain cases the
Trustee may require additional documentation before they will transfer
or redeem your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- A written initial transaction statement containing a description of
the Trust;
- A list of the number of Units issued or transferred;
- Your name, address and Taxpayer Identification Number ("TIN");
- A notation of any liens or restrictions of the issuer and any adverse
claims; and
- The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of 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;
- A list of any Securities sold during the year and the Securities held
at the end of that year by your Trust;
- The Redemption Price per Unit, computed on the 31st day of December of
such year (or the last business day before); and
- Amounts of income and capital distributed during the year.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Income and Capital Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit dividends received on 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" in Part One of this prospectus. No income distribution will
be paid if accrued expenses of a Trust exceed amounts in the Income
Account on the Income Distribution Dates. Distribution amounts will vary
with changes in a Trust's fees and expenses, in dividends received and
with the sale of Securities. The Trustee will distribute amounts in the
Capital Account, net of amounts designated to meet redemptions or pay
expenses on the last day of each month to Unit holders of record on the
fifteenth day of each month provided the amount equals at least $1.00
per 100 Units ($1.00 per 1,000 Units if the Initial Public Offering
Price was approximately $1.00 per Unit). If the Trustee does not have
your TIN, it is required to withhold a certain percentage of your
distribution and deliver such amount to the Internal Revenue Service
Page 10
("IRS"). You may recover this amount by giving your TIN to the Trustee,
or when you file a tax return. However, you should check your statements
to make sure the Trustee has your TIN to avoid this "back-up withholding."
Within a reasonable time after a Trust is terminated, you will receive
the pro rata share of the money from the sale 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."
You will receive a pro rata share of any other assets remaining in your
Trust after deducting any unpaid expenses.
The Trustee may establish reserves (the "Reserve Account") within a
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of such Trust.
Distribution Reinvestment Option. If applicable, you may elect to have
each distribution of income and/or capital reinvested into additional
Units of your Trust by notifying the Trustee at least 10 days before any
Record Date. Each later distribution of income and/or capital on your
Units will be reinvested by the Trustee into additional Units of your
Trust. There is no sales charge on Units acquired through the
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.See Part Three of
this prospectus to determine whether the distribution reinvestment
option is available for a particular Trust.
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 uncertificated, you
need only deliver a request for redemption to the Trustee. In either
case, the certificates or the redemption request 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 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. The IRS will require the Trustee to withhold a
portion of your redemption proceeds if it does not have your TIN, as
generally discussed under "Income and Capital Distributions."
For certain Trusts, if you tender at least the minimum number of Units
specified in "Summary of Essential Information" in Part One of this
prospectus, rather than receiving cash, you may elect to receive an In-
Kind Distribution in an amount 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.
The Trustee may sell Securities to make funds available for redemption.
If Securities are sold, the size and diversification of a Trust will be
reduced. These sales may result in lower prices than if the Securities
were sold at a different time.
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
Page 11
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 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;
5. liquidation costs for foreign Securities, if any; and
6. other liabilities incurred by a Trust; and
dividing
1. the result by the number of outstanding Units of a Trust.
Removing Securities from a Trust
The portfolios of the Trusts are not managed. However, we may, but are
not required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- The issuer of the Security defaults in the payment of a declared
dividend;
- Any action or proceeding prevents the payment of dividends;
- There is any legal question or impediment affecting the Security;
- The issuer of the Security has breached a covenant which would affect
the payment of dividends, the issuer's credit standing, or otherwise
damage the sound investment character of the Security;
- The issuer has defaulted on the payment of any other of its
outstanding obligations;
- There has been a public tender offer made for a Security or a merger
or acquisition is announced affecting a Security, and that in our
opinion the sale or tender of the Security is in the best interest of
Unit holders; or
- The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to a Trust.
A Trust may not acquire any securities or other property other than the
Securities. The Trustee, on behalf of the Trusts, 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 each Portfolio Supervisor.
Any proceeds received from the sale of Securities, exchanged securities
or property will be credited to the Capital Account for distribution to
Unit holders or to meet redemption requests. The Trustee may retain and
pay us or an affiliate of ours to act as agent for a Trust to facilitate
selling Securities, exchanged securities or property from the Trusts. If
we or our affiliate act in this capacity, we will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Securities designated by us or, absent our
direction, at its own discretion, in order to meet redemption requests
or pay expenses. In designating Securities to be sold, we will try to
maintain the proportionate relationship among the Securities. If this is
not possible, the composition and diversification of a Trust may be
changed. To get the best price for a Trust we may specify minimum
amounts (generally 100 shares) in which blocks of Securities are to be
sold. We may consider sales of units of unit investment trusts which we
sponsor when we make recommendations to the Trustee as to which
broker/dealers they select to execute a Trust's portfolio transactions,
or when acting as agent for a Trust in acquiring or selling Securities
on behalf of the Trusts.
Page 12
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- To cure ambiguities;
- To correct or supplement any defective or inconsistent provision;
- To make any amendment required by any governmental agency; or
- To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, the Trusts will terminate on
the Mandatory Termination Date as stated in the "Summary of Essential
Information" in Part One for each Trust. The Trusts may be terminated
earlier:
- Upon the consent of 100% of the Unit holders of a Trust;
- 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.
Prior to termination, the Trustee will send written notice to all Unit
holders which will specify how you should tender your certificates, if
any, to the Trustee. For various reasons, a Trust may be reduced below
the Discretionary Liquidation Amount and could therefore be terminated
before the Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of a Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Securities. Because the Trustee must sell the Securities within a
relatively short period of time, the sale of Securities as part of the
termination process may result in a lower sales price than might
otherwise be realized if such sale were not required at this time.
If you qualify for an In-Kind Distribution, the Trustee will send you a
form at least 30 days prior to the Mandatory Termination Date which will
enable you to receive an In-Kind Distribution (reduced by customary
transfer and registration charges) rather than the typical cash
distribution. See "Tax Status" for additional information. 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, you will
receive a cash distribution from the sale of the remaining Securities,
along with your interest in the Income and Capital Accounts, within a
reasonable time after such Trust is terminated. Regardless of the
distribution involved, the Trustee will deduct from the Trusts any
accrued costs, expenses, advances or indemnities provided for by the
Indenture, including estimated compensation of the Trustee and costs of
liquidation and any amounts required as a reserve to pay any taxes or
other governmental charges.
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- The First Trust Combined Series
- FT Series (formerly known as The First Trust Special Situations Trust)
- The First Trust Insured Corporate Trust
- The First Trust of Insured Municipal Bonds
- The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $27 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1999, the total partners' capital of
Nike Securities L.P. was $19,881,035 (audited).
Page 13
This information refers only to us and not to the Trusts or to any
series of the Trusts or to any other dealer. We are including this
information only to inform you of our financial responsibility and our
ability to carry out our contractual obligations. We will provide more
detailed financial information on request.
Code of Ethics. The Sponsor and the Trusts have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to the Trusts.
The Trustee.
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th Floor, New York, New
York, 10004-2413. If you have questions regarding the Trusts, you may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee has not participated in selecting the Securities for the
Trusts; it only provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC;
- Terminate the Indenture and liquidate the Trusts; or
- Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel, as well as special New York tax
counsel for the Trusts.
Experts.
Ernst & Young LLP, independent auditors, have audited the Trusts'
statements of net assets, including the schedules of investments,
appearing in each Part One of this prospectus, 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.
Page 14
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Page 15
FIRST TRUST (registered trademark)
THE FIRST TRUST SPECIAL SITUATIONS TRUST
FT SERIES
Prospectus
Part Two
Sponsor:
NIKE SECURITIES L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to the above-mentioned
unit investment trusts, but does not contain all of the information
about this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- Securities Act of 1933 (set forth in Part One for each Trust) and
- Investment Company Act of 1940 (file no. 811-05903)
Information about the Trusts, including their Codes of Ethics, can be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington D.C. Information regarding the operation of
the Commission's Public Reference Room may be obtained by calling the
Commission at 1-202-942-8090.
Information about the Trusts is available on the EDGAR Database on the
Commission's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0102
e-mail address: [email protected]
May 31, 2000
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE
Page 16
High-Yield Corporate Closed-End Portfolio Series
FT Series
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated August 31, 2000 PART ONE AND PART TWO
The Trusts consist of diversified portfolios of common stocks (the
"Securities") issued by closed-end investment companies. Each Trust
invests in a portfolio of closed-end investment companies, the
portfolios of which are concentrated in high-yield corporate bonds
("Corporate Bonds"). Each Trust seeks to provide investors with high
current income, with capital appreciation being a secondary objective of
the Trusts.
All Parts of the Prospectus Should be Retained for Future Reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First Trust (registered trademark)
1-800-621-9533
Page 1
Portfolio
Objectives.
The objective of each Trust is to provide investors with high current
income, with capital appreciation being a secondary objective of each
Trust. Each Trust 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 each Trust,
we selected those Closed-End Funds which, at the Initial Date of
Deposit, 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.
Of course, as with any similar investments, there can be no guarantee
that the objective of the Trusts will be achieved. See "Risk Factors"
herein and in Part Two of this prospectus for a discussion of the risks
of investing in the Trusts.
Risk Factors
High-Yield Corporate Bonds. Each of the Closed-End Funds held by the
Trusts 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
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.
Foreign Securities. Certain or all of the underlying bonds held by
certain of the Closed-End Funds in the Trusts 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.
Legislation/Litigation. 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.
Public Offering
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:
Page 2
Your maximum
If you invest sales charge
(in thousands):* will be:
_________________ ____________
$50 but less than $100 4.25%
$100 but less than $250 4.00%
$250 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. To
help you reach the above levels, you may combine same-day purchases of a
Trust's Units and units of other similarly structured equity unit trusts
for which we act as Principal Underwriter and which are currently in the
initial offering period. 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 is the responsibility of
the party making the sale.
The following persons may purchase Units at the Public Offering Price
less the applicable dealer concession:
- Employees, officers and directors of the Sponsor, our related
companies, dealers and their affiliates, and vendors providing services
to us.
- Immediate family members of the above (spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law, daughters-in-law, brothers-in-law and sisters-in-
law, and trustees, custodians or fiduciaries for the benefit of such
persons).
If you purchase Units through registered broker/dealers who charge
periodic fees for financial planning, investment advisory or asset
management services or provide these services as part of an investment
account where a comprehensive "wrap fee" charge is imposed, your Units
will only be assessed that portion of the sales charge retained by the
Sponsor.
Distribution of Units
We intend to qualify Units of the Trusts for sale in a number of states.
Units will be sold at the current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
represent a concession or agency commission of 65% of the maximum sales
charge.
Expenses and Charges
Investors will indirectly pay a portion of the expenses of the
underlying Closed-End Funds.
Tax Status
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. 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.
See "Tax Status" in Part Two of this prospectus for more information.
Income and Capital Distributions
Distribution Reinvestment Option. You may elect to have each
distribution of income and/or capital reinvested into additional Units
of your Trust by notifying the Trustee at least 10 days before any
Record Date. Each later distribution of income and/or capital on your
Units will be reinvested by the Trustee into additional Units of your
Trust. 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.
Page 3
Other Information
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
Page 4
FIRST TRUST(registered trademark)
High-Yield Corporate Closed-End Portfolio Series
FT Series
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
Sponsor:
Nike Securities L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE
Page 5
First Trust (registered trademark)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in High-Yield Corporate Closed-End Portfolio Series not found
in the prospectus. This Information Supplement is not a prospectus and
does not include all of the information you should consider before
investing in a Trust. This Information Supplement should be read in
conjunction with the prospectus.
This Information Supplement is dated August 31, 2000. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors
Securities 1
High-Yield Corporate Bonds 2
High-Yield Obligations 2
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
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.
Page 1
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
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
Page 2
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.
Page 3
Municipal Closed-End Portfolio Series
FT Series
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated August 31, 2000 PART ONE AND PART TWO
The Trusts consist of diversified portfolios of common stocks (the
"Securities") issued by closed-end investment companies. Each Trust
invests in a portfolio of closed-end investment companies, the
portfolios of which are concentrated in tax-exempt municipal bonds
("Municipal Bonds"). Each Trust seeks to provide investors with
federally tax-exempt income and to preserve capital.
All Parts of the Prospectus Should be Retained for Future Reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First Trust (registered trademark)
1-800-621-9533
Page 1
Portfolio
Objectives.
The objective of each Trust is to provide investors with federally tax-
exempt income and to preserve capital. Each Trust 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 tax-exempt municipal bonds. In selecting
Securities for the Trusts, we began by eliminating all tax-exempt
municipal Closed-End Funds with net assets, on the Initial Date of
Deposit, under $120 million and an indicated yield of less than 6%. We
then selected those Closed-End Funds which, on the Initial Date of
Deposit, 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.
Of course, as with any similar investments, there can be no guarantee
that the objective of the Trusts will be achieved. See "Risk Factors"
herein and in Part Two of this prospectus for a discussion of the risks
of investing in the Trusts.
Risk Factors
Alternative Minimum Tax. While distributions of interest from the Trusts
are generally exempt from federal income taxes, a portion of such
interest may be taken into account in computing the alternative minimum
tax.
Municipal Bonds. Each of the Closed-End Funds held by the Trusts
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.
Legislation/Litigation. 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.
Public Offering
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:
Page 2
Your maximum
If you invest sales charge
(in thousands):* will be:
_________________ ____________
$50 but less than $100 4.25%
$100 but less than $250 4.00%
$250 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. To
help you reach the above levels, you may combine same-day purchases of a
Trust's Units and units of other similarly structured equity unit trusts
for which we act as Principal Underwriter and which are currently in the
initial offering period. 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 is the responsibility of
the party making the sale.
The following persons may purchase Units at the Public Offering Price
less the applicable dealer concession:
- Employees, officers and directors of the Sponsor, our related
companies, dealers and their affiliates, and vendors providing services
to us.
- Immediate family members of the above (spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law, daughters-in-law, brothers-in-law and sisters-in-
law, and trustees, custodians or fiduciaries for the benefit of such
persons).
If you purchase Units through registered broker/dealers who charge
periodic fees for financial planning, investment advisory or asset
management services or provide these services as part of an investment
account where a comprehensive "wrap fee" charge is imposed, your Units
will only be assessed that portion of the sales charge retained by the
Sponsor.
Distribution of Units
We intend to qualify Units of the Trusts for sale in a number of states.
Units will be sold at the current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
represent a concession or agency commission of 65% of the maximum sales
charge.
Expenses and Charges
Investors will also indirectly pay a portion of the expenses of the
underlying Closed-End Funds.
Tax Status
Assets of the Trusts.
Each Trust will hold shares of Closed-End Funds qualifying as regulated
investment companies ("RICs"). 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.
See "Tax Status" in Part Two of this prospectus for more information.
Income and Capital Distributions
Distribution Reinvestment Option. You may elect to have each
distribution of income and/or capital reinvested into additional Units
of your Trust by notifying the Trustee at least 10 days before any
Record Date. Each later distribution of income and/or capital on your
Units will be reinvested by the Trustee into additional Units of your
Trust. 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.
Page 3
Other Information
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
Page 4
FIRST TRUST(registered trademark)
Municipal Closed-End Portfolio Series
FT Series
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
Sponsor:
Nike Securities L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE
Page 5
First Trust (registered trademark)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in Municipal Closed-End Portfolio Series not found in the
prospectus. This Information Supplement is not a prospectus and does not
include all of the information you should consider before investing in a
Trust. This Information Supplement should be read in conjunction with
the prospectus.
This Information Supplement is dated August 31, 2000. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors
Securities 1
Municipal Bonds 2
Healthcare Revenue Bonds 2
Single Family Mortgage Revenue Bonds 2
Multi-Family Mortgage Revenue Bonds 2
Water and Sewerage Revenue Bonds 3
Electric Utility Revenue Bonds 3
Lease Obligation Revenue Bonds 3
Industrial Revenue Bonds 3
Transportation Facility Revenue Bonds 4
Educational Obligation Revenue Bonds 4
Resource Recovery Facility Revenue Bonds 4
Discount Bonds 4
Original Issue Discount Bonds 5
Zero Coupon Bonds 5
Premium Bonds 5
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
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
Page 1
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.
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
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.
Page 2
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
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
Page 3
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,
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
discount bond held to maturity will have a larger portion of its total
Page 4
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.
Page 5
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 320 HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO
SERIES MUNICIPAL CLOSED-END PORTFOLIO SERIES, certifies that it
meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment of its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the
Village of Lisle and State of Illinois on August 31, 2000.
FT 320
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO
SERIES MUNICIPAL CLOSED-END PORTFOLIO
SERIES
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title Date
David J. Allen Sole Director of )
Nike Securities )
Corporation, ) August 31, 2000
the General Partner )
of Nike Securities L.P. )
)
) Robert M. Porcellino
) Attorney-in-Fact**
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Combined Series 258 (File No. 33-63483) and the same is
hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated August 11, 2000 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The FT Series dated August 29, 2000.
ERNST & YOUNG LLP
Chicago, Illinois
August 29, 2000
