Rule 497(b)
European Target 20 Portfolio, 4th Quarter 1999 Series
Target Small-Cap Portfolio, 4th Quarter 1999 Series
FT 361
FT 361 is a series of a unit investment trust, the FT Series. Each of
the two portfolios listed above (each, a "Trust," and collectively, the
"Trusts") is a portfolio or series of FT 361 consisting of a portfolio
of common stocks ("Securities") selected by applying a specialized
strategy. The objective of each Trust is to provide an above-average
total return.
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
The date of this prospectus is September 30, 1999
As amended October 1, 1999
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statements of Net Assets 6
Schedules of Investments 7
The FT Series 10
Portfolios 11
Risk Factors 11
Hypothetical Performance Information 13
Public Offering 16
Distribution of Units 18
The Sponsor's Profits 19
The Secondary Market 19
How We Purchase Units 19
Expenses and Charges 19
Tax Status 20
Retirement Plans 22
Rights of Unit Holders 22
Income and Capital Distributions 22
Redeeming Your Units 23
Investing in a New Trust 24
Removing Securities from a Trust 25
Amending or Terminating the Indenture 25
Information on the Sponsor, Trustee and Evaluator 26
Other Information 27
Page 2
Summary of Essential Information
FT 361
At the Opening of Business on the Initial Date of Deposit-September 30, 1999
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
European Target 20 Target Small-Cap
Portfolio, 4th Quarter Portfolio, 4th Quarter
1999 Series 1999 Series
____________ ____________
<S> <C> <C>
Initial Number of Units (1) 14,994 15,007
Fractional Undivided Interest in the Trust per Unit (1) 1/14,994 1/15,007
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 9.900 $ 9.900
Maximum Sales Charge of 2.75% of the Public Offering Price per Unit
(2.778% of the net amount invested, exclusive of the deferred sales $ .275 $ .275
charge) (3)
Less Deferred Sales Charge per Unit $ (.175) $ (.175)
Public Offering Price per Unit (4) $ 10.000 $ 10.000
Sponsor's Initial Repurchase Price per Unit (5) $ 9.725 $ 9.725
Redemption Price per Unit (based on aggregate underlying value
of Securities less the deferred sales charge) (5) $ 9.725 $ 9.725
Estimated Net Annual Distributions per Unit (6) $ .3347 $ N.A.
Cash CUSIP Number 30264X 519 30264X 535
Reinvestment CUSIP Number 30264X 527 30264X 543
Security Code 57400 57398
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date October 5, 1999
Rollover Notification Date December 1, 2000
Special Redemption and Liquidation Period December 15, 2000 to December 29, 2000
Mandatory Termination Date (7) December 29, 2000
Income Distribution Record Date Fifteenth day of June and December, commencing December 15, 1999.
Income Distribution Date (6) Last day of June and December, commencing December 31, 1999.
____________
<FN>
(1) As of the close of business on October 1, 1999, we may adjust the
number of Units of a Trust so that the Public Offering Price per Unit
will equal approximately $10.00. If we make such an adjustment, the
fractional undivided interest per Unit will vary from the amounts
indicated above.
(2) Each listed Security is valued at its last closing sale price on the
relevant stock exchange on the business day prior to the Initial Date of
Deposit. If a Security is not listed, or if no closing sale price
exists, it is valued at its closing ask price on such date. The value of
foreign Securities trading in non-U.S. currencies is determined by
converting the value of such Securities to their U.S. dollar equivalent
based on the offering side of the currency exchange rate for the
currency in which a Security is generally denominated at the Evaluation
Time on the business day prior to the Initial Date of Deposit.
Evaluations for purposes of determining the purchase, sale or redemption
price of Units are made as of the close of trading on the New York Stock
Exchange ("NYSE") (generally 4:00 p.m. Eastern time) on each day on
which it is open (the "Evaluation Time").
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" and "Public Offering."
(4) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit. No
investor will purchase Units at this price. The price you pay for your
Units will be based on their valuation at the Evaluation Time on the
date you purchase your Units. On the Initial Date of Deposit the Public
Offering Price per Unit will not include any accumulated dividends on
the Securities. After this date, a pro rata share of any accumulated
dividends on the Securities will be included.
(5) During the initial offering period the Sponsor's Initial Repurchase
Price per Unit and Redemption Price per Unit will include the estimated
organization costs per Unit set forth under "Fee Table." After the
initial offering period, the Sponsor's Initial Repurchase Price per Unit
and Redemption Price per Unit will not include such estimated
organization costs. See "Redeeming Your Units."
(6) The actual net annual distributions per Unit you receive will vary
from that set forth above with changes in a Trust's fees and expenses,
dividends received, currency exchange rates, foreign withholding and
with the sale of Securities. See "Fee Table" and "Expenses and Charges."
Dividend yield was not a selection criteria for the Target Small-Cap
Portfolio, 4th Quarter 1999 Series. At the Rollover Notification Date
for Rollover Unit holders or upon termination of a Trust for other Unit
holders, amounts in the Income Account (which consist of dividends on
the Securities) will be included in amounts distributed to Unit holders.
We will distribute money from the Capital Account monthly 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 $1.00 per
100 Units. In any case, we will distribute any funds in the Capital
Account as part of the final liquidation distribution.
(7) See "Amending or Terminating the Indenture."
</FN>
</TABLE>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of a Trust. See "Public
Offering" and "Expenses and Charges." Although the Trusts have a term of
approximately 15 months and are unit investment trusts rather than
mutual funds, this information allows you to compare fees, assuming that
when each Trust terminates, the principal amount and distributions are
rolled over into a New Trust, and you pay only the deferred sales charge.
<TABLE>
<CAPTION>
EUROPEAN TARGET 20 TARGET SMALL-CAP
PORTFOLIO, 4 TH QUARTER PORTFOLIO, 4 TH QUARTER
1999 Series 1999 Series
______________ ______________
Amount Amount
per Unit per Unit
______ ______
<S> <C> <C> <C> <C>
Unit Holder Transaction Expenses
(as a percentage of public offering price)
Initial sales charge imposed on purchase 1.00%(a) $ .100 1.00%(a) $ .100
Deferred sales charge 1.75%(b) .175 1.75%(b) $ .175
______ ______ ______ ______
Maximum sales charge 2.75% $ .275 2.75% $ .275
====== ====== ====== ======
Maximum sales charge imposed on reinvested dividends 1.75%(c) $ .175 1.75%(c) $ .175
====== ====== ====== ======
Organization Costs
(as a percentage of public offering price)
Estimated organization costs .180%(d) $.0180 .225%(d) $.0225
====== ====== ====== ======
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative
and evaluation fees .060% $.0060 .060% $.0060
Trustee's fee and other operating expenses .203%(e) .0202 .082%(e) .0082
______ ______ ______ ______
Total .263% $.0262 .142% $.0142
====== ====== ====== ======
</TABLE>
Example
This example is intended to help you compare the cost of investing in a
Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in a Trust for the periods shown
and sell all your Units at the end of those periods. The example also
assumes a 5% return on your investment each year and that a Trust's
operating expenses stay the same. Although your actual costs may vary,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
______ _______ _______ ________
<S> <C> <C> <C> <C>
European Target 20 Portfolio, 4th Quarter 1999 Series $319 $758 $1,004 $1,907
Target Small-Cap Portfolio, 4th Quarter 1999 Series 312 735 961 1,822
The example will not differ if you hold rather than sell your Units at
the end of each period. The example does not reflect sales charges on
reinvested dividends and other distributions. If these sales charges
were included, your costs would be higher.
_____________
<FN>
(a) The amount of the initial sales charge will vary depending on the
purchase price of your Units. The amount of the initial sales charge is
actually the difference between the maximum sales charge (2.75% of the
Public Offering Price) and the maximum remaining deferred sales charge
(initially $.175 per Unit). When the Public Offering Price exceeds
$10.00 per Unit the initial sales charge will exceed 1.00% of the Public
Offering Price per Unit.
(b) The deferred sales charge is a fixed dollar amount equal to $.175
per Unit which will be deducted in ten monthly installments of $.0175
per Unit beginning January 20, 2000 and on the 20th day of each month
thereafter (or the preceding business day if the 20th day is not a
business day) through October 20, 2000. If you buy Units at a price of
less than $10.00 per Unit, the dollar amount of the deferred sales
charge will not change but the deferred sales charge on a percentage
basis will be more than 1.75% of the Public Offering Price. If you
purchase Units after the first deferred sales charge payment has been
deducted, your purchase price will include both the initial sales charge
and any remaining deferred sales charge payments.
(c) Reinvested dividends will be subject only to the deferred sales
charge remaining at the time of reinvestment. See "Income and Capital
Distributions."
(d) You will bear all or a portion of the costs incurred in organizing
your respective Trust. These estimated organization costs are included
in the price you pay for your Units and will be deducted from the assets
of a Trust at the end of the initial offering period.
(e) Other operating expenses do not include brokerage costs and other
portfolio transaction fees for any of the Trusts. In certain
circumstances the Trusts may incur additional expenses not set forth
above. See "Expenses and Charges."
</FN>
</TABLE>
Page 4
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
FT 361
We have audited the accompanying statements of net assets, including the
schedules of investments, of FT 361, comprised of the European Target 20
Portfolio, 4th Quarter 1999 Series and the Target Small-Cap Portfolio,
4th Quarter 1999 Series as of the opening of business on September 30,
1999. These statements of net assets are the responsibility of the
Trusts' Sponsor. Our responsibility is to express an opinion on these
statements of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of net assets
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
statements of net assets. Our procedures included confirmation of the
letter of credit allocated among the Trusts on September 30, 1999. An
audit also includes assessing the accounting principles used and
significant estimates made by the Sponsor, as well as evaluating the
overall presentation of the statements of net assets. We believe that
our audit of the statements of net assets provides a reasonable basis
for our opinion.
In our opinion, the statements of net assets referred to above present
fairly, in all material respects, the financial position of FT 361,
comprised of the European Target 20 Portfolio, 4th Quarter 1999 Series
and the Target Small-Cap Portfolio, 4th Quarter 1999 Series, at the
opening of business on September 30, 1999 in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 30, 1999
Page 5
Statements of Net Assets
FT 361
At the Opening of Business on the
Initial Date of Deposit-September 30, 1999
<TABLE>
<CAPTION>
European Target 20 Target Small-Cap
Portfolio, 4th Quarter Portfolio, 4th Quarter
1999 Series 1999 Series
_____________ ______________
<S> <C> <C>
NET ASSETS
Investment in Securities represented
by purchase contracts (1) (2) $148,444 $148,567
Less liability for reimbursement to Sponsor
for organization costs (3) (270) (338)
Less liability for deferred sales charge (4) (2,624) (2,626)
_______ ________
Net assets $145,550 $145,603
======= ========
Units outstanding 14,994 15,007
ANALYSIS OF NET ASSETS
Cost to investors (5) $149,943 $150,068
Less maximum sales charge (5) (4,123) (4,127)
Less estimated reimbursement to Sponsor
for organization costs (3) (270) (338)
_______ ________
Net assets $145,550 $145,603
======= ========
__________
<FN>
NOTES TO STATEMENTS OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" for each Trust is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by The Chase Manhattan Bank,
of which $400,000 will be allocated between the two Trusts in FT 361,
has been deposited with the Trustee as collateral, covering the monies
necessary for the purchase of the Securities according to their purchase
contracts.
(3) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trusts. These costs have been estimated at $.0180 and
$.0225 per Unit for the European Target 20 Portfolio, 4th Quarter 1999
Series and the Target Small-Cap Portfolio, 4th Quarter 1999 Series,
respectively. A payment will be made at the end of the initial offering
period to an account maintained by the Trustee from which the obligation
of the investors to the Sponsor will be satisfied. To the extent that
actual organization costs of a Trust are greater than the estimated
amount, only the estimated organization costs added to the Public
Offering Price will be reimbursed to the Sponsor and deducted from the
assets of such Trust.
(4) Represents the amount of mandatory deferred sales charge
distributions from a Trust ($.175 per Unit), payable to us in ten equal
monthly installments beginning on January 20, 2000 and on the twentieth
day of each month thereafter (or if such date is not a business day, on
the preceding business day) through October 20, 2000. If you redeem
Units before October 20, 2000 you will have to pay the remaining amount
of the deferred sales charge applicable to such Units when you redeem
them.
(5) The aggregate cost to investors in a Trust includes a maximum sales
charge (comprised of an initial and a deferred sales charge) computed at
the rate of 2.75% of the Public Offering Price (equivalent to 2.778% of
the net amount invested, exclusive of the deferred sales charge),
assuming no reduction of sales charge as set forth under "Public
Offering."
</FN>
</TABLE>
Page 6
Schedule of Investments
European Target 20 Portfolio, 4th Quarter 1999 Series
FT 361
At the Opening of Business on the
Initial Date of Deposit-September 30, 1999
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of Current
of Offering Value Securities to Dividend
Shares Name of Issuer of Securities (1) Price per Share the Trust (2) Yield (3)
______ _______________________________________ _________ _________ _________ _________
<C> <S> <C> <C> <C> <C>
330 ABN AMRO Holding NV 5% $ 22.489 $ 7,421 2.85%
426 Abbey National Plc 5% 17.409 7,416 3.88%
178 BASF AG 5% 41.636 7,411 4.09%
1,295 BG Plc 5% 5.733 7,424 2.84%
253 Barclays Plc 5% 29.393 7,437 2.80%
187 Bayer AG 5% 39.620 7,409 3.63%
880 British American Tobacco Plc 5% 8.433 7,421 4.40%
492 CGU Plc 5% 15.100 7,429 4.37%
108 DaimlerChrysler AG 5% 69.004 7,452 5.17%
710 Diageo Plc 5% 10.455 7,423 3.41%
21 Electrabel SA 5% 351.968 7,391 3.79%
393 Endesa SA 5% 18.882 7,421 2.97%
603 Halifax Group Plc 5% 12.305 7,420 3.12%
589 Lloyds TSB Group Plc 5% 12.601 7,422 3.42%
1,437 Marks & Spencer Plc 5% 5.166 7,424 5.26%
317 National Westminster Bank Plc 5% 23.393 7,416 2.91%
1,023 Norwich Union Plc 5% 7.258 7,425 3.32%
175 RWE AG 5% 42.431 7,426 3.57%
419 Rio Tinto Plc 5% 17.738 7,432 3.34%
569 San Paolo-IMI SpA 5% 13.048 7,424 3.78%
_______ ________
Total Investments 100% $148,444
======= ========
___________
<FN>
See "Notes to Schedules of Investments" on page 9.
</FN>
</TABLE>
Page 7
Schedule of Investments
Target Small-Cap Portfolio, 4th Quarter 1999 Series
FT 361
At the Opening of Business on the
Initial Date of Deposit-September 30, 1999
<TABLE>
<CAPTION>
Number Percentage Market Cost of
of Ticker Symbol and of Aggregate Value per Securities to
Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
______ _______________________________________ ____________ ________ ____________
<C> <S> <C> <C> <C>
131 ACTL Actel Corporation 1.59% $18.063 $ 2,366
137 ATVI Activision, Inc. 1.64% 17.750 2,432
130 APEX Apex Inc. 1.59% 18.125 2,356
180 APPB Applebee's International, Inc. 4.01% 33.063 5,951
155 BFT Bally Total Fitness Holding Corporation 3.09% 29.625 4,592
97 BHE Benchmark Electronics, Inc. 2.21% 33.875 3,286
83 EWB E.W. Blanch Holdings, Inc. 3.59% 64.188 5,328
362 CLST CellStar Corporation 1.80% 7.375 2,670
52 CHCS Chico's Fas, Inc. 0.94% 27.000 1,404
244 CHD Church & Dwight Co., Inc. 4.06% 24.750 6,039
205 CINR Cinar Corporation (Class B) (4) 4.09% 29.625 6,073
85 COO The Cooper Companies, Inc. 1.79% 31.313 2,662
168 CPRT Copart, Inc. 2.20% 19.500 3,276
63 CRDT Creditrust Corporation 0.98% 23.125 1,457
94 DSCP Datascope Corp. 2.21% 35.000 3,290
137 DRTE Dendrite International, Inc. 3.93% 42.625 5,840
121 ELK Elcor Corporation 2.04% 25.000 3,025
228 FM Foodmaker, Inc. 3.75% 24.438 5,572
86 FULL H.B. Fuller Company 3.40% 58.750 5,052
91 HAIN The Hain Food Group, Inc. 1.53% 24.938 2,269
155 HTCH Hutchinson Technology Incorporated 2.85% 27.313 4,234
258 IMP Imperial Bancorp 3.78% 21.750 5,611
156 INSUA Insituform Technologies, Inc. (Class A) 2.42% 23.000 3,588
82 KRON Kronos Incorporated 2.04% 37.000 3,034
272 LIPO The Liposome Company, Inc. 1.28% 7.000 1,904
140 LBFC Long Beach Financial Corporation 1.43% 15.188 2,126
159 MTW The Manitowoc Company, Inc. 3.58% 33.438 5,317
171 MTZ MasTec, Inc. 3.32% 28.813 4,927
130 NCOG NCO Group, Inc. 4.00% 45.750 5,947
77 OTRKB Oshkosh Truck Corporation 1.31% 25.250 1,944
177 PSUN Pacific Sunwear of California, Inc. 3.42% 28.688 5,078
95 PLXS Plexus Corporation 1.96% 30.688 2,915
243 PDS Precision Drilling Corporation (4) 3.82% 23.375 5,680
121 PHCC Priority Healthcare Corporation (Class B) 2.21% 27.125 3,282
122 ROAD Roadway Express, Inc. 1.69% 20.563 2,509
115 SONC Sonic Corp. 2.21% 28.563 3,285
228 OWN Sunterra Corporation 1.73% 11.250 2,565
152 TSFW TSI International Software Ltd. 2.74% 26.813 4,076
107 URBN Urban Outfitters, Inc. 1.58% 22.000 2,354
85 OATS Wild Oats Markets, Inc. 2.19% 38.250 3,251
_______ __________
Total Investments 100% $148,567
======= ==========
___________
<FN>
See "Notes to Schedules of Investments" on page 9.
Page 8
NOTES TO SCHEDULES OF INVESTMENTS
(1) All Securities are represented by regular way contracts to purchase
such Securities which are backed by an irrevocable letter of credit
deposited with the Trustee. We entered into purchase contracts for the
Securities on September 30, 1999. Each Trust has a Mandatory Termination
Date of December 29, 2000.
(2) The cost of the Securities to a Trust represents the aggregate
underlying value with respect to the Securities acquired-generally
determined by the closing sale prices of the Securities on the
applicable exchange (where applicable, converted into U.S. dollars at
the offer side of the exchange rate at the Evaluation Time) at the
Evaluation Time on September 29, 1999, the business day prior to the
Initial Date of Deposit. The valuation of the Securities has been
determined by the Evaluator, an affiliate of ours. The cost of the
Securities to us and our loss (which is the difference between
the cost of the Securities to us and the cost of the Securities to a
Trust) are set forth below:
Cost of Securities Profit
to Sponsor (Loss)
___________ ________
European Target 20 Portfolio, 4th Quarter 1999 Series $149,840 (1,396)
Target Small-Cap Portfolio, 4th Quarter 1999 Series 149,022 (455)
(3) Current Dividend Yield for each Security was calculated by dividing
the most recent annualized ordinary dividend paid on a Security by that
Security's closing sale price at the Evaluation Time on the business day
prior to the Initial Date of Deposit.
(4)This Security represents the common stock of a foreign company which
trades directly on a U.S. national securities exchange.
</FN>
</TABLE>
Page 9
The FT Series
The FT Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created several similar
yet separate series of a unit investment trust which we have named the
FT Series. We designate each of these series of the FT Series with a
different series number. European Target 20 Portfolio, 4th Quarter 1999
Series and Target Small-Cap Portfolio, 4th Quarter 1999 Series are each
a separate portfolio or series of FT 361.
YOU MAY GET MORE SPECIFIC DETAILS CONCERNING THE NATURE, STRUCTURE AND
RISKS OF THIS PRODUCT IN AN "INFORMATION SUPPLEMENT" BY CALLING THE
TRUSTEE AT 1-800-682-7520.
Mandatory Termination Date.
The Trusts will terminate on the Mandatory Termination Date set forth in
"Summary of Essential Information." Each Trust was created under the
laws of the State of New York according to a Trust Agreement (the
"Indenture") dated the Initial Date of Deposit. This agreement, entered
into between Nike Securities L.P., as Sponsor, The Chase Manhattan Bank
as Trustee and First Trust Advisors L.P. as Portfolio Supervisor and
Evaluator, governs the operation of the Trusts.
How We Created the Trusts.
On the Initial Date of Deposit, we deposited 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").
With our deposit of Securities on the Initial Date of Deposit we
established a percentage relationship among the Securities in each
Trust's portfolio, as stated under "Schedule of Investments" for each
Trust. After the Initial Date of Deposit, we may deposit additional
Securities in a Trust, or cash (including a letter of credit) with
instructions to buy more Securities, to create new Units for sale. If we
create additional Units, we will attempt, to the extent practicable, to
maintain the percentage relationship established among the Securities on
the Initial Date of Deposit, and not the percentage relationship
existing on the day we are creating Units, since the two may differ.
This difference may be due to the sale, redemption or liquidation of any
of the Securities.
Since the prices of the Securities will fluctuate daily, the ratio of
Securities in a Trust, on a market value basis, will also change daily.
The portion of Securities represented by each Unit will not change as a
result of the deposit of additional Securities or cash in a Trust. If we
deposit cash, you and new investors may experience a dilution of your
investment. This is because prices of Securities will fluctuate between
the time of the cash deposit and the purchase of the Securities, and
because the Trust pays the associated brokerage fees. To reduce this
dilution, the Trusts will try to buy the Securities as close to the
Evaluation Time and as close to the evaluation price as possible.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may retain and pay us (or our affiliate) to act as agent for a
Trust to buy Securities. If we or an affiliate of ours act as agent to a
Trust we will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Securities may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. 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 a Trust. As the holder of the Securities, the
Trustee will vote all of the Securities and will do so based on our
instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in a Trust fails, unless we can purchase
substitute Securities ("Replacement Securities") we will refund to you
that portion of the purchase price and sales charge resulting from the
failed contract on the next Income Distribution Date. Any Replacement
Security a Trust acquires will be identical to those from the failed
contract.
Page 10
Portfolios
Objectives.
When you invest in a Trust you are purchasing a quality portfolio of
attractive common stocks in one convenient purchase. Certain of the
Trusts invest in stocks with high dividend yields. Investing in stocks
with high dividend yields may be effective in achieving a Trust's
investment objective because regular dividends are common for
established companies, and dividends have historically accounted for a
large portion of the total return on stocks. Because the Trusts' lives
are short (approximately 15 months), we cannot guarantee that a Trust
will achieve its objective or that a Trust will make money once expenses
are deducted.
Each Trust's investment objective is to provide an above-average total
return. The European Target 20 Portfolio, 4th Quarter 1999
Series seeks to meet its objective through a combination of capital
appreciation and dividend income, while the Target Small-Cap Portfolio,
4th Quarter 1999 Series seeks to meet its objective through capital
appreciation. As discussed below, each Trust follows a different
investment strategy to meet its objective.
Portfolio Strategies.
European Target 20 Portfolio Strategy.
Step 1: We rank the 120 largest companies based on market capitalization
which are headquartered in Austria, Belgium, Denmark, Finland, Germany,
Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland or the United Kingdom by dividend yield as of two
business days prior to the date of this prospectus.
Step 2: We select the 20 highest dividend-yielding stocks for the
European Target 20 Portfolio.
Target Small-Cap Portfolio Strategy.
Step 1: We select the stocks of all U.S. corporations which trade on the
NYSE, the American Stock Exchange ("AMEX") or The Nasdaq Stock Market
("Nasdaq") (excluding limited partnerships, American Depositary Receipts
and mineral and oil royalty trusts) as of two business days prior to the
date of this prospectus.
Step 2: We then select companies which have a market capitalization of
between $150 million and $1 billion and whose stock has an average daily
dollar trading volume of at least $500,000.
Step 3: We next select stocks with positive three-year sales growth.
Step 4: From there we select those stocks whose most recent annual
earnings are positive.
Step 5: We eliminate any stock whose price has appreciated by more than
75% in the last 12 months.
Step 6: We select the 40 stocks with the greatest price appreciation in
the last 12 months on a relative market capitalization basis (highest to
lowest) for the Target Small-Cap Portfolio.
For purposes of applying the Target Small-Cap Strategy, market
capitalization and average trading volume are based on 1996 dollars
which are periodically adjusted for inflation. All steps apply monthly
and rolling quarterly data instead of annual figures where possible.
Companies which, based on publicly available information as of two
business days prior to the date of this prospectus, are the subject of
an announced business combination which we expect will happen within six
months of date of this prospectus have been excluded from the Target
Small-Cap Strategy Portfolio.
Please note that we applied each strategy at a particular time. If we
create additional Units of a Trust after the Initial Date of Deposit we
will deposit the Securities originally selected by applying the strategy
at such time. This is true even if a later application of a strategy
would have resulted in the selection of different securities.
Risk Factors
Price Volatility. The European Target 20 Portfolio, 4th Quarter 1999
Series invests in the common stock of foreign companies, while the
Target Small-Cap Portfolio, 4th Quarter 1999 Series may invest in the
common stock of both domestic and foreign companies. The value of a
Trust's Units will fluctuate with changes in the value of these common
stocks. Common stock prices fluctuate for several reasons including
changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, or when
political or economic events affecting the issuers occur.
Page 11
Because the Trusts are not managed, the Trustee will not sell stocks in
response to or in anticipation of market fluctuations, as is common in
managed investments. As with any investment, we cannot guarantee that
the performance of 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.
The European Target 20 Portfolio, 4th Quarter 1999 Series, which uses
dividend yield as a selection criteria, employs a contrarian strategy in
which the Securities selected share qualities that have caused them to
have lower share prices or higher dividend yields than other common
stocks in their peer group. There is no assurance that negative factors
affecting the share price or dividend yield of these Securities will be
overcome over the life of the Trust or that these Securities will
increase in value.
The Target Small-Cap Portfolio, 4th Quarter 1999 Series is concentrated
in Securities 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 Securities will
declare dividends in the future or that if declared they will either
remain at current levels or increase over time.
Financial Institutions Industry. The European Target 20 Portfolio is
concentrated in the stock of financial institutions. Such institutions
are especially subject to the adverse effects of economic recession;
volatile interest rates; portfolio concentrations in geographic markets
and in commercial and residential real estate loans; and competition
from new entrants in their fields of business. In addition, financial
institutions are extensively regulated and may be adversely affected by
increased or changing regulations.
Financial institutions face increased competition from nontraditional
lending sources as regulatory changes permit new entrants to offer
various financial products. Technological advances such as the Internet
allow these nontraditional lending sources to cut overhead and permit
the more efficient use of customer data.
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 these issuers may negatively impact
the share prices of these Securities. We cannot predict what impact any
pending or threatened litigation will have on the share prices of the
Securities.
Year 2000 Problem. Many computer systems were not designed to properly
process information and data involving dates of January 1, 2000 and
thereafter. This is commonly known as the "Year 2000 Problem." We do not
expect that any of the computer system changes necessary to prepare for
January 1, 2000 will cause any major operational difficulties for the
Trusts. However, we are unable to predict what impact the Year 2000
Problem will have on any of the issuers of the Securities, but you
should note that foreign issuers may have greater difficulties than
other issuers.
Foreign Stocks. All of the Securities in the European Target 20
Portfolio, 4th Quarter 1999 Series, and certain of the Securities in the
Target Small-Cap Portfolio, 4th Quarter 1999 Series, are issued by
foreign companies, which makes the Trusts subject to more risks than if
they invested solely in domestic common stocks. 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; lack of liquidity of certain foreign
markets; and less government supervision and regulation of exchanges,
brokers, and issuers in foreign countries.
The purchase and sale of the foreign Securities will generally occur
only in foreign securities markets. Although we do not believe that the
Trusts will have problems buying and selling these Securities, certain
of the factors stated above may make it impossible to buy or sell them
in a timely manner. Custody of certain of the Securities in the European
Target 20 Portfolio is maintained by Cedel Bank S.A., a global custody
and clearing institution which has entered into a sub-custodian
relationship with the Trustee.
Page 12
United Kingdom. The European Target 20 Portfolio, 4th Quarter 1999
Series is concentrated in common stocks of U.K. issuers. The United
Kingdom is one of 15 members of the European Union ("EU") which was
formed by the Maastricht Treaty on European Union. It is expected that
the Treaty will have the effect of eliminating most remaining trade
barriers between the member nations and make Europe one of the largest
common markets in the world. However, the uncertain implementation of
the Treaty provisions and recent rapid political and social change
throughout Europe make the extent and nature of future economic
development in the United Kingdom and Europe and their effect on
Securities issued by U.K. issuers impossible to predict.
Unlike a majority of EU members, the United Kingdom did not convert its
currency to the new common European currency, the euro, on January 1,
1999. All companies with significant markets or operations in Europe
face strategic challenges as these entities adapt to a single currency.
The euro conversion may materially impact revenues, expenses or income;
increase competition; affect issuers' currency exchange rate risk and
derivatives exposure; cause issuers to increase spending on information
technology updates; and result in potentially adverse tax consequences.
We cannot predict when or if the United Kingdom will convert to the euro
or what impact the implementation of the euro throughout a majority of
EU countries will have on U.K. or European issuers.
Exchange Rates. Because securities of foreign issuers generally pay
dividends and trade in foreign currencies, the U.S. dollar value of
these Securities (and therefore Units of the Trusts) will vary with
fluctuations in foreign exchange rates. Most foreign currencies have
fluctuated widely in value against the U.S. dollar for various economic
and political reasons. The recent conversion by eleven of the fifteen EU
members of their national currencies to the euro could negatively impact
the market rate of exchange between such currencies (or the newly
created euro) and the U.S. dollar.
To determine the value of foreign Securities or their dividends, the
Evaluator will estimate current exchange rates for the relevant
currencies based on activity in the various currency exchange markets.
However, these markets can be quite volatile, depending on the activity
of the large international commercial banks, various central banks,
large multi-national corporations, speculators and other buyers and
sellers of foreign currencies. Since actual foreign currency
transactions may not be instantly reported, the exchange rates estimated
by the Evaluator may not reflect the amount the Trusts would receive, in
U.S. dollars, had the Trustee sold any particular currency in the market.
Hypothetical Performance Information
The following table compares hypothetical performance information for
the strategies employed by each Trust and the actual performance of the
Ibbotson Small-Cap Index and MSCI Europe Index in each of the full years
listed below (and as of the most recent quarter).
These hypothetical returns should not be used to predict future
performance of the Trusts. Returns from a Trust will differ from its
strategy for several reasons, including the following:
- - Total Return figures shown do not reflect sales charges, commissions,
Trust expenses or taxes.
- - Strategy returns are for calendar years (and through the most recent
quarter), while the Trusts begin and end on various dates.
- - Trusts have a maturity longer than one year.
- - Trusts may not be fully invested at all times or equally weighted in
all stocks comprising a strategy.
- - Securities are often purchased or sold at prices different from the
closing prices used in buying and selling Units.
- - For Trusts investing in foreign Securities, currency exchange rates
may differ.
You should note that the Trusts are not designed to parallel movements
in any index or combination of indexes, and it is not expected that they
will do so. In fact, each Trust's strategy underperformed its
comparative index, or combination thereof, in certain years and we
cannot guarantee that a Trust will outperform its respective index over
the life of a Trust or over consecutive rollover periods, if available.
Each index differs widely in size and focus, as described below.
Ibbotson Small-Cap Index. The Ibbotson Small-Cap Index is a market
capitalization weighted index of the ninth and tenth deciles of the New
York Stock Exchange, plus stocks listed on the American Stock Exchange
Page 13
and over-the-counter with the same or less capitalization as the upper
bound of the NYSE ninth decile.
MSCI Europe Index. The MSCI Europe Index is an equity market
capitalization weighted index consisting of over 500 companies from all
of the developed markets in Europe.
Page 14
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURN(2)
Hypothetical Strategy
Total Returns(1) Index Total Returns
__________________ __________________
European Target MSCI Ibbotson
Target 20 Small-Cap Europe Small-Cap
Year Strategy Strategy Index Index
______ ______ ______ ______
<S> <C> <C> <C> <C>
1972 12.66% 4.43%
1973 -25.02% -30.90%
1974 -34.85% -19.95%
1975 40.13% 52.82%
1976 45.70% 57.38%
1977 16.22% 25.38%
1978 17.53% 23.46%
1979 40.78% 43.46%
1980 61.97% 38.88%
1981 -9.46% 13.88%
1982 51.26% 28.01%
1983 31.04% 39.67%
1984 2.00% -1.10% 1.26% -6.67%
1985 79.54% 50.81% 79.79% 24.66%
1986 42.53% 23.35% 44.46% 6.85%
1987 14.86% 14.94% 4.10% -9.30%
1988 16.77% 23.19% 16.35% 22.87%
1989 33.09% 26.10% 29.06% 10.18%
1990 -0.49% 1.08% -3.37% -21.56%
1991 16.59% 59.55% 13.66% 44.63%
1992 -4.03% 27.81% -4.25% 23.35%
1993 37.38% 22.47% 29.79% 20.98%
1994 -0.51% 2.11% 2.66% 3.11%
1995 34.71% 41.65% 22.13% 34.66%
1996 24.35% 34.96% 21.57% 17.62%
1997 28.91% 16.66% 24.20% 22.78%
1998 35.77% 1.85% 28.80% -7.38%
1999 22.11% -10.18% -2.43% 7.16%
(thru
9/30)
________________
<FN>
(1) The Strategy stocks for each Strategy for a given year consist of the
common stocks selected by applying the respective Strategy as of the
beginning of the period.
(2) Total Return represents the sum of the change in market value of each
group of stocks between the first and last trading day of a period plus
the total dividends paid on each group of stocks during such period
divided by the opening market value of each group of stocks as of the
first trading day of a period. Total Return figures assume that all
dividends are reinvested semi-annually and all returns are stated in
terms of U.S. dollars. Based on the year-by-year returns contained in
the table, over the full years as listed above, the European Target 20
Strategy and the Target Small-Cap Strategy achieved an average annual
total return of 22.42% and 19.43%, respectively. In addition, over this
period, each individual strategy achieved a greater average annual total
return than that of its corresponding index, the MSCI Europe Index and
the Ibbotson Small-Cap Index, which were 19.05% and 14.83%, respectively.
</FN>
</TABLE>
Page 15
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the price per Unit 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 (which combines an initial up-front sales
charge and a deferred sales charge).
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the prices of the Securities, changes in the
relevant currency exchange rates, changes in the applicable commissions,
stamp taxes, custodial fees and other costs associated with foreign
trading, and changes in the value of the Income and/or Capital Accounts.
Securities purchased with the portion of the Public Offering Price
intended to be used to reimburse the Sponsor for a Trust's organization
costs (including costs of preparing the registration statement, the
Indenture and other closing documents, registering Units with the
Securities and Exchange Commission ("SEC") and states, the initial audit
of each Trust portfolio, legal fees and the initial fees and expenses of
the Trustee) will be purchased in the same proportionate relationship as
all the Securities contained in a Trust. Securities will be sold to
reimburse the Sponsor for a Trust's organization costs at the end of the
initial offering period (a significantly shorter time period than the
life of the Trusts). During the initial offering period, there may be a
decrease in the value of the Securities. To the extent the proceeds from
the sale of these Securities are insufficient to repay the Sponsor for
Trust organization costs, the Trustee will sell additional Securities to
allow a Trust to fully reimburse the Sponsor. In that event, the net
asset value per Unit of a Trust will be reduced by the amount of
additional Securities sold. Although the dollar amount of the
reimbursement due to the Sponsor will remain fixed and will never exceed
the per Unit amount set forth for a Trust in "Statements of Net Assets,"
this will result in a greater effective cost per Unit to Unit holders
for the reimbursement to the Sponsor. To the extent actual organization
costs are less than the estimated amount, only the actual organization
costs will be deducted from the assets of a Trust. When Securities are
sold to reimburse the Sponsor for organization costs, the Trustee will
sell Securities, to the extent practicable, which will maintain the same
proportionate relationship among the Securities contained in a Trust as
existed prior to such sale.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Minimum Purchase.
The minimum amount you can purchase of a Trust is $1,000 worth of Units
($500 if you are purchasing Units for your Individual Retirement Account
or any other qualified retirement plan).
Sales Charges.
The sales charge you will pay has both an initial and a deferred
component. The initial sales charge, which you will pay at the time of
purchase, is initially equal to approximately 1.00% of the Public
Offering Price of a Unit. This initial sales charge is actually equal to
the difference between the maximum sales charge of 2.75% and the maximum
remaining deferred sales charge (initially $.175 per Unit) and will vary
from 1.00% with changes in the aggregate underlying value of the
Securities, changes in the Income and Capital Accounts and as deferred
sales charge payments are made. In addition, ten monthly deferred sales
charges of $.0175 per Unit will be deducted from a Trust's assets on
approximately the twentieth day of each month from January 20, 2000
through October 20, 2000. The maximum sales charge you will pay during
the initial offering period will be 2.75% of the Public Offering Price
per Unit (equivalent to 2.778% of the net amount invested, exclusive of
the deferred sales charge).
Discounts for Certain Persons.
If you invest at least $50,000 (except if you are purchasing for a "wrap
Page 16
fee account" as described below) the maximum sales charge is reduced, as
follows:
If you invest(in thousands)* Your maximum
sales charge
will be
_______________ ____________
$50 but less than $100 2.50%
$100 but less than $150 2.25%
$150 but less than $500 1.90%
$500 but less than $1,000 1.75%
$1,000 or more 1.00%
*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 can combine the Units you purchase
of the Trusts in this prospectus with any other same day purchases of
other trusts for which we are Principal Underwriter and are currently in
the initial offering period. In addition, we will also consider Units
you purchase in the name of your spouse or child under 21 years of age
to be purchases by you. The reduced sales charges will also apply to a
trustee or other fiduciary purchasing Units for a single trust estate or
single fiduciary account. You must inform your dealer of any combined
purchases before the sale in order to be eligible for the reduced sales
charge. Any reduced sales charge is the responsibility of the
broker/dealer or other selling agent making the sale.
If you commit to purchase Units of the Trusts, or subsequent series of
the Trusts, valued at $1,000,000 or more over a 12-month period,
commencing with your first purchase you will receive the reduced sales
charge set forth above on all individual purchases over $83,000.
If you purchase Units with rollover proceeds from a previous series of a
Trust, you will be subject only to the maximum deferred sales charge on
such Units (for rollover purchases of $1,000,000 or more, the charge
will be a deferred sales charge limited to 1.00% of the Public Offering
Price), but you will not be eligible to receive the reduced sales
charges described in the above table. In addition, you can use
termination proceeds from other unit investments trusts with a similar
strategy as a Trust, or redemption or termination proceeds from any unit
investment trust we sponsor, to purchase Units of the Trusts subject
only to any remaining deferred sales charge. Please note that you will
be charged the amount of any remaining deferred sales charge on Units
you redeem when you redeem them.
The following persons may purchase Units at the Public Offering Price
less the applicable dealer concession:
- - Employees, officers and directors of the Sponsor, our related
companies, dealers and their affiliates, and vendors providing services
to us.
- - Immediate family members of the above (spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law and daughters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons).
The Sponsor and certain dealers may establish a schedule where
employees, officers and directors of such dealers can purchase Units of
a Trust at the Public Offering Price less the established schedule
amount, which is designed to compensate such dealers for activities
relating to the sale of Units (the "Employee Dealer Concession").
If you purchase Units through registered broker/dealers who charge
periodic fees for financial planning, investment advisory or asset
management services or provide these services as part of an investment
account where a comprehensive "wrap fee" charge is imposed, you may
purchase Units at the Public Offering Price, subject only to the
Sponsor's retention of the sales charge. See "Distribution of Units-
Dealer Concessions."
You will be charged the deferred sales charge per Unit regardless of any
discounts. However, if you are eligible to receive a discount such that
the maximum sales charge you must pay is less than the applicable
maximum deferred sales charge, you will be credited the difference
between your maximum sales charge and the maximum deferred sales charge
at the time you buy your Units.
The Value of the Securities.
The 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
Page 17
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 ask 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 ask prices on the over-the-counter
market (unless it is determined that these prices are not appropriate as
a basis for valuation). If current ask prices are unavailable, the
valuation is generally determined:
a) On the basis of current ask prices for comparable securities;
b) By appraising the value of the Securities on the ask side of the
market; or
c) By any combination of the above.
The total value of the Securities in the European Target 20 Portfolio
during the initial offering period is computed on the basis of the
offering side value of the relevant currency exchange rate expressed in
U.S. dollars as of the Evaluation Time.
After the initial offering period is over, the aggregate underlying
value of the Securities will be determined as set forth above, except
that bid prices are used instead of ask prices when necessary. In
addition, during this period the aggregate underlying value of the
Securities is computed on the basis of the bid side value of the
relevant currency exchange rate expressed in U.S. dollars as of the
Evaluation Time.
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 and other selling agents can purchase Units at prices which
reflect a concession or agency commission of 2.25% of the Public
Offering Price per Unit. However, this amount will be reduced to $0.13
per Unit on purchases by Rollover Unit holders or on the sale of Units
subject only to any remaining deferred sales charge. In addition,
dealers and other selling agents will receive a maximum concession of up
to $0.10 per Unit on purchases of Units resulting from the automatic
reinvestment of income or capital distributions into additional Units.
Dealers and other selling agents who sell Units of a Trust during the
initial offering period in the dollar amounts shown below will be
entitled to the following additional sales concessions as a percentage
of the Public Offering Price:
Total sales per Trust (in millions) Additional
Concession
_____________________ ___________
$ 15 but less than $25 0.015%
$ 25 but less than $40 0.025%
$ 40 but less than $50 0.050%
$ 50 but less than $75 0.125%
$ 75 but less than $100 0.150%
$100 or more 0.200%
Dealers and other selling agents who, during any consecutive 12-month
period, sell at least $2 billion worth of primary market units of unit
investment trusts sponsored by us will receive a concession of $30,000
in the month following the achievement of this level. We reserve the right
to change the amount of concessions or agency commissions from time to
time. If we reacquire, or the Trustee redeems, Units from brokers, dealers
or other selling agents while a market is being maintained for such Units,
such entities agree to immediately repay to us any concession or agency
commission relating to the reacquired Units. 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 our
dealers' registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trusts. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
Page 18
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 a Trust (which
may show performance net of the expenses and charges a Trust would have
incurred) and returns over specified periods of other similar trusts we
sponsor in our advertising and sales materials, with (1) returns on
other taxable investments such as the common stocks comprising various
market indices, corporate or U.S. Government bonds, bank CDs and money
market accounts or funds, (2) performance data from Morningstar
Publications, Inc. or (3) information from publications such as Money,
The New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. The investment characteristics of each Trust 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 for each Trust less any reduced sales charge as stated
in "Public Offering." Also, any difference between our cost to purchase
the Securities and the price at which we sell them to a Trust is
considered a profit or loss (see Note 2 of "Notes to Schedules of
Investments"). During the initial offering period, dealers and others
may also realize profits or sustain losses as a result of fluctuations
in the Public Offering Price they receive when they sell the Units.
In maintaining a market for 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
after the initial offering period and continuously offer to purchase
Units at prices based on the Redemption Price per Unit.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees and Trustee costs to transfer and record the ownership of
Units. We may discontinue purchases of Units at any time. IF YOU WISH TO
DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET PRICES
BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. If you sell or
redeem your Units before you have paid the total deferred sales charge
on your Units, you will have to pay the remainder at that time.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid 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 we
hold to the Trustee for redemption as any other Units. If we elect not
to purchase Units, the Trustee may sell tendered Units in the over-the-
counter market, if any. However, the amount you will receive is the same
as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trusts are listed under "Fee
Table." If actual expenses of a Trust exceed the estimate, that Trust
will bear the excess. The Trustee will pay operating expenses of the
Trusts from the Income Account of a 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. First Trust Advisors L.P., an affiliate of ours,
acts as both Portfolio Supervisor and Evaluator to the Trusts and will
receive the fees set forth under "Fee Table" for providing portfolio
supervisory and evaluation services to the Trusts. In providing
portfolio supervisory services, the Portfolio Supervisor may purchase
Page 19
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, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fee 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 service in such year.
In addition to a Trust's operating expenses, and the fees described
above, the Trusts may also incur the following charges:
- - All legal 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;
- - Foreign custodial and transaction fees, if any; 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
a Trust. Since the Securities are all common stocks and dividend income
is unpredictable, we cannot guarantee that dividends will be sufficient
to meet any or all expenses of a Trust. If there is not enough cash in
the Income or Capital Accounts of a Trust, 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."
Tax Status
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trusts. This section is current as
of the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe your state or foreign taxes. As
with any investment, you should consult your own tax professional about
your particular consequences.
Trust Status.
The Trusts will not be taxed as corporations for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of the Securities and other assets held by a Trust, and as
such you will be considered to have received a pro rata share of income
(i.e., dividends and capital gains, if any) from each Security when such
income is considered to be received by a Trust. This is true even if you
elect to have your distributions automatically reinvested into
additional Units. In addition, the income from the Trust which you must
take into account for federal income tax purposes is not reduced for
amounts used to pay a deferred sales charge.
Your Tax Basis and Income or Loss Upon Disposition.
If your Trust disposes of Securities, you will generally recognize gain
or loss. If you dispose of your Units or redeem your Units for cash, you
will also generally recognize gain or loss. To determine the amount of
this gain or loss, you must subtract your tax basis in the related
Securities from your share of the total proceeds received in the
transaction. You can generally determine your initial tax basis in each
Security or other Trust asset by apportioning the cost of your Units,
generally including sales charges, among each Security or other Trust
asset ratably according to their value on the date you purchase your
Units. In certain circumstances, however, you may have to adjust your
tax basis after you purchase your Units (for example, in the case of
certain dividends that exceed a corporation's accumulated earnings and
profits).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the lowest
tax bracket). Net capital gain equals net long-term capital gain minus
net short-term capital loss for the taxable year. Capital gain or loss
Page 20
is long-term if the holding period for the asset is more than one year
and is short-term if the holding period for the asset is one year or
less. You must exclude the date you purchase your Units to determine the
holding period of your Units. The tax rates for capital gains realized
from assets held for one year or less are generally the same as for
ordinary income. The Tax Code may, however, treat certain capital gains
as ordinary income in special situations.
Rollovers.
If you elect to have your proceeds from a Trust rolled over into the
next series of such Trust, it is considered a sale for federal income
tax purposes, and any gain on the sale will be treated as a capital
gain, and any loss will be treated as a capital loss. However, any loss
you incur in connection with the exchange of your Units of a Trust for
units of the next series will generally be disallowed with respect to
this deemed sale and subsequent deemed repurchase, to the extent the two
trusts have identical Securities under the wash sale provisions of the
Internal Revenue Code.
In-Kind Distributions.
Under certain circumstances, you may request a distribution of shares of
Securities (an "In-Kind Distribution") from the Target Small-Cap
Portfolio when you redeem your Units or at the Trust's termination. If
you request an In-Kind Distribution you will be responsible for any
expenses related to this distribution. By electing to receive an In-Kind
Distribution, you will receive an undivided interest in whole shares of
stock plus, possibly, cash.
You will not recognize gain or loss if you only receive Securities in
exchange for your pro rata portion of the Securities held by the Trust.
However, if you also receive cash in exchange for a fractional share of
a Security held by such Trust, you will generally recognize gain or loss
based on the difference between the amount of cash you receive and your
tax basis in such fractional share of the Security.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes you must take into account
your full pro rata share of a Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by a Trust to the same extent as if you directly
paid the expense. You may, however, be required to treat some or all of
the expenses of a Trust as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Foreign, State and Local Taxes.
Distributions by a Trust that are treated as U.S. source income (e.g.,
dividends received on Securities of domestic corporations) will
generally be subject to U.S. income taxation and withholding in the case
of Units held by non-resident alien individuals, foreign corporations or
other non-U.S. persons, subject to any applicable treaty. However,
distributions by a Trust that are derived from dividends of Securities
of a foreign corporation and that are not effectively connected to your
conduct of a trade or business within the United States will generally
not be subject to U.S. income taxation and withholding in the case of
Units held by non-resident alien individuals, foreign corporations or
other U.S. persons, provided that less than 25 percent of the gross
income of the foreign corporation over the three-year period ending with
the close of the taxable year preceding payment was effectively
connected to the conduct of a trade or business within the United States.
Some distributions by a Trust may be subject to foreign withholding
taxes. Any dividends withheld will nevertheless be treated as income to
you. However, because you are deemed to have paid directly your share of
foreign taxes that have been paid or accrued by a Trust, you may be
entitled to a foreign tax credit or deduction for U.S. tax purposes with
respect to such taxes.
Under the existing income tax laws of the State and City of New York,
the Trusts will not be taxed as corporations, and the income of the
Trusts will be treated as the income of the Unit holders in the same
manner as for federal income tax purposes. You should consult your tax
advisor regarding potential foreign, state or local taxation with
respect to your Units.
Retirement Plans
You may purchase Units of the Trusts for:
- - Individual Retirement Accounts;
- - Keogh Plans;
- - Pension funds; and
- - Other tax-deferred retirement plans.
Page 21
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
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 signature
guaranteed by an eligible institution. In certain cases the Trustee may
require additional documentation before they will transfer or redeem
your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- - A written initial transaction statement containing a description of
your Trust;
- - 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;
- - 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 a Trust. All other receipts,
such as return of capital, are credited to the Capital Account of a
Trust. Dividends received on foreign Securities, if any, are converted
into U.S. dollars at the applicable exchange rate.
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
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preceding Income Distribution Record Date. See "Summary of Essential
Information." 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, pay the deferred sales
charge 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. If the Trustee does not have your TIN, it is
required to withhold a certain percentage of your distribution and
deliver such amount to the Internal Revenue Service ("IRS"). You may
recover this amount by giving your TIN to the Trustee, or when you file
a tax return. However, you should check your statements to make sure the
Trustee has your TIN to avoid this "back-up withholding."
We anticipate that there will be enough money in the Capital Account of
a Trust to pay the deferred sales charge. If not, the Trustee may sell
Securities to meet the shortfall.
Within a reasonable time after a Trust is terminated, unless you are a
Rollover Unit holder, you will receive the pro rata share of the money
from the sale of the Securities. However, if you own Units of the Target
Small-Cap Portfolio, you may elect to receive an In-Kind Distribution as
described under "Amending or Terminating the Indenture." All Unit
holders will receive a pro rata share of any other assets remaining in
their 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 that Trust.
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. You will have to pay any remaining deferred sales charge on any
Units acquired pursuant to this distribution reinvestment option. This
option may not be available in all states. PLEASE NOTE THAT EVEN IF YOU
REINVEST DISTRIBUTIONS, THEY ARE STILL CONSIDERED DISTRIBUTIONS FOR
INCOME TAX PURPOSES.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by sending the
certificates representing the Units you want to redeem to the Trustee at
its unit investment trust office. If your Units are 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 of a Trust if funds are available for that
purpose, or from the Capital Account. All other amounts paid on
redemption will be taken from the Capital Account of a Trust. The IRS
will require the Trustee to withhold a portion of your redemption
proceeds if the Trustee does not have your TIN as generally discussed
under "Income and Capital Distributions."
If you tender 1,000 Units or more of the Target Small-Cap Portfolio for
redemption, 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
Page 23
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 of a Trust 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
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- - For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Income and Capital Accounts of a Trust not designated to
purchase Securities;
2. the aggregate underlying value of the Securities held in that 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 such Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of such Trust, if any;
4. cash held for distribution to Unit holders of record of such 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 such Trust; and
dividing
1. the result by the number of outstanding Units of such Trust.
Any remaining deferred sales charge on the Units when you redeem them
will be deducted from your redemption proceeds. In addition, during the
initial offering period, the Redemption Price per Unit will include
estimated organization costs as set forth under "Fee Table."
Investing in a New Trust
Each Trust's portfolio has been selected on the basis of capital
appreciation potential for a limited time period. When each Trust is
about to terminate, you may have the option to roll your proceeds into
the next series of a Trust (the "New Trusts") if one is available. We
intend to create the New Trusts in conjunction with the termination of
the Trusts and plan to apply the same strategy we used to select the
portfolio for the Trusts to the New Trusts.
If you wish to have the proceeds from your Units rolled into a New Trust
you must notify the Trustee in writing of your election by the Rollover
Notification Date stated in the "Summary of Essential Information." As a
Rollover Unit holder, your Units will be redeemed and the underlying
Securities sold by the Trustee, in its capacity as Distribution Agent,
during the Special Redemption and Liquidation Period. The Distribution
Agent may engage us or other brokers as its agent to sell the Securities.
Once all of the Securities are sold, your proceeds, less any brokerage
fees, governmental charges or other expenses involved in the sales, will
be used to buy units of a New Trust or trust with a similar investment
strategy that you have selected, provided such trusts are registered and
being offered. Accordingly, proceeds may be uninvested for up to several
days. Units purchased with rollover proceeds will generally be purchased
subject only to the maximum remaining deferred sales charge on such
units (currently expected to be $.175 per unit).
We intend to create New Trust units as quickly as possible, depending on
the availability of the Securities contained in a New Trust's portfolio.
Rollover Unit holders will be given first priority to purchase New Trust
units. We cannot, however, assure the exact timing of the creation of
Page 24
New Trust units or the total number of New Trust units we will create.
Any proceeds not invested on behalf of Rollover Unit holders in New
Trust units will be distributed within a reasonable time after such
occurrence. Although we believe that enough New Trust units can be
created, monies in a New Trust may not be fully invested on the next
business day.
Please note that there are certain tax consequences associated with
becoming a Rollover Unit holder. See "Tax Status." If you elect not to
participate as a Rollover Unit holder ("Remaining Unit holders"), you
will not incur capital gains or losses due to the Special Redemption and
Liquidation, nor will you be charged any additional sales charge. We may
modify, amend or terminate this rollover option upon 60 days notice.
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; or
- - The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to a Trust.
Except in the limited instance in which a Trust acquires Replacement
Securities, as described in "The FT Series," a Trust may not acquire any
securities or other property other than the Securities. The Trustee, on
behalf of a Trust, will reject any offer for new or exchanged securities
or property in exchange for a Security, such as those acquired in a
merger or other transaction. If such exchanged securities or property
are nevertheless acquired by a Trust, at our instruction they will
either be sold or held in such Trust. In making the determination as to
whether to sell or hold the exchanged securities or property we may get
advice from the Portfolio Supervisor. Any proceeds received from the
sale of Securities, exchanged securities or property will be credited to
the Capital Account of a Trust for 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 the Trusts 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 the Trusts' portfolio
transactions, or when acting as agent for the Trusts in acquiring or
selling Securities on behalf of the Trusts.
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, each Trust will terminate on
the Mandatory Termination Date. A Trust may be terminated prior to the
Mandatory Termination Date:
Page 25
- - Upon the consent of 100% of the Unit holders;
- - If the value of the Securities owned by such 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. If a Trust is terminated due to this last reason,
we will refund your entire sales charge; however, termination of a Trust
before the Mandatory Termination Date for any other stated reason will
result in all remaining unpaid deferred sales charges on your Units
being deducted from your termination proceeds. For various reasons,
including Unit holders' participation as Rollover Unit holders, 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 own at least 1,000 Units of the Target Small-Cap Portfolio the
Trustee will send you a form at least 30 days prior to the Mandatory
Termination Date which will enable you to receive an In-Kind
Distribution of Securities (reduced by customary transfer and
registration charges) rather than the typical cash distribution. 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 either the Rollover Option
or 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 your
Trust is terminated. Regardless of the distribution involved, the
Trustee will deduct from a Trust 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 $25 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1998, the total partners' capital of
Nike Securities L.P. was $18,506,548 (audited).
This information refers only to 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.
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
Page 26
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; 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 Trust; 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, at the
opening of business on the Initial Date of Deposit, as set forth in
their report. We've included the Trusts' statements of net assets,
including the schedules of investments, in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
Page 27
FIRST TRUST(registered trademark)
European Target 20 Portfolio, 4th Quarter 1999 Series
Target Small-Cap Portfolio, 4th Quarter 1999 Series
FT 361
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
________________________
When Units of the Trusts are no longer available, this prospectus may be
used as a preliminary prospectus for a future series, in which case you
should note the following:
THE INFORMATION IN THE PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL, OR ACCEPT OFFERS TO BUY, SECURITIES OF A FUTURE SERIES
UNTIL THAT SERIES HAS BECOME EFFECTIVE WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO SECURITIES CAN BE SOLD IN ANY STATE WHERE A SALE WOULD BE
ILLEGAL.
________________________
This prospectus contains information relating to the two unit investment
trusts listed above, but does not contain all of the information about
this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- - Securities Act of 1933 (file no. 333-83947) and
- - Investment Company Act of 1940 (file no. 811-05903)
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W., Washington, D.C. 20549-6009
Call: 1-800-SEC-0330
Visit: http://www.sec.gov
September 30, 1999
As amended October 1, 1999
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 28
First Trust (registered trademark)
TARGET PORTFOLIO SERIES
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of unit investment trusts ("Trusts")
contained in Target Portfolio Series not found in the prospectus for the
Trusts. This Information Supplement is not a prospectus and does not
include all of the information that a prospective investor should
consider before investing in a Trust. This Information Supplement should
be read in conjunction with the prospectus for the Trust in which an
investor is considering investing.
This Information Supplement is dated September 30, 1999. Capitalized
terms have been defined in the prospectus.
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Risk Factors 1
Securities 1
Dividends 1
Foreign Issuers 2
United Kingdom 3
Exchange Rate 3
Concentrations 6
Banks and Thrifts 6
Small-Cap Companies 7
Portfolios 8
Equity Securities Selected for European Target 20 Portfolio, 4th Quarter 1999 Series 8
Equity Securities Selected for Target Small-Cap Portfolio, 4th Quarter 1999 Series 9
</TABLE>
Risk Factors
Securities. An investment in Units should be made with an understanding
of the risks which an investment in common stocks entails, including the
risk that the financial condition of the issuers of the Securities or
the general condition of the relevant stock market may worsen, and the
value of the Securities and therefore the value of the Units may
decline. Common stocks are especially susceptible to general stock
market movements and to volatile increases and decreases of value, as
market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors, including expectations
regarding government, economic, monetary and fiscal policies, inflation
and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Both U.S. and foreign
markets have experienced substantial volatility and significant declines
recently as a result of certain or all of these factors. From September
30, 1997 through October 30, 1997, amid record trading volume, the S&P
500 Index, DJIA, FT Index and Hang Seng Index declined 4.60%, 7.09%,
6.19% and 31.14%, respectively. In addition, against a backdrop of
continued uncertainty regarding the current global currency crisis and
falling commodity prices, during the period between July 31, 1998 and
September 30, 1998, the S&P 500, DJIA and FT Index declined by 8.97%,
11.32% and 17.80%, respectively, while the Hang Seng Index increased .20%.
Dividends. Shareholders of common stocks have rights to receive payments
from the issuers of those common stocks that are generally subordinate
to those of creditors of, or holders of debt obligations or preferred
stocks of, such issuers. Shareholders of common stocks of the type held
by the Trusts have a right to receive dividends only when and if, and in
the amounts, declared by the issuer's board of directors and have a
right to participate in amounts available for distribution by the issuer
only after all other claims on the issuer have been paid or provided
for. Common stocks do not represent an obligation of the issuer and,
Page 1
therefore, do not offer any assurance of income or provide the same
degree of protection of capital as do debt securities. The issuance of
additional debt securities or preferred stock will create prior claims
for payment of principal, interest and dividends which could adversely
affect the ability and inclination of the issuer to declare or pay
dividends on its common stock or the rights of holders of common stock
with respect to assets of the issuer upon liquidation or bankruptcy.
Cumulative preferred stock dividends must be paid before common stock
dividends, and any cumulative preferred stock dividend omitted is added
to future dividends payable to the holders of cumulative preferred
stock. Preferred stockholders are also generally entitled to rights on
liquidation which are senior to those of common stockholders.
Foreign Issuers. Since certain or all of the Securities included in the
Trusts consist of securities of foreign issuers, an investment in such
Trusts involves certain investment risks that are different in some
respects from an investment in a trust which invests entirely in the
securities of domestic issuers. These investment risks include future
political or governmental restrictions which might adversely affect the
payment or receipt of payment of dividends on the relevant Securities,
the possibility that the financial condition of the issuers of the
Securities may become impaired or that the general condition of the
relevant stock market may worsen (both of which would contribute
directly to a decrease in the value of the Securities and thus in the
value of the Units), the limited liquidity and relatively small market
capitalization of the relevant securities market, expropriation or
confiscatory taxation, economic uncertainties and foreign currency
devaluations and fluctuations. In addition, for foreign issuers that are
not subject to the reporting requirements of the Securities Exchange Act
of 1934, there may be less publicly available information than is
available from a domestic issuer. Also, foreign issuers are not
necessarily subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those
applicable to domestic issuers. The securities of many foreign issuers
are less liquid and their prices more volatile than securities of
comparable domestic issuers. In addition, fixed brokerage commissions
and other transaction costs on foreign securities exchanges are
generally higher than in the United States and there is generally less
government supervision and regulation of exchanges, brokers and issuers
in foreign countries than there is in the United States. However, due to
the nature of the issuers of the Securities selected for the Trusts, the
Sponsor believes that adequate information will be available to allow
the Supervisor to provide portfolio surveillance for such Trusts.
Securities issued by non-U.S. issuers generally pay dividends in foreign
currencies and are principally traded in foreign currencies. Therefore,
there is a risk that the United States dollar value of these securities
will vary with fluctuations in the U.S. dollar foreign exchange rates
for the various Securities. See "Exchange Rate" below.
On the basis of the best information available to the Sponsor at the
present time, none of the Securities in the Trusts are subject to
exchange control restrictions under existing law which would materially
interfere with payment to such Trusts of dividends due on, or proceeds
from the sale of, the Securities. However, there can be no assurance
that exchange control regulations might not be adopted in the future
which might adversely affect payment to such a Trust. The adoption of
exchange control regulations and other legal restrictions could have an
adverse impact on the marketability of international securities in the
Trusts and on the ability of such Trusts to satisfy their obligation to
redeem Units tendered to the Trustee for redemption. In addition,
restrictions on the settlement of transactions on either the purchase or
sale side, or both, could cause delays or increase the costs associated
with the purchase and sale of the foreign Securities and correspondingly
could affect the price of the Units.
Investors should be aware that it may not be possible to buy all
Securities at the same time because of the unavailability of any
Security, and restrictions applicable to a Trust relating to the
purchase of a Security by reason of the federal securities laws or
otherwise.
Foreign securities generally have not been registered under the
Securities Act of 1933 and may not be exempt from the registration
requirements of such Act. Sales of non-exempt Securities by a Trust in
the United States securities markets are subject to severe restrictions
and may not be practicable. Accordingly, sales of these Securities by a
Trust will generally be effected only in foreign securities markets.
Although the Sponsor does not believe that the Trusts will encounter
obstacles in disposing of the Securities, investors should realize that
the Securities may be traded in foreign countries where the securities
markets are not as developed or efficient and may not be as liquid as
those in the United States. The value of the Securities will be
adversely affected if trading markets for the Securities are limited or
absent.
United Kingdom. The emphasis of the United Kingdom's economy is in the
private services sector, which includes the wholesale and retail sector,
Page 2
banking, finance, insurance and tourism. Services as a whole account for
a majority of the United Kingdom's gross national product and makes a
significant contribution to the country's balance of payments. The
portfolios of the Trusts may contain common stocks of British companies
engaged in such industries as banking, chemicals, building and
construction, transportation, telecommunications and insurance. Many of
these industries may be subject to government regulation, which may have
a materially adverse effect on the performance of their stock. In the
first quarter of 1998, gross domestic product (GDP) of the United
Kingdom grew to a level 3.0% higher than in the first quarter of 1997,
however the overall rate of GDP growth has slowed since the third
quarter of 1997. The slow down largely reflects a deteriorating trade
position and higher indirect taxes. The average quarterly rate of GDP
growth in the United Kingdom (as well as in Europe generally) has been
decelerating since 1994. The United Kingdom is a member of the European
Union (the "EU") which was created through the formation of the
Maastricht Treaty on European Union in late 1993. It is expected that
the Treaty will have the effect of eliminating most remaining trade
barriers between the 15 member nations and make Europe one of the
largest common markets in the world. However, the effective
implementation of the Treaty provisions and the rate at which trade
barriers are eliminated is uncertain at this time. Furthermore, the
recent rapid political and social change throughout Europe make the
extent and nature of future economic development in the United Kingdom
and Europe and the impact of such development upon the value of
Securities issued by United Kingdom companies impossible to predict.
A majority of the EU members converted their existing sovereign
currencies to a common currency (the "euro") on January 1, 1999. The
United Kingdom did not participate in this conversion on January 1, 1999
and the Sponsor is unable to predict if or when the United Kingdom will
convert to the euro. Moreover, it is not possible to accurately predict
the effect of the current political and economic situation upon long-
term inflation and balance of trade cycles and how these changes, as
well as the implementation of a common currency throughout a majority of
EU countries, would affect the currency exchange rate between the U.S.
dollar and the British pound sterling. In addition, United Kingdom
companies with significant markets or operations in other European
countries (whether or not such countries are participating) face
strategic challenges as these entities adapt to a single trans-national
currency. The euro conversion may have a material impact on revenues,
expenses or income from operations; increase competition due to the
increased price transparency of EU markets; affect issuers' currency
exchange rate risk and derivatives exposure; disrupt current contracts;
cause issuers to increase spending on information technology updates
required for the conversion; and result in potential adverse tax
consequences. The Sponsor is unable to predict what impact, if any, the
euro conversion will have on any of the Securities issued by United
Kingdom companies in the Trusts.
Exchange Rate. The Trusts are comprised either totally or substantially
of Securities that are principally traded in foreign currencies and as
such, involve investment risks that are substantially different from an
investment in a fund which invests in securities that are principally
traded in United States dollars. The United States dollar value of the
portfolio (and hence of the Units) and of the distributions from the
portfolio will vary with fluctuations in the United States dollar
foreign exchange rates for the relevant currencies. Most foreign
currencies have fluctuated widely in value against the United States
dollar for many reasons, including supply and demand of the respective
currency, the rate of inflation in the respective economies compared to
the United States, the impact of interest rate differentials between
different currencies on the movement of foreign currency rates, the
balance of imports and exports goods and services, the soundness of the
world economy and the strength of the respective economy as compared to
the economies of the United States and other countries.
The post-World War II international monetary system was, until 1973,
dominated by the Bretton Woods Treaty which established a system of
fixed exchange rates and the convertibility of the United States dollar
into gold through foreign central banks. Starting in 1971, growing
volatility in the foreign exchange markets caused the United States to
abandon gold convertibility and to effect a small devaluation of the
United States dollar. In 1973, the system of fixed exchange rates
between a number of the most important industrial countries of the
world, among them the United States and most Western European countries,
was completely abandoned. Subsequently, major industrialized countries
have adopted "floating" exchange rates, under which daily currency
valuations depend on supply and demand in a freely fluctuating
international market. Many smaller or developing countries have
continued to "peg" their currencies to the United States dollar although
Page 3
there has been some interest in recent years in "pegging" currencies to
"baskets" of other currencies or to a Special Drawing Right administered
by the International Monetary Fund. In Europe, the euro has been
developed. Currencies are generally traded by leading international
commercial banks and institutional investors (including corporate
treasurers, money managers, pension funds and insurance companies). From
time to time, central banks in a number of countries also are major
buyers and sellers of foreign currencies, mostly for the purpose of
preventing or reducing substantial exchange rate fluctuations.
Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of
actual and proposed government policies on the value of currencies,
interest rate differentials between the currencies and the balance of
imports and exports of goods and services and transfers of income and
capital from one country to another. These economic factors are
influenced primarily by a particular country's monetary and fiscal
policies (although the perceived political situation in a particular
country may have an influence as well-particularly with respect to
transfers of capital). Investor psychology may also be an important
determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative
strength or weakness of a particular currency may sometimes exercise
considerable speculative influence on currency exchange rates by
purchasing or selling large amounts of the same currency or currencies.
However, over the long term, the currency of a country with a low rate
of inflation and a favorable balance of trade should increase in value
relative to the currency of a country with a high rate of inflation and
deficits in the balance of trade.
The following tables set forth, for the periods indicated, the range of
fluctuation concerning the equivalent U.S. dollar rates of exchange and
end of month equivalent U.S. dollar rates of exchange for the United
Kingdom pound sterling the and the euro:
Foreign Exchange Rates
Range of Fluctuations in Foreign Currencies
United Kingdom
Annual Pound Sterling/
Period U.S. Dollar
_____ __________
1983 0.616-0.707
1984 0.670-0.864
1985 0.672-0.951
1986 0.643-0.726
1987 0.530-0.680
1988 0.525-0.601
1989 0.548-0.661
1990 0.504-0.627
1991 0.499-0.624
1992 0.499-0.667
1993 0.630-0.705
1994 0.610-0.684
1995 0.610-0.653
1996 0.583-0.670
1997 0.584-0.633
1998 0.584-0.620
Source: Bloomberg L.P.
Page 4
<TABLE>
<CAPTION>
End of Month Exchange Rates End of Month Exchange Rates
for Foreign Currencies
United Kingdom United Kingdom
Pound Sterling/ Euro/ Pound Sterling/ Euro/
Monthly Period U.S. Dollar U.S. Dollar Monthly Period U.S. Dollar U.S. Dollar
___________ ___________ ________ ___________ ___________ ________
<S> <C> <C> <C> <C> <C>
1992:
January .559 N.A. December .645 N.A.
February .569 N.A. 1996:
March .576 N.A. January .661 N.A.
April .563 N.A. February .653 N.A.
May .546 N.A. March .655 N.A.
June .525 N.A. April .664 N.A.
July .519 N.A. May .645 N.A.
August .503 N.A. June .644 N.A.
September .563 N.A. July .642 N.A.
October .641 N.A. August .639 N.A.
November .659 N.A. September .639 N.A.
December .662 N.A. October .615 N.A.
1993: November .595 N.A.
January .673 N.A. December .583 N.A.
February .701 N.A. 1997:
March .660 N.A. January .624 N.A.
April .635 N.A. February .614 N.A.
May .640 N.A. March .611 N.A.
June .671 N.A. April .616 N.A.
July .674 N.A. May .610 N.A.
August .670 N.A. June .600 N.A.
September .668 N.A. July .609 N.A.
October .676 N.A. August .622 N.A.
November .673 N.A. September .619 N.A.
December .677 N.A. October .598 N.A.
1994: November .592 N.A.
January .664 N.A. December .607 N.A.
February .673 N.A. 1998:
March .674 N.A. January .613 N.A.
April .659 N.A. February .609 N.A.
May .662 N.A. March .598 N.A.
June .648 N.A. April .598 N.A.
July .648 N.A. May .613 N.A.
August .652 N.A. June .600 N.A.
September .634 N.A. July .613 N.A.
October .611 N.A. August .595 N.A.
November .639 N.A. September .589 N.A.
December .639 N.A. October .596 N.A.
1995: November .607 N.A.
January .633 N.A. December .602 N.A.
February .631 N.A. 1999:
March .617 N.A. January .608 1.136
April .620 N.A. February .624 1.103
May .630 N.A. March .621 1.076
June .627 N.A. April .621 1.057
July .626 N.A. May .624 1.042
August .645 N.A. June .634 1.035
September .631 N.A. July .617 1.071
October .633 N.A. August .623 1.056
November .652 N.A. September 29 .608 1.064
</TABLE>
Source: Bloomberg L.P.
Page 5
The Evaluator will estimate current exchange rates for the relevant
currencies based on activity in the various currency exchange markets.
However, since these markets are volatile and are constantly changing,
depending on the activity at any particular time of the large
international commercial banks, various central banks, large multi-
national corporations, speculators and other buyers and sellers of
foreign currencies, and since actual foreign currency transactions may
not be instantly reported, the exchange rates estimated by the Evaluator
may not be indicative of the amount in United States dollars the Trusts
would receive had the Trustee sold any particular currency in the
market. The foreign exchange transactions of the Trusts will be
conducted by the Trustee with foreign exchange dealers acting as
principals on a spot (i.e., cash) buying basis. Although foreign
exchange dealers trade on a net basis, they do realize a profit based
upon the difference between the price at which they are willing to buy a
particular currency (bid price) and the price at which they are willing
to sell the currency (offer price).
Concentrations
Banks and Thrifts. Certain Trusts may be considered to be concentrated
in common stocks of financial institutions. See "Risk Factors" in the
prospectus which will indicate, if applicable, a Trust's concentration
in this industry. Banks, thrifts and their holding companies are
especially subject to the adverse effects of economic recession,
volatile interest rates, portfolio concentrations in geographic markets
and in commercial and residential real estate loans, and competition
from new entrants in their fields of business. Banks and thrifts are
highly dependent on net interest margin. Recently, bank profits have
come under pressure as net interest margins have contracted, but volume
gains have been strong in both commercial and consumer products. There
is no certainty that such conditions will continue. Bank and thrift
institutions had received significant consumer mortgage fee income as a
result of activity in mortgage and refinance markets. As initial home
purchasing and refinancing activity subsided, this income diminished.
Economic conditions in the real estate markets, which have been weak in
the past, can have a substantial effect upon banks and thrifts because
they generally have a portion of their assets invested in loans secured
by real estate. Banks, thrifts and their holding companies are subject
to extensive federal regulation and, when such institutions are state-
chartered, to state regulation as well. Such regulations impose strict
capital requirements and limitations on the nature and extent of
business activities that banks and thrifts may pursue. Furthermore, bank
regulators have a wide range of discretion in connection with their
supervisory and enforcement authority and may substantially restrict the
permissible activities of a particular institution if deemed to pose
significant risks to the soundness of such institution or the safety of
the federal deposit insurance fund. Regulatory actions, such as
increases in the minimum capital requirements applicable to banks and
thrifts and increases in deposit insurance premiums required to be paid
by banks and thrifts to the Federal Deposit Insurance Corporation
("FDIC"), can negatively impact earnings and the ability of a company to
pay dividends. Neither federal insurance of deposits nor governmental
regulations, however, insures the solvency or profitability of banks or
their holding companies, or insures against any risk of investment in
the securities issued by such institutions.
The statutory requirements applicable to and regulatory supervision of
banks, thrifts and their holding companies have increased significantly
and have undergone substantial change in recent years. To a great
extent, these changes are embodied in the Financial Institutions Reform,
Recovery and Enforcement Act; enacted in August 1989, the Federal
Deposit Insurance Corporation Improvement Act of 1991, the Resolution
Trust Corporation Refinancing, Restructuring, and Improvement Act of
1991 and the regulations promulgated under these laws. Many of the
regulations promulgated pursuant to these laws have only recently been
finalized and their impact on the business, financial condition and
prospects of the Securities in the Trust's portfolio cannot be predicted
with certainty. Periodic efforts to introduce legislation broadening the
ability of banks to compete with new products have not been successful,
but if enacted could lead to more failures as a result of increased
competition and added risks. Failure to enact such legislation, on the
other hand, may lead to declining earnings and an inability to compete
with unregulated financial institutions. Efforts to expand the ability
of federal thrifts to branch on an interstate basis have been initially
successful through promulgation of regulations, and legislation to
liberalize interstate banking which has recently been signed into law.
Under the legislation, banks will be able to purchase or establish
subsidiary banks in any state, one year after the legislation's
enactment. Starting in mid-1997, banks were allowed to turn existing
Page 6
banks into branches. Consolidation is likely to continue. The Securities
and Exchange Commission and the Financial Accounting Standards Board
require the expanded use of market value accounting by banks and have
imposed rules requiring market accounting for investment securities held
in trading accounts or available for sale. Adoption of additional such
rules may result in increased volatility in the reported health of the
industry, and mandated regulatory intervention to correct such problems.
In late 1993 the United States Treasury Department proposed a
restructuring of the banks regulatory agencies which, if implemented,
may adversely affect certain of the Securities in the Trust's portfolio.
Additional legislative and regulatory changes may be forthcoming. For
example, the bank regulatory authorities have proposed substantial
changes to the Community Reinvestment Act and fair lending laws, rules
and regulations, and there can be no certainty as to the effect, if any,
that such changes would have on the Securities in a Trust's portfolio.
In addition, from time to time the deposit insurance system is reviewed
by Congress and federal regulators, and proposed reforms of that system
could, among other things, further restrict the ways in which deposited
moneys can be used by banks or reduce the dollar amount or number of
deposits insured for any depositor. Such reforms could reduce
profitability as investment opportunities available to bank institutions
become more limited and as consumers look for savings vehicles other
than bank deposits. Banks and thrifts face significant competition from
other financial institutions such as mutual funds, credit unions,
mortgage banking companies and insurance companies, and increased
competition may result from legislative broadening of regional and
national interstate banking powers as has been recently enacted. Among
other benefits, the legislation allows banks and bank holding companies
to acquire across previously prohibited state lines and to consolidate
their various bank subsidiaries into one unit. The Sponsor makes no
prediction as to what, if any, manner of bank and thrift regulatory
actions might ultimately be adopted or what ultimate effect such actions
might have on a Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5%
of the outstanding shares of any class of voting securities of a bank or
bank holding company, (2) acquiring control of a bank or another bank
holding company, (3) acquiring all or substantially all the assets of a
bank, or (4) merging or consolidating with another bank holding company,
without first obtaining Federal Reserve Board ("FRB") approval. In
considering an application with respect to any such transaction, the FRB
is required to consider a variety of factors, including the potential
anti-competitive effects of the transaction, the financial condition and
future prospects of the combining and resulting institutions, the
managerial resources of the resulting institution, the convenience and
needs of the communities the combined organization would serve, the
record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the
prospective availability to the FRB of information appropriate to
determine ongoing regulatory compliance with applicable banking laws. In
addition, the federal Change In Bank Control Act and various state laws
impose limitations on the ability of one or more individuals or other
entities to acquire control of banks or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends
by bank holding companies. In the policy statement, the FRB expressed
its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends which exceed its net income or which could
only be funded in ways that would weaken its financial health, such as
by borrowing. The FRB also may impose limitations on the payment of
dividends as a condition to its approval of certain applications,
including applications for approval of mergers and acquisitions. The
Sponsor makes no prediction as to the effect, if any, such laws will
have on the Securities or whether such approvals, if necessary, will be
obtained.
Small-Cap Companies. While historically small-cap company stocks have
outperformed the stocks of large companies, the former have customarily
involved more investment risk as well. Small-cap companies may have
limited product lines, markets or financial resources; may lack
management depth or experience; and may be more vulnerable to adverse
general market or economic developments than large companies. Some of
these companies may distribute, sell or produce products which have
recently been brought to market and may be dependent on key personnel.
The prices of small company securities are often more volatile than
prices associated with large company issues, and can display abrupt or
erratic movements at times, due to limited trading volumes and less
publicly available information. Also, because small cap companies
normally have fewer shares outstanding and these shares trade less
Page 7
frequently than large companies, it may be more difficult for the Trusts
which contain these Securities to buy and sell significant amounts of
such shares without an unfavorable impact on prevailing market prices.
Portfolios
Equity Securities Selected for the European Target 20 Portfolio, 4th
Quarter 1999 Series
ABN AMRO Holding NV, headquartered in Amsterdam, the Netherlands,
provides full-service banking operations both in the Netherlands and
worldwide.
Abbey National Plc, headquartered in London, England, offers personal
banking services through its locations in the United Kingdom, France,
Gibraltar, Italy, Spain and other countries worldwide.
BASF AG, headquartered in Ludwigshafen, Germany, is a chemical producing
group. Its main fields of business are health and nutrition, colorants
and finishing products, chemicals, plastics and fibers, and oil and gas.
BG Plc, headquartered in Berkshire, England, is an international energy
company that develops and supplies gas markets worldwide. The company
and its subsidiaries also provide exploration and production; research
and technology; and property development services.
Barclays Plc, headquartered in London, England, is a financial services
group engaged primarily in the banking and investment banking
businesses. Through its subsidiary, Barclay Bank Plc, the company offers
commercial and investment banking, insurance, financial and related
services in more than 60 countries.
Bayer AG, headquartered in Leverkusen, Germany, manufactures industrial
chemicals and polymers, as well as human and animal healthcare products,
pharmaceuticals and agricultural crop protection agents. The company
markets its products to the automotive, electronic, medical,
construction, farming, textile, utility and printing industries worldwide.
British American Tobacco Plc, headquartered in London, England, is the
holding company for a group of tobacco product manufacturers whose
international brands include "State Express 555," "Lucky Strike," "Kent"
and "Benson & Hedges."
CGU Plc, headquartered in London, England, is the holding company for
Commercial Union Assurance Company Plc, an international life and
property-casualty insurance operation. Through its subsidiary, the
company transacts all classes of insurance and life assurance excluding
industrial life. The company also does business in property investment
and development, loans and mortgages.
DaimlerChrysler AG, headquartered in Stuttgart, Germany, designs,
manufactures and markets automobiles and other vehicles worldwide. The
company also provides electronics and telecommunications services as
well as aerospace, defense and financial services.
Diageo Plc, headquartered in London, England, has operations in food,
alcoholic beverages, fast food restaurants and property management. The
company markets food products under the "Pillsbury," "Haagen Dazs," and
"Green Giant" brand names; and liquor and beer products under the
"Smirnoff," "J&B Rare," "Johnnie Walker," "Jose Cuervo," "Baileys,"
"Harp" and "Guinness Stout" names. The company also owns "Burger King"
restaurants.
Electrabel SA, headquartered in Brussels, Belgium, is a private utility
company active in two fields: electricity generation and transmission,
and operation and management of networks for public utility services
including electricity, natural gas, cable television, steam and water.
The company maintains partnerships with major industrial consumers and
governments in Belgium and in other European countries.
Endesa SA, headquartered in Madrid, Spain, produces, transmits,
distributes and supplies electricity to major utilities throughout Spain
and has interests in coal mining companies.
Halifax Group Plc, headquartered in Halifax, England, provides a full
range of personal financial services throughout the United Kingdom.
Lloyds TSB Group Plc, headquartered in London, England, through
subsidiaries and associated companies, offers a wide range of banking
and financial services throughout the United Kingdom and a number of
other countries.
Marks & Spencer Plc, headquartered in London, England, retails consumer
goods and food under the name "St. Michael." The company sells quality
clothing through "Brooks Brothers" stores in the United States and
Japan, sells food through its "Kings Super Markets" in the United
Page 8
States, and other merchandise through a chain of retail stores in
Canada, Europe and Hong Kong. The company is also engaged in financial,
unit trust, treasury and insurance businesses.
National Westminster Bank Plc, headquartered in London, England,
provides worldwide corporate and investment banking, asset management
and financial services to both domestic and international markets.
Norwich Union Plc, headquartered in Norwich, England, is an insurance
company which provides life insurance, pensions and investment products;
motor and household insurance; and PMI and income protection products.
The company operates in the United Kingdom and worldwide.
RWE AG, headquartered in Essen, Germany, is one of Germany's largest
energy utility companies. Through subsidiaries, the company operates
worldwide, offering products and services in the energy, mining, raw
materials, petroleum, chemicals, waste disposal, mechanical and plant
engineering, construction and civil engineering business sectors.
Rio Tinto Plc, headquartered in London, England, is an international
mining company with operations in Australia, Canada, Europe, New
Zealand, South Africa, South America and the United States.
San Paolo-IMI SpA, headquartered in Turin, Italy, operates as a
commercial bank in Italy and abroad and is the holding company of a
diversified financial group which includes municipal lender "Crediop."
Equity Securities Selected for the Target Small-Cap Portfolio, 4th
Quarter 1999 Series
Actel Corporation, headquartered in Sunnyvale, California, designs,
develops and markets field programmable gate arrays and associated
development system software and programming hardware. The company
markets its products through a worldwide sales and distribution network.
Activision, Inc., headquartered in Santa Monica, California, develops,
publishes and sells interactive entertainment software for video game
systems and personal computers. The company also develops software
products which combine entertainment with education.
Apex Inc., headquartered in Woodinville, Washington, makes and markets
stand-alone switching systems that enable client/server network
administrators to manage multiple servers from a single keyboard, video
monitor and mouse configuration.
Applebee's International, Inc., headquartered in Overland Park, Kansas,
develops, franchises and operates a national chain of restaurants
throughout the United States, Canada, Curacao and Europe under the
"Applebee's Neighborhood Grill & Bar" name. The company also operates
"Rio Bravo Cantina" restaurants and other specialty restaurants in
several states.
Bally Total Fitness Holding Corporation, headquartered in Chicago,
Illinois, operates fitness centers in 27 states and Canada, which offer
members a selection of cardiovascular, conditioning and strength
equipment, and extensive aerobic training programs.
Benchmark Electronics, Inc., headquartered in Angleton, Texas, provides
contract manufacturing and design services to original equipment
manufacturers. The company specializes in the assembly of printed
circuit boards with computer-automated equipment using surface mount and
pin-through-hole interconnection technologies.
E.W. Blanch Holdings, Inc., headquartered in Dallas, Texas, provides
integrated risk management services including reinsurance intermediary,
consulting, administration and wholesale insurance services.
CellStar Corporation, headquartered in Carrollton, Texas, sells cellular
phones and other wireless telecommunications products, such as pagers
and two-way radios, to wholesalers and at retail in the United States,
the Asia-Pacific region, Latin America and the United Kingdom.
Chico's Fas, Inc., headquartered in Fort Myers, Florida, sells
exclusively designed, private label casual clothing and related
accessories through stores in the United States and Washington, D.C. The
company's clothing line targets women aged 35 to 60.
Church & Dwight Co., Inc., headquartered in Princeton, New Jersey, makes
sodium bicarbonate and sodium bicarbonate-based consumer products sold
mainly under the "Arm & Hammer" name, including baking soda, laundry
detergent, dryer sheets, tooth powder and toothpaste, washing soda and
deodorizers. The company also makes ammonium bicarbonate.
Cinar Corporation (Class B), headquartered in Montreal, Quebec, Canada,
develops, produces and distributes non-violent television programming
for children and families. The company also offers post-production
services, including dubbing, and distributes programs for third parties.
The Cooper Companies, Inc., headquartered in Pleasanton, California,
through subsidiaries, develops, makes and markets contact lenses. The
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company also develops, makes and distributes diagnostic and surgical
instruments and equipment.
Copart, Inc., headquartered in Benicia, California, provides vehicle
suppliers, mainly insurance companies, with a full range of services to
process and sell salvage vehicles through auctions, principally to
licensed dismantlers, rebuilders and used vehicle dealers.
Creditrust Corporation, headquartered in Baltimore, Maryland, acquires
and liquidates consumer finance receivables originated and charged off
by national financial and retail institutions. The company does not
extend credit or originate loans.
Datascope Corp., headquartered in Montvale, New Jersey, produces
proprietary products for clinical healthcare markets in interventional
cardiology, anesthesiology, cardiovascular and vascular surgery, and
critical care. The company's products include an intra-aortic balloon
pumping (IABP) system, monitors, a collagen hemostat pad and VasoSeal.
Dendrite International, Inc., headquartered in Morristown, New Jersey,
provides comprehensive electronic territory management (ETM) solutions
used to manage, coordinate and control the activities of large sales
forces in complex selling environments, primarily in the ethical
pharmaceutical industry.
Elcor Corporation, headquartered in Dallas, Texas, makes premium
laminated fiberglass asphalt residential roofing products;
remanufactures diesel engine cylinder liners; provides tin plating of
pistons; and applies shielding to computer and electronic equipment.
Foodmaker, Inc., headquartered in San Diego, California, owns, operates
and franchises "Jack In The Box" fast-food restaurants located primarily
in the western and southwestern United States.
H.B. Fuller Company, headquartered in St. Paul, Minnesota, produces
specialty chemical products which include formulating, compounding and
marketing adhesives, sealants, paints, specialty waxes and related
chemicals.
The Hain Food Group, Inc., headquartered in Uniondale, New York, sells
and distributes a full line of natural foods, cooking oils, sugar-free,
medically-directed snack foods; low-sodium food products; snacks and
cheese and mayonnaise products; kosher foods; and dry milk products.
Hutchinson Technology Incorporated, headquartered in Hutchinson,
Minnesota, develops, makes and sells precision suspension assemblies for
computer rigid disk drives and supplies them to users around the world.
Imperial Bancorp, headquartered in Inglewood, California, through its
principal subsidiary, Imperial Bank, conducts a general commercial
banking business at offices throughout California and loan production
offices in California, Arizona, Massachusetts, Texas, Virginia and
Washington.
Insituform Technologies, Inc. (Class A), headquartered in Chesterfield,
Missouri, provides proprietary trenchless technologies for the
rehabilitation and improvement of sewer, water, gas and industrial
pipes. The company markets its products to governmental and industrial
customers worldwide through subsidiaries in North America, South America
and Europe.
Kronos Incorporated, headquartered in Waltham, Massachusetts, designs,
develops, makes and markets time and attendance, workforce management
and shop floor data collection systems, and application software that
enhances productivity in the workplace.
The Liposome Company, Inc., headquartered in Princeton, New Jersey,
develops liposome and lipid-complex based pharmaceuticals for the
treatment, prevention and diagnosis of life-threatening illnesses.
Long Beach Financial Corporation, headquartered in Orange, California,
through its subsidiary, Long Beach Mortgage Company, operates as a
specialty finance company that originates, purchases and sells sub-prime
residential mortgage loans secured by one-to-four family residences. The
company originates loans mainly through independent mortgage brokers and
operates throughout the United States.
The Manitowoc Company, Inc., headquartered in Manitowoc, Wisconsin,
makes ice cube making and dispensing machines; ice storage bins; reach-
in and walk-in refrigerators and freezers; and a diversified line of
crawler, truck, fixed-base mounted and hydraulically-powered cranes. The
company also provides ship repair, maintenance and conversion services.
MasTec, Inc., headquartered in Miami, Florida, designs, installs and
maintains outside physical plants for telephone and cable television
communications systems. The company also installs central office
switching equipment and designs, installs and maintains integrated
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voice, data and video local and wide area networks inside buildings.
NCO Group, Inc., headquartered in Fort Washington, Pennsylvania,
provides accounts receivable management services utilizing an extensive
teleservices infrastructure mainly to educational organizations,
financial institutions, healthcare organizations, telecommunications
companies, utilities and government entities.
Oshkosh Truck Corporation, headquartered in Oshkosh, Wisconsin,
engineers, makes and markets a broad range of specialized trucks and
proprietary parts under the "Oshkosh" trademark; a broad line of
specialty fire trucks and fire apparatus under the Pierce trademark; and
specialty commercial and military trucks.
Pacific Sunwear of California, Inc., headquartered in Anaheim,
California, sells everyday casual apparel, footwear and accessories
through mall-based stores in the United States, primarily to teenagers
and young adults.
Plexus Corporation, headquartered in Neenah, Wisconsin, through
subsidiaries, offers contract development, design, manufacturing and
test services mainly to original equipment manufacturers in the computer
(mainly mainframes and peripherals), medical, industrial,
telecommunications and transportation electronics industries.
Precision Drilling Corporation, headquartered in Calgary, Alberta,
Canada, provides oilfield services in Canada and the United States,
including drilling services, well servicing, compression equipment and
equipment rental. The company also provides industrial services in
Canada and the United States, including industrial process services and
equipment rental.
Priority Healthcare Corporation (Class B), headquartered in Altamonte
Springs, Florida, distributes specialty pharmaceuticals and related
medical supplies to the alternate site healthcare market. The company
also provides patient-specific, self-injectable biopharmaceuticals and
disease treatment programs to individuals with chronic diseases.
Roadway Express, Inc., headquartered in Akron, Ohio, provides less-than-
truckload freight services of general commodity freight by motor vehicle
on two-day and longer major city-to-city routes in North America, and on
international lanes to and from North America.
Sonic Corp., headquartered in Oklahoma City, Oklahoma, operates and
franchises drive-in restaurants mainly in the south central and
southeastern United States under the name "Sonic" that feature fast
service and a limited menu of moderately priced, cooked-to-order items.
Sunterra Corporation, headquartered in Orlando, Florida, operates
resorts in North America, the Caribbean, Europe and Japan. The company
also manages units at several resorts in Hawaii and sells vacation
ownership interests.
TSI International Software Ltd., headquartered in Wilton, Connecticut,
provides software and related services that enable organizations to
integrate their business applications both internally and with external
business partners.
Urban Outfitters, Inc., headquartered in Philadelphia, Pennsylvania,
owns and operates "Urban Outfitters" and "Anthropologie" retail stores
in metropolitan areas throughout the United States which sell fashion
apparel, accessories, and household and gift merchandise. The company's
wholesale subsidiary designs and markets young women's casual wear for
its retail stores and also sells to specialty stores throughout the world.
Wild Oats Markets, Inc., headquartered in Boulder, Colorado, operates
natural food supermarkets under the "Wild Oats Community Market" and
"Alfalfa's Market" trade names in several western and midwestern states
and under the "Capers Whole Foods Markets" trade name in British
Columbia, Canada. The company's stores, which also operate under the
"Beans, Grains & Things," "Ideal Market," "Oasis Fine Foods," "Sunshine
Grocery" and "Uptown Whole Foods" trade names, offer a wide variety of
natural and gourmet foods and related products at competitive prices.
We have obtained the foregoing company descriptions from sources we deem
reliable. We have not independently verified the provided information
either in terms of accuracy or completeness.
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