FT DEFINED PORTFOLIO LLC
485BPOS, 2000-12-28
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As filed with the Securities and Exchange Commission on December 28, 2000

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933                  [ ]
Registration No. 333-46062

Pre-Effective Amendment No. _____                                        [ ]

Post-Effective Amendment No. 1                                           [X]

                                     and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940          [ ]
Registration No. 811-10015

         Amendment No. __2__                                             [X]

FT DEFINED PORTFOLIOS LLC
(Exact Name of Registrant as Specified in Charter)

1001 Warrenville Road, Suite 300, Lisle, Illinois 60532
(Address of Principal Executive Offices)         (Zip Code)

Registrant's Telephone Number, including Area Code: (630) 241-4141

                                                     with a copy to:
W. Scott Jardine, Esq.                               Eric F. Fess
Nike Securities L.P.                                 Chapman and Cutler
1001 Warrenville Road, Suite 300                     111 West Monroe Street
Lisle, Illinois 60532                                Chicago, Illinois 60603
(Name and Address of Agent for Service)

Approximate date of proposed public offering: January 2, 2001

It is proposed that this filing will become effective (check appropriate box)

         [x] immediately upon filing pursuant to paragraph (b)
         [ ] on (date) pursuant to paragraph (b)
         [ ] 60 days after filing pursuant to paragraph (a)(1)
         [ ] on (date) pursuant to paragraph (a)(1)
         [ ] 75 days after filing pursuant to paragraph (a)(2)
         [ ] on (date) pursuant to paragraph (a)(2) of rule 485.

If appropriate, check the following box:

         [ ] This  post-effective  amendment  designates a new effective date
             for a previously filed post-effective amendment.

Title of Securities Being Registered: Membership interests

The Registrant hereby amends this  Registration  Statement on such date or dates
as may be necessary to delay its effective date until the Registrant  shall file
a further amendment which specifically  states that this Registration  Statement
shall  thereafter  become  effective  in  accordance  with  Section  8(a) of the
Securities  Act of  1933  or  until  the  Registration  Statement  shall  become
effective on such date as the Commission,  acting pursuant to said Section 8(a),
may determine.


                     CONTENTS OF THE REGISTRATION STATEMENT

This Registration Statement comprises the following papers and contents:

         The Facing Sheet

         Part A--Prospectus

         Part B--Statement of Additional Information

         Part C--Other Information

         Signatures

         Index to Exhibits

         Exhibits


FT DEFINED PORTFOLIOS LLC

Nasdaq Target 15 Portfolio
First Trust 10 Uncommon Values Portfolio

December 28, 2000

Prospectus

________________________________________________________________________________

This prospectus is intended for use in connection with variable annuity policies
offered by Allmerica Financial Life Insurance and Annuity Company ("Allmerica").
This prospectus provides important  information to help you evaluate whether one
of the funds listed above may be right for you.

The Securities and Exchange Commission has not approved or disapproved
these  securities  or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.


                                Table of Contents

                                                                          Page

Nasdaq Target 15 Portfolio...................................................3
       Fund Overview.........................................................3
First Trust 10 Uncommon Values Portfolio.....................................4
       Fund Overview.........................................................4
Fund Organization............................................................5
Fund Management..............................................................5
Management Fees and Expenses.................................................5
Fund Investments.............................................................6
How Securities Are Selected..................................................6
Risk Factors.................................................................8
Investment in Fund Interests.................................................9
Interest Redemption..........................................................9
Distributions and Taxes......................................................9
12b-1 Plan..................................................................10
Net Asset Value.............................................................10
Fund Service Providers......................................................10
Shareholder Inquiries.......................................................11


NASDAQ TARGET 15 PORTFOLIO

Fund Overview

Investment Objective

The fund seeks to provide above-average total return.

How the Fund Pursues its Objective

The fund seeks to achieve its  objective by investing in common stocks issued by
companies that are expected to have the potential for capital  appreciation.  To
select the stocks for the fund,  the  investment  adviser  follows a disciplined
investment  strategy  that  invests  primarily  in the common  stocks of fifteen
companies  selected from a subset of the stocks included in the Nasdaq-100 Index
as of the close of business on or about the applicable stock selection date. See
"Description of Indices" for a description of the Nasdaq-100 Index.

The fund  primarily  consists of a portfolio of fifteen  common stocks  selected
each year through the following  multi-step  process from a subset of the stocks
listed  on the  Nasdaq-100  Index as of the  close of  business  on or about the
applicable stock selection. The first step begins by removing from the index all
companies  that are the subject of an announced  business  combination  which is
expected to occur within six months of the applicable  stock selection date. The
second step ranks each remaining  security by price  appreciation over the prior
twelve-month  period.  The  third  step  ranks  the  same  securities  by  price
appreciation over the prior six-month period.  The combined effect of the second
and third step is to select stocks which have shown  consistent  growth over the
past year.  The  fourth  step  numerically  ranks the stocks by return on assets
ratio.  The fifth step  numerically  ranks each  security by their ratio of cash
flow per share to stock  price.  This is a common  indication  of  value.  After
ranking each of the securities in each of the second through fifth criteria, the
resulting four rankings are added up for each security. Those fifteen securities
with the lowest sums are selected for the portfolio.  The initial portfolio will
primarily  consist of the stocks selected by the strategy on or about January 2,
2001. Beginning December 31, 2001, the portfolio will be adjusted annually on or
about December 31 in accordance with the investment strategy.

Each year, on or about the stock  selection date (December 31), the fund expects
to invest in the securities determined by the strategy. These securities will be
weighted by market capitalization  subject to the restriction that no stock will
comprise  less than 1% or more than 25% of the  portfolio  on or about the stock
selection date. At that time, the percentage  relationship  among the numbers of
shares of each issuer held by the fund is established. Through the next one-year
period that percentage relationship will be maintained as closely as practicable
when the fund makes subsequent purchases and sales of the securities.

The fund may also invest in futures,  options,  warrants,  forward contracts and
repurchase agreements.

What are the Risks of Investing in the Fund?

The principal  risk of investing in the fund is market risk.  Market risk is the
risk that a particular  stock in the fund,  the fund itself or stocks in general
may fall in value.  The fund's  potential  investment in foreign stocks presents
additional risk including  currency risk.  Foreign  companies may be affected by
adverse  political,  diplomatic  and economic  developments,  changes in foreign
currency exchange rates,  taxes, less publicly  available  information and other
factors.  As  with  any  mutual  fund  investment,  loss of  money  is a risk of
investing.  An  investment  in the  fund is not a  deposit  of a bank and is not
insured or guaranteed by the FDIC or any other government agency.

Because the fund is  non-diversified,  the fund is exposed to additional  market
risk. A  non-diversified  fund may invest a relatively  high  percentage  of its
assets  in  a  limited  number  of  issuers.   Non-diversified  funds  are  more
susceptible to any single  political,  regulatory or economic  occurrence and to
the financial  condition of individual issuers in which it invests.  The fund is
also  exposed  to  additional  market  risk due to its  policy of  investing  in
accordance with an investment strategy.  As a result of this policy,  securities
held by the fund will  generally  not be bought  or sold in  response  to market
fluctuations  and the  securities may be issued by companies  concentrated  in a
particular  industry,   including  technology.   The  fund's  relative  lack  of
diversity,   possible   concentration  in  a  particular  industry  and  limited
management may subject investors to greater market risk than other mutual funds.

Fund Performance

Fund  performance  is not included in this  prospectus  because the fund has not
been effective for a full calendar year.


"The  Nasdaq  100(R)",  "Nasdaq-100  Index(R)",  "Nasdaq  Stock  Market(R)"  and
"Nasdaq(R)"  are trade or service marks of The Nasdaq Stock Market,  Inc. (which
with its  affiliates are the  "Corporations")  and have been licensed for use by
First Trust Advisors L.P.  ("First  Trust").  The fund has not been passed on by
the  Corporations  as to its  legality or  suitability.  The fund is not issued,
endorsed,  sponsored,  managed,  sold  or  promoted  by  the  Corporations.  THE
CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND.


First Trust 10 Uncommon Values Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average capital appreciation.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing primarily in the ten common
stocks, listed on a U.S. securities exchange,  selected by the Investment Policy
Committee of Lehman Brothers Inc. ("Lehman Brothers") with the assistance of the
Research Department of Lehman Brothers which, in the opinion of Lehman Brothers,
have the greatest  potential for capital  appreciation  (on a percentage  basis)
during the next year. The initial portfolio will primarily consist of the stocks
selected by the strategy on June 28, 2000. Beginning July 1, 2001, the portfolio
will be adjusted  annually on or about July 1 in accordance  with the investment
strategy.

Each  year,  on or about the  annual  stock  selection  date  (July 1), the fund
expects to invest in the securities  determined by Lehman Brothers in relatively
equal amounts.  At that time, the percentage  relationship  among the numbers of
shares of each issuer held by the fund is established. Through the next one-year
period that percentage relationship will be maintained as closely as practicable
when the fund makes subsequent purchases and sales of the securities.

The fund may also invest in futures,  options,  warrants,  forward contracts and
repurchase agreements.

What are the Risks of Investing in the Fund?

The principal  risk of investing in the fund is market risk.  Market risk is the
risk that a particular  stock in the fund,  the fund itself or stocks in general
may fall in value.  The fund's  potential  investment in foreign stocks presents
additional risk including  currency risk.  Foreign  companies may be affected by
adverse  political,  diplomatic  and economic  developments,  changes in foreign
currency exchange rates,  taxes, less publicly  available  information and other
factors.  As  with  any  mutual  fund  investment,  loss of  money  is a risk of
investing.  An  investment  in the  fund is not a  deposit  of a bank and is not
insured or guaranteed by the FDIC or any other government agency.

Because the fund is  non-diversified,  the fund is exposed to additional  market
risk. A  non-diversified  fund may invest a relatively  high  percentage  of its
assets  in  a  limited  number  of  issuers.   Non-diversified  funds  are  more
susceptible to any single  political,  regulatory or economic  occurrence and to
the financial  condition of individual issuers in which it invests.  The fund is
also  exposed  to  additional  market  risk due to its  policy of  investing  in
accordance with an investment strategy.  As a result of this policy,  securities
held by the fund will  generally  not be bought  or sold in  response  to market
fluctuations  and the  securities may be issued by companies  concentrated  in a
particular  industry,   including  technology.   The  fund's  relative  lack  of
diversity,   possible   concentration  in  a  particular  industry  and  limited
management may subject investors to greater market risk than other mutual funds.

Fund Performance

Fund  performance  is not included in this  prospectus  because the fund has not
been effective for a full calendar year.

The  fund  is not  sponsored  or  created  by  Lehman  Brothers,  Inc.  ("Lehman
Brothers").  Lehman Brothers' only  relationship to First Trust is the licensing
of certain trademarks and trade names of Lehman Brothers and of the "10 Uncommon
Values" which is determined,  composed and calculated by Lehman Brothers without
regard to First Trust or the fund.


Fund Organization

Each  fund is a  series  of the FT  Defined  Portfolios  LLC ("FT  Defined"),  a
non-diversified  open-end  management  investment  company  registered under the
Investment  Company Act of 1940.  Each fund  constitutes a separate  mutual fund
with its own  investment  objective and  policies.  FT Defined is organized as a
Delaware limited liability company. Its Board of Trustees is responsible for its
overall management and direction. The Board elects the FT Defined's officers and
approves all significant agreements including those with the investment adviser,
custodian  and fund  administrative  and  accounting  agent.  Board  members are
elected by owners of FT Defined's membership interests (the "interests").

Under Delaware law, a limited  liability company does not issue shares of stock.
Instead, ownership rights are contained in "membership interests". Each interest
of a fund represents an undivided  interest in the securities held in the fund's
portfolio.  The funds are not offered  directly to the public.  Interests of the
funds are sold only to Separate  Account VA-K (the  "Separate  Account") to fund
the benefits of variable annuity policies (the "Policies")  issued by Allmerica.
The  Separate  Account  is the sole  member of FT  Defined.  Separate  Account's
variable  annuity  owners who have Policy  values  allocated to any of the funds
have indirect rights in FT Defined's interests.

Fund Management

The  overall  management  of  the  business  and  affairs  of the  funds  is the
responsibility of the Board of Trustees of the funds.

First Trust  Advisors  L.P.  ("First  Trust"),  1001  Warrenville  Road,  Lisle,
Illinois, 60532, is the investment adviser to the funds. In this capacity, First
Trust is responsible for the selection and ongoing  monitoring of the securities
in  the  funds'  portfolios  and  certain  other  services  necessary  with  the
management of the portfolios.

First Trust is a limited partnership with one limited partner, Grace Partners of
DuPage  L.P.,  and one  general  partner,  Nike  Securities  Corporation.  Grace
Partners of DuPage L.P. is a limited partnership with one general partner,  Nike
Securities  Corporation,  and a number  of  limited  partners.  Nike  Securities
Corporation  is an  Illinois  corporation  controlled  by the Robert  Donald Van
Kampen  family.  First  Trust  discharges  its  responsibilities  subject to the
policies of the Board of Trustees of the funds.

First Trust serves as subadvisor or advisor for over 50 mutual funds and is also
the portfolio  supervisor of unit investment trusts sponsored by Nike Securities
L.P. ("Nike Securities"),  some of which are substantially similar to the funds.
Nike Securities,  1001 Warrenville Road, Lisle,  Illinois 60532,  specializes in
the  underwriting,  trading and distribution of unit investment trusts and other
securities.  Nike  Securities  is the sponsor and principal  underwriter  of the
funds' interests and has sponsored or underwritten  approximately $25 billion of
investment company shares.

There  is no one  individual  primarily  responsible  for  portfolio  management
decisions  for  the  funds.  Investments  are  made  under  the  direction  of a
committee.  For  additional  information  concerning  First  Trust,  including a
description  of  the  services   provided,   see  the  Statement  of  Additional
Information.

Management Fees and Expenses

For providing management services, First Trust is paid an annual fund management
fee by each fund of 0.60% of average daily net assets.

Each fund pays for its own operating expenses such as custodial, transfer agent,
administrative,  accounting and legal fees; brokerage commissions;  distribution
and service fees; licensing fees (if applicable);  extraordinary  expenses;  and
its portion of the FT Defined's  operating  expenses.  First Trust has agreed to
waive fees and  reimburse  expenses for the Nasdaq  Target 15 Portfolio  and the
Lehman Brothers 10 uncommon Values Portfolio through September 30, 2001 and July
1, 2001, respectively,  to prevent a fund's Total Annual Fund Operating Expenses
(excluding  brokerage expenses and extraordinary  expenses) from exceeding 1.47%
and 1.37% of the average daily net asset value of the Nasdaq Target 15 Portfolio
and the First Trust 10 Uncommon Values Portfolio, respectively.

Fund Investments

Equity Securities

Each fund invests  primarily in equity  securities.  Eligible equity  securities
include  common  stocks;  warrants to purchase  common  stocks;  and  securities
convertible  into common stocks,  such as convertible  bonds and debentures.  In
addition,  the  funds  may  invest  in equity  securities  of  foreign  issuers,
including  depositary  receipts that represent  foreign common stocks  deposited
with a custodian.

Short-Term Investments

Each  fund  may  invest  in cash  equivalents  or other  short-term  investments
including U.S. government securities,  commercial paper,  repurchase agreements,
money-market funds or similar fixed-income  securities with remaining maturities
of one year or less.  For more  information on short-term  investments,  see the
Statement of Additional Information.

Futures and Options

Each fund may invest in various investment  strategies designed to hedge against
changes in the values of  securities  the fund owns or expects to purchase or to
hedge against  interest rate or currency  exchange rate changes.  The securities
used to implement these strategies include financial futures contracts, options,
forward contracts, options on financial futures and stock index options.

Delayed Delivery Securities

Each fund may buy or sell securities on a when-issued or delayed-delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15 to 45 days of the trade. Such transactions involve an element of risk because
the value of the  securities to be purchased may decline  before the  settlement
date.

How Securities Are Selected

To select securities for the funds,  First Trust primarily follows a disciplined
investment  strategy  that  invests  in  the  common  stocks  determined  by the
strategy.  Beginning  December 31, 2000,  the  portfolio of the Nasdaq Target 15
Portfolio is adjusted  annually on or about the funds'  annual  stock  selection
date of  December  31 and  beginning  July 1, 2001 the First  Trust 10  Uncommon
Values  Portfolio  is adjusted  annually on or about each July 1, in  accordance
with the applicable  investment strategy. On or about the annual stock selection
date for a fund, a percentage relationship among the number of securities in the
fund will be established.  When  additional  assets are deposited into the fund,
additional  securities  will be purchased in such numbers that reflect as nearly
as  practicable  the  percentage   relationship  of  the  number  of  securities
established  on or about the  annual  stock  selection  date.  First  Trust will
likewise  attempt to replicate the percentage  relationship  of securities  when
selling  securities for a fund. The percentage  relationship among the number of
securities in a fund should therefore remain relatively stable.  However,  given
the fact that the market price of such securities will vary throughout the year,
the value of the  securities  of each of the  companies as compared to the total
assets of a fund will fluctuate  during the year, above and below the proportion
established  on the annual stock  selection  date.  On or about the annual stock
selection date for a fund, new securities  will be selected and a new percentage
relationship will be established among the number of securities for the fund.

It is generally not possible for First Trust to purchase round lots (usually 100
shares) of stocks in amounts that will precisely duplicate the prescribed mix of
securities. Also, it usually is impossible for a fund to be 100% invested in the
prescribed mix of securities at any time. To the extent that a fund is not fully
invested,  the  interests of variable  annuity  Policy owners may be diluted and
total return may not directly track the investment results of the prescribed mix
of securities.  To minimize this effect, First Trust will generally try, as much
as practicable,  to maintain a minimum cash position at all times. Normally, the
only cash items held by a fund are amounts  expected to be deducted as expenses,
amounts  too small to  purchase  additional  round  lots of the  securities  and
amounts held during the settlement of portfolio transactions.

The Nasdaq-100 Index

The portfolio of the Nasdaq Target 15 Portfolio consists of the common stocks of
companies  listed on the Nasdaq-100  Index.  The Nasdaq-100 Index represents the
largest  non-financial  domestic and  international  issues listed on the Nasdaq
Stock  Market(R).  The index is  calculated  based on a modified  capitalization
weighted  methodology.   The  Nasdaq  Stock  Market  lists  approximately  5,400
companies and trades more shares per day than any other major U.S. market.

The Nasdaq  Target 15 Portfolio is not designed so that prices will  parallel or
correlate  with the  movements of the  Nasdaq-100  Index and it is expected that
their prices will not parallel or correlate with such movements.  The publishers
of the Nasdaq-100  Index have not participated in any way in the creation of the
Nasdaq Target 15 Portfolio or in the selection of stocks in the fund.

Investment Limitations

The funds have adopted certain  investment  limitations  (based on total assets)
that cannot be changed  without  interest  holder  approval  and are designed to
limit your investment  risk. Such  limitations are described in the Statement of
Additional Information.

Hedging and Other Defensive and Temporary Investment Strategies

Although  the funds have no  present  intentions  to vary from their  investment
strategies  under any  circumstances,  the funds may  invest up to 100% of their
assets in cash equivalents and short-term  investments as a temporary  defensive
measure in response to adverse market conditions,  or to keep cash on hand fully
invested. During these periods, a fund may not be able to achieve its investment
objective.

First  Trust may also use  various  investment  strategies  designated  to hedge
against changes in the value of securities a fund owns or expects to purchase or
to  hedge  against   interest  rate  changes  and  to  hedge  against   currency
fluctuations  during the  settlement  of portfolio  transactions.  These hedging
strategies  include  using  financial  futures  contracts,  options,  options on
financial  futures,  foreign currency forward  contracts or stock index options.
The ability of a fund to benefit from  options and futures is largely  dependent
on First Trust's ability to use such strategies successfully.  A fund could lose
money on futures transactions or an option can expire worthless.

Each fund's  investment  objective may not be changed  without  interest  holder
approval.  The above investment policies may be changed by the Board of Trustees
without  interest holder  approval unless  otherwise noted in this prospectus or
the Statement of Additional Information.

Portfolio Turnover

A fund  buys  and  sells  portfolio  securities  in  the  normal  course  of its
investment activities. The proportion of the fund's investment portfolio that is
sold and  replaced  with  new  securities  during a year is known as the  fund's
portfolio  turnover  rate.  The funds  anticipate  that their  annual  portfolio
turnover  rates will  generally be between 20% and 100%. A turnover rate of 100%
would occur, for example,  if a fund sold and replaced securities valued at 100%
of its net assets within one year. Active trading would result in the payment by
the fund of increased brokerage costs and expenses.

Risk Factors

Risk is  inherent  in all  investing.  Investing  in the  funds  involves  risk,
including the risk that you may lose all or part of your  investment.  There can
be no assurance that a fund will meet its stated  objective.  Before you invest,
you should consider the following risks.

Market risk:  Market risk is the risk that a particular  stock,  an industry,  a
mutual fund or stocks in general may fall in value.

Small-cap company risk: The funds may invest in small capitalization  companies.
Such  companies  may be more  vulnerable to adverse  general  market or economic
developments,  may be less liquid,  and may experience  greater price volatility
than larger capitalization  companies as a result of several factors,  including
limited   trading   volumes,   products  or  financial   resources,   management
inexperience  and  less  publicly  available  information.   Accordingly,   such
companies   are   generally   subject  to  greater   market   risk  than  larger
capitalization companies.

Inflation  risk:  Inflation  risk is the risk that the value of assets or income
from investments will be less in the future as inflation  decreases the value of
money. As inflation increases, the value of the funds' assets can decline as can
the value of the funds'  distributions.  Common stock prices may be particularly
sensitive to rising  interest  rates, as the cost of capital rises and borrowing
costs increase.

Foreign investment risk: The funds may invest in foreign securities.  Securities
issued by  foreign  companies  or  governments  present  risks  beyond  those of
securities of U.S.  issuers.  Risks of investing in foreign  securities  include
higher  brokerage  costs;   different   accounting   standards;   expropriation,
nationalization  or other adverse political or economic  developments;  currency
devaluation,  blockages or transfer  restrictions;  changes in foreign  currency
exchange  rates;  taxes;  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. Prices of foreign securities also may
be more volatile than U.S. stocks.

Concentration risk: Each fund is classified as  "non-diversified."  As a result,
each  fund is only  limited  as to the  percentage  of its  assets  which may be
invested in the securities of any one issuer by its own investment  restrictions
and by the diversification  requirements imposed by the Internal Revenue Code of
1986, as amended. Since each fund may invest a relatively high percentage of its
assets in a limited number of issuers,  each fund may be more susceptible to any
single  economic,  political  or  regulatory  occurrence  and to  the  financial
conditions of the issuers in which it invests.

In  addition,  because  each  fund  invests  in  accordance  with an  investment
strategy,  a fund  may be  concentrated  in the  securities  of  companies  in a
particular  industry  or sector.  This  concentration  also makes the funds more
susceptible to any single occurrence affecting the applicable industry or sector
and may subject the funds to greater market risk than more diversified funds. In
particular,  due  to  their  investment  strategies,  as of  the  date  of  this
Prospectus,  the Funds are  concentrated  in the  technology  sector.  Companies
involved  in  the  technology   industry  must  contend  with  rapidly  changing
technology,  worldwide  competition,  including  aggressive  pricing and reduced
profit  margins,  rapid  obsolescence  of products and services,  loss of patent
protections,  cyclical market patterns, evolving industry standards and frequent
new  product  introductions.  Technology  companies  may  be  smaller  and  less
experienced  companies,  with  limited  product  lines,  markets,  or  financial
resources and fewer  experienced  management or marketing  personnel.  Also, the
stocks of many technology  companies have  exceptionally  high  price-to-earning
ratios  with  little  or  no  earnings  histories.  Many  technology  companies,
particularly  those involved with the Internet,  have experienced  extreme price
and  volume  fluctuations  that  often have been  unrelated  to their  operating
performance.

Investment strategy risk: The funds are exposed to additional market risk due to
their policy of investing in accordance with an investment strategy. As a result
of this policy,  securities  held by a fund will generally not be bought or sold
in response to market fluctuations. This policy may subject investors to greater
market risk than other mutual funds.

Investment in Fund Interests

Interests  of the  funds  are  sold  only to the  Separate  Account  to fund the
benefits of the Policies  issued by Allmerica.  The Separate  Account  purchases
interests  of  the  funds  in  accordance  with  variable   account   allocation
instructions  received  from owners of the  Policies.  First Trust then uses the
proceeds to buy securities for the funds. The Separate  Account,  as an interest
holder, has an ownership in the funds' investments.

The funds do not  issue  interest  certificates.  Individual  investors  may not
purchase or redeem  interests in the funds directly;  interests may be purchased
or  redeemed  only  through  the  Policies.  There  are  no  minimum  investment
requirements.  All  investments in a fund are credited to the interest  holder's
account in the form of full and  fractional  interests  of the  designated  fund
(rounded  to the  nearest  1/1000 of a share).  For a  discussion  of how Policy
owners may  purchase  fund  interests,  please refer to the  prospectus  for the
Separate  Account.  Owners of the  Policies  may direct  purchase or  redemption
instructions to Allmerica.

The  price  received  for  purchase  requests  will  depend on when the order is
received.  Orders  received  before the close of trading on a business  day will
receive that day's closing  price,  otherwise the next business day's price will
be received.  A business day is any day the New York Stock  Exchange is open for
business and normally ends at 4 p.m. New York time.  See "Net Asset Value" for a
discussion of how interests are priced.

Interest Redemption

Each fund offers to buy back  (redeem)  interests  of the fund from the Separate
Account  at any time at net  asset  value.  The  Separate  Account  will  redeem
interests to make benefit or surrender  payments under the terms of the Policies
or to effect  transfers among investment  options.  Redemptions are processed on
any day on which the funds are open for  business  and are  effected  at the net
asset value next  determined  after the  redemption  order,  in proper form,  is
received.  Orders  received  before the close of trading on a business  day will
receive that day's closing  price,  otherwise the next business day's price will
be received. For a discussion of how Policy owners may redeem interests,  please
refer to the prospectus for the Separate Account.

A fund may  suspend the right of  redemption  only under the  following  unusual
circumstances:

-  when the New York Stock Exchange is closed (other than weekends and holidays)
   or trading is restricted;

-  when  trading  in the  markets  utilized  is  restricted,  or  when  an
   emergency  exists  so  that  disposal  of  the  Fund's  investments  or
   determination of its net assets is not reasonably practicable; or

-  during any period when the SEC may permit.

Distributions and Taxes

Automatic Reinvestment

All  dividends  received  by a fund  will be  reinvested  into  additional  fund
interests.

Taxes and Tax Reporting

FT Defined is a limited  liability  company with all of its interests owned by a
single entity (the  Separate  Account).  Accordingly,  FT Defined is part of the
operations of Allmerica and is not taxed separately.  FT Defined does not intend
to  qualify  as a  "regulated  investment  company"  under  Subchapter  M of the
Internal Revenue Code.  Allmerica,  through the Separate Account,  is treated as
owning the assets of the funds,  which are the  collective  assets of the funds,
directly and its tax obligations  thereon are computed  pursuant to Subchapter L
of the Code  (which  governs  the  taxation  of  insurance  companies).  See the
Statement of  Additional  Information  for more complete  information  regarding
taxation.  For a discussion  of the tax status of the variable  annuity  Policy,
please refer to the prospectus for the Separate Account.

Internal Revenue Service Diversification Requirements

The funds  intend  to comply  with the  diversification  requirements  currently
imposed by the  Internal  Revenue  Service on  separate  accounts  of  insurance
companies  as a condition  of  maintaining  the status of the  variable  annuity
Policies  issued by the  Separate  Account  under  Section  817 of the  Internal
Revenue  Code.  First Trust  reserves  the right to depart  from the  investment
strategy of a fund in order to meet these diversification requirements.  See the
Statement of Additional Information for more specific information.

12b-1 Plan

Nike  Securities  serves as the  selling  agent and  distributor  of the  funds'
interests.  In this capacity, Nike Securities manages the offering of the funds'
interests and is responsible for all sales and promotional activities.  In order
to compensate Nike Securities for its costs in connection with these activities,
each fund has  adopted a service  plan  under Rule  12b-1  under the  Investment
Company  Act of 1940.  Each fund may  spend up to 0.25% per year of its  average
daily net assets as a service  fee.  Nike  Securities  uses the  service  fee to
compensate  Allmerica for providing  account  services to Policy  owners.  These
services include establishing and maintaining Policy owners' accounts, supplying
information  to Policy  owners,  delivering  fund  materials  to Policy  owners,
answering  inquiries,  and providing  other personal  services to Policy owners.
Because these fees are paid out of the fund's assets on an on-going basis,  over
time these fees will increase the cost of your  investment any may cost you more
than paying other types of sales  charges.  In  addition,  the Plan allows First
Trust to use a portion of its advisory fee to  compensate  Nike  Securities  for
other  expenses,  including  printing and  distributing  prospectuses to persons
other than interest  holders or Policy owners,  and the expenses of compensating
its sales force and  preparing,  printing and  distributing  advertising,  sales
literature and reports to interest  holders and Policy owners used in connection
with the sale of interests.

Net Asset Value

The price of fund  interests  is based on a fund's net asset value per  interest
which is determined as of the close of trading (normally 4:00 p.m. eastern time)
on each day the New York Stock Exchange is open for business. Net asset value is
calculated  for each fund by taking the market price of the fund's total assets,
including  interest  or  dividends  accrued  but not  yet  collected,  less  all
liabilities,  and  dividing by the total number of  interests  outstanding.  The
result,  rounded to the nearest cent,  is the net asset value per interest.  All
valuations  are  subject  to  review  by the  funds'  Board of  Trustees  or its
delegate.

In  determining  net asset  value,  expenses  are accrued and applied  daily and
securities  and other assets are  generally  valued as set forth  below.  Common
stocks and other equity securities listed on any national or foreign exchange or
on the Nasdaq  National  Market  System will be valued at the last sale price on
the  exchange or system in which they are  principally  traded on the  valuation
date. If there are no  transactions  on the  valuation  day,  securities  traded
principally on a national or foreign  exchange or on the Nasdaq  National Market
System  will be valued at the mean  between  the most recent bid and ask prices.
Equity securities traded in the over-the-counter market, which are not traded on
the Nasdaq National Market System,  are valued at their most recent trade price.
Short-term  securities  with a  remaining  maturity  of 61 days or more  will be
valued  by the fund  accounting  agent at  current  market  quotations  using an
independent  pricing  service or principal  market maker.  Bonds and other fixed
income  securities  (other  than  short-term  securities  described  above)  are
generally  valued by using  market  quotations  provided by dealers or a pricing
service.  The value of any portfolio  security held by a fund for which reliable
market  quotations  are not readily  available or for which the pricing  service
does not provide a valuation or such valuation is deemed  inappropriate by First
Trust will be determined by the funds' Valuation Committee in a manner that most
fairly reflects fair value of the security on the valuation date.

For funds that hold securities that trade  primarily on foreign  exchanges,  the
net asset value of a fund's  interests may change on days when interest  holders
will not be able to purchase or redeem the fund's interests.

Fund Service Providers

The  custodian  of the assets of the funds is PFPC Trust  Company,  8800 Tinicum
Boulevard,  3rd Floor,  Suite 200,  Philadelphia,  PA 19153.  PFPC also provides
certain  accounting  services  to the funds.  The funds'  transfer,  shareholder
services,  fund accounting and dividend  paying agent,  ICA Fund Services Corp.,
4455 E. Camelback Road, Suite 261E,  Phoenix,  AZ 85018,  performs  bookkeeping,
data processing, accounting and administrative services for the operation of the
funds and the maintenance of shareholder accounts.

Investment Company  Administration,  2020 E. Financial Way, Suite 100, Glendora,
CA  91741,  serves as the  administrator  of the  funds.  See the  Statement  of
Additional Information for an additional discussion of fund expenses.

Shareholder Inquiries

All inquiries  regarding the funds should be directed to the applicable  fund at
1001 Warrenville Road, Suite 300, Lisle, Illinois 60532, 1-800-621-1675.



FT DEFINED PORTFOLIOS LLC

Nasdaq Target 15 Portfolio
First Trust 10 Uncommon Values Portfolio

Several additional sources of information are available to you. The Statement of
Additional  Information  (SAI),  incorporated by reference into this prospectus,
contains detailed information on the funds' policies and operation.  The SAI and
the prospectus are intended for use in connection with variable annuity policies
offered by Allmerica.  Call the fund at 1-800-621-1675 to request a free copy of
the SAI or for other fund information.

You may also  obtain  this and other  fund  information,  including  the code of
ethics  adopted  by  First  Trust,   Nike  Securities  and  the  funds,  in  the
Commission's  Public  Reference  Room.  Information  about the  operation of the
Public   Reference   Room  may  be  obtained  by  calling  the   Commission   at
1-202-942-8090.  Fund information is also available on the EDGAR Database on the
Commission's  website at  http://www.sec.gov,  or may be obtained at  proscribed
rates by sending an e-mail  request to  [email protected]  or by writing to the
Commission's  Public Reference Section at 450 Fifth Street NW, Washington,  D.C.
20549-0102.

FT Defined Portfolios LLC
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
(800) 621-1675
www.nikesec.com


PART B

                       STATEMENT OF ADDITIONAL INFORMATION

FT DEFINED PORTFOLIOS LLC
FIRST DEFINED SECTOR FUND

                                December 28, 2000

This  Statement  of  Additional  Information  is not a  prospectus.  It contains
information  in addition to and more detailed  than set forth in the  Prospectus
for the applicable funds and should be read in conjunction with the prospectuses
for the funds,  dated December 28, 2000. A Prospectus may be obtained by calling
(800) 621-1675,  or writing 1001 Warrenville  Road,  Suite 300, Lisle,  Illinois
60532.

                                TABLE OF CONTENTS

                                                                            PAGE

General Information and History................................................1
Investment Policies............................................................2
Description of Strategy Funds.................................................16
Description of the Nasdaq-100 Index...........................................17
Nasdaq-100 Index..............................................................17
Investment Risks..............................................................18
Additional Sector Fund Industry Risks.........................................21
Additional Foreign Issuer Risks...............................................26
Fund Management...............................................................29
Performance Data of Investment Strategies.....................................33
Investment Advisory and Other Services........................................35
Purchases, Redemptions and Pricing of Interests...............................38
12b-1 Plan....................................................................41
Additional Information........................................................41
Tax Status....................................................................42

General Information and History

FT Defined  Portfolios  LLC (the "FT Fund") and First  Defined  Sector Fund (the
"First Defined Fund") are non-diversified, open-end management series investment
companies.  The FT Fund was organized as a Delaware limited liability company on
April  27,  2000.  Currently,   the  FT  Fund  has  two  series  authorized  and
outstanding.  Each series of the FT Fund  represents  membership  interests (the
"interests")  in a separate  portfolio of securities and other assets,  with its
own  objectives  and policies.  The series of the FT Fund consists of the Nasdaq
Target 15  Portfolio  and First  Trust 10  Uncommon  Values  Portfolio  (the "FT
Funds"). The First Defined Fund was organized as a Massachusetts  business trust
on April 27, 2000. Currently, the First Defined Fund has three series authorized
and  outstanding.  Each series of the First  Defined Fund  represents  shares of
beneficial  interest (the "shares"),  in a separate  portfolio of securities and
other  assets,  with its own  objectives  and  policies.  (The  "shares" and the
"interests" are collectively  referred to as the "interests".) The series of the
First Defined Fund  consists of the First Trust  Financial  Services  Portfolio,
First Trust Life Sciences  Portfolio and First Trust  Technology  Portfolio (the
"Sector  Funds" and the "First Defined  Funds").  The Nasdaq Target 15 Portfolio
and First  Trust 10  Uncommon  Values  Portfolio  are  referred to herein as the
"Strategy  Funds".  The  Strategy  Funds and the Sector  Funds are  collectively
referred  to herein as the  "Funds"  and  individually  referred to as a "Fund."
Interests of the Funds are sold only to insurance company separate accounts (the
"Separate  Accounts")  to fund the benefits of variable  annuity  policies  (the
"Policies").  Such Policies are issued by Allmerica Financial Life Insurance and
Annuity Company  ("Allmerica") for the FT Fund and possibly by various insurance
companies for the First Defined Fund.

Investment Policies

The Prospectus describes the investment objectives and strategies of each of the
Funds. Each Fund is also subject to the following fundamental policies which may
not be changed without  approval of the holders of a majority of the outstanding
voting interests of the Fund:

(1)......A Fund may not issue senior  securities,  except as permitted under the
Investment Company Act of 1940.

(2)......A  Fund may not borrow  money,  except that a Fund may (i) borrow money
from banks for  temporary  or  emergency  purposes  (but not for leverage or the
purchase of investments) and (ii) engage in other transactions permissible under
the  Investment  Company  Act of 1940  that may  involve a  borrowing  (such as,
obtaining short-term credits as are necessary for the clearance of transactions,
engaging  in  delayed-delivery  transactions,  or  purchasing  certain  futures,
forward  contracts and options),  provided that the  combination of (i) and (ii)
shall not exceed 33-1/3% of the value of the Fund's total assets  (including the
amount borrowed), less the Fund's liabilities (other than borrowings).

(3)......A  Fund will not  underwrite  the securities of other issuers except to
the extent the Fund may be considered an underwriter under the Securities Act of
1933 in connection with the purchase and sale of portfolio securities.

(4)......  A Fund will not  purchase or sell real estate or  interests  therein,
unless acquired as a result of ownership of securities or other instruments (but
this shall not prohibit a Fund from  purchasing  or selling  securities or other
instruments  backed  by  real  estate  or of  issuers  engaged  in  real  estate
activities).

(5)......A  Fund may not make loans to other  persons,  except  through  (i) the
purchase of debt securities  permissible under the Fund's  investment  policies,
(ii)  repurchase  agreements,  or (iii) the  lending  of  portfolio  securities,
provided that no such loan of portfolio  securities may be made by a Fund if, as
a result,  the aggregate of such loans would exceed  33-1/3% of the value of the
Fund's total assets.

(6)......A Fund may not purchase or sell physical commodities unless acquired as
a result of ownership of  securities  or other  instruments  (but this shall not
prevent a Fund from purchasing or selling options,  futures  contracts,  forward
contracts or other  derivative  instruments,  or from investing in securities or
other instruments backed by physical commodities).

(7)......A Fund may not pledge, mortgage or hypothecate any of its assets except
as may be necessary in connection with permissible borrowings or investments and
then such pledging,  mortgaging,  or hypothecating may not exceed 33-1/3% of the
Fund's total assets at the time of the borrowing or investment.

(8)......A  Strategy  Fund  may  invest  more  than  25%  of its  assets  in the
securities  of issuers  in any  single  industry  if the  applicable  investment
strategy  for the Fund  selects  securities  in a manner that  results in such a
concentration.  A Sector  Fund may  invest  more  than 25% of its  assets in the
securities of issuers in the industry  represented by the Fund.  Notwithstanding
the  foregoing,  there shall be no  limitation  on the  purchase of  obligations
issued or guaranteed by the U.S. Government,  its agencies or instrumentalities.
(See "Risk  Factors" in the  Prospectus  and  "Additional  Fund Industry  Risks"
herein for a discussion  of the risks  associated  with the  concentration  of a
Fund's  holdings  in  a  given  industry.)  Except  for  restriction  (2),  if a
percentage restriction is adhered to at the time of investment, a later increase
in percentage  resulting  from a change in market value of the investment or the
total assets will not constitute a violation of that restriction.

The foregoing  fundamental  policies and the investment  objective of a Fund may
not be changed without the  affirmative  vote of the majority of the outstanding
voting interests of a Registrant (or of a particular Fund, if appropriate).  The
Investment  Company Act of 1940 ("1940 Act") defines a majority vote as the vote
of the lesser of (i) 67% of the  voting  interests  represented  at a meeting at
which more than 50% of the  outstanding  interests are  represented or (ii) more
than 50% of the outstanding voting interests.  With respect to the submission of
a change in an investment policy to the holders of outstanding  voting interests
of a particular Fund, such matter shall be deemed to have been effectively acted
upon with respect to such Fund if a majority of the outstanding voting interests
of such Fund vote for the approval of such matter, notwithstanding that (1) such
matter has not been  approved by the  holders of a majority  of the  outstanding
voting interests of any other Fund affected by such matter,  and (2) such matter
has not  been  approved  by the vote of a  majority  of the  outstanding  voting
Registrant interests.

In addition to the foregoing fundamental policies, the Funds are also subject to
strategies and policies  discussed  herein which,  unless  otherwise  noted, are
non-fundamental  restrictions  and policies which may be changed by the Board of
Trustees.

Warrants

Each Fund may invest in warrants.  Warrants acquired by a Fund entitle it to buy
common  stock  from the  issuer  at a  specified  price  and  time.  They do not
represent  ownership of the securities but only the right to buy them.  Warrants
are  subject to the same  market  risks as stocks,  but may be more  volatile in
price. A Fund's  investment in warrants will not entitle it to receive dividends
or exercise  voting rights and will become  worthless if the warrants  cannot be
profitably exercised before their expiration date.

Securities Lending

Each Fund may also lend  portfolio  securities to  broker-dealers  and financial
institutions to realize  additional  income.  A Fund will not lend its portfolio
securities  or other  assets,  if as a result,  more than 33 1/3% of the  Fund's
total assets,  including collateral received, would be lent to broker-dealers or
other parties.  Such loans will be secured  continuously  by collateral at least
equal to the value of the securities lent by "marking-to-market" daily. The Fund
will continue to receive the equivalent of the interest or dividends paid by the
issuer of the  securities  lent and will retain the right to call,  upon notice,
the lent securities. The Fund may also receive interest on the investment of the
collateral or a fee from the borrower as compensation  for the loan.  Securities
loaned by a Fund remain subject to  fluctuations in market value. A Fund may pay
reasonable finders, custodian and administrative fees in connection with a loan.
As with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the  collateral  should the  borrower of the  securities  fail
financially.  However, loans will be made only to firms deemed by First Trust to
be of good standing.

During the period that a Fund seeks to enforce its rights  against the borrower,
the  collateral  and the securities  loaned remain  subject to  fluctuations  in
market value. A Fund may also incur expenses in enforcing its rights.  If a Fund
has  sold a  loaned  security,  it may  not be able to  settle  the  sale of the
security and may incur potential  liability to the buyer of the security on loan
for its costs to cover the purchase.

Delayed-Delivery Transactions

A Fund may from time to time  purchase  securities on a  "when-issued"  or other
delayed-delivery  basis. The price of securities  purchased in such transactions
is fixed at the time the  commitment  to  purchase  is made,  but  delivery  and
payment for the securities take place at a later date. Normally,  the settlement
date  occurs  within 45 days of the  purchase.  During  the period  between  the
purchase  and  settlement,  no  payment  is made by a Fund to the  issuer and no
interest is accrued on debt  securities  or dividend  income is earned on equity
securities.  Delayed-delivery commitments involve a risk of loss if the value of
the security to be purchased  declines prior to the settlement  date, which risk
is in addition to the risk of decline in value of a Fund's other  assets.  While
securities  purchased in delayed-delivery  transactions may be sold prior to the
settlement  date, the Funds intend to purchase such  securities with the purpose
of actually  acquiring them. At the time a Fund makes the commitment to purchase
a security in a delayed-delivery transaction, it will record the transaction and
reflect the value of the security in determining its net asset value.  The Funds
do not believe that net asset value will be  adversely  affected by purchases of
securities in delayed-delivery transactions.

Each  Fund  will  maintain  in  a  segregated  account  cash,  U.S.   government
securities,  and high grade liquid debt securities equal in value to commitments
for delayed-delivery  securities.  Such segregated securities will mature or, if
necessary,  be sold on or before the settlement date. When the time comes to pay
for  delayed-delivery   securities,  a  Fund  will  meet  its  obligations  from
then-available  cash flow, sale of the securities held in the segregated account
described above,  sale of other  securities,  or, although it would not normally
expect to do so,  from the sale of the  delayed-delivery  securities  themselves
(which  may  have a  market  value  greater  or less  than  the  Fund's  payment
obligation).

Illiquid Securities

Each Fund may  invest in  illiquid  securities  (i.e.,  securities  that are not
readily  marketable).  For  purposes of this  restriction,  illiquid  securities
include,  but  are  not  limited  to,  restricted  securities   (securities  the
disposition  of  which  is  restricted  under  the  federal   securities  laws),
securities  that may only be resold  pursuant to Rule 144A under the  Securities
Act of 1933,  as  amended  (the  "Securities  Act"),  but that are  deemed to be
illiquid;  and repurchase  agreements  with  maturities in excess of seven days.
However,  a Fund will not  acquire  illiquid  securities  if, as a result,  such
securities  would  comprise more than 15% of the value of the Fund's net assets.
The Board of Trustees or its delegates has the ultimate  authority to determine,
to the extent  permissible  under the federal  securities laws, which securities
are  liquid  or  illiquid  for  purposes  of this 15%  limitation.  The Board of
Trustees  has  delegated  to First  Trust the  day-to-day  determination  of the
illiquidity  of any equity or  fixed-income  security,  although it has retained
oversight  and  ultimate  responsibility  for such  determinations.  Although no
definitive liquidity criteria are used, the Board of Trustees has directed First
Trust to look to such  factors  as (i) the  nature of the  market for a security
(including the institutional  private resale market; the frequency of trades and
quotes for the security;  the number of dealers  willing to purchase or sell the
security; and the amount of time normally needed to dispose of the security, the
method of soliciting  offers and the  mechanics of transfer),  (ii) the terms of
certain securities or other instruments  allowing for the disposition to a third
party or the issuer thereof (e.g.,  certain  repurchase  obligations  and demand
instruments), and (iii) other permissible relevant factors.

Restricted  securities may be sold only in privately negotiated  transactions or
in a public offering with respect to which a registration statement is in effect
under  the  Securities  Act.  Where  registration  is  required,  a Fund  may be
obligated to pay all or part of the  registration  expenses  and a  considerable
period may elapse  between the time of the  decision to sell and the time a Fund
may be permitted to sell a security under an effective  registration  statement.
If, during such a period,  adverse  market  conditions  were to develop,  a Fund
might obtain a less favorable price than that which prevailed when it decided to
sell.  Illiquid  securities  will be priced at fair value as  determined in good
faith by the Board of Trustees or its delegate.  If, through the appreciation of
illiquid  securities or the depreciation of liquid securities,  a Fund should be
in a position where more than 15% of the value of its net assets are invested in
illiquid  securities,  including  restricted  securities  which are not  readily
marketable,  the affected Fund will take such steps as is deemed  advisable,  if
any, to protect liquidity.

Money Market Funds

Each Fund may invest in shares of money market funds to the extent  permitted by
the Investment Company Act of 1940.

Temporary Investments

Each  Fund  may,  without  limit  as to  percentage  of  assets,  purchase  U.S.
government  securities or short-term  debt securities to keep cash on hand fully
invested or for temporary  defensive  purposes.  Short-term  debt securities are
securities  from issuers  having a long-term debt rating of at least A or higher
by Standard & Poor's  Ratings Group ("S&P"),  Moody's  Investors  Service,  Inc.
("Moody's")  or Fitch IBCA,  Inc.  ("Fitch"),  or A- or higher by Duff & Phelps,
Inc. ("D&P") and having a maturity of one year or less.

Short-term  debt  securities  are defined to include,  without  limitation,  the
following:

(1)......U.S.  government securities, including bills, notes and bonds differing
as to maturity and rates of interest,  which are either  issued or guaranteed by
the U.S.  Treasury or by U.S.  government  agencies or  instrumentalities.  U.S.
government  agency  securities  include  securities  issued  by (a) the  Federal
Housing  Administration,  Farmers  Home  Administration,  Export-Import  Bank of
United  States,  Small  Business  Administration,  and the  Government  National
Mortgage  Association,  whose  securities  are  supported  by the full faith and
credit  of  the  United  States;  (b)  the  Federal  Home  Loan  Banks,  Federal
Intermediate Credit Banks, and the Tennessee Valley Authority,  whose securities
are supported by the right of the agency to borrow from the U.S.  Treasury;  (c)
the Federal National Mortgage Association, whose securities are supported by the
discretionary  authority of the U.S.  government to purchase certain obligations
of  the  agency  or   instrumentality;   and  (d)  the  Student  Loan  Marketing
Association,  whose securities are supported only by its credit.  While the U.S.
government provides financial support to such U.S. government-sponsored agencies
or instrumentalities,  no assurance can be given that it always will do so since
it is  not  so  obligated  by  law.  The  U.S.  government,  its  agencies,  and
instrumentalities  do not  guarantee the market value of their  securities,  and
consequently, the value of such securities may fluctuate.

(2)......Certificates  of deposit  issued  against funds  deposited in a bank or
savings and loan  association.  Such  certificates  are for a definite period of
time,  earn a specified  rate of return,  and are normally  negotiable.  If such
certificates  of deposit are  non-negotiable,  they will be considered  illiquid
securities and be subject to a Fund's 15% restriction on investments in illiquid
securities. Pursuant to the certificate of deposit, the issuer agrees to pay the
amount  deposited  plus  interest to the bearer of the  certificate  on the date
specified thereon. Under current FDIC regulations, the maximum insurance payable
as to any one  certificate of deposit is $100,000;  therefore;  certificates  of
deposit purchased by a Fund may not be fully insured.

(3)......Bankers'  acceptances which are short-term  credit  instruments used to
finance commercial transactions.  Generally, an acceptance is a time draft drawn
on a bank by an exporter  or an  importer to obtain a stated  amount of funds to
pay for specific  merchandise.  The draft is then  "accepted" by a bank that, in
effect,  unconditionally  guarantees to pay the face value of the  instrument on
its maturity  date.  The acceptance may then be held by the accepting bank as an
asset or it may be sold in the  secondary  market at the going rate of  interest
for a specific maturity.

(4)......Repurchase  agreements which involve  purchases of debt securities.  In
such an action,  at the time the Fund purchases the security,  it simultaneously
agrees  to  resell  and  redeliver   the  security  to  the  seller,   who  also
simultaneously  agrees to buy back the security at a fixed price and time.  This
assures a  predetermined  yield for a Fund during its holding  period  since the
resale  price is  always  greater  than  the  purchase  price  and  reflects  an
agreed-upon market rate. The period of these repurchase  agreements will usually
be short,  from overnight to one week.  Such actions afford an opportunity for a
Fund to invest  temporarily  available  cash.  A Fund may enter into  repurchase
agreements only with respect to obligations of the U.S. government, its agencies
or  instrumentalities;  certificates of deposit; or bankers acceptances in which
the Funds may  invest.  In  addition,  the Funds may only enter into  repurchase
agreements where the market value of the purchased  securities/collateral equals
at least 100% of principal  including  accrued interest and is  marked-to-market
daily.  The risk to a Fund is  limited  to the  ability of the seller to pay the
agreed-upon sum on the repurchase date; in the event of default,  the repurchase
agreement  provides  that the affected  Fund is entitled to sell the  underlying
collateral.  If the value of the  collateral  declines  after the  agreement  is
entered into, however,  and if the seller defaults under a repurchase  agreement
when the value of the underlying collateral is less than the repurchase price, a
Fund could incur a loss of both  principal  and  interest.  The Funds,  however,
intend to enter into repurchase agreements only with financial  institutions and
dealers  believed by First Trust to present  minimal  credit risks in accordance
with  criteria  established  by the Fund's Board of  Trustees.  First Trust will
review and  monitor  the  creditworthiness  of such  institutions.  First  Trust
monitors the value of the  collateral at the time the action is entered into and
at all times during the term of the repurchase agreement. First Trust does so in
an effort to determine that the value of the collateral always equals or exceeds
the agreed-upon  repurchase price to be paid to a Fund. If the seller were to be
subject to a federal bankruptcy  proceeding,  the ability of a Fund to liquidate
the collateral could be delayed or impaired because of certain provisions of the
bankruptcy laws.

(5)......Bank  time  deposits,  which are monies  kept on deposit  with banks or
savings  and loan  associations  for a stated  period of time at a fixed rate of
interest. There may be penalties for the early withdrawal of such time deposits,
in which case the yields of these investments will be reduced.

(6)......Commercial  paper,  which are short-term  unsecured  promissory  notes,
including  variable rate master demand notes issued by  corporations  to finance
their current  operations.  Master demand notes are direct lending  arrangements
between a Fund and a  corporation.  There is no secondary  market for the notes.
However, they are redeemable by the Fund at any time. The portfolio manager will
consider the financial  condition of the corporation (e.g.,  earning power, cash
flow,  and  other   liquidity   ratios)  and  will   continuously   monitor  the
corporation's ability to meet all of its financial obligations, because a Fund's
liquidity might be impaired if the corporation  were unable to pay principal and
interest  on demand.  A Fund may only  invest in  commercial  paper rated A-1 or
better by S&P, Prime-1 or higher by Moody's,  Duff 2 or higher by D&P or Fitch 2
or higher by Fitch.

Hedging Strategies

General Description of Hedging Strategies

A Fund may engage in hedging activities. First Trust may cause a Fund to utilize
a variety  of  financial  instruments,  including  options,  forward  contracts,
futures contracts  (sometimes  referred to as "futures"),  and options on future
contracts to attempt to hedge the Fund's holdings.

Hedging or  derivative  instruments  on  securities  generally are used to hedge
against price  movements in one or more particular  securities  positions that a
Fund owns or intends to acquire.  Such instruments may also be used to "lock-in"
realized but unrecognized  gains in the value of portfolio  securities.  Hedging
instruments on stock indices,  in contrast,  generally are used to hedge against
price  movements in broad equity market  sectors in which a Fund has invested or
expects to invest.  Hedging  strategies,  if successful,  can reduce the risk of
loss by wholly or partially  offsetting the negative effect of unfavorable price
movements in the investments being hedged. However,  hedging strategies can also
reduce the  opportunity  for gain by offsetting the positive effect of favorable
price  movements in the hedged  investments.  The use of hedging  instruments is
subject to applicable regulations of the Securities and Exchange Commission (the
"SEC"),  the several  options and futures  exchanges upon which they are traded,
the  Commodity  Futures  Trading  Commission  (the  "CFTC")  and  various  state
regulatory authorities. In addition, a Fund's ability to use hedging instruments
may be limited by tax considerations.

General Limitations on Futures and Options Transactions

The  Registrant  has  filed a  notice  of  eligibility  for  exclusion  from the
definition of the term  "commodity pool operator" with the CFTC and the National
Futures Association,  which regulate trading in the futures markets. Pursuant to
Section 4.5 of the regulations under the Commodity Exchange Act (the "CEA"), the
notice of eligibility for a Fund includes the representation  that the Fund will
use futures  contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC  regulations.  A Fund will not enter into futures and
options transactions if the sum of the initial margin deposits and premiums paid
for unexpired options exceeds 5% of a Fund's total assets.  In addition,  a Fund
will not enter into futures contracts and options  transactions if more than 30%
of its net assets would be committed to such instruments.

The  foregoing  limitations  are not  fundamental  policies of a Fund and may be
changed without  shareholder  approval as regulatory  agencies  permit.  Various
exchanges and  regulatory  authorities  have  undertaken  reviews of options and
futures trading in light of market  volatility.  Among the possible actions that
have been  presented  are proposals to adopt new or more  stringent  daily price
fluctuation  limits for  futures  and  options  transactions  and  proposals  to
increase the margin requirements for various types of futures transactions.

Asset Coverage for Futures and Options Positions

Each Fund will comply with the regulatory  requirements  of the SEC and the CFTC
with  respect to  coverage  of  options  and  futures  positions  by  registered
investment  companies  and, if the  guidelines so require,  will set aside cash,
U.S.  government  securities,  high grade  liquid debt  securities  and/or other
liquid assets permitted by the SEC and CFTC in a segregated custodial account in
the amount  prescribed.  Securities held in a segregated  account cannot be sold
while the futures or options position is outstanding, unless replaced with other
permissible assets, and will be marked-to-market daily.

Stock Index Options

A Fund may purchase  stock index  options,  sell stock index options in order to
close out existing positions,  and/or write covered options on stock indexes for
hedging  purposes.  Stock index  options  are put  options  and call  options on
various stock indexes. In most respects, they are identical to listed options on
common stocks.  The primary  difference  between stock options and index options
occurs  when index  options are  exercised.  In the case of stock  options,  the
underlying security,  common stock, is delivered.  However, upon the exercise of
an index  option,  settlement  does  not  occur by  delivery  of the  securities
comprising the index.  The option holder who exercises the index option receives
an amount of cash if the closing  level of the stock index upon which the option
is based is greater  than, in the case of a call, or less than, in the case of a
put,  the  exercise  price of the  option.  This  amount of cash is equal to the
difference  between the closing price of the stock index and the exercise  price
of the option expressed in dollars times a specified multiple.

A stock index fluctuates with changes in the market values of the stock included
in the index. For example,  some stock index options are based on a broad market
index,  such as the Standard & Poor's 500 or the Value Line Composite Indices or
a more  narrower  market index,  such as the Standard & Poor's 100.  Indexes may
also be based on an industry  or market  segment.  Options on stock  indexes are
currently  traded on the  following  exchanges:  the  Chicago  Board of  Options
Exchange,  the New York Stock Exchange, the American Stock Exchange, the Pacific
Stock Exchange, and the Philadelphia Stock Exchange.

A Fund's use of stock index options is subject to certain risks.  Successful use
by a Fund of options on stock  indexes  will be subject to the  ability of First
Trust to correctly predict movements in the directions of the stock market. This
requires  different skills and techniques than predicting  changes in the prices
of individual securities. In addition, a Fund's ability to effectively hedge all
or a portion of the securities in its portfolio,  in anticipation of or during a
market decline through transactions in put options on stock indexes,  depends on
the degree to which price  movements in the underlying  index correlate with the
price  movements  of  the  securities  held  by a  Fund.  Inasmuch  as a  Fund's
securities will not duplicate the components of an index,  the correlation  will
not be  perfect.  Consequently,  each Fund will bear the risk that the prices of
its  securities  being  hedged will not move in the same amount as the prices of
its put options on the stock  indexes.  It is also  possible that there may be a
negative  correlation  between  the index and a Fund's  securities  which  would
result  in a loss on both  such  securities  and the  options  on stock  indexes
acquired by the Fund.

The hours of trading for options may not conform to the hours  during  which the
underlying  securities are traded.  To the extent that the options markets close
before the markets for the  underlying  securities,  significant  price and rate
movements can take place in the  underlying  markets that cannot be reflected in
the options markets.  The purchase of options is a highly  specialized  activity
which involves  investment  techniques and risks different from those associated
with ordinary  portfolio  securities  transactions.  The purchase of stock index
options involves the risk that the premium and transaction  costs paid by a Fund
in purchasing an option will be lost as a result of  unanticipated  movements in
prices  of the  securities  comprising  the stock  index on which the  option is
based.

Certain Considerations Regarding Options

There is no assurance that a liquid secondary market on an options exchange will
exist for any particular option, or at any particular time, and for some options
no secondary  market on an exchange or elsewhere may exist.  If a Fund is unable
to close out a call option on securities  that it has written  before the option
is  exercised,  the Fund may be required to purchase the optioned  securities in
order to satisfy its obligation under the option to deliver such securities.  If
a Fund is unable to effect a closing sale transaction with respect to options on
securities that it has purchased,  it would have to exercise the option in order
to realize any profit and would incur  transaction  costs upon the  purchase and
sale of the underlying securities.

The writing and  purchasing of options is a highly  specialized  activity  which
involves  investment  techniques and risks different from those  associated with
ordinary portfolio securities  transactions.  Imperfect  correlation between the
options and securities  markets may detract from the  effectiveness of attempted
hedging.  Options  transactions may result in significantly  higher  transaction
costs and portfolio turnover for the Fund.

Futures Contracts

Each Fund may enter into futures contracts (hereinafter referred to as "Futures"
or "Futures Contracts"), including index Futures as a hedge against movements in
the equity  markets,  in order to hedge against  changes on  securities  held or
intended to be acquired by a Fund or for other  purposes  permissible  under the
CEA. Each Fund's  hedging may include sales of Futures as an offset  against the
effect of  expected  declines  in stock  prices and  purchases  of Futures as an
offset against the effect of expected  increases in stock prices.  The Fund will
not enter into Futures Contracts which are prohibited under the CEA and will, to
the extent required by regulatory authorities, enter only into Futures Contracts
that are  traded  on  national  futures  exchanges  and are  standardized  as to
maturity date and underlying financial  instrument.  The principal interest rate
Futures  exchanges  in the  United  States are the Board of Trade of the City of
Chicago and the Chicago Mercantile  Exchange.  Futures exchanges and trading are
regulated under the CEA by the CFTC.

An interest rate futures contract  provides for the future sale by one party and
purchase  by  another  party  of a  specified  amount  of a  specific  financial
instrument  (e.g.,  a debt  security)  or currency  for a  specified  price at a
designated  date,  time and place.  An index  Futures  Contract is an  agreement
pursuant  to which the  parties  agree to take or make  delivery of an amount of
cash equal to the difference  between the value of the index at the close of the
last  trading  day of the  contract  and the price at which  the  index  Futures
Contract was originally  written.  Transaction costs are incurred when a Futures
Contract is bought or sold and margin  deposits  must be  maintained.  A Futures
Contract may be  satisfied  by delivery or purchase,  as the case may be, of the
instrument  or by payment  of the  change in the cash  value of the index.  More
commonly, Futures Contracts are closed out prior to delivery by entering into an
offsetting transaction in a matching Futures Contract.  Although the value of an
index  might be a function  of the value of  certain  specified  securities,  no
physical delivery of those securities is made. If the offsetting  purchase price
is less than the original sale price,  a gain will be realized.  Conversely,  if
the offsetting sale price is more than the original  purchase price, a gain will
be realized; if it is less, a loss will be realized.  The transaction costs must
also be included in these calculations. There can be no assurance, however, that
a Fund will be able to enter into an  offsetting  transaction  with respect to a
particular Futures Contract at a particular time. If a Fund is not able to enter
into an  offsetting  transaction,  the Fund  will  continue  to be  required  to
maintain the margin deposits on the Futures Contract.

Margin is the  amount  of funds  that  must be  deposited  by each Fund with its
custodian in a segregated account in the name of the futures commission merchant
in order to initiate  Futures  trading and to maintain the Fund's open positions
in  Futures  Contracts.  A margin  deposit  is  intended  to ensure  the  Fund's
performance  of the  Futures  Contract.  The margin  required  for a  particular
Futures  Contract is set by the exchange on which the Futures Contract is traded
and may be  significantly  modified from time to time by the exchange during the
term of the Futures Contract.  Futures  Contracts are customarily  purchased and
sold on  margins  that may  range  upward  from less than 5% of the value of the
Futures Contract being traded.

If the price of an open Futures  Contract  changes (by increase in the case of a
sale or by decrease  in the case of a purchase)  so that the loss on the Futures
Contract  reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the
value of a position  increases  because of favorable price changes in the Future
Contract so that the margin deposit exceeds the required margin, the broker will
pay the excess to the respective Fund. In computing daily net asset value,  each
Fund will mark to market the current value of its open Futures  Contracts.  Each
Fund expects to earn interest income on their margin deposits.

Because  of the low  margin  deposits  required,  Futures  trading  involves  an
extremely  high  degree of  leverage.  As a result,  a  relatively  small  price
movement in a Futures Contract may result in immediate and substantial  loss, as
well as gain, to the investor.  For example, if at the time of purchase,  10% of
the value of the Futures  Contract is  deposited  as margin,  a  subsequent  10%
decrease in the value of the Futures  Contract  would  result in a total loss of
the margin  deposit,  before any deduction  for the  transaction  costs,  if the
account  were then closed out. A 15%  decrease  would  result in a loss equal to
150% of the original  margin deposit,  if the Future  Contracts were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount initially  invested in the Futures  Contract.  However,  a Fund would
presumably have sustained comparable losses if, instead of the Futures Contract,
it had invested in the  underlying  financial  instrument  and sold it after the
decline.

Most United States Futures  exchanges limit the amount of fluctuation  permitted
in  Futures  Contract  prices  during  a  single  trading  day.  The  day  limit
establishes  the maximum  amount that the price of a Futures  Contract  may vary
either  up or down  from the  previous  day's  settlement  price at the end of a
trading  session.  Once the daily limit has been reached in a particular type of
Futures  Contract,  no  trades  may be made on that day at a price  beyond  that
limit.  The daily limit governs only price movement during a particular  trading
day and therefore does not limit potential losses, because the limit may prevent
the  liquidation  of  unfavorable   positions.   Futures  Contract  prices  have
occasionally moved to the daily limit for several  consecutive trading days with
little or no trading, thereby preventing prompt liquidation of Futures positions
and subjecting some Futures traders to substantial losses.

There can be no assurance  that a liquid market will exist at a time when a Fund
seeks to close out a Futures position. The Fund would continue to be required to
meet margin  requirements until the position is closed,  possibly resulting in a
decline  in the Fund's  net asset  value.  In  addition,  many of the  contracts
discussed  above are relatively new  instruments  without a significant  trading
history. As a result,  there can be no assurance that an active secondary market
will develop or continue to exist.

A public  market  exists in  Futures  Contracts  covering  a number of  indexes,
including,  but not limited to, the Standard & Poor's 500 Index,  the Standard &
Poor's 100 Index,  the Nasdaq-100  Index, the Value Line Composite Index and the
New York Stock Exchange Composite Index.

Options on Futures

Each Fund may also  purchase or write put and call options on Futures  Contracts
and enter into closing transactions with respect to such options to terminate an
existing position. A futures option gives the holder the right, in return of the
premium  paid,  to assume a long position  (call) or short  position  (put) in a
Futures  Contract at a specified  exercise  price prior to the expiration of the
option.  Upon exercise of a call option,  the holder acquires a long position in
the Futures Contract and the writer is assigned the opposite short position.  In
the case of a put option, the opposite is true. Prior to exercise or expiration,
a  futures  option  may be closed  out by an  offsetting  purchase  or sale of a
futures option of the same series.

A Fund  may  use  options  on  Futures  Contracts  in  connection  with  hedging
strategies.  Generally,  these strategies would be applied under the same market
and  market  sector  conditions  in which the Fund use put and call  options  on
securities  or indexes.  The  purchase of put  options on Futures  Contracts  is
analogous  to the  purchase  of puts on  securities  or indexes so as to hedge a
Funds'  securities  holdings  against the risk of declining  market prices.  The
writing of a call option or the purchasing of a put option on a Futures Contract
constitutes a partial hedge against  declining  prices of a securities which are
deliverable  upon  exercise of the  Futures  Contract.  If the futures  price at
expiration  of a written  call option is below the exercise  price,  a Fund will
retain the full  amount of the option  premium  which  provides a partial  hedge
against any decline that may have occurred in the Fund's holdings of securities.
If the futures  price when the option is exercised is above the exercise  price,
however,  the Fund will incur a loss, which may be offset,  in whole or in part,
by the increase in the value of the securities  held by the Fund that were being
hedged.  Writing a put option or purchasing a call option on a Futures  Contract
serves as a partial hedge against an increase in the value of the securities the
Fund intends to acquires.

As with investments in Futures  Contracts,  each Fund is required to deposit and
maintain  margin  with  respect to put and call  options  on  Futures  Contracts
written by it. Such margin  deposits  will vary  depending  on the nature of the
underlying Futures Contract (and the related initial margin  requirements),  the
current  market value of the option,  and other  futures  positions  held by the
Fund. Each Fund will set aside in a segregated  account at the Fund's  custodian
liquid  assets,  such as cash,  U.S.  government  securities or other high grade
liquid  debt  obligations  equal in value to the  amount  due on the  underlying
obligation.   Such  segregated  assets  will  be  marked-to-market   daily,  and
additional  assets will be placed in the segregated  account  whenever the total
value of the  segregated  account  falls below the amount due on the  underlying
obligation.

The risks  associated with the use of options on Futures  Contracts  include the
risk that a Fund may close out its  position  as a writer of an option only if a
liquid  secondary  market  exists for such options,  which cannot be assured.  A
Fund's  successful use of options on Futures  Contracts depends on First Trust's
ability to correctly predict the movement in prices of Futures Contracts and the
underlying instruments,  which may prove to be incorrect. In addition, there may
be imperfect  correlation  between the instruments  being hedged and the Futures
Contract  subject  to the  option.  For  additional  information,  see  "Futures
Contracts."  Certain  characteristics  of the futures  market might increase the
risk that  movements  in the prices of futures  contracts  or options on futures
contracts  might not  correlate  perfectly  with  movements in the prices of the
investments  being  hedged.  For example,  all  participants  in the futures and
options on futures contracts markets are subject to daily variation margin calls
and might be  compelled  to  liquidate  futures or options on futures  contracts
positions whose prices are moving  unfavorably to avoid being subject to further
calls. These liquidations could increase the price volatility of the instruments
and distort the normal price relationship between the futures or options and the
investments being hedged.  Also, because of initial margin deposit  requirements
in markets, there might be increased participation by speculators in the futures
markets.  This participation  also might cause temporary price  distortions.  In
addition, activities of large traders in both the futures and securities markets
involving  arbitrage,  "program trading," and other investment  strategies might
result in temporary price distortions.

Risks and Special Considerations Concerning Derivatives

In addition to the foregoing, the use of derivative instruments involves certain
general risks and considerations as described below.

(1)......Market  Risk.  Market risk is the risk that the value of the underlying
assets may go up or down.  Adverse movements in the value of an underlying asset
can expose a Fund to losses.  Market risk is the primary  risk  associated  with
derivative transactions. Derivative instruments may include elements of leverage
and,  accordingly,  fluctuations  in the value of the  derivative  instrument in
relation  to the  underlying  asset  may be  magnified.  The  successful  use of
derivative  instruments  depends  upon a variety of  factors,  particularly  the
portfolio manager's ability to predict movements of the securities,  currencies,
and  commodities  markets,  which may require  different  skills than predicting
changes in the prices of individual  securities.  There can be no assurance that
any  particular  strategy  adopted  will  succeed.  A  decision  to  engage in a
derivative  transaction will reflect the portfolio  manager's  judgment that the
derivative  transaction will provide value to a Fund and its shareholders and is
consistent  with a Fund's  objectives,  investment  limitations,  and  operating
policies.  In making such a judgment,  the  portfolio  manager  will analyze the
benefits and risks of the derivative  transactions and weigh them in the context
of a Fund's overall investments and investment objective.

(2)......Credit  Risk.  Credit  risk is the risk that a loss be  sustained  as a
result of the failure of a counterparty to comply with the terms of a derivative
instrument.  The counterparty risk for exchange-traded  derivatives is generally
less  than  for  privately-negotiated  or OTC  derivatives,  since  generally  a
clearing  agency,  which is the issuer or counterparty  to each  exchange-traded
instrument,  provides  a  guarantee  of  performance.  For  privately-negotiated
instruments, there is no similar clearing agency guarantee. In all transactions,
a Fund will bear the risk that the  counterparty  will  default,  and this could
result in a loss of the  expected  benefit of the  derivative  transactions  and
possibly  other  losses to the Fund.  The Fund will enter into  transactions  in
derivative  instruments only within  counterparties  that First Trust reasonably
believes are capable of performing under the contract.

(3)......Correlation  Risk.  Correlation risk is the risk that there might be an
imperfect  correlation,  or even no  correlation,  between price  movements of a
derivative  instrument and price movements of investments  being hedged.  When a
derivative transaction is used to completely hedge another position,  changes in
the market value of the combined  position (the  derivative  instrument plus the
position  being hedged) result from an imperfect  correlation  between the price
movements  of the two  instruments.  With a  perfect  hedge,  the  value  of the
combined  position  remains  unchanged  with  any  change  in the  price  of the
underlying  asset.  With  an  imperfect  hedge,  the  value  of  the  derivative
instrument and its hedge are not perfectly correlated. For example, if the value
of a derivative instrument used in a short hedge (such as writing a call option,
buying a put option or selling a futures  contract)  increased  by less than the
decline in value of the hedged  investments,  the hedge  would not be  perfectly
correlated.  This  might  occur  due to  factors  unrelated  to the value of the
investments being hedged,  such as speculative or other pressures on the markets
in which  these  instruments  are  traded.  The  effectiveness  of hedges  using
instruments  on indices  will  depend,  in part,  on the  degree of  correlation
between price  movements in the index and the price movements in the investments
being hedged.

(4)......Liquidity Risk. Liquidity risk is the risk that a derivative instrument
cannot  be  sold,  closed  out,  or  replaced  quickly  at or very  close to its
fundamental  value.  Generally,  exchange  contracts are very liquid because the
exchange  clearinghouse is the counterparty of every contract.  OTC transactions
are less liquid than  exchange-traded  derivatives  since they often can only be
closed out with the other party to the transaction.  A Fund might be required by
applicable  regulatory  requirements  to maintain  assets as  "cover,"  maintain
segregated  accounts,  and/or make margin  payments  when it takes  positions in
derivative instruments involving obligations to third parties (i.e., instruments
other than purchase options).  If a Fund is unable to close out its positions in
such  instruments,  it might be required to continue to maintain  such assets or
accounts or make such payments until the position expires, matures, or is closed
out. These requirements might impair a Fund's ability to sell a security or make
an  investment  at a time  when it would  otherwise  be  favorable  to do so, or
require  that the Fund sell a portfolio  security at a  disadvantageous  time. A
Fund's  ability  to sell or  close  out a  position  in an  instrument  prior to
expiration or maturity  depends upon the existence of a liquid  secondary market
or,  in the  absence  of such a  market,  the  ability  and  willingness  of the
counterparty  to enter  into a  transaction  closing  out the  position.  Due to
liquidity risk, there is no assurance that any derivatives  position can be sold
or closed out at a time and price that is favorable to a Fund.

(5)......Legal   Risk.   Legal   risk  is  the  risk  of  loss   caused  by  the
unenforceability  of a party's  obligations under the derivative.  While a party
seeking price certainty agrees to surrender the potential upside in exchange for
downside protection, the party taking the risk is looking for a positive payoff.
Despite this voluntary assumption of risk, a counterparty that has lost money in
a derivative  transaction  may try to avoid payment by exploiting  various legal
uncertainties about certain derivative products.

(6)......Systemic or "Interconnection" Risk. Systemic or interconnection risk is
the risk that a disruption in the financial markets will cause  difficulties for
all market  participants.  In other words, a disruption in one market will spill
over into other  markets,  perhaps  creating a chain  reaction.  Much of the OTC
derivatives market takes place among the OTC dealers themselves, thus creating a
large  interconnected  web of  financial  obligations.  This  interconnectedness
raises the  possibility  that a default by one large dealer could create  losses
for  other  dealers  and  destabilize  the  entire  market  for  OTC  derivative
instruments.

Foreign Currency Transactions.  The Funds may engage in foreign currency forward
contracts, options, and futures transactions.  Such Funds may enter into foreign
currency transactions for hedging and other permissible risk management purposes
only.  Foreign currency futures and options  contracts are traded in the U.S. on
regulated  exchanges such as the Chicago  Mercantile  Exchange,  the Mid-America
Commodities  Exchange,  and the Philadelphia Stock Exchange. If the Funds invest
in a currency  futures or options  contract,  they must make a margin deposit to
secure  performance  of such  contract.  With respect to investments in currency
futures  contracts,  the Funds may also be required  to make a variation  margin
deposit  because  the value of futures  contracts  fluctuates  from  purchase to
maturity.  In  addition,  the Funds may  segregate  assets to cover its  futures
contracts obligations.

Risks and Special Considerations Concerning Foreign Currencies

(1)......Currency  Risks. The exchange rates between the U.S. dollar and foreign
currencies  depend  upon such  factors  as  supply  and  demand in the  currency
exchange markets, international balances of payments, governmental intervention,
speculation,  and other  economic and political  conditions.  Although each Fund
values its assets daily in U.S. dollars,  a Fund may not convert its holdings of
foreign currencies to U.S. dollars daily. A Fund may incur conversion costs when
it converts  its  holdings to another  currency.  Foreign  exchange  dealers may
realize a profit on the  difference  between  the price at which a Fund buys and
sells currencies.  Funds may engage in foreign currency exchange transactions in
connection  with its  portfolio  investments.  A Fund will  conduct  its foreign
currency exchange  transactions  either on a spot (i.e., cash) basis at the spot
rate  prevailing  in the foreign  currency  exchange  market or through  forward
contracts to purchase or sell foreign contracts.

(2)......Forward  Foreign Currency Exchange Contracts.  The Funds may enter into
forward foreign currency exchange  contracts.  Forward foreign currency exchange
contracts may limit  potential gains that could result from a positive change in
such currency  relationships.  First Trust believes that it is important to have
the  flexibility  to enter into  forward  foreign  currency  exchange  contracts
whenever it determines  that it is in a Fund's best interest to do so. The Funds
will not speculate in foreign currency exchange.

The Funds will not enter into forward currency exchange  contracts or maintain a
net exposure in such  contracts  that it would be obligated to deliver an amount
of foreign  currency  in excess of the value of their  portfolio  securities  or
other assets  denominated  in that currency or, in the case of a  "cross-hedge,"
denominated  in a currency or currencies  that First Trust believes will tend to
be  closely  correlated  with that  currency  with  regard  to price  movements.
Generally,  the Funds will not enter into a forward  foreign  currency  exchange
contract with a term longer than one year.

(3)......Foreign Currency Options. A foreign currency option provides the option
buyer with the right to buy or sell a stated  amount of foreign  currency at the
exercise price on a specified  date or during the option period.  The owner of a
call  option  has  the  right,  but  not the  obligation,  to buy the  currency.
Conversely, the owner of a put options has the right, but not the obligation, to
sell the currency.  When the option is exercised,  the seller (i.e.,  writer) of
the option is obligated to fulfill the terms of the sold option. However, either
the seller or the buyer may, in the secondary market,  close its position during
the option period at any time prior to expiration.

A call option on foreign  currency  generally  rises in value if the  underlying
currency  appreciates in value, and a put option on a foreign currency generally
rises  in  value if the  underlying  currency  depreciates  in  value.  Although
purchasing  a foreign  currency  option can protect the Fund  against an adverse
movement  in the  value of a foreign  currency,  the  option  will not limit the
movement in the value of such currency.  For example,  if a Fund held securities
denominated  in a foreign  currency  that was  appreciating  and had purchased a
foreign  currency put to hedge  against a decline in the value of the  currency,
the Fund would not have to exercise its put option.  Likewise, if a Fund entered
into a contract to purchase a security  denominated in foreign  currency and, in
conjunction  with that  purchase,  purchased a foreign  currency  call option to
hedge against a rise in value of the currency,  and if the value of the currency
instead  depreciated  between the date of purchase and the settlement  date, the
Fund would not have to exercise its call. Instead, the Fund could acquire in the
spot market the amount of foreign currency needed for settlement.

(4)......Special  Risks  Associated with Foreign  Currency  Options.  Buyers and
sellers of foreign  currency options are subject to the same risks that apply to
options generally. In addition,  there are certain risks associated with foreign
currency  options.  The markets in foreign  currency options are relatively new,
and the Fund's  ability to establish  and close out positions on such options is
subject to the maintenance of a liquid  secondary  market.  Although a Fund will
not purchase or write such options unless and until, in the opinion of the First
Trust,  the market for them has developed  sufficiently to ensure that the risks
in  connection  with such options are not greater  than the risks in  connection
with the underlying currency,  there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time.

In addition,  options on foreign currencies are affected by all of those factors
that influence foreign exchange rates and investments generally.  The value of a
foreign  currency  option  depends  upon the  value of the  underlying  currency
relative to the U.S. dollar.  As a result,  the price of the option position may
vary with  changes  in the value of  either or both  currencies  and may have no
relationship  to the investment  merits of a foreign  security.  Because foreign
currency  transactions  occurring in the interbank market involve  substantially
larger  amounts  than those that may be involved in the use of foreign  currency
options,  investors may be  disadvantaged by having to deal in an odd lot market
(generally  consisting  of  transactions  of  less  than  $1  million)  for  the
underlying  foreign  currencies at prices that are less favorable than for round
lots.

There is no systematic reporting of last sale information for foreign currencies
or any regulatory  requirements  that  quotations  available  through dealers or
other market sources be firm or revised on a timely basis.  Available  quotation
information  is  generally  representative  of very  large  transactions  in the
interbank market and thus may not reflect relatively smaller transactions (i.e.,
less than $1 million) where rates may be less favorable. The interbank market in
foreign currencies is a global,  around-the-clock market. To the extent that the
U.S. options markets are closed while the markets for the underlying  currencies
remain  open,  significant  price  and  rate  movements  may  take  place in the
underlying  markets that cannot be reflected in the options  markets  until they
reopen.

(5)......Foreign  Currency  Futures  Transactions.  By  using  foreign  currency
futures  contracts and options on such contracts,  a Fund may be able to achieve
many of the same  objectives  as it would  through  the use of  forward  foreign
currency exchange  contracts.  The Funds may be able to achieve these objectives
possibly  more  effectively  and at a lower cost by using  futures  transactions
instead of forward foreign currency exchange contracts.

(6)......Special  Risks Associated with Foreign  Currency Futures  Contracts and
Related Options.  Buyers and sellers of foreign  currency futures  contracts are
subject  to the same  risks  that  apply  to the use of  futures  generally.  In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging  device  similar  to those  associated  with  options  on
currencies, as described above.

Options on foreign  currency  futures  contracts may involve certain  additional
risks.  Trading options on foreign currency futures contracts is relatively new.
The ability to establish  and close out  positions on such options is subject to
the maintenance of a liquid secondary  market.  To reduce this risk, a Fund will
not purchase or write options on foreign currency  futures  contracts unless and
until, in the opinion of First Trust,  the market for such options has developed
sufficiently that the risks in connection with such options are not greater than
the risks in connection  with  transactions in the underlying  foreign  currency
futures contracts.  Compared to the purchase or sale of foreign currency futures
contracts,  the  purchase of call or put options on futures  contracts  involves
less  potential risk to a Fund because the maximum amount at risk is the premium
paid  for  the  option  (plus  transaction   costs).   However,   there  may  be
circumstances  when the  purchase of a call or put option on a futures  contract
would  result in a loss,  such as when there is no  movement in the price of the
underlying currency or futures contract.

Foreign Investments

Indirect  Foreign  Investment--Depositary  Receipts.  The  Funds  may  invest in
foreign  securities  by  purchasing  depositary  receipts,   including  American
Depositary Receipts ("ADRs"),  European Depositary Receipts ("EDRs"),  or Global
Depositary  Receipts  ("GDRs"),   or  other  securities   representing  indirect
ownership  interests in the securities of foreign issuers.  Generally,  ADRs, in
registered form, are denominated in U.S. dollars and are designed for use in the
U.S. securities markets, while EDRs and GDRs, in bearer form, may be denominated
in other currencies and are designed for use in European and other markets.  For
purposes of such Fund's investment policies,  ADRs, EDRs, and GDRs are deemed to
have the same classification as the underlying securities they represent, except
that ADRs,  EDRs,  and GDRs shall be treated as  indirect  foreign  investments.
Thus, an ADR, EDR, or GDR representing ownership of common stock will be treated
as  common  stock.  ADRs,  EDRs,  and  GDRs  do no  eliminate  all of the  risks
associated with directly investing in the securities of foreign issuers.

Other types of depositary  receipts include American Depositary Shares ("ADSs"),
Global Depositary  Certificates ("GDCs"), and International  Depositary Receipts
("IDRs").  ADSs are shares  issued under a deposit  agreement  representing  the
underlying  ordinary  shares that trade in the  issuer's  home  market.  An ADR,
described  above,  is a certificate  that  represents a number of ADSs. GDCs and
IDRs are typically issued by a foreign bank or trust company,  although they may
sometimes  also be issued  by a U.S.  bank or trust  company.  GDCs and IDRs are
depositary  receipts that evidence ownership of underlying  securities issued by
either a foreign or a U.S. corporation.

Direct Foreign  Investments.  The Funds may invest directly in the securities of
foreign  issuers.  In  consideration of whether to invest in the securities of a
foreign company,  First Trust considers such factors as the  characteristics  of
the particular company, differences between economic trends, and the performance
of securities  markets within the U.S. and those within other  countries.  First
Trust also considers factors relating to the general economic, governmental, and
social conditions of the country or countries where the company is located.

Securities  transactions  conducted  outside the U.S.  may not be  regulated  as
rigorously  as in the U.S.,  may not  involve a clearing  mechanism  and related
guarantees,  and are  subject  to the  risk of  governmental  actions  affecting
trading  in,  or  the  prices  of,  foreign  securities,  currencies  and  other
instruments. The value of such positions also could be adversely affected by (i)
other  complex  foreign  political,  legal and  economic  factors,  (ii)  lesser
availability than in the U.S. of data on which to make trading decisions,  (iii)
delays in a Fund's  ability to act upon  economic  events  occurring  in foreign
markets during  non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and the margin requirements than in
the U.S., and (v) lower trading volume and liquidity.

Insurance Law Restrictions

In  connection  with the  Registrant's  agreement to sell shares to the Separate
Accounts,   First  Trust  may  enter  into  agreements  with  certain  insurance
companies,  required by certain state insurance  departments,  under which First
Trust may agree to use its best efforts to assure and to permit those  insurance
companies to monitor each Fund for compliance  with the investment  restrictions
and limitations prescribed by state insurance laws and regulations applicable to
the investment of separate  account assets in shares of mutual funds.  If a Fund
failed to comply with such  restrictions or limitations,  the insurance  company
would take appropriate action which might include ceasing to make investments in
the  Fund  or  withdrawing   from  the  state  imposing  the  limitation.   Such
restrictions  and limitations  are not expected to have a significant  impact on
the Registrant's operations.

Description of Strategy Funds

As  described  in the  Funds'  Prospectus  of each  Strategy  Fund is  primarily
invested in accordance with an investment  strategy.  Each year, as discussed in
the  Prospectus,  the  portfolio of each Strategy Fund is adjusted in accordance
with its  investment  strategy.  See "Fund  Overview" in the  Prospectus for the
relevant Fund for a more detailed description of its investment strategy.

Dow Jones,  Standard & Poor's, The Nasdaq Stock Market,  Inc. and Value Line are
not affiliated with First Trust and have not participated in the creation of the
Funds or the selection of the equity securities  included therein.  There is, of
course, no guarantee that the objective of any Fund will be achieved.

Any  changes  in the  components  of any of  the  respective  indices  or in the
composition of the stocks listed on the New York Stock Exchange,  American Stock
Exchange or Nasdaq Stock Market made after the respective  Stock  Selection Date
will not cause a change in the  identity  of the common  stocks  included in the
applicable Fund, including any additional equity securities deposited thereafter
until the next Stock  Selection Date when the portfolio of the each Fund will be
adjusted in accordance with its investment strategy.

Investors should note that each Fund's  investment  criteria is applied and will
in the future be applied to the equity securities  selected for inclusion in the
Fund as of the applicable  Stock Selection Date.  Additional  equity  securities
which were originally selected through this process may be purchased  throughout
the year,  as  investors  may  continue  to invest in the Fund,  even though the
yields on these equity  securities  may have changed  subsequent to the previous
Stock Selection Date.  These equity  securities may no longer be included in the
index, or may not meet a Fund's selection  criteria at that time, and therefore,
such equity  securities  would no longer be chosen for  inclusion in the Fund if
the selection process were to be performed again at that time. Accordingly,  the
equity securities  selected and the percentage  relationship among the number of
shares  will not change for  purchases  or sales by a Fund until the next annual
Stock Selection Date.

Licensing Arrangements with Lehman Brothers, Inc.

As noted in the  Prospectus,  the objective of the First Trust 10 Uncommon Value
Portfolio is to provide the potential for above-average  capital appreciation by
investing  the  Fund's  portfolio  in the  ten  common  stocks  selected  by the
Investment  Policy  Committee of Lehman Brothers Inc. with the assistance of the
Research  Department  of Lehman  Brothers Inc.  which,  in the opinion of Lehman
Brothers Inc., have the greatest potential for capital  appreciation  during the
next year. The selection was based upon a determination  by Lehman Brothers Inc.
that the  selected  stocks  are  deemed  to have an  above-average  appreciation
potential  against the S&P 500 Index over the 12 months  following the selection
of the  portfolio.  The stocks  included in this Fund are  adjusted  annually in
accordance  with the new  selections of Lehman  Brothers for  subsequent  years.
Lehman  Brothers  Inc. is one of the leading  global  investment  banks  serving
institutional,  corporate,  government and high net worth individual clients and
customers.  Lehman  Brothers'  business  includes  capital  raising  for clients
through securities  underwriting and direct  placements;'  corporate finance and
strategic  advisory  services;  merchant banking;  securities sales and trading;
research;  and the trading of foreign exchange,  derivative products and certain
commodities. The Fund are not sponsored,  advised, or created by Lehman Brothers
Inc. Lehman Brothers Inc.'s only relationship to First Trust is the licensing of
certain  trademarks  and  tradenames  of  Lehman  Brothers  Inc.  and of the "10
Uncommon  Values" and the sale to First Trust of research  which is  determined,
composed and calculated by Lehman Brothers Inc. without regard to First Trust or
the Fund. In addition,  Lehman Brothers Inc. may also receive fees for brokerage
services  provided to a Fund as well as unit investment trusts sponsored by Nike
Securities L.P. Lehman Brothers Inc., in its general  securities  business acts,
as  agent or  principal  in  connection  with the  purchase  and sale of  equity
securities,  including  the  equity  securities  held in a Fund and may act as a
market maker in certain of the equity securities.

Description of the Nasdaq-100 Index

The Nasdaq  Target 15  Portfolio  invests in stocks  included in the  Nasdaq-100
Index. The following is a description of this index.

Nasdaq-100 Index

The  Nasdaq-100  Index  represents  the largest  and most  active  non-financial
domestic and  international  issues  listed on the Nasdaq Stock  Market(R).  The
index is calculated based on a modified capitalization weighted methodology. The
Nasdaq Stock Market lists  approximately  5,400 companies and trades more shares
per day than any other major U.S. market.

The Funds are not  sponsored,  endorsed,  sold or promoted  by The Nasdaq  Stock
Market,  Inc.  (including  its  affiliates)  (Nasdaq,  with its  affiliates  are
referred  to as the  "Corporations").  The  Corporations  have not passed on the
legality or  suitability  of, or the  accuracy or adequacy of  descriptions  and
disclosures  relating to, the Funds. The Corporations  make no representation or
warranty,  express  or  implied  to the owners of the Funds or any member of the
public regarding the advisability of investing in securities generally or in the
Fund  particularly,  or the ability of the Nasdaq-100  Index(R) to track general
stock market  performance.  The  Corporations'  only relationship to First Trust
(the "Licensee") is in the licensing of the Nasdaq-100(R),  Nasdaq-100  Index(R)
and  Nasdaq(R)  trademarks  or service  marks,  and  certain  trade names of the
corporations  and  the  use of the  Nasdaq-100  Index(R)  which  is  determined,
composed  and  calculated  by Nasdaq  without  regard to  Licensee or the Funds.
Nasdaq has no  obligation to take the needs of the Licensee or the owners of the
Funds into consideration in determining, composing or calculating the Nasdaq-100
Index(R).  The Corporations are not responsible for and have not participated in
the  determination  of the timing of, prices at, or quantities of the Fund to be
issued or in the  determination or calculation of the equation by which the Fund
is to be converted into cash. The corporations  have not liability in connection
with the administration, marketing or trading of the Funds.

THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED  CALCULATION
OF THE NASDAQ-100  INDEX(R) OR ANY DATA INCLUDED THEREIN.  THE CORPORATIONS MAKE
NO  WARRANTY,  EXPRESS OR IMPLIED,  AS TO RESULTS TO BE  OBTAINED  BY  LICENSEE,
OWNERS  OF THE  PRODUCT(S)  OR ANY OTHER  PERSON  OR ENTITY  FROM THE USE OF THE
NASDAQ-100  INDEX(R) OR ANY DATA  INCLUDED  THEREIN.  THE  CORPORATIONS  MAKE NO
EXPRESS  OR  IMPLIED   WARRANTIES  AND  EXPRESSLY  DISCLAIM  ALL  WARRANTIES  OF
MERCHANTABILITY  OR FITNESS FOR A PARTICULAR  PURPOSE OR USE WITH RESPECT TO THE
NASDAQ-100  INDEX(R) OR ANY DATA INCLUDED  THEREIN.  WITHOUT LIMITING ANY OF THE
FOREGOING,  IN NO EVENT SHALL THE  CORPORATIONS  HAVE ANY LIABILITY FOR ANY LOST
PROFITS OR SPECIAL,  INCIDENTAL,  PUNITIVE,  INDIRECT OR CONSEQUENTIAL  DAMAGES,
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Investment Risks

Generally

An investment in a Fund 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 equity  securities  or the general  condition of
the common  stock market may worsen and the value of the equity  securities  and
therefore  the  value of a Fund may  decline.  A Fund may not be an  appropriate
investment  for those who are unable or unwilling  to assume the risks  involved
generally with an equity investment. The past market and earnings performance of
any of the  equity  securities  included  in a Fund is not  predictive  of their
future  performance.  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.
First Trust  cannot  predict  the  direction  or scope of any of these  factors.
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 a Fund have a right to receive
dividends  only when and if, and in the amounts,  declared by the issuer's board
of  directors  and  have  a  right  to  participate  in  amounts  available  for
distribution  by the issuer only after all other  claims on the issuer have been
paid or provided for. Common stocks do not represent an obligation of the issuer
and, therefore,  do not offer any assurance of income or provide the same degree
of protection of capital as do debt securities.  The issuance of additional debt
securities or preferred stock will create prior claims for payment of principal,
interest and dividends which could adversely  affect the ability and inclination
of the issuer to declare or pay  dividends  on its common stock or the rights of
holders of common stock with respect to assets of the issuer upon liquidation or
bankruptcy.  The value of common stocks is subject to market fluctuations for as
long as the common stocks remain  outstanding,  and thus the value of the equity
securities in a Fund will fluctuate over the life of the Fund and may be more or
less than the price at which  they  were  purchased  by such  Fund.  The  equity
securities  held  in a Fund  may  appreciate  or  depreciate  in  value  (or pay
dividends)  depending  on the  full  range of  economic  and  market  influences
affecting these securities, including the impact of the Fund's purchase and sale
of the equity securities and other factors.

Holders of common  stocks incur more risk than  holders of preferred  stocks and
debt  obligations  because common  stockholders,  as owners of the entity,  have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors of, or holders of debt  obligations or preferred  stocks
issued by, the issuer.  Cumulative preferred stock dividends must be paid before
common stock dividends and any cumulative  preferred  stock dividend  omitted is
added to future dividends payable to the holders of cumulative  preferred stock.
Preferred  stockholders  are also  generally  entitled to rights on  liquidation
which are senior to those of common stockholders.

First Trust shall not be liable in any way for any default, failure or defect in
any equity security held in a Fund's portfolio.

Legislation

At any time after the date of the  Prospectus,  legislation  may be enacted that
could  negatively  affect the equity  securities in a Fund or the issuers of the
equity securities. Changing approaches to regulation,  particularly with respect
to the  environment  or with  respect  to the  petroleum  industry,  may  have a
negative  impact on certain  companies  represented  in a Fund.  There can be no
assurance that future  legislation,  regulation or deregulation  will not have a
material  adverse effect on a Fund or will not impair the ability of the issuers
of the equity securities held in a Fund to achieve their business goals.

Liquidity

Whether  or not the  equity  securities  in a Fund are  listed  on a  securities
exchange,  the principal  trading market for the equity securities may be in the
over-the-counter  market. As a result,  the existence of a liquid trading market
for the equity  securities  may depend on whether  dealers will make a market in
the equity securities.  There can be no assurance that a market will be made for
any of the equity securities,  that any market for the equity securities will be
maintained or that there will be sufficient  liquidity of the equity  securities
in any markets made. The price at which the equity securities held in a Fund may
be sold to meet transfers,  partial withdrawals or surrenders and the value of a
Fund will be adversely affected if trading markets for the equity securities are
limited or absent.

Lack of Diversification

Each  Fund is  classified  as  "non-diversified"  and  therefore  a Fund is only
limited as to the  percentage  of its assets which may be invested in securities
of any one  issuer by its own  investment  restrictions  and by  diversification
requirements  imposed by the Internal  Revenue Code of 1986, as amended.  A Fund
may  therefore  invest a relatively  high  percentage of its assets in a limited
number of  issuers.  This can expose  each Fund to  potentially  greater  market
fluctuations  than might be experienced by a diversified  fund. Each Fund may be
more susceptible to any single economic,  political or regulatory occurrence and
to the financial  conditions of the issuer in which it invests.  For example, an
investment  in the  Nasdaq  Target 15  Portfolio  may  subject  an  investor  to
additional risk due to the relative lack of diversity in its portfolio since the
portfolio contains only 15 stocks. Therefore, the Nasdaq Target 15 Portfolio may
be subject to greater  market  risk than other  funds  which may  contain a more
diversified  portfolio  of  securities.  A Fund is not designed to be a complete
investment program for an investor.  Variable annuity Policy owners, in light of
their own financial  situations  and goals,  should  consider  other  additional
funding options in order to diversify the allocations of their Policy assets.

Small Capitalization Companies

Certain or all of the equity  securities  in the Funds may be small cap  company
stocks.  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 frequently than large companies,  it may
be more  difficult for a Fund which  contain these equity  securities to buy and
sell  significant  amounts  of such  shares  without  an  unfavorable  impact on
prevailing  market prices.  The  securities of small  companies are often traded
over-the-counter  and may not be traded in the  volumes  typical  of a  national
securities exchange.

Litigation

Certain of the issuers of equity  securities in certain Funds may be involved in
the manufacture,  distribution and sale of tobacco products.  Pending litigation
proceedings  against such  issuers in the United  States and abroad cover a wide
range of matters including product  liability and consumer  protection.  Damages
claimed in such litigation  alleging  personal injury (both individual and class
actions), and in health cost recovery cases brought by governments, labor unions
and  similar  entities  seeking  reimbursement  for  health  care  expenditures,
aggregate many billions of dollars.

In November 1998,  certain  companies in the U.S.  tobacco  industry,  including
Philip Morris,  entered into a negotiated  settlement  with several states which
would result in the resolution of significant  litigation and regulatory  issues
affecting  the  tobacco  industry  generally.  The  proposed  settlement,  while
extremely  costly  to  the  tobacco   industry,   would   significantly   reduce
uncertainties facing the industry and increase stability in business and capital
markets.  Future litigation and/or legislation could adversely affect the value,
operating  revenues  and  financial  position  of  tobacco  companies  and could
adversely affect the Funds.

Certain of the Funds may  include  the common  stock of  Microsoft  Corporation.
Microsoft  is  engaged  in  litigation  with Sun  Microsystems,  Inc.,  the U.S.
Department  of Justice and  several  state  Attorneys  General.  The  complaints
against  Microsoft  include  copyright  infringement,   unfair  competition  and
anti-trust  violations.  The claims seek injunctive relief and monetary damages.
In the action brought against Microsoft by the U.S.  Department of Justice,  the
United States  District  Court for the District of Columbia  issued  findings of
fact that included a finding that  Microsoft  possesses  and exercised  monopoly
power. The court also recently entered an order finding that Microsoft exercised
this power in violation of the Sherman Antitrust Act and various state antitrust
laws. Subject to appeal, the court has determined that Microsoft must split into
two  companies  and change some of its  business  practices.  One company  would
retain the Microsoft  Windows operating  systems;  the other company would offer
Microsoft's other software and Web products--such as Outlook, Internet Explorer,
BackOffice and Microsoft Network.  Microsoft has stated that it will appeal this
ruling.  It is possible that any remedy could have a material  adverse impact on
Microsoft,  however, it is impossible to predict the impact that any penalty may
have on Microsoft's business in the future.

Additional Strategy Fund Risks

Equity securities in a Strategy Fund from time to time may be sold under certain
circumstances  described  in the  Prospectus  or  herein.  Each  Strategy  Fund,
however,  is not actively  managed and equity  securities  in a Fund will not be
sold to take advantage of market fluctuations or changes in anticipated rates of
appreciation  or  depreciation  or if the equity  securities  no longer meet the
criteria by which they were selected for a Fund. However, equity securities will
be sold on or about each annual  Stock  Selection  Date in  accordance  with its
stock selection strategy.

Additional Fund Industry Risks

The following is a discussion of additional risks affecting  particular industry
sectors represented in the Funds.

Financial Sector. An investment in the financial  services sector should be made
with an  understanding  of the  problems  and  risks  inherent  in the  bank and
financial services sector in general.

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. Their
impact  on the  business,  financial  condition  and  prospects  of  the  equity
securities in the First Trust Financial  Services  Portfolio cannot be predicted
with certainty. The recently enacted Gramm-Leach-Bliley Act repealed most of the
barriers  set up by the 1933  Glass-Steagall  Act which  separated  the banking,
insurance  and  securities  industries.   Now  banks,  insurance  companies  and
securities firms can merge to form one-stop financial  conglomerates marketing a
wide range of financial  service  products to investors.  This  legislation will
likely result in increased  merger  activity and  heightened  competition  among
existing  and new  participants  in the field.  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 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.  Since  mid-1997,  banks  have  been  allowed  to turn
existing  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.  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 equity securities in
the First Trust Financial Services 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  such 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. First Trust 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
the First Trust Financial Services Portfolio.

The Federal Bank Holding Company Act of 1956 generally  prohibits a bank holding
company  from  (1)  acquiring,  directly  or  indirectly,  more  than 25% 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.  First Trust makes no prediction as to the effect, if
any, such laws will have on the equity securities in this sector or whether such
approvals, if necessary, will be obtained.

Companies  involved  in the  insurance  industry  are  engaged in  underwriting,
reinsuring,  selling,  distributing or placing of property and casualty, life or
health  insurance.  Other  growth areas within the  insurance  industry  include
brokerage,  reciprocals,  claims processors and multiline  insurance  companies.
Insurance company profits are affected by interest rate levels, general economic
conditions, and price and marketing competition. Property and casualty insurance
profits may also be affected by weather  catastrophes and other disasters.  Life
and health  insurance  profits may be affected by mortality and morbidity rates.
Individual  companies  may  be  exposed  to  material  risks  including  reserve
inadequacy  and the inability to collect from  reinsurance  carriers.  Insurance
companies  are  subject to  extensive  governmental  regulation,  including  the
imposition  of maximum rate levels,  which may not be adequate for some lines of
business.  Proposed  or  potential  tax law changes  may also  adversely  affect
insurance  companies'  policy sales,  tax  obligations,  and  profitability.  In
addition to the foregoing,  profit margins of these companies continue to shrink
due to the commoditization of traditional businesses,  new competitors,  capital
expenditures on new technology and the pressures to compete globally.

In addition to the normal risks of business, companies involved in the insurance
industry are subject to significant risk factors,  including those applicable to
regulated  insurance  companies,  such as: (i) the inherent  uncertainty  in the
process of establishing  property-liability loss reserves, particularly reserves
for the cost of environmental,  asbestos and mass tort claims, and the fact that
ultimate losses could  materially  exceed  established loss reserves which could
have a material adverse effect on results of operations and financial condition;
(ii) the fact that insurance companies have experienced,  and can be expected in
the future to experience, catastrophe losses which could have a material adverse
impact on their financial condition,  results of operations and cash flow; (iii)
the inherent uncertainty in the process of establishing  property-liability loss
reserves due to changes in loss payment patterns caused by new claims settlement
practices;  (iv) the need for  insurance  companies  and their  subsidiaries  to
maintain  appropriate  levels of statutory capital and surplus,  particularly in
light of  continuing  scrutiny  by  rating  organizations  and  state  insurance
regulatory  authorities,  and in order to maintain acceptable financial strength
or claims-paying ability rating; (v) the extensive regulation and supervision to
which  insurance  companies'   subsidiaries  are  subject,   various  regulatory
initiatives that may affect insurance companies,  and regulatory and other legal
actions;  (vi) the adverse impact that increases in interest rates could have on
the  value  of  an  insurance   company's   investment   portfolio  and  on  the
attractiveness  of  certain  of its  products;  (vii)  the  need to  adjust  the
effective duration of the assets and liabilities of life insurance operations in
order  to meet  the  anticipated  cash  flow  requirements  of its  policyholder
obligations,  and (vii) the uncertainty  involved in estimating the availability
of reinsurance and the collectibility of reinsurance recoverables.

The state insurance  regulatory  framework has, during recent years,  come under
increased  federal scrutiny,  and certain state  legislatures have considered or
enacted laws that alter and, in many cases, increase state authority to regulate
insurance companies and insurance holding company systems. Further, the National
Association of Insurance  Commissioners  ("NAIC") and state insurance regulators
are  re-examining  existing  laws  and  regulations,  specifically  focusing  on
insurance companies, interpretations of existing laws and the development of new
laws. In addition,  Congress and certain federal agencies have  investigated the
condition of the insurance industry in the United States to determine whether to
promulgate  additional  federal  regulations.  First  Trust is unable to predict
whether any state or federal legislation will be enacted to change the nature or
scope of  regulation  of the insurance  industry,  or what effect,  if any, such
legislation would have on the industry.

All insurance  companies are subject to state laws and regulations  that require
diversification  of  their  investment   portfolios  and  limit  the  amount  of
investments in certain investment categories.  Failure to comply with these laws
and  regulations  could  cause  non-conforming  investments  to  be  treated  as
non-admitted  assets for  purposes of measuring  statutory  surplus and, in some
instances, would require divestiture.

Environmental  pollution  clean-up  is the  subject  of both  federal  and state
regulation.  By some  estimates,  there are  thousands of potential  waste sites
subject to clean up. The insurance industry is involved in extensive  litigation
regarding coverage issues. The Comprehensive Environmental Response Compensation
and  Liability  Act  of  1980   ("Superfund")   and  comparable  state  statutes
("mini-Superfund")   govern  the  clean-up  and   restoration  by   "Potentially
Responsible   Parties"   ("PRP's").   Superfund   and   the   mini-   Superfunds
("Environmental  Clean-up  Laws" or "ECLs")  establish  a  mechanism  to pay for
clean-up of waste sites if PRPs fail to do so, and to assign  liability to PRPs.
The extent of  liability  to be  allocated to a PRP is dependent on a variety of
factors. Further, the number of waste sites subject to clean-up is unknown. Very
few sites  have  been  subject  to  clean-up  to date.  The  extent of  clean-up
necessary  and the  assignment  of  liability  has  not  been  established.  The
insurance  industry is disputing many such claims.  Key coverage  issues include
whether Superfund response costs are considered damages under the policies, when
and how  coverage is  triggered,  applicability  of  pollution  exclusions,  the
potential  for joint and several  liability  and  definition  of an  occurrence.
Similar  coverage  issues  exist for clean up and waste sites not covered  under
Superfund.  To date,  courts have been  inconsistent  in their  rulings on these
issues.  An insurer's  exposure to liability  with regard to its insureds  which
have been, or may be, named as PRPs is  uncertain.  Superfund  reform  proposals
have been  introduced in Congress,  but none have been enacted.  There can be no
assurance that any Superfund reform legislation will be enacted or that any such
legislation  will provide for a fair,  effective and  cost-efficient  system for
settlement of Superfund related claims.

While current  federal income tax law permits the  tax-deferred  accumulation of
earnings  on the  premiums  paid by an  annuity  owner and  holders  of  certain
savings-oriented  life insurance products, no assurance can be given that future
tax law will continue to allow such tax  deferrals.  If such  deferrals were not
allowed,  consumer  demand  for the  affected  products  would be  substantially
reduced. In addition,  proposals to lower the federal income tax rates through a
form of flat tax or otherwise  could have, if enacted,  a negative impact on the
demand for such products.

Companies  engaged in investment  banking/brokerage  and  investment  management
include brokerage firms, broker/dealers, investment banks, finance companies and
mutual fund  companies.  Earnings and share prices of companies in this industry
are quite  volatile,  and often exceed the volatility  levels of the market as a
whole.  Recently,  ongoing  consolidation  in the  industry and the strong stock
market has benefited  stocks which  investors  believe will benefit from greater
investor and issuer  activity.  Major  determinants  of future earnings of these
companies  are the direction of the stock market,  investor  confidence,  equity
transaction volume, the level and direction of long-term and short-term interest
rates,  and the outlook for emerging  markets.  Negative  trends in any of these
earnings  determinants  could  have a serious  adverse  effect on the  financial
stability,  as well as on the stock  prices,  of these  companies.  Furthermore,
there can be no assurance that the issuers of the equity securities  included in
the Financial  Services  Portfolio will be able to respond in a timely manner to
compete in the rapidly  developing  marketplace.  In addition to the  foregoing,
profit margins of these companies continue to shrink due to the  commoditization
of  traditional  businesses,  new  competitors,   capital  expenditures  on  new
technology and the pressures to compete globally.

Life Sciences and Pharmaceutical Sectors. An investment in the life sciences and
pharmaceutical   sectors   should   be  made  with  an   understanding   of  the
characteristics  of the healthcare  industry and the risks which such investment
may entail.

Healthcare  companies include companies involved in advanced medical devices and
instruments,    drugs   and   biotech,    healthcare/managed    care,   hospital
management/health  services and medical supplies. These companies have potential
risks  unique to their  sector of the  healthcare  field.  These  companies  are
subject to  governmental  regulation of their  products and  services,  a factor
which could have a significant and possibly  unfavorable effect on the price and
availability  of such  products  and  services,  a  factor  which  could  have a
significant  and possibly  unfavorable  effect on the price and  availability of
such  products  or  services.  Furthermore,  such  companies  face  the  risk of
increasing  competition  from new products or services,  generic drug sales, the
termination of patent  protection  for drug or medical  supply  products and the
risk  that  technological  advances  will  render  their  products  or  services
obsolete.  The research and  development  costs of bringing a drug to market are
substantial, and include lengthy governmental review processes with no guarantee
that the  product  will ever come to market.  Many of these  companies  may have
losses and may not offer certain products for several years.  Such companies may
also have persistent  losses during a new product's  transition from development
to  production,  and revenue  patterns may be erratic.  In addition,  healthcare
facility  operators  may be affected by events and  conditions  including  among
other things,  demand for  services,  the ability of the facility to provide the
services   required,   physicians'   confidence  in  the  facility,   management
capabilities,   competition  with  other  hospitals,  efforts  by  insurers  and
governmental   agencies  to  limit   rates,   legislation   establishing   state
rate-setting agencies,  expenses,  government regulation,  the cost and possible
unavailability  of malpractice  insurance and the  termination or restriction of
governmental  financial  assistance,  including that  associated  with Medicare,
Medicaid and other similar third party payor programs.

As the  population  of the United  State  ages,  the  companies  involved in the
healthcare  field will  continue to search for and  develop  new drugs,  medical
products and medical services through advanced technologies and diagnostics.  On
a  worldwide  basis,   such  companies  are  involved  in  the  development  and
distributions of drugs, vaccines,  medical products and medical services.  These
activities may make the healthcare and medical  services  sector very attractive
for investors  seeking the potential for growth in their  investment  portfolio.
However, there are no assurances that a Fund's objectives will be met.

Legislative  proposals concerning  healthcare are proposed in Congress from time
to time.  These proposals span a wide range of topics,  including cost and price
controls  (which might  include a freeze on the prices of  prescription  drugs),
national  health  insurance,  incentives  for  competition  in the  provision of
healthcare  services,   tax  incentives  and  penalties  related  to  healthcare
insurance premiums and promotion of pre-paid healthcare plans.

Technology, Communications and Internet Sectors. An investment in the technology
industry, including the communications and Internet sectors, should be made with
an understanding of the characteristics of the technology industry and the risks
which such an investment may entail.

Technology  companies  generally include companies  involved in the development,
design, manufacture and sale of computers,  computer-related equipment, computer
networks,   communications  systems,   telecommunications  products,  electronic
products and other related products,  systems and services. The market for these
products,   especially   those   specifically   related  to  the  Internet,   is
characterized  by  rapidly  changing  technology,  rapid  product  obsolescence,
cyclical market patterns,  evolving industry  standards and frequent new product
introductions.  The success of the issuers of the equity securities  included in
this  sector  depends  in   substantial   part  on  the  timely  and  successful
introduction  of new  products.  An  unexpected  change  in one or  more  of the
technologies  affecting an issuer's products or in the market for products based
on a particular  technology  could have a material adverse affect on an issuer's
operating  results.  Furthermore,  there can be no assurance that the issuers of
the  equity  securities  included  in this  sector  will be able to respond in a
timely manner to compete in the rapidly developing marketplace.

Based on trading history of common stock,  factors such as  announcements of new
products  or  development  of new  technologies  and general  conditions  of the
industry  have  caused  and are  likely  to  cause  the  market  price  of high-
technology  common stocks to fluctuate  substantially.  In addition,  technology
company stocks have experienced extreme price and volume fluctuations that often
have been unrelated to the operating performance of such companies.  This market
volatility may adversely affect the market price of the securities.

Some key  components  of certain  products of  technology  issuers are currently
available only from single sources. There can be no assurance that in the future
suppliers  will be able to meet the demand for  components  in a timely and cost
effective  manner.  Accordingly,  an issuer's  operating  results  and  customer
relationships could be adversely affected by either an increase in price for, or
an  interruption  or reduction in supply of, any key  components.  Additionally,
many technology issuers are characterized by a highly concentrated customer base
consisting  of a  limited  number of large  customers  who may  require  product
vendors to comply with rigorous industry  standards.  Any failure to comply with
such standards may result in a significant  loss or reduction of sales.  Because
many products and  technologies of technology  companies are  incorporated  into
other  related  products,  such  companies  are often  highly  dependent  on the
performance  of  the  personal  computer,   electronics  and  telecommunications
industries. There can be no assurance that these customers will place additional
orders,  or that an issuer of securities will obtain orders of similar magnitude
such as past  orders  from other  customers.  Similarly,  the success of certain
technology  companies is tied to a relatively small concentration of products or
technologies. Accordingly, a decline in demand of such products, technologies or
from  such  customers  could  have a  material  adverse  impact  on  issuers  of
securities.

Many  technology  companies  rely  on  a  combination  of  patents,  copyrights,
trademarks  and trade secret laws to  establish  and protect  their  proprietary
rights in their  products and  technologies.  There can be no assurance that the
steps taken by the issuers of the equity securities to protect their proprietary
rights will be adequate to prevent  misappropriation of their technology or that
competitors will not independently  develop  technologies that are substantially
equivalent  or superior to such  issuers'  technology.  In addition,  due to the
increasing  public  use of the  Internet,  it is  possible  that  other laws and
regulations  may  be  adopted  to  address  issues  such  as  privacy,  pricing,
characteristics,  and quality of Internet  products and  services.  For example,
recent  proposals  would  prohibit the  distribution  of obscene,  lascivious or
indecent  communications  on the  Internet.  The adoption of any such laws could
have a material adverse impact on the securities.

Additional Foreign Issuer Risks

Since certain of the portfolio  securities  included in the Funds may consist of
common stocks of foreign  issuers,  an investment in such Funds involves certain
investment  risks that are  different in some  respects  from an investment in a
fund  which  invests  entirely  in common  stocks  of  domestic  issuers.  These
investment  risks  include  the  possible  imposition  of  future  political  or
governmental restrictions which might adversely affect the payment or receipt of
dividends  on the  relevant  portfolio  securities,  the  possibility  that  the
financial  condition  of the  issuers  of the  portfolio  securities  may become
impaired  or that  the  general  condition  of the  relevant  stock  market  may
deteriorate, the limited liquidity and relatively small market capitalization of
the relevant  securities market, the imposition of expropriation or confiscatory
taxation,  economic  uncertainties,  the lack of the  quantity  and  quality  of
publicly  available  information  concerning the foreign issuers as such issuers
are generally not subject to the same reporting and accounting  requirements  as
domestic  issuers,   and  the  effect  of  foreign  currency   devaluations  and
fluctuations  on the value of the common stocks and dividends of foreign issuers
in terms of U.S.  dollars.  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.

On the basis of the best  information  available  to First  Trust at the present
time,  none of the portfolio  securities in such Funds are currently  subject to
exchange  control   restrictions  under  existing  law  which  would  materially
interfere  with payment to such Funds of dividends  due on, or proceeds from the
sale of, the foreign portfolio securities.  The adoption of such restrictions or
other legal restrictions could adversely impact the marketability of the foreign
portfolio  securities  and may impair the  ability of such Funds to satisfy  its
obligation  to  redeem  shares  or could  cause  delays  or  increase  the costs
associated  with the purchase and sale of the foreign  portfolio  securities and
correspondingly affect the price of its shares.

The purchase and sale of the foreign portfolio securities may be made in foreign
securities  markets.  Although  First Trust does not believe that the Funds will
encounter   obstacles  in  acquiring  or  disposing  of  the  foreign  portfolio
securities,  investors should be aware that in certain  situations it may not be
possible to purchase or sell a foreign portfolio security in a timely manner for
any number of reasons,  including lack of liquidity in the relevant market,  the
unavailability of a seller or purchaser of the foreign portfolio securities, and
restrictions on such purchases or sales by reason of federal  securities laws or
otherwise.  An  investment  in such  Funds  will also be subject to the risks of
currency  fluctuations  associated with investments in foreign equity securities
trading in non-U.S. currencies.

Certain of the equity  securities in the Funds may be in ADR or GDR form.  ADRs,
which evidence  American  Depositary  Receipts and GDRs,  which evidence  Global
Depositary  Receipts,  represent  common stock  deposited  with a custodian in a
depositary.   American   Depositary   Shares   and  Global   Depositary   Shares
(collectively,  the "Depositary Receipts") are issued by a bank or trust company
to evidence ownership of underlying  securities issued by a foreign corporation.
These instruments may not necessarily be denominated in the same currency as the
securities  into which they may be  converted.  For  purposes of the  discussion
herein,  the terms ADR and GDR generally include American  Depositary Shares and
Global Depositary Shares, respectively.

Depositary Receipts may be sponsored or unsponsored. In an unsponsored facility,
the  depositary  initiates  and  arranges  the facility at the request of market
makers and acts as agent for the Depositary  Receipts holder,  while the company
itself is not involved in the transaction.  In a sponsored facility, the issuing
company  initiates  the  facility and agrees to pay certain  administrative  and
shareholder-related  expenses.  Sponsored facilities use a single depositary and
entail a contractual  relationship  between the issuer,  the shareholder and the
depositary;   unsponsored   facilities  involve  several  depositaries  with  no
contractual  relationship  to the  company.  The  depositary  bank  that  issues
Depositary  Receipts  generally  charges  a  fee,  based  on  the  price  of the
Depositary Receipts,  upon issuance and cancellation of the Depositary Receipts.
This  fee  would be in  addition  to the  brokerage  commissions  paid  upon the
acquisition  or surrender of the  security.  In addition,  the  depositary  bank
incurs  expenses in  connection  with the  conversion of dividends or other cash
distributions  paid in local  currency  into U.S.  dollars and such expenses are
deducted  from the  amount of the  dividend  or  distribution  paid to  holders,
resulting in a lower payout per underlying  share  represented by the Depositary
Receipts  than would be the case if the  underlying  share  were held  directly.
Certain tax  considerations,  including tax rate  differentials  and withholding
requirements,  arising  from the  application  of the tax laws of one  nation to
nationals  of another and from  certain  practices  in the  Depositary  Receipts
market may also exist with respect to certain  Depositary  Receipts.  In varying
degrees,  any or all of these  factors  may affect  the value of the  Depositary
Receipts  compared with the value of the underlying  shares in the local market.
In addition,  the rights of holders of Depositary Receipts may be different than
those of  holders  of the  underlying  shares,  and the  market  for  Depositary
Receipts  may be less liquid  than that for the  underlying  shares.  Depositary
Receipts are  registered  securities  pursuant to the Securities Act of 1933 and
may be subject to the reporting  requirements of the Securities  Exchange Act of
1934.

For the equity securities that are Depositary  Receipts,  currency  fluctuations
will  affect  the U.S.  dollar  equivalent  of the local  currency  price of the
underlying  domestic shares and, as a result,  are likely to affect the value of
the Depositary Receipts and consequently the value of the equity securities. The
foreign issuers of securities that are Depositary  Receipts may pay dividends in
foreign currencies which must be converted into dollars. Most foreign currencies
have  fluctuated  widely in value  against  the  United  States  dollar for many
reasons,  including supply and demand of the respective currency,  the soundness
of the world economy and the strength of the  respective  economy as compared to
the  economies  of the United  States and other  countries.  Therefore,  for any
securities of issuers (whether or not they are in Depositary Receipt form) whose
earnings  are stated in foreign  currencies,  or which pay  dividends in foreign
currencies or which are traded in foreign currencies, there is a risk that their
United  States  dollar value will vary with  fluctuations  in the United  States
dollar foreign exchange rates for the relevant currencies.

Exchange Rate.  The Funds may be comprised  substantially  of equity  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 each Fund's  portfolios  and of the
distributions  from the  portfolios  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 of 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.

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.

First Trust 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 First Trust may
not be indicative  of the amount in United  States  dollars a Fund would receive
had the Fund sold any particular  currency in the market.  The foreign  exchange
transactions  of a Fund  will be  conducted  by the Fund 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).

Fund Management

The  officers  of the FT Fund and the  First  Defined  Fund  (collectively,  the
"Registrants")  manage their day to day operations and are  responsible to their
Board of Trustees.  The management of a Fund,  including general  supervision of
the duties  performed for a Fund under the  Investment  Advisory and  Management
Agreement,  is the  responsibility  of its Board of  Trustees.  The Trustees set
broad policies for each Fund and choose the Registrants' officers. The following
is a list of the  Trustees and  officers of the  Registrants  and a statement of
their present  positions and principal  occupations  during the past five years,
with the Trustee who is an  "interested  person" (as such term is defined in the
Investment Company Act of 1940) of the Registrants indicated by an asterisk. The
mailing address of the officers and Trustees,  unless  otherwise  noted, is 1001
Warrenville Road, Suite 300, Lisle, Illinois 60532.

<TABLE>
<CAPTION>
                                                                                  Principal Occupations
Name, Age and Address          Position and Offices with Registrant               During Past 5 Years
---------------------          ------------------------------------               -------------------
<S>                            <C>                                                <C>
(1) Robert J. Bartel (67)      Trustee                                            Board Member (1996 to Present), First
730 Windmill Circle                                                               American Federal Savings Bank of
Bristol, VA 24201                                                                 Virginia; Tri-City Advisory Board (1999
                                                                                  to Present), First American Bank;
                                                                                  Senior Financial Advisor (1997
                                                                                  to Present), United Management Company, LLC;
                                                                                  Trustee (1997 to Present), United Investment
                                                                                  Trust; Chairman of the Board (1989
                                                                                  to 1996), Charter Federal Savings Bank.

*James A. Bowen (44)           President, Chairman of the Board,                  President, Nike Securities; Managing
                               Chief Executive Officer and Trustee                Director, First Trust Advisors.

(1) Mark R. Bradley (42)       Treasurer, Controller, Chief                       Chief Financial Officer, Senior Vice
                               Financial Officer and Chief                        President, Nike Securities and First
                               Accounting Officer                                 Trust Advisors.

Susan M. Brix (40)             Assistant Vice President                           Representative, Nike Securities;
                                                                                  Assistant Portfolio Manager, First Trust
                                                                                  Advisors.

Robert F. Carey (36)           Vice President                                     Senior Vice President, Nike Securities
                                                                                  and First Trust Advisors.

Richard E. Erickson (48)       Trustee                                            Physician, Sportsmed/Wheaton Orthopedics.
327 Gundersen Drive
Carol Stream, IL 60188

David B. Field (50)            Vice President                                     Senior Vice President, Nike Securities;
                                                                                  Senior Vice President, Chief Investment
                                                                                  Officer, First Trust Advisors; Of Counsel
                                                                                  (1998 to Present), Johnson Westra,
                                                                                  Attorneys; Adjunct Professor of Finance
                                                                                  (1999 to Present), Kellstadt Graduate
                                                                                  School of Business, DePaul University.

Patrick M. Fitzgerald (46)     Trustee                                            President, Available Business Group Inc.
4141 S. Peoria Street                                                             (Printing products and distribution).
Chicago, IL 60609

W. Scott Jardine (39)          Secretary                                          Senior Vice President and General Counsel
                                                                                  (1995 to Present), Nike Securities and
                                                                                  First Trust Advisors; Partner (1985 to
                                                                                  1995), Chapman and Cutler (Law firm).

Niel B. Nielson (45)           Trustee                                            Pastor (1997 to Present), College Church
330 East Union                                                                    in Wheaton; Partner (1996 to 1997),
Wheaton, IL 60187                                                                 Ritchie Capital Markets (Options Trading);
                                                                                  Vice President (1995 to 1996), The
                                                                                  Service-Master Company; Senior Vice
                                                                                  President (1984 to 1995), Chicago Research
                                                                                  and Trading--NationsBank.

(1)      Mr. Bartel is Mr. Bradley's father-in-law.
</TABLE>

The following table sets forth estimated total  compensation for the First Trust
Fund  complex  for the fiscal  year ended  December  31,  2000 and  compensation
estimated  to be paid by the  Registrants  to  each of the  Trustee  who are not
designated  "interested  persons"  during the  Registrants'  fiscal  year ending
December 31, 2001.  The  Registrants  have no retirement or pension  plans.  The
officers and the Trustee who are "interested  persons" as designated above serve
without any compensation from the Registrants.

                                             Estimate          Aggregate
                            Estimated        Compensation      Compensation
                            Compensation     From First Trust  From Fund
Name of Trustee             From FT Fund (1) Defined Fund (1)  Complex (2)
_______________             _______________  ________________  _____________
Robert J. Bartel........... $  875           $1,000            $14,750
Richard E. Erickson........ $  875           $1,000            $14,250
Patrick M. Fitzgerald...... $  875           $1,000            $14,750
Niel B. Nielson............ $  875           $1,000            $14,750
                            ______           ______            _______
Total.....................  $3,500           $4,000            $58,000
                            ======           ======            =======


(1) Based on the estimated  compensation to be paid to the independent Trustees
for the  fiscal  year  ending  December  31,  2000 for  services  to the
applicable Registrant.  2Based  on the  estimated  compensation  to be paid to
independent Trustees  for the fiscal year ended  December 31, 1999 for service
to the eleven open-end funds advised by First Trust.

As of December 28, 2000, the Trustees and officers of the Funds,  owned,  in the
aggregate,  less than 1% of the interests of any individual  First Defined Fund.
As of such date, James A. Bowen,  Trustee,  owned all of the interests of the FT
Funds.  As a result of such  ownership,  Mr.  Bowen  possesses  the  ability  to
significantly  affect the outcome of any matter  voted on by  shareholders.  Mr.
Bowen will be deemed to control the FT Funds so long as he owns more than 25% of
a Fund's voting securities.

                                   PERFORMANCE

A Fund may quote its total  return and yield in reports to  shareholders,  sales
literature, and advertisements.  These performance measures are described below.
Performance  advertised  for a Fund may or may not  reflect  the  effect  of any
charges that are imposed under a variable  annuity  Policy that is funded by the
Registrant.  Such charges,  described in the variable annuity  prospectus,  will
have the effect of reducing a Fund's performance.

Standardized  average  annual  total  return and  non-standardized  total return
measure  both the net  investment  income  generated  by,  and the effect of any
realized  and  unrealized   appreciation  or  depreciation  of,  the  underlying
investments  of a Fund.  Yield is a measure  of the net  investment  income  per
interest  earned  over a  specific  one month or 30-day  period  expressed  as a
percentage of the net asset value.

A Fund's  standardized  average  annual  total  return  quotation is computed in
accordance with a standardized  method prescribed by rules of the Securities and
Exchange Commission. The standardized average annual total return for a Fund for
a specific  period is found by first  taking a  hypothetical  $1,000  investment
("initial  investment") in the Fund's  interests on the first day of the period,
adjusting  to  deduct  the  applicable   charges,  if  any,  and  computing  the
"redeemable  value" of that investment at the end of the period.  The redeemable
value is then divided by the initial  investment,  and this quotient is taken to
the Nth  root (N  representing  the  number  of years  in the  period)  and 1 is
subtracted  from  the  result,  which is then  expressed  as a  percentage.  The
calculation  assumes that all income and capital gains  dividends paid by a Fund
have been  reinvested  at net asset value on the  reinvestment  dates during the
period.

The standardized  average annual total return  quotations will be current to the
last day of the calendar quarter preceding the date on which an advertisement is
submitted for publication.  The standardized average annual total return will be
based on rolling calendar  quarters and will cover at least periods of one, five
and ten years, or a period covering the time the Fund has been in existence,  if
it has not been in existence for one of the prescribed periods.

Non-standardized total return may also be advertised. The non-standardized total
return is not subject to a prescribed formula. Non-standardized total return may
be for periods other than those required to be presented or may otherwise differ
from standardized average annual total return. Non-standardized total return for
a  specific  period  is  calculated  by first  taking  an  investment  ("initial
investment")  in the  Fund's  interests  on the  first  day  of the  period  and
computing the "end value" of that investment at the end of the period. The total
return percentage is then determined by subtracting the initial  investment from
the ending  value and  dividing  the  remainder  by the initial  investment  and
expressing the result as a percentage.  The calculation  assumes that all income
and capital  gains  dividends  paid by a Fund have been  reinvested at net asset
value on the reinvestment dates during the period. Non-standardized total return
may also be shown as the increased dollar value of the  hypothetical  investment
over the period.

Quotations  of  standardized  average  annual total return and  non-standardized
total return are based upon historical  earnings and is not intended to indicate
future performance.

The  yield for a Fund is  computed  in  accordance  with a  standardized  method
prescribed  by the rules of the SEC.  Under that  method,  yield is  computed by
dividing the net investment  income per interest earned during the specified one
month or 30-day period by the offering price per interest on the last day of the
period, according to the following formula:

                                         6
              Yield     =   2[(a - b + 1) - 1]
                                -----
                                cd
Where:
         a =  dividends and interest earned during the period;
         b =  expenses accrued for the period (net of reimbursements);
         c =  the average  daily number of interests  outstanding  during the
              period that were entitled to receive dividends; and
         d =  the offering price (net asset value) per interest on the last day
              of the period.

In computing the yield, a Fund follows certain standardized accounting practices
specified by SEC rules.  These  practices are not  necessarily  consistent  with
those that a Fund uses to prepare  annual and interim  financial  statements  in
accordance with generally accepted accounting principles.

A Fund's  performance  quotations are based upon historical  results and are not
necessarily representative of future performance. A Fund's interests are sold at
net asset value. Returns and net asset value will fluctuate. Factors affecting a
Fund's  performance  include general market  conditions,  operating expenses and
investment  management.  Interests of a Fund are  redeemable at the then current
net asset value, which may be more or less than original cost.

The  performance of the Funds may be compared to the performance of other mutual
funds,  mutual fund  indices or annuity  indices  with  similar  objectives  and
policies as reported by various sources,  including Lipper Analytical  Services,
Inc. ("Lipper") and CDA Investment  Technologies,  Inc. ("CDA").  Lipper and CDA
performance  calculations  are based upon  changes  in net asset  value with all
dividends  reinvested  and do not  include  the effect of any sales  charges.  A
Fund's  performance  may also be compared to that of the Consumer Price Index or
various unmanaged stock and bond indices including,  but not limited to, Salomon
Brothers Broad Investment Grade Index,  Lehman Brothers High Yield Index, Lehman
Brothers Aggregate Bond Index, Lehman Brothers Intermediate Government/Corporate
Bond  Index,  Salomon  Brothers  Treasury  Index,  S&P MidCap 400 Index,  Morgan
Stanley Capital  International World Index, Morgan Stanley Capital International
Europe and Australia,  Far East Equity Index, Russell 2000 Index, Russell MidCap
Index, Dow Jones Industrial Average,  Hang Seng Index, Ibbotson Small Cap Index,
Financial  Times and S&P 500  Index.  There  are  differences  and  similarities
between the  investments  which a Fund may purchase and the  investments  by the
market indicators.

From  time  to  time,  a Fund  also  may  quote  information  from  publications
including, but not limited to, the following: Morningstar, Inc., The Wall Street
Journal,  Money  Magazine,  Forbes,  Barron's,  The New York  Times,  USA Today,
Institutional Investor and Registered  Representative.  Also, investors may want
to compare the historical returns of various investments, performance indices of
those investments or economic  indicators,  including but not limited to stocks,
bonds,  certificates of deposit and other bank products,  money market funds and
U.S. Treasury  obligations.  Certain of these alternative  investments may offer
fixed rates of return and  guaranteed  principal,  and may be insured.  Economic
indicators may include, without limitation, indicators of market rate trends and
cost of funds,  such as Federal Home Loan Bank Board 11th District Cost of Funds
Index  (COFI).  A Fund may  also  advertise  its  portfolio  or its  significant
holdings at any given time. A Fund may also periodically  advertise tax-deferred
compounding charts and other hypothetical illustrations.

Performance Data of Investment Strategies

As of the date of this  Statement of Additional  Information,  the Funds had not
yet commenced investment operations.  However, certain aspects of the investment
strategies can be demonstrated using historical data.

The following  table shows  hypothetical  performance  and  information  for the
strategies  employed by the Funds noted below,  but not any actual Fund, and the
actual  performance of the S&P 500 Index.  The  information  for each investment
strategy  assumed that the strategy  was fully  invested as of the  beginning of
each year and that each Stock  Selection  Date was the last day of the preceding
year. In addition, the performance  information does take into consideration the
estimated net expenses of the Funds (after expense  reimbursements) but does not
take  into  consideration  any sales  charges,  commissions,  insurance  fees or
charges imposed on the sale of the variable  annuity  policies or any taxes. Any
of such charges will lower the returns shown. All of the figures set forth below
have been  adjusted to take into  account the effect of currency  exchange  rate
fluctuations of the U.S. dollar,  where applicable (i.e.,  returns are stated in
U.S. dollar terms). The returns shown in the following tables and graphs are not
guarantees  of future  performance  and  should  not be used as a  predictor  of
returns to be expected in connection with a Fund's portfolio.  Both stock prices
(which may  appreciate or  depreciate)  and  dividends  (which may be increased,
reduced or eliminated)  will affect the returns.  Each  investment  strategy has
underperformed  its respective  index or indices in certain years.  Accordingly,
there can be no assurance that a Fund's portfolio will outperform its respective
index (or combination thereof, where applicable).

The following  table  compares the  hypothetical  performance  of the investment
strategy of the Nasdaq  Target 15 Portfolio and the  performance  of the S&P 500
Index,  Nasdaq-100  Index and the DJIA,  each of those years (and as of the most
recent quarter).

An investor in a Fund would not necessarily realize as high a total return on an
investment in the stocks upon which the  hypothetical  returns are based for the
following  reasons:  the total return  figures shown  reflect  estimated and not
actual expenses and do not reflect taxes; the Funds are established at different
times of the  year;  and the  Funds  may not be fully  invested  at all times or
equally weighted in all stocks comprising a strategy.  Further, the returns also
do not reflect the deduction of any insurance  fees or charges which are imposed
by the insurance companies that sponsor the Separate Accounts in connection with
the sale of variable annuity policies.  Investors should refer to the prospectus
for the applicable  Separate Account for a description of those fees and charges
which  have a  detrimental  effect  on the  performance  of  the  Funds.  If the
above-mentioned  charges were reflected in the hypothetical returns, the returns
would be lower than those presented here.

The returns  shown below for the Nasdaq  Target 15 Strategy do not represent the
results of actual  trading using client assets but were achieved by means of the
retroactive  application  of a strategy  that was  designed  with the benefit of
hindsight.  These returns  should not be  considered  indicative of the skill of
First Trust.  The returns may not reflect the impact that any material market or
economic  factors  might  have had if the  strategies  had been used  during the
periods shown to actually manage client assets.  During most of the period shown
in the table  below,  First  Trust did not manage or  supervise  accounts  which
employed  strategies  similar to the  hypothetical  strategies  shown below. The
returns shown below for the strategies are not a guarantee of future performance
and should not be used to predict the expected  returns of a Fund. Each strategy
has the potential for loss.

These  figures are for  calendar  years;  the Funds may use  different  12-month
periods.

                        COMPARISON OF TOTAL RETURN(2)

        Hypothetical Strategy
        Total Returns (1)            Index Total Returns

                                                         Nasdaq-
          Nasdaq Target           S&P 500                   100
Year      15 Strategy             Index        DJIA        Index
____      ___________             ______       _____       _____
1986       21.78%                 18.31%       27.00%       6.89%
1987       12.98%                  5.33%        5.66%      10.49%
1988       -1.64%                 16.64%       16.03%      13.54%
1989       36.10%                 31.35%       32.09%      26.17%
1990       -6.42%                 -3.30%       -0.73%     -10.41%
1991      107.72%                 30.40%       24.19%      64.99%
1992       -1.20%                  7.62%        7.39%       8.86%
1993       27.36%                  9.95%       16.87%      11.67%
1994        9.40%                  1.34%        5.03%       1.74%
1995       52.49%                 37.22%       36.67%      43.01%
1996       58.69%                 22.82%       28.71%      42.74%
1997       33.92%                 33.21%       24.82%      20.76%
1998      121.49%                 28.57%       18.03%      85.43%
1999       99.03%                 20.94%       27.06%     102.08%
9/29/00    40.44%                 -1.39%       -6.28%      -3.68%

(1) The  strategy  stocks for the  Nasdaq  Target 15  Strategy  for a given year
consist of the stocks  selected by applying the 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 the period divided by the opening
market  value of each group of stocks as of the first  trading  day of a period.
Total Return does not take into  consideration  any taxes.  Total Return assumes
that all dividends are  reinvested  semi-annually  and all returns are stated in
terms of the United States dollar.

There  can be no  assurance  that any Fund  will  outperform  any  index  shown.
Investors  should  not  rely  on  the  preceding  financial  information  as  an
indication of the past or future  performance of a Fund. This information may be
used in advertisements.

Investment Advisory and Other Services

Investment Adviser

First Trust Advisors L.P., 1001  Warrenville  Road,  Suite 300, Lisle,  Illinois
60532,  is the investment  adviser to the Funds.  As investment  adviser,  First
Trust provides the Funds with professional investment supervision and management
and permits any of its officers or employees to serve  without  compensation  as
Trustees or officers of the Registrant if elected to such positions. First Trust
provides  each Fund with  discretionary  investment  services and certain  other
services  necessary with the management of the portfolios.  Specifically,  First
Trust is responsible  for supervising and directing the investments of each Fund
in accordance with each Fund's investment  objective,  program, and restrictions
as provided in the  Prospectus  and this  Statement of  Additional  Information.
First Trust is responsible for effecting all security  transactions on behalf of
each Fund. First Trust is also responsible for compliance with the provisions of
the Internal Revenue Code of 1986, as amended ("Code"),  applicable to each Fund
(relating to the  diversification  requirements  applicable  to  investments  in
underlying variable annuity contracts and/or regulated investment companies).

First Trust Advisors L.P.  ("First  Trust") is an Illinois  limited  partnership
formed  in 1991 and an  investment  adviser  registered  with the SEC  under the
Investment  Advisers Act of 1940. First Trust is a limited  partnership with one
limited  partner,  Grace  Partners of DuPage L.P.  ("Grace  Partners"),  and one
general  partner,  Nike  Securities  Corporation.  Grace  Partners  is a limited
partnership with one general partner, Nike Securities Corporation,  and a number
of limited partners.  Grace Partners' and Nike Securities  Corporation's primary
business  is  investment  advisory  and  broker/dealer  services  through  their
interests.  Nike Securities Corporation is an Illinois corporation controlled by
Robert Donald Van Kampen family. First Trust is controlled by Grace Partners and
Nike Securities Corporation.

First Trust is also  advisor or  subadvisor  to over 50 mutual  funds and is the
portfolio  supervisor  of  certain  unit  investment  trusts  sponsored  by Nike
Securities L.P. ("Nike Securities") which are substantially similar to the Funds
in that they have the same  investment  objectives and strategies as the various
Funds but have a finite life. Nike Securities  specializes in the  underwriting,
trading and distribution of unit investment  trusts and other  securities.  Nike
Securities,  an Illinois limited partnership formed in 1991, acts as sponsor for
successive  series of The First Trust Combined Series,  FT Trust (formerly known
as The First Trust Special  Situations Trust), the First Trust Insured Corporate
Trust,  The First  Trust of Insured  Municipal  Bonds and The First  Trust GNMA.
First Trust  introduced the first insured unit  investment  trust in 1974 and to
date more than $27  billion in First  Trust  unit  investment  trusts  have been
deposited.

First Trust acts as  investment  adviser to the Funds  pursuant to an Investment
Advisory and  Management  Agreement.  The  Investment  Advisory  and  Management
Agreement  continues in effect for each Fund from year to year after its initial
two-year term so long as its  continuation  is approved at least annually by the
Trustees  including  a  majority  of the  Trustees  who are not  parties to such
agreement or  interested  persons of any such party except in their  capacity as
Trustees of the  Registrant,  or the  interest  holders of each Fund.  It may be
terminated  at any time upon 60 days  notice by either  party,  or by a majority
vote of the outstanding  interests of a Fund with respect to that Fund, and will
terminate  automatically  upon assignment.  Additional Funds may be subject to a
different  agreement.  The Investment Advisory and Management Agreement provides
that First Trust,  its partners,  directors,  officers,  employees,  and certain
other persons performing  specific functions for a Fund will only be liable to a
Fund for losses resulting from willful misfeasance, bad faith, gross negligence,
or reckless  disregard of their  obligations and duties under the agreement.  As
compensation for its services,  each Fund pays First Trust a fee as described in
the Prospectus.  Provisions  regarding expense  limitations are described in the
Prospectus.

Nike Securities,  1001 Warrenville  Road, Lisle,  Illinois 60532,  serves as the
principal underwriter of the interests of the Funds pursuant to a "best efforts"
arrangement  as  provided  by a  distribution  agreement  with  the  Funds  (the
"Distribution  Agreement").  The officers of the  Registrant  described as being
associated  with Nike  Securities are affiliated  persons of both the Registrant
and Nike Securities.  Pursuant to the Distribution Agreement, the Fund appointed
Nike  Securities to be its agent for the  distribution of the Funds' shares on a
continuous  offering  basis.  Nike  Securities  sells  shares  to  the  Separate
Accounts.  Pursuant to the Distribution Agreement,  Nike Securities,  at its own
expense,  finances certain  activities  incident to the sale and distribution of
the interests of the Funds,  including printing and distribution of prospectuses
and statements of additional information to other than existing shareholders and
the  printing  and  distributing  of  sales  literature  and  advertising.  Nike
Securities does not receive underwriting commissions for its sale of interest of
the Funds, but does receive  compensation  pursuant to a Rule 12b-1 plan adopted
by the Fund and described herein under "12b-1 Plan."

Custodian and Transfer Agent

The  custodian  has  custody  of all  securities  and  cash  of  the  Registrant
maintained in the United  States and attends to the  collection of principal and
income and payment for and collection of proceeds of securities  bought and sold
by the Funds. PFPC Trust Company, 8800 Tinicum Boulevard,  3rd Floor, Suite 200,
Philadelphia,  PA 19153,  acts as  custodian  for each Fund.  ICA Fund  Services
Corp., 4455 E. Camelback Road, Suite 261E, Phoenix,  AZ, 85018, is the transfer,
shareholder  services,  accounting and  dividend-paying  agent for each Fund and
also provides  certain  clerical,  bookkeeping,  accounting  and  administrative
services  necessary  for the  operation of the  Registrant  and  maintenance  of
shareholder accounts.

Administrator

Each  Fund  pays an  administration  fee to  Investment  Company  Administration
("ICA"), 2020 E. Financial Way, Suite 100, Glendora, CA 91741, to compensate ICA
for  providing  administrative  services.  The  services  provided  by ICA shall
include,  among others,  the following:  (i) prepare and coordinate  reports and
other  materials  to be supplied  to the Board of  Trustees  of the Trust;  (ii)
prepare and/or  supervise the preparation and filing of all securities  filings,
periodic financial reports, prospectuses,  statements of additional information,
marketing  materials,  tax  returns,  shareholder  reports and other  regulatory
reports  of  filings  required  of the Trust and the Funds;  (iii)  prepare  all
required  filings  necessary  for the sale of shares of the Funds in all  states
where the  officers  of the  Trust  deem it  appropriate;  (iv)  coordinate  the
preparation,  printing  and  mailing of all  materials  (e.g.,  Annual  Reports)
required to be sent to shareholders;  (v) coordinate the preparation and payment
of Trust and Fund related expenses; (vi) conduct relations with, and monitor and
oversee the  activities  of the Trust's and the Funds'  servicing  agents (i.e.,
transfer agent,  custodian,  fund  accounting  agent,  attorneys,  underwriters,
brokers and dealers,  corporate fiduciaries and banks) and such other persons in
any such other  capacity  deemed to be necessary or desirable;  (vii) review and
adjust as necessary the Funds' daily expense accruals;  (viii) maintain and keep
such  books  and  records  of the  Trust as  required  by law or for the  proper
operation of the Trust and the Funds other than those maintained and kept by the
Trust's Adviser and other servicing agents;  (ix) provide the Trust with (i) the
services  of  persons  competent  to perform  the  administrative  and  clerical
functions  described  herein,  and (ii)  personnel  to serve as  officers of the
Trust; (x) provide the Funds with office space as well as administrative offices
and such data processing  facilities as are necessary for the performance of its
duties under this Agreement; (xi) monitor each Fund's compliance with investment
policies  and  restrictions  as set  forth  in the  Fund's  currently  effective
Prospectus and Statement of Additional  Information  under the Securities Act of
1933 and (xii)  perform  such  additional  services as may be agreed upon by the
Trust and the Administrator.

         ICA  receive  a  monthly  fee  based on the  scheduled  provided  below
         (however, the minimum Annual per fund fee is $25,000):

         Administration Services Fees:

                        Basis Points                   Average Daily Net Assets
                        .10%                           First $200 million
                        .05%                           Next $300 million
                        .03%                           Thereafter

Independent Accountants

The Funds'  independent  accountants,  Ernst & Young  LLP,  233 S.  Wacker  Dr.,
Chicago,  Illinois  60606-6301,  audit and report on the Funds' annual financial
statements,  and perform other  professional  accounting,  auditing and advisory
services when engaged to do so by the Funds.

Fund Transactions and Brokerage

First Trust is  responsible  for decisions to buy and sell  securities  for each
Fund and for the placement of a Fund's securities  business,  the negotiation of
the  commissions to be paid on brokered  transactions,  the prices for principal
trades in securities,  and the  allocation of portfolio  brokerage and principal
business. It is the policy of First Trust to seek the best execution at the best
security price available with respect to each  transaction,  and with respect to
brokered  transactions in light of the overall quality of brokerage and research
services  provided to First Trust and its  advisees.  The best price to the Fund
means the best net price  without  regard to the mix  between  purchase  or sale
price and commission, if any. Purchases may be made from underwriters,  dealers,
and, on occasion, the issuers.  Commissions will be paid on a Fund's futures and
options  transactions,  if any.  The  purchase  price  of  portfolio  securities
purchased from an underwriter or dealer may include underwriting commissions and
dealer spreads. A Fund may pay mark-ups on principal transactions.  In selecting
broker/dealers  and in negotiating  commissions,  First Trust  considers,  among
other things, the firm's reliability, the quality of its execution services on a
continuing basis and its financial condition. Fund portfolio transactions may be
effected  with  broker/dealers  who have  assisted  investors in the purchase of
policies.  The  selection of a  broker-dealer  may take into account the sale of
products sponsored or advised by First Trust and/or its affiliates.

Section 28(e) of the Securities  Exchange Act of 1934 ("Section  28(e)") permits
an investment adviser, under certain circumstances, to cause an account to pay a
broker or dealer who supplies  brokerage and research  services a commission for
effecting a transaction in excess of the amount of commission  another broker or
dealer would have charged for effecting the transaction.  Brokerage and research
services  include  (a)  furnishing  advice  as to the value of  securities,  the
advisability   of  investing,   purchasing  or  selling   securities,   and  the
availability  of  securities  or  purchasers  or  sellers  of  securities,   (b)
furnishing  analyses and reports  concerning  issuers,  industries,  securities,
economic  factors  and  trends,  portfolio  strategy,  and  the  performance  of
accounts;  and (c) effecting  securities  transactions and performing  functions
incidental thereto (such as clearance, settlement, and custody).

In light of the above, in selecting  brokers,  First Trust considers  investment
and market  information  and other  research,  such as economic,  securities and
performance measurement research,  provided by such brokers, and the quality and
reliability of brokerage services, including execution capability,  performance,
and financial responsibility.  Accordingly,  the commissions charged by any such
broker may be greater  than the amount  another firm might charge if First Trust
determines  in good faith that the amount of such  commissions  is reasonable in
relation  to the  value  of the  research  information  and  brokerage  services
provided by such broker to First Trust or the  Registrant.  First Trust believes
that the research  information  received in this manner  provides the Funds with
benefits by  supplementing  the research  otherwise  available to the Funds. The
Investment   Advisory  and  Management   Agreement  provides  that  such  higher
commissions will not be paid by the Funds unless the adviser  determines in good
faith that the amount is  reasonable in relation to the services  provided.  The
investment  advisory fees paid by the Funds to First Trust under the  Investment
Advisory  and  Management  Agreement  are not  reduced as a result of receipt by
First Trust of research services.

First Trust places portfolio transactions for other advisory accounts advised by
it, and research  services  furnished by firms  through  which the Funds effects
their securities transactions may be used by First Trust in servicing all of its
accounts; not all of such services may be used by First Trust in connection with
a Fund.  First Trust  believes  it is not  possible  to measure  separately  the
benefits from research  services to each of the accounts  (including  the Funds)
advised by it.  Because the volume and nature of the trading  activities  of the
accounts are not uniform,  the amount of  commissions in excess of those charged
by another broker paid by each account for brokerage and research  services will
vary.  However,  First  Trust  believes  such  costs  to the  Funds  will not be
disproportionate  to the benefits  received by the Funds on a continuing  basis.
First  Trust  seeks  to  allocate  portfolio   transactions  equitably  whenever
concurrent  decisions  are made to purchase or sell  securities by the Funds and
another advisory  account.  In some cases,  this procedure could have an adverse
effect on the price or the  amount of  securities  available  to the  Funds.  In
making such allocations between the Funds and other advisory accounts,  the main
factors considered by First Trust are the respective investment objectives,  the
relative  size of portfolio  holding of the same or comparable  securities,  the
availability  of cash  for  investment  and the size of  investment  commitments
generally held.

Code of Ethics

To mitigate the possibility  that a Fund will be adversely  affected by personal
trading of employees,  the  Registrants,  First Trust and Nike  Securities  have
adopted Codes of Ethics under Rule 17j-1 of the Investment  Company Act of 1940.
These Codes contain policies restricting securities trading in personal accounts
of the  portfolio  Trustees  and others who  normally  come into  possession  of
information on portfolio transactions.

Purchases, Redemptions and Pricing of Interests

The Separate  Accounts will  purchase  interests of the Funds at their net asset
value. Interests are purchased using premiums received on Policies issued by the
insurance  companies.  The  Separate  Accounts  are funded by  interests  of the
Registrants.

All investments in the Registrants are credited to the interest holder's account
in the form of full and fractional  interests of the designated Fund (rounded to
the  nearest  1/1000 of an  interest).  The  Registrants  do not issue  interest
certificates.

As stated in the applicable Prospectus,  the net asset value ("NAV") of a Fund's
interests is determined  once each day on which the New York Stock Exchange (the
"NYSE") is open ("Business  Day") at the close of the regular trading session of
the Exchange (normally 4:00 p.m., Eastern Time, Monday through Friday).  The NAV
of a Fund's  interests is not  determined on the days the NYSE is closed,  which
days generally are New Year's Day, Martin Luther King Jr.  holiday,  President's
Day, Good Friday,  Memorial Day,  Independence Day, Labor Day,  Thanksgiving and
Christmas.

The per interest NAV of a Fund is  determined by dividing the total value of the
securities and other assets, less liabilities,  by the total number of interests
outstanding.  A Fund's net assets  value may not be  calculated  on days  during
which the Fund receives no orders to purchase  shares and no shares are tendered
for redemption. In determining NAV, portfolio securities for each Fund for which
accurate  market  quotations  are readily  available  will be valued by the fund
accounting agent as follows:

         (1)  Securities  that are  primarily  traded on a  national  or foreign
securities  exchange  shall be valued at the last sale price on the  exchange on
which they are primarily traded on the day of valuation or, if there has been no
sale on such day, at the mean between the bid and asked prices.

         (2) Securities  primarily  traded in the Nasdaq  National Market System
for which market  quotations are readily  available  shall be valued at the last
sale price on the day of valuation, or if there has been no sale on such day, at
the mean between the bid and asked prices.

         (3)  Over-the-counter  ("OTC")  securities  which are not traded in the
Nasdaq  National  Market  System shall be valued at the most recent trade price.
These  prices are obtained by the pricing  service  from the National  Quotation
Bureau.

         (4) Quotations of foreign  securities in a foreign  currency are valued
daily in U.S.  dollars  on the  basis of the  foreign  currency  exchange  rates
prevailing at the time such valuation is determined.  Foreign currency  exchange
rates generally are determined prior to the close of the New York Stock Exchange
(the "NYSE"). Occasionally, events affecting the value of foreign securities and
such exchange  rates occur between the time at which they are determined and the
close of the NYSE,  which events would not be reflected in the  computation of a
Portfolio's  net asset value. If events  materially  affecting the value of such
securities  or currency  exchange  rates  occur  during  such time  period,  the
securities  will be valued at their fair value as determined in good faith by or
under the direction of the Board of Trustees.

         (5) Short-term securities, including bonds, notes, debentures and other
debt securities,  and money market  instruments such as certificates of deposit,
commercial paper,  bankers'  acceptances and obligations of domestic and foreign
banks,  with remaining  maturities of 61 days or more, for which reliable market
quotations  are  readily  available  shall  each be  valued  at  current  market
quotations as provided by an  independent  pricing  service or principal  market
maker.

         (6) Bonds and other fixed-income  securities (other than the short-term
securities  described  above) are valued  using  market  quotations  provided by
dealers,  and also may be valued on the  basis of prices  provided  by a pricing
service when the Board of Trustees  believes  that such prices  reflect the fair
market value of such securities.

         (7)  Options  on  securities  that are listed on an  exchange  shall be
valued at the last sales price at the close of trading on such  exchange  or, if
there was no sale on the applicable options exchange on such day, at the average
of the quoted bid and asked prices as of the close of such exchange.

         (8) Futures  contracts  and  options  thereon  traded on a  commodities
exchange  or board of trade  shall be valued at the last sale price at the close
of  trading on such  exchange  or board of trade or, if there was no sale on the
applicable commodities exchange or board of trade on such day, at the average of
quoted bid and asked prices as of the close of such exchange or board of trade.

         (9) OTC  options  shall be  valued  at the mean  between  bid and asked
prices  provided  by a dealer.  On a monthly  basis,  the Adviser of a Portfolio
holding such  options  shall obtain bid and asked prices from at least two other
dealers engaged in OTC options  transactions  for the purpose of comparison with
the then current valuations of OTC options written or held by the Portfolio.  In
addition,  the  Adviser on a daily basis will  monitor the market  prices on the
securities  underlyling the OTC options with a view to determining the necessity
of obtaining  additional bid and ask quotations from other dealers to assess the
validity of the prices received from the primary pricing dealer.

        (10) Options and futures positions or any other securities or assets for
which reliable market  quotations are not readily available shall each be valued
at a price,  supplied by a pricing  service  approved by the Board of  Trustees,
which is in the opinion of such  pricing  service  representative  of the market
value of such securities or assets as of the time of  determination of net asset
value,  it being  the  opinion  of the  Board of  Trustees  that the  valuations
supplied by such  pricing  service  accurately  reflect the fair market value of
such securities or assets.

        (11) Any assets for which reliable  market  quotations are not available
or for which the pricing  service  does not  provide a  valuation  or provides a
valuation  that in the  judgment of the Adviser to the  Portfolio  holding  such
assets  does not  represent  fair value  shall  each be valued by the  Valuation
Committee in consultation  with that Adviser,  including its portfolio  managers
and its research and credit  analysts,  on the basis of the  following  factors:
cost of the security or asset,  transactions in comparable securities or assets,
relationships  among various securities and assets and such other factors as may
be determined by that Adviser to affect materially the value of the security.

Where a security is traded on more than one exchange,  or on an exchange as
well as over-the-counter  ("OTC"),  the Adviser and Administrator will determine
what market  represents  that on which the  security is  primarily  traded.  The
following are approved as the pricing  services for the portfolio  securities of
the Portfolios:  IDC Corp.,  ILX Systems Inc.,  J.J. Kenny & Co., Inc.,  Merrill
Lynch, Pierce,  Fenner & Smith Inc., Muller Data Corp. and Quotron. The Adviser,
in its discretion, may also use other pricing agents for a Portfolio's portfolio
securities as may be necessary.

The Valuation  Committee shall meet to consider any valuations for securities or
assets for which  market  quotations  are not  readily  available  or are deemed
inappropriate.  If the Valuation  Committee in consultation  with the Adviser is
unable to determine what it believes to be a fair value for such securities, the
Adviser  shall inform the Secretary of the Company and a meeting of the Board of
Trustees  shall be called  forthwith to determine  what action shall be taken to
value the  security.  A Fund  calculates  net  asset  value  per  interest,  and
therefore effects sales, redemptions and repurchases of its interests, as of the
close of the NYSE once on each day on which the NYSE is open.  Such  calculation
does not take place  contemporaneously  with the  determination of the prices of
the majority of the foreign portfolio securities used in such calculation.

The  Registrants may suspend the right of redemption for any Fund only under the
following unusual circumstances:  (a) when the New York Stock Exchange is closed
(other than weekends and holidays) or trading is restricted; (b) when trading in
the markets  normally  utilized is  restricted,  or when an emergency  exists as
determined  by the  Securities  and Exchange  Commission so that disposal of the
Company's  investments  or  determination  of its net  assets is not  reasonably
practicable;  or  (c)  during  any  period  when  the  Securities  and  Exchange
Commission may permit.

12b-1 Plan

The  Registrants  have adopted plans (the "Plans")  pursuant to Rule 12b-1 under
the Investment  Company Act of 1940,  which provides that interests of the Funds
will be subject to an annual service fee.

Nike Securities  serves as selling agent and distributor of the interests of the
Funds.  In this  capacity,  Nike  Securities  manages the offering of the Funds'
interests and is responsible for all sales and promotional activities.  In order
to compensate Nike Securities for its costs in connection with these activities,
each Fund has  adopted a service  plan  under Rule  12b-1  under the  Investment
Company Act of 1940.  Nike  Securities  uses the service fee to  compensate  the
insurance  companies  for providing  account  services to Policy  owners.  These
services include establishing and maintaining Policy owners' accounts, supplying
information  to Policy  owners,  delivering  fund  materials  to Policy  owners,
answering  inquiries,  and providing  other personal  services to Policy owners.
Each Fund may spend up to .25 of 1% per year of the average  daily net assets of
its  interests as a service fee under the Plan.  In  addition,  the Plan permits
First Trust to use a portion of its advisory fee to compensate  Nike  Securities
for expenses  incurred in connection with the sale and  distribution of a Fund's
interests  including,  without  limitation,  compensation  of its  sales  force,
expenses  of  printing  and  distributing  prospectuses  to  persons  other than
interest  holders  or  policy  owners,  expenses  of  preparing,   printing  and
distributing  advertising and sales literature and reports to interests  holders
and  Policy  owners  used in  connection  with the  sale of a Fund's  interests,
certain other  expenses  associated  with the  distribution  of interests of the
Funds, and any distribution-related expenses that may be authorized from time to
time by the Board of Trustees of the applicable Fund.

Under each Registrant's  Plan, the Registrant will report quarterly to the Board
of Trustees  for its review all amounts  expended  under the Plan. A Plan may be
terminated  at any time with  respect to any Fund,  without  the  payment of any
penalty,  by a vote of a  majority  of the  Trustees  who  are  not  "interested
persons" and who have no direct or indirect  financial  interest in a Plan or by
vote of a majority of the outstanding voting securities of such Fund. A Plan may
be renewed  from year to year if approved by a vote of the Board of Trustees and
a vote of the  non-interested  Trustees who have no direct or indirect financial
interest in a Plan cast in person at a meeting  called for the purpose of voting
on the Plan.  A Plan may be  continued  only if the Trustees who vote to approve
such continuance  conclude,  in the exercise of reasonable business judgment and
in light of their  fiduciary  duties under the  applicable  law, that there is a
reasonable likelihood that the Plan will benefit a Fund and its shareholders.  A
Plan may not be amended to  increase  materially  the cost which a Fund may bear
under the Plan  without the  approval of the  interest  holders of the  affected
Fund,  and any  other  material  amendments  of a Plan must be  approved  by the
non-interested  Trustees  by a vote cast in person at a meeting  called  for the
purpose of considering  such  amendments.  During the continuance of a Plan, the
selection and nomination of the  non-interested  Trustees of the Registrant will
be committed to the discretion of the non-interested Trustees then in office.

Additional Information

Voting Rights and General Fund Information

Interest  holders are  entitled  to one vote for each  interest  held.  Interest
holders may vote on the election of Trustees and on other  matters  submitted to
meetings  of  interest   holders.   In  regard  to  certain  matters   including
termination,  merger, or a change of investment restrictions,  the right to vote
is limited to the holders of interests of the  particular  Fund  affected by the
proposal. When a majority is required, it means the lesser of 67% or more of the
interests  present  at a  meeting  when  the  holders  of more  than  50% of the
outstanding  interests are present or represented by proxy,  or more than 50% of
the outstanding interests.

To the extent required by applicable  law, the insurance  companies will solicit
voting  instructions from owners of variable annuity Policies.  All interests in
each Fund will be voted by the  insurance  companies in  accordance  with voting
instructions  received from such variable  annuity Policy owners.  The insurance
companies  will vote all of the  interests  which it is  entitled to vote in the
same  proportion as the voting  instructions  given by variable  annuity  Policy
owners, on the issues presented.

Each  issued and  outstanding  interest  in a Fund is  entitled  to  participate
equally in dividends and  distributions,  if any,  declared by its corresponding
Fund,  and in  the  net  assets  of  the  Fund  remaining  upon  liquidation  or
dissolution after outstanding  liabilities are satisfied.  The interests of each
Fund, when issued, are fully paid and  non-assessable.  They have no preemptive,
conversion,   cumulative  dividend  or  similar  rights.  They  are  not  freely
transferable.  The FT Funds can only be owned by the Allmerica Separate Account.
The First Defined Funds may only be owned by the Allmerica  Separate Account and
other separate accounts. Interests in a Fund do not have cumulative rights. This
means that owners of more than half of the FT Fund's or the First Defined Fund's
interests  voting  for  election  of  Trustees  of such  Fund can  elect all the
Trustees of such Fund if they so choose.  Then,  the remaining  interest  owners
would not be able to elect any Trustees.

The Board of Trustees of the Funds has the right to establish  additional series
in the future,  to change those series and to determine the preferences,  voting
powers, rights and privileges thereof.

The  Funds  are not  required  and do not  intend  to hold  annual  meetings  of
shareholders.  Shareholders  owning more than 10% of the outstanding shares of a
Fund have the  right to call a special  meeting  to remove  Trustees  or for any
other purpose.

With regard to the First Defined Fund,  under  Massachusetts  law  applicable to
Massachusetts  business trusts,  shareholders of such a trust may, under certain
circumstances,  be held  personally  liable  as  partners  for its  obligations.
However,  the Declaration of Trust of the First Defined Fund contains an express
disclaimer of shareholder liability for acts or obligations of the First Defined
Fund and  requires  that  notice of this  disclaimer  be given in each  contract
agreement,  obligation  or  instrument  entered  into or  executed  by the First
Defined Fund,  the Trustees or Officers.  The First Defined Fund  Declaration of
Trust  further  provides  for  indemnification  out of the  assets  of the First
Defined  Fund for all losses and  expenses of any  shareholder  held  personally
liable  for the  obligations  of the First  Defined  Fund.  Thus,  the risk of a
shareholder  incurring  financial  loss on account of  shareholder  liability is
limited to  circumstances  in which both  inadequate  insurance  existed and the
First  Defined  Fund or the  applicable  Fund  itself  was  unable  to meet  its
obligations. The First Defined Fund believes the likelihood of the occurrence of
these circumstances is remote.

Shareholder Inquiries

All inquiries  regarding a Registrant  should be directed to the applicable Fund
at 1-(800) 621-1675 or by writing the applicable Fund at 1001 Warrenville  Road,
Suite 300, Lisle, Illinois 60532.

Tax Status

Federal Income Tax Matters

The following  discussion of federal income tax matters is based upon the advice
of Chapman and Cutler, counsel to the Funds.

First Defined Fund

Each First  Defined Fund intends to qualify  under  Subchapter M of the Internal
Revenue Code of 1986,  as amended (the "Code") for tax  treatment as a regulated
investment company. In order to qualify as a regulated investment company,  each
Sector Fund (i) must elect to be treated as a regulated  investment  company and
(ii) for each taxable year thereafter must satisfy certain requirements relating
to the source of its income, diversification of its assets, and distributions of
its income to shareholders.

First,  each First  Defined  Fund must  derive at least 90% of its annual  gross
income (including tax-exempt interest) from dividends,  interest,  payments with
respect to securities  loans,  gains from the sale or other disposition of stock
or securities,  foreign currencies or other income (including but not limited to
gains from options,  futures,  or forward contracts) derived with respect to its
business of investing in such stock,  securities or  currencies  (the "90% gross
income  test").  Second,  each First Defined Fund must diversify its holdings so
that, at the close of each quarter of its taxable year,  (i) at least 50% of the
value of its total  assets is  comprised  of cash,  cash  items,  United  States
Government  securities,  securities of other regulated  investment companies and
other  securities  limited in respect of any one issuer to an amount not greater
in value  that 5% of the value of the Fund's  total  assets and to not more that
10% of the outstanding  voting securities of such issuer, and (ii) not more than
25% of the value of the Fund's total assets is invested in the securities of any
one issuer (other than United States  Government  securities  and  securities of
other regulated  investment  companies) or two or more issuers controlled by the
Fund and engaged in the same, similar or related trades or businesses.

As a regulated  investment company,  each First Defined Fund will not be subject
to federal  income tax in any taxable year for which it distributes at least 90%
of the sum of (i) its "investment company taxable income" (without regard to its
net capital gain,  i.e.,  the excess of its net long-term  capital gain over its
short-term capital loss) and (ii) its net tax-exempt interest (the excess of its
gross  tax-exempt  interest  income  over  certain  disallowed  deductions).  In
addition,  to the extent a First Defined Fund timely distributes to shareholders
at least 98% of its taxable income (including any net capital gain), it will not
be subject to the 4% excise tax on certain  undistributed  income of  "regulated
investment   companies."   Each  First  Defined  Fund  intends  to  make  timely
distributions  in compliance  with these  requirements  and  consequently  it is
anticipated  that they  generally  will not be required to pay the excise tax. A
First Defined Fund may retain for investment its net capital gain. However, if a
First  Defined  Fund  retains any net  capital  gain or any  investment  company
taxable  income,  it will be subject to federal income tax at regular  corporate
rates on the amount  retained.  If a First  Defined Fund retains any net capital
gain, the Fund may designate the retained amount as undistributed  capital gains
in a notice to its  shareholders  who,  if  subject  to  federal  income  tax on
long-term  capital gains,  (i) will be required to include in income for federal
income  tax  purposes,   as  long-term   capital  gain,  their  shares  of  such
undistributed  amount,  and (ii) will be entitled to credit their  proportionate
shares of the tax paid by the Fund against their federal income tax  liabilities
if any, and to claim refunds to the extent the credit exceeds such  liabilities.
For federal income tax purposes,  the tax basis of shares owned by a shareholder
of a First  Defined Fund will be increased by an amount equal to the  difference
between  the amount of such  includible  gains and the tax  deemed  paid by such
shareholder  in  respect of such  shares.  Each First  Defined  Fund  intends to
distribute at least annually to its shareholders all or substantially all of its
investment company taxable income, net tax-exempt interest and net capital gain.

Treasury  regulations permit a regulated  investment company, in determining its
investment  company taxable income and net capital gain, to elect (unless it has
made a taxable year  election  for excise tax  purposes as  discussed  below) to
treat all or part of any net capital loss, any net long-term capital loss or any
net foreign currency loss incurred after October 31 as if they had been incurred
in the succeeding year.

If a First  Defined Fund  engages in hedging  transactions  involving  financial
futures and options,  these  transactions  will be subject to special tax rules,
the  effect of which may be to  accelerate  income to the Fund,  defer the First
Defined Fund's losses,  cause  adjustments in the holding  periods of the Fund's
securities,  convert long term capital gains into short-term  capital losses and
convert  short-term  capital losses into long-term  capital losses.  These rules
could  therefore  affect the amount,  timing and character of  distributions  to
shareholders.

Prior to purchasing  shares in a First Defined Fund,  the impact of dividends or
distributions  which are  expected  to be or have been  declared,  but not paid,
should be carefully  considered.  Any dividend or distribution  declared shortly
after a purchase of such shares prior to the record date will have the effect of
reducing  the per share net asset value by the per share  amount of the dividend
or distribution  and will be subject to federal income tax to the extent it is a
distribution of ordinary income or capital gain.

In any  taxable  year of a First  Defined  Fund,  distributions  from the  First
Defined Fund,  other than  distributions  which are  designated as capital gains
dividends,  will to the extent of the earnings and profits on the First  Defined
Fund,  constitute dividends for Federal income tax purposes which are taxable as
ordinary  income  to  shareholders.  To  the  extent  that  distributions  to  a
shareholder in any year exceed a First Defined  Fund's  current and  accumulated
earnings  and  profits,  they will be treated  as a return of  capital  and will
reduce the shareholder's basis in his or her shares and, to the extent that they
exceed his or her basis, will be treated as gain from the sale of such shares as
discussed below.  Distributions of a First Defined Fund's net capital gain which
are properly designated as capital gain dividends by the First Defined Fund will
be taxable to the  shareholders  as long-term  capital  gain,  regardless of the
length of time the shares have been held by a shareholder. Distributions will be
taxed in the manner described (i.e., as ordinary income, long-term capital gain,
return of capital or exempt-interest dividends) even if reinvested in additional
shares of a First Defined Fund.

Although dividends generally will be treated as distributed when paid, dividends
declared in October, November or December,  payable to shareholders of record on
a specified  date in one of those months and paid during the following  January,
will be treated as having been distributed by a First Defined Fund (and received
by the shareholders) on December 31 of the year such dividends are declared.

The  redemption  or exchange of the shares of a First Defined Fund normally will
result in capital gain or loss to the shareholders.  Generally,  a shareholder's
gain or loss will be  long-term  gain or loss if the  shares  have been held for
more than one year. Present law taxes both long- and short-term capital gains of
corporations at the rates  applicable to ordinary  income.  The Internal Revenue
Service Restructuring and Reform Act for 1998 (the "1998 Tax Act") provides that
for taxpayers other than corporations, net capital gain (which is defined as net
long-term  capital gain over net  short-term  capital loss for the taxable year)
realized  from  property  (with certain  exclusions)  is generally  subject to a
maximum marginal stated tax rate of 20% (10% in the case of certain taxpayers in
the lowest tax bracket).  For tax years  beginning  after December 31, 2000, the
20% rate is reduced to 18% and the 10% rate is reduced to 8% for long-term gains
from most property held for more than five years.  However, the reduction of the
20% rate to 18% applies only if the holding period for the property begins after
December 31, 2000. Therefore,  you will not be eligible for the 18% capital gain
rate on assets for which  your  holding  period  began  before  January 1, 2001.
However,  if you are an  individual,  you may elect to treat certain  assets you
hold on January 1, 2001 as having been sold for their fair  market  value on the
next  business day after  January 1, 2001 for  purposes of this  holding  period
requirement. If you make this election for an asset, the asset would be eligible
for the 18% rate if it is held by you for more than five years after this deemed
sale. If you make this  election,  you must  recognize any gain from this demand
sale, but any loss is not  recognized.  In the case of capital gains  dividends,
the  determination  of which portion of the capital gain dividend,  if any, that
may be treated as  long-term  gain from  property  held for more than five years
eligible  for  the  18% (or 8%) tax  rate  will  be made  based  on  regulations
prescribed by the United States  Treasury.  Capital gain or loss is long-term if
the holding period for the asset is more than one year, and is short-term if the
holding  period for the asset is one year or less.  The date on which a share is
acquired  (i.e.,  the "trade date") is excluded for purposes for determining the
holding  period of the share.  Capital  gains  realized from assets held for one
year or less are taxed at the same rates as ordinary income. Note that if a sale
of  shares  held for less  than six  months  results  in loss,  the loss will be
treated  as a  long-term  capital  loss  to  the  extent  of  any  capital  gain
distribution made with respect to such shares during the period those shares are
held by the shareholder.

In addition,  please note that capital gains may be  recharacterized as ordinary
income  in the  case of  certain  financial  transactions  that  are  considered
"conversion  transactions"  effective for transactions  entered into after April
30, 1993.  Shareholders and prospective  investors should consult with their tax
advisers regarding the potential effect of this provision on their investment in
shares of a First Defined Fund.

Under the Code, certain  miscellaneous  itemized deductions,  such as investment
expenses,  tax return preparation fees and employee business  expenses,  will be
deductible by  individuals  only to the extent they exceed 2% of adjusted  gross
income.  Miscellaneous  itemized  deductions  subject to this  limitation  under
present law do not include expenses  incurred by a First Defined Fund as long as
the shares of the First  Defined  Fund are held by or for 500 or more persons at
all times during the taxable year or another  exception is met. In the event the
shares of a First  Defined Fund are held by fewer than 500  persons,  additional
taxable  income may be  realized  by the  individual  (and other  non-corporate)
shareholders  in excess of the  distributions  received  from the First  Defined
Fund.

All or a portion of a sales load paid in  purchasing  shares of a First  Defined
Fund cannot be taken into  account for purposes of  determining  gain or loss on
the redemption or exchange of such shares within 90 days after their purchase to
the extent  shares of the First  Defined Fund or another  fund are  subsequently
acquired  without payment of a sales load or with the payment of a reduced sales
load pursuant to the reinvestment or exchange privilege. Any disregarded portion
of such load will result in an increase  in the  shareholder's  tax basis in the
shares subsequently  acquired.  Moreover,  losses recognized by a shareholder on
the redemption or exchange of shares of a First Defined Fund held for six months
or less are  disallowed  to the extent of any  distribution  of  exempt-interest
dividends  received  with  respect to such shares and, if not  disallowed,  such
losses  are  treated  as  long-term   capital   losses  to  the  extent  of  any
distributions  of long-term  capital gains made with respect to such shares.  In
addition,  no loss will be allowed on the  redemption or exchange of shares of a
First  Defined  Fund if the  shareholder  purchases  other  shares  of the First
Defined Fund (whether through reinvestment of distributions or otherwise) or the
shareholder  acquires or enters into a contract or option to acquire  securities
that are  substantially  identical to shares of the First  Defined Fund within a
period  of 61 days  beginning  30 days  before  and  ending 30 days  after  such
redemption  or  exchange.  If  disallowed,  the  loss  will be  reflected  in an
adjustment to the basis of the shares acquired.

If in any year a First Defined Fund should fail to qualify under Subchapter M
for tax treatment as a regulated investment company, the First Defined Fund
would incur a regular  corporate federal income tax upon its income for that
year, and distributions to its  shareholders would be taxable to shareholders as
ordinary dividend  income  for  federal  income tax  purposes  to the extent of
the First Defined Fund's available earnings and profits.

Each First Defined Fund is required in certain  circumstances to withhold 31% of
taxable  dividends and certain other payments paid to  non-corporate  holders of
shares who have not furnished to the First  Defined Fund their correct  taxpayer
identification number (in the case of individuals, their social security number)
and certain certifications, or who are otherwise subject to backup withholding.

A shareholder  who is a foreign  investor (i.e., an investor other than a United
States citizen or resident or a United States corporation,  partnership,  estate
or trust) should be aware that,  generally,  subject to applicable tax treaties,
distributions  from a First Defined Fund which constitute  dividends for Federal
income tax purposes  (other than dividends which a First Defined Fund designates
as  capital  gain  dividends)  will be subject to United  States  income  taxes,
including  withholding  taxes.  However,  distributions  received  by a  foreign
investor from a First  Defined Fund that are  designated by a First Defined Fund
as capital gain dividends  should not be subject to United States Federal income
taxes,  including withholding taxes, if all of the following conditions are met:
(i) the capital gain dividend is not  effectively  connected with the conduct by
the foreign  investor of a trade or business within the United States,  (ii) the
foreign investor (if and individual) is not present in the United States for 183
days or more during his or her  taxable  year,  and (iii) the  foreign  investor
provides  all  certification  which  may  be  required  of his  status  (foreign
investors  may contact the Fund to obtain a Form W-8BEN which must be filed with
such First  Defined Fund and refiled  every three  calendar  years  thereafter).
Foreign  investors  should  consult  their tax  advisors  with respect to United
States tax  consequences  of ownership of Shares.  Units in a First Defined Fund
and First  Defined  Fund  distribution  may also be  subject  to state and local
taxation and Shareholders should consult their tax advisors in this regard.

Generally,   First  Defined  Fund   dividends  are  not  eligible  for  the  20%
dividends-received deduction for corporations.  However, a corporate shareholder
may be  entitled  to a 70%  dividends  received  deduction  with  respect to any
portion of such  shareholder's  ordinary income dividends which are attributable
to  dividends  received by a First  Defined  Fund on certain  Equity  Securities
(other than  corporate  shareholders,  such as "S"  corporations,  which are not
eligible for the deduction  because of their special  characteristics  and other
than for purposes of special taxes such as the accumulated  earnings tax and the
personal  holding  corporation  tax). Each First Defined Fund will designate the
portion of any taxable dividend which is eligible for this deduction. However, a
corporate  shareholder  should be aware that  Sections  246 and 246A of the Code
impose  additional  limitations  on the  eligibility  of  dividends  for the 70%
dividends received deduction. These limitations include a requirement that stock
(and  therefore  Shares of a First Defined Fund) must generally be held at least
46 days (as determined under, and during the period specified in, Section 246(c)
of the Code). Regulations have been issued which address special rules that must
be  considered in  determining  whether the 46 day holding  requirement  is met.
Moreover,  the allowable  percentage of the deduction  will generally be reduced
from 70% if a  corporate  shareholder  owns Shares of a First  Defined  Fund the
financing of which is directly  attributable  to  indebtedness  incurred by such
corporation.  To the  extent  dividends-received  by a First  Defined  Fund  are
attributable  to  foreign  corporations,  a  corporate  shareholder  will not be
entitled to the dividends  received  deduction with respect to its share of such
foreign dividends since the dividends received deduction is generally  available
only with respect to dividends paid by domestic corporations. It should be noted
that payments to a First Defined Fund of dividends on equity Securities that are
attributable  to foreign  corporations  may be  subject  to foreign  withholding
taxes.  Corporate  shareholders  should  consult  with their tax  advisers  with
respect to the  limitations  on, and possible  modifications  to, the  dividends
received deduction.

A First Defined Fund may elect to pass through to the  shareholders  the foreign
income and similar  taxes paid by the Fund in order to enable such  shareholders
to take a credit (or deduction) for foreign income taxes paid by a First Defined
Fund. If such an election is made, shareholders of a First Defined Fund, because
they are deemed to own a pro rata portion of the foreign  securities held by the
First Defined Fund,  much include in their gross income,  for federal income tax
purposes,  both their  portion of dividends  received by such First Defined Fund
and also their  portion of the amount  which the First  Defined Fund deems to be
the  shareholders'  portion of foreign  income  taxes paid with  respect  to, or
withheld  from,  dividends,  interest or other income of the First  Defined Fund
from its foreign investments.  Shareholders may then subtract from their federal
income tax the amount of such taxes  withheld,  or else treat such foreign taxes
as deductions from gross income;  however, as in the case of investors receiving
income  directly  from  foreign  sources,  the  above  described  tax  credit or
deduction  is subject to certain  limitations.  The 1997 Act  imposes a required
holding period for such credits.  Shareholders should consult their tax advisers
regarding this election and its consequences to them.

Foreign  currency gains and losses realized by a Fund in connection with certain
transactions that involve foreign currency-denominated debt securities,  certain
foreign  currency   options,   foreign  currency  forward   contracts,   foreign
currencies,  or payable or  receivables  denominated  in a foreign  currency are
subject to Section 988 of the Code, which generally causes such gains and losses
to be treated as ordinary  income and losses and may affect the  amount,  timing
and character of distributions to  shareholders.  For example,  if a Fund sold a
foreign stock or bond and part of the gain or loss on the sale was  attributable
to an increase or decrease in the value of a foreign currency, then the currency
gain or loss may be treated as  ordinary  income or loss.  If such  transactions
result in higher net ordinary  income,  the  dividends  paid by the Fund will be
increased;  if such transactions  result in lower net ordinary income, a portion
of dividends paid could be classified as a return of capital.

Each First Defined Fund may qualify for and make an election permitted under the
"pass  through"  provisions of Section 853 of the Internal  Revenue Code,  which
allows a  regulated  investment  company to elect to have its foreign tax credit
taken by its shareholders  instead of on its own tax return.  To be eligible for
this credit, more than 50% of the value of a Fund's total assets at the close of
its  taxable  year  must  consist  of  stock  or  other  securities  in  foreign
corporations, and the Fund must meet certain other requirements.

If a First  Defined  Fund makes this  election,  it may not take any foreign tax
credit and may not take a deduction for foreign taxes paid.  However,  each Fund
is allowed to include the amount of foreign  taxes paid in a taxable year in its
dividends  paid  deduction.  Each  shareholder  would then  include in his gross
income,  and treat as paid by him, his proportionate  share of the foreign taxes
paid by the Fund.

If the U.S.  government  were to impose any  restrictions,  through  taxation or
other means, on foreign  investments by U.S.  investors such as those to be made
through a Fund,  the Board of  Trustees  of each Fund will  promptly  review the
policies of the Fund to determine whether significant changes in its investments
are appropriate.

General

The foregoing is a general and abbreviated summary of the provisions of the Code
and Treasury Regulations presently in effect as they directly govern the federal
income  taxation of a Sector Fund and its  shareholders  and relates only to the
federal  income tax status of a First  Defined Fund and to the tax  treatment of
distributions  by a  First  Defined  Fund to  United  States  shareholders.  For
complete provisions, reference should be made to the pertinent Code sections and
Treasury Regulations. The Code and Treasury Regulations are subject to change by
legislative  or  administrative  action,  and any such change may be retroactive
with respect to Fund transactions. Shareholders are advised to consult their own
tax advisers for more detailed information  concerning the federal taxation of a
First Defined Fund and the income tax consequences to its shareholders,  as well
as with  respect to foreign,  state and local tax  consequences  of ownership of
First Defined Fund shares.

FT Fund

The FT Fund is not a "regulated  investment  company" under  Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code").  The FT Fund nonetheless
does not pay  federal  income tax on its  interest,  dividend  income or capital
gains, because as a limited liability company whose interests are sold only to a
Separate  Account,  the FT Fund is  disregarded  as an entity  for  purposes  of
federal  income  taxation,  assuming that the FT Fund meets the  diversification
requirements  of  Section  817 of the  Code.  Allmerica,  through  the  Separate
Account, is treated as owning the assets of the FT Fund which are the collective
assets of the FT Funds  directly  and its tax  obligations  thereon are computed
pursuant to  Subchapter  L of the Code (which  governs the taxation of insurance
companies).  Under current tax law, interest,  dividend income and capital gains
of the FT Fund are not taxable to the FT Fund, and are not currently  taxable to
Allmerica or to Policy owners, when left to accumulate within a variable annuity
Policy. Tax disclosure  relating to the variable annuity Policies that offer the
FT Fund as an investment  alternative is contained in the prospectuses for those
Policies.

Section  817(h) of the Code  imposes  certain  diversification  standards on the
underlying  assets of segregated asset accounts that hold assets purchased under
contracts  such as the  variable  annuity  Policies  (that is, the assets of the
Funds).  Failure  to  satisfy  those  standards  at any  time  would  result  in
imposition of Federal income tax on a variable annuity Policy owner with respect
to the increase in the value of the variable annuity Policy.  Section  817(h)(2)
provides  that a  segregated  asset  account  that funds  contracts  such as the
variable  annuity Policies is treated as meeting the  diversification  standards
if, as of the close of each calendar quarter, the assets in the account meet the
diversification requirements for a regulated investment company and no more than
55% of those assets consist of cash, cash items, U.S. Government  securities and
securities of other regulated investment companies.

The Treasury  Regulations  amplify the  diversification  standards  set forth in
Section  817(h) and provide an  alternative  to the provision  described  above.
Under  the  regulations,  an  investment  portfolio  will be  deemed  adequately
diversified only if (i) no more than 55% of the value of the total assets of the
portfolio is  represented by any one  investment;  (ii) no more than 70% of such
value is  represented  by any two  investments;  (iii) no more  than 80% of such
value is represented by any three investments; and (iv) no more than 90% of such
value is represented by any four investments. For purposes of these Regulations,
all securities of the same issuer are treated as a single  investment,  but each
United  States  government  agency  or  instrumentality  shall be  treated  as a
separate issuer.

Each FT Fund  will be  managed  with  the  intention  of  complying  with  these
diversification requirements. It is possible that, in order to comply with these
requirements, less desirable investment decisions may be made which could affect
the investment performance of a FT Fund.



                              FT DEFINED PORTFOLIOS

                                     PART C

                                OTHER INFORMATION

Note: Items 23-30 have been answered with respect to all investment
portfolios (Funds) of the Registrant.

Item 23. Exhibits

<TABLE>
<CAPTION>
Exhibit
Number   Description
_______  ___________
<S>      <C>
(a)(1)   Form of Certificate of Formation of the Registrant.(1)

(a)(2)   Form of Limited Liability Company Agreement of the Registrant.(1)

(a)(3)   Amended and Restated Limited Liability Company Agreement of the Registrant.(2)

(b)      Operating By-Laws of the Registrant (see Exhibit (a)(3)).(2)

(c)      Establishment and Designation of Series of Membership Interests.(2)

(d)      Form of Investment Advisory and Management Agreement between Registrant and First Trust Advisors L.P.(2)

(e)      Form of Distribution Agreement between Registrant and Nike Securities L.P.(2)

(f)      Not Applicable

(g)      Form of Custodian Agreement between the Registrant and PFPC Trust Company.(2)

(h)(1)   Form of Administration Agreement between Registrant and Investment Company Administration.(2)

(h)(2)   Form of Transfer Agency and Service Agreement.(2)

(i)(1)   Opinion and Consent of Chapman and Cutler.(2)

(i)(2)   Opinion and Consent of Potter Anderson & Corroon, LLP.(2)

(j)      Not Applicable.

(k)      Not Applicable.

(l)      Not Applicable.

(m)      12b-1 Service Plan.(2)

(n)      Not Applicable.

(p)      Code of Ethics of the Registrant, First Trust Advisors L.P. and Nike Securities L.P. (2)

(z)      Original Powers of Attorney for Messrs.  Bartel,  Bowen,  Erickson,  Fitzgerald and Nielson, authorizing,
         among others, James A. Bowen and W. Scott Jardine to execute the Registration Statement.(2)

         (1) Incorporated by reference to the initial registration statement filed on Form N-1A for Registrant.
         (2) Filed herewith.

Item 24. Persons controlled by or under Common Control with Registrant

         Not Applicable

Item 25. Indemnification

Section 12.4 of the Registrant's Limited Liability Company Agreement provides as follows:

         Section 12.4.   Indemnification.   (a) Subject  to  the  exceptions  and  limitations  contained  in  this
Section 12.4,  every person who is, or has been, a Trustee, director, officer, employee, authorized person or agent
of the Company,  including  persons who serve at the request of the Company as Trustees,  officers,  employees,  or
agents,  of another  organization  in which the Company has an interest  as a  shareholder,  creditor or  otherwise
(hereinafter  referred  to as a "Covered  Person"),  shall be  indemnified  by the  Company to the  fullest  extent
permitted by law against liability and against all expenses  reasonably  incurred or paid by him in connection with
any claim,  action,  suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being
or having been such a Trustee,  director,  officer,  employee,  authorized person or agent and against amounts paid
or incurred by him in settlement thereof.
</TABLE>

         (b) No indemnification shall be provided hereunder to a Covered Person:

                   (i)  against  any  liability  to the Company or the Member by
         reason of a final  adjudication by the court or other body before which
         the proceeding was brought that he engaged in willful misfeasance,  bad
         faith, gross negligence or reckless disregard of the duties involved in
         the conduct of his office;

                  (ii) with respect to any matter as to which he shall have been
         finally  adjudicated  not to have acted in good faith in the reasonable
         belief that his action was in the best interests of the Company; or

                 (iii) in the event of a  settlement  or other  disposition  not
         involving a final  adjudication  (as provided in paragraph  (a) or (b))
         and resulting in a payment by a Covered  Person,  unless there has been
         either a  determination  that such  Covered  Person  did not  engage in
         willful misfeasance,  bad faith, gross negligence or reckless disregard
         of the  duties  involved  in the  conduct of his office by the court or
         other  body  approving  the  settlement  or  other  disposition,  or  a
         reasonable determination,  based on a review of readily available facts
         (as opposed to a full  trial-type  inquiry),  that he did not engage in
         such conduct:

                            (A) by a vote  of a  majority  of the  Disinterested
                  Trustees acting on the matter (provided that a majority of the
                  Disinterested Trustees then in office act on the matter); or

                        (B)     by written opinion of independent legal counsel.

         (c) The  rights  of  indemnification  herein  provided  may be  insured
against by policies  maintained by the Company,  shall be  severable,  shall not
affect any other  rights to which any  Covered  Person may now or  hereafter  be
entitled,  shall  continue  as to a person  who has  ceased to be such a Covered
Person and shall inure to the benefit of the heirs, executors and administrators
of  such  a  person.  Nothing  contained  herein  shall  affect  any  rights  to
indemnification  to which Company  personnel  other than Covered  Persons may be
entitled by contract or otherwise under law.

         (d) Expenses of preparation and presentation of a defense to any claim,
action,  suit or proceeding  subject to a claim for  indemnification  under this
Section 12.4 shall be advanced by the Company prior to final disposition thereof
upon receipt of an  undertaking  by or on behalf of the  recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 12.4, provided that either:

                   (i) such  undertaking  is  secured  by a surety  bond or some
         other  appropriate  security  or the Company  shall be insured  against
         losses arising out of any such advances; or

                  (ii) a majority of the  Disinterested  Trustees  acting on the
         matter (provided that a majority of the Disinterested  Trustees then in
         office act on the  matter) or  independent  legal  counsel in a written
         opinion shall determine,  based upon a review of the readily  available
         facts (as opposed to a full trial-type  inquiry),  that there is reason
         to believe  that the  recipient  ultimately  will be found  entitled to
         indemnification.

                           As  used  in  this  Section  12.4,  a  "Disinterested
                  Trustee"  is one (x) who is not an  Interested  Person  of the
                  Company (including anyone, as such Disinterested  Trustee, who
                  has been exempted from being an Interested Person by any rule,
                  regulation or order of the  Commission),  and (y) against whom
                  none of such actions,  suits or other  proceedings  or another
                  action,  suit or  other  proceeding  on the  same  or  similar
                  grounds is then or has been pending.

                           As used in this  Section  12.4,  the  words  "claim,"
                  "action,"  "suit" or  "proceeding"  shall apply to all claims,
                  actions, suits, proceedings (civil,  criminal,  administrative
                  or other,  including appeals),  actual or threatened;  and the
                  words   "liability"  and  "expenses"   shall  include  without
                  limitation, attorneys' fees, costs, judgments, amounts paid in
                  settlement, fines, penalties and other liabilities.

The trustees  and officers of the  Registrant  are covered by  Investment  Trust
Errors and Omission policies in the aggregate amount of $500,000 (with a maximum
deductible of $50,000) against liability and expenses of claims of wrongful acts
arising out of their  position  with the  Registrant,  except for matters  which
involved willful acts, bad faith, gross negligence and willful disregard of duty
(i.e.,  where the  insured  did not act in good  faith  for a purpose  he or she
reasonably  believed to be in the best interest of Registrant or where he or she
shall have had reasonable cause to believe this conduct was unlawful).

Insofar as indemnification  for liabilities  arising under the Securities Act of
1933 may be permitted to the officers,  trustees or  controlling  persons of the
Registrant pursuant to the Limited Liability Company Agreement of the Registrant
or  otherwise,  the  Registrant  has been  advised  that in the  opinion  of the
Securities and Exchange Commission such indemnification is against public policy
as expressed  in the Act and is,  therefore,  unenforceable.  In the even that a
claim for indemnification is against such liabilities (other than the payment by
the  Registrant  of  expenses  incurred  or paid by an  officer  or  trustee  or
controlling  person of the Registrant in the  successful  defense of any action,
suit or proceeding) is asserted by such officer,  trustee or controlling  person
in connection with the securities being registered,  the Registrant will, unless
in the  opinion  of its  counsel  the matter  has been  settled  by  controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such  indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

Item 26: Business and Other Connections of the Investment Adviser

         First Trust Advisors L.P. ("First Trust") serves as investment  adviser
to the  funds  and also  serves  as  subadvisor  to 23  mutual  funds and is the
portfolio supervisor of certain unit investment trusts. Its principal address is
1001 Warrenville Road, Suite 300, Lisle, Illinois 60532.

         The principal business of certain of First Trust's principal  executive
officers  involves  various  activities  in  connection  with the family of unit
investment  trusts sponsored by Nike Securities L.P. ("Nike  Securities").  Nike
Securities  principal  address  is 1001  Warrenville  Road,  Suite  300,  Lisle,
Illinois 60532.

<TABLE>
<CAPTION>
                                                              Other Business, Profession, Vocation or
Name and Position with First Trust                            Employment During Past Two Years
__________________________________                            _______________________________________
<S>                                                           <C>
Ronald Dean McAlister, Managing Director                      Managing Director, Nike Securities.

James A. Bowen, President                                     President, Nike Securities.

Charles Henry Bradley, Jr., Senior Vice President             Senior Vice President, Nike Securities;

Mark R. Bradley, Chief Financial Officer and                  Chief Financial Officer and Managing Director,
Managing Director                                             Nike Securities.

Robert W. Bredemeier, Managing Director                       Managing Director, Nike Securities.

Susan Marie Brix, Ass't Portfolio Manager                     Representative, Nike Securities.

Robert Franklin Carey, Senior Vice President                  Senior Vice President, Nike Securities.

Jon Carl Erickson, Vice President                             Vice President, Nike Securities.

Frank Leonard Fichera, Managing Director                      Managing Director, Nike Securities.

David Brooks Field, Senior Vice President                     Senior Vice President, Nike Securities; of Counsel,
                                                              Johnson, Westra, Attorneys; Adjunct Professor of
                                                              Finance, Kellstadt Graduate School of Business, DePaul
                                                              University.

Robert Scott Hall and Managing Director                       Managing Director, Nike Securities.

William Scott Jardine, Senior Vice President, General         Senior Vice President, General Counsel, Nike Securities.
Counsel

David Gerard McGarel, Evaluations Supervisor                  Evaluations Supervisor, Nike Securities

Nike Securities Corporation, General Partner                  General Partner, Grace Partners of DuPage L.P.

Richard Allen Olson, Managing Director                        Managing Director, Nike Securities.

John Griffin Phillips, Vice President                         Vice President, Nike Securities.

Robert Steven Swiatek, Vice President                         Vice President of Nike Securities;
</TABLE>

Item 27: Principal Underwriters

(a) Nike Securities L.P. serves as principal underwriter of the interests of the
Fund.  Nike  Securities  serves as principal  underwriter  and  depositor of the
following  investment  companies registered as unit investment trusts: 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, and the First Trust GNMA.

(b)
<TABLE>
<CAPTION>
                                          Positions and Offices
Name and Principal Business Address       with Underwriter                   Positions and Offices with Fund
___________________________________       ___________________________        _______________________________
<S>                                       <C>                                <C>
Nike Securities Corporation               General Partner                    None
1001 Warrenville Road
Lisle, IL 60532

Grace Partners of DuPage L.P.             Limited Partner                    None

James A. Bowen                            President                          President, Chairman of the Board,
1001 Warrenville Road                                                        Chief Financial Officer, Trustee
Lisle, IL 60532

Ronald D. McAlister                       Managing Director                  None
1001 Warrenville Road
Lisle, IL 60532

Scott R. Hall                             Managing Director                  None
1001 Warrenville Road
Lisle, IL 60532

Frank L. Fichera                          Managing Director                  None
1001 Warrenville Road
Lisle, IL 60532

Richard A. Olson                          Managing Director                  None
1001 Warrenville Road
Lisle, IL 60532

Mark R. Bradley                           Chief Financial Officer            Treasurer, Chief Financial
1001 Warrenville Road                     Managing Director                  Officer and Chief Accounting
Lisle, IL 60532                                                              Officer

Robert W. Bredemeier                      Managing Director                  None
1001 Warrenville Road
Lisle, IL 60532

David B. Field                            Senior Vice President              Vice President
1001 Warrenville Road
Lisle, IL 60532

Andrew S. Roggensack                      Managing Director                  None
1001 Warrenville Road
Lisle, IL 60532

William S. Jardine                        General Counsel                    Secretary
1001 Warrenville Road
Lisle, IL 60532

<FN>
(c)      Not Applicable.
</FN>
</TABLE>

Item 28. Location of Accounts and Records

         First Trust Advisors L.P.,  1001  Warrenville  Road,  Suite 300, Lisle,
         Illinois 60532,  maintains the Registrant's  organizational  documents,
         minutes of  meetings,  contracts  of the  Registrant  and all  advisory
         material of the investment adviser.

         PFPC Trust  Company,  8800  Tinicum  Boulevard,  3rd Floor,  Suite 200,
         Philadelphia,  PA 19153,  maintains all general and subsidiary ledgers,
         journals, trial balances,  records of all portfolio purchase and sales,
         and all  other  requirement  records  not  maintained  by  First  Trust
         Advisors L.P.

         The ICA Fund  Services  Corp.,  4455 E.  Camelback  Road,  Suite 261 E,
         Phoenix,  AZ 85018,  maintains all the required records in its capacity
         as transfer,  accounting,  dividend payment and interest holder service
         agent for the Registrant.

Item 29. Management Services

         Not Applicable

Item 30. Undertakings

         Not Applicable



                                   SIGNATURES

Pursuant to the  requirements  of the Securities Act and the Investment  Company
Act,  the  Registrant  certifies  that  it  meets  all of the  requirements  for
effectiveness  of this  registration  statement  under  Rule  485(b)  under  the
Securities Act and has duly caused this  Registration  Statement to be signed on
its behalf by the  undersigned,  duly  authorized,  in the City of Lisle and the
State of Illinois on the 28th day of December, 2000.

                                      FT DEFINED PORTFOLIOS LLC

                                      By:  /s/ James A. Bowen
                                         _______________________________
                                            James A. Bowen
                                            President


Pursuant to the requirements of the Securities Act of 1933, this  Post-Effective
Amendment  No. 1 to the  Registration  Statement  has been  signed  below by the
following person in the capacity and on the date indicated.

Signature                        Title                           Date

/s/ Mark R. Bradley      Treasurer, Controller and Chief       December 28, 2000
____________________     Financial and Accounting Officer
  Mark R. Bradley

/s/ James A. Bowen       President and Trustee                 December 28, 2000
____________________
  James A. Bowen

Robert J. Bartel                   Trustee      )
                                                )
Richard E. Erickson                Trustee      )
                                                )    By:  /s/   James A. Bowen
Patrick M. Fitzgerald              Trustee      )         _____________________
                                                )         James A. Bowen
                                                )         Attorney-in-Fact
                                                )
Niel B. Nielson                    Trustee      )         December 28, 2000


An original power of attorney authorizing, among others, James A. Bowen
and W. Scott  Jardine to execute this  Registration  Statement,  and  Amendments
thereto,  for  each of the  trustees  of the  Registrant  on whose  behalf  this
Registration  Statement is filed, has been executed and is being filed with this
Registration Statement.


                                  Exhibit Index


<TABLE>
<CAPTION>
Exhibit
Number   Description
_______  ___________
<S>      <C>
(a)(3)   Amended and Restated Limited Liability Company Agreement of the Registrant.

(b)      Operating By-Laws of the Registrant (see Exhibit (a)(3)).

(c)      Establishment and Designation of Series of Membership Interests.

(d)      Form of Investment Advisory and Management Agreement between Registrant and First Trust Advisors L.P.

(e)      Form of Distribution Agreement between Registrant and Nike Securities L.P.

(g)      Form of Custodian Agreement between the Registrant and PFPC Trust Company.

(h)(1)   Form of Administration Agreement between Registrant and Investment Company Administration.

(h)(2)   Form of Transfer Agency and Service Agreement.

(i)(1)   Opinion and Consent of Chapman and Cutler.

(i)(2)   Opinion and Consent of Potter Anderson & Corroon LLP.

(m)      12b-1 Service Plan.

(p)      Code of Ethics of the Registrant, First Trust Advisors L.P. and Nike Securities L.P.

(z)      Original Powers of Attorney for Messrs.  Bartel,  Bowen,  Erickson, Fitzgerald and Nielson,  authorizing,
         among others, James A. Bowen and W. Scott Jardine to execute the Registration Statement.
</TABLE>



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