Registration No. 333-52466
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to Form S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
FT 495
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
E. Title of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as
amended
F. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
|XXX|Check box if it is proposed that this filing will become
effective on December 26, 2000 at 2:00 p.m. pursuant to Rule 487.
________________________________
Income & Treasury Portfolio Series
FT 495
FT 495 is a series of a unit investment trust, the FT Series. FT 495
consists of a single portfolio known as Income & Treasury Portfolio
Series (the "Trust"). The Trust invests in a portfolio of common stocks
issued by closed-end investment companies ("Closed-End Funds"), the
portfolios of which are concentrated in high-yield corporate bonds, and
zero coupon U.S. Treasury bonds ("Treasury Obligations"). Collectively,
the Closed-End Funds and Treasury Obligations are referred to as the
"Securities." The objective of the Trust is to provide investors with
high current income and protection of a portion of their principal
investment for investors who hold their investment until termination of
the Trust.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
GIBRALTAR SECURITIES
A DIVISION OF TUCKER ANTHONY
1-800-322-3240
The date of this prospectus is December 26, 2000
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statement of Net Assets 6
Schedule of Investments 7
The FT Series 9
Portfolio 9
Risk Factors 10
Public Offering 12
Distribution of Units 14
The Sponsor's Profits 15
The Secondary Market 15
How We Purchase Units 16
Expenses and Charges 16
Tax Status 17
Retirement Plans 19
Rights of Unit Holders 19
Income and Capital Distributions 20
Redeeming Your Units 20
Removing Securities from the Trust 22
Amending or Terminating the Indenture 22
Information on Gibraltar Securities, the Sponsor,
Trustee and Evaluator 23
Other Information 24
Page 2
Summary of Essential Information
Income & Treasury Portfolio Series
FT 495
At the Opening of Business on the Initial Date of Deposit
of the Securities-December 26, 2000
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
<S> <C>
Initial Number of Units 15,000
Fractional Undivided Interest in the Trust per Unit 1/15,000
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (1) $ 9.902
Maximum Transactional Sales Charge of 4.4% of the Public Offering Price per Unit
(4.444% of the net amount invested, exclusive of the deferred sales charge) (2) $ .440
Less Deferred Sales Charge per Unit $ (.340)
Public Offering Price per Unit (3) $ 10.002
Sponsor's Initial Repurchase Price per Unit (4) $ 9.562
Redemption Price per Unit (based on the bid side evaluation of the Treasury Obligations and
the aggregate underlying value of the Closed-End Funds, less the deferred sales charge) (4) $ 9.553
Estimated Net Annual Distribution per Unit for the first year (5) $ .9499
Cash CUSIP Number 30266A 228
Fee Accounts Cash CUSIP Number 30266A 236
Security Code 60124
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date December 29, 2000
Mandatory Termination Date (6) November 16, 2011
Income Distribution Record Date Fifteenth day of each month, commencing February 15, 2001.
Income Distribution Date (5) Last day of each month, commencing February 28, 2001.
______________
<FN>
(1) Each Closed-End Fund share is valued at its last closing sale price.
If a Closed-End Fund is not listed, or if no closing sale price exists,
it is valued at its closing ask price. Each Treasury Obligation is
valued at its last offering price. Evaluations for purposes of
determining the purchase, sale or redemption price of Units are made as
of the close of trading on the New York Stock Exchange ("NYSE")
(generally 4:00 p.m. Eastern time) on each day on which it is open (the
"Evaluation Time").
(2) The maximum transactional sales charge consists of an initial sales
charge and a deferred sales charge, and does not include the creation
and development fee. See "Fee Table" and "Public Offering."
(3) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit. No
investor will purchase Units at this price. The price you pay for your
Units will be based on their valuation at the Evaluation Time on the
date you purchase your Units. On the Initial Date of Deposit, the Public
Offering Price per Unit will not include any accumulated cash in the
Income Account. After this date, a pro rata share of any cash in the
Income Account will be included.
(4) Until the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period the Sponsor's Initial Repurchase
Price per Unit and the Redemption Price per Unit will include the
estimated organization costs per Unit set forth under "Fee Table." After
such date, the Sponsor's Repurchase Price and Redemption Price per Unit
will not include such estimated organization costs. See "Redeeming Your
Units."
(5) The estimated net annual distribution for subsequent years, $.9218
per Unit, is expected to be less than that set forth above for the first
year because a portion of the Securities included in the Trust will be
sold during the first year to pay for organization costs and the
deferred sales charge. The actual net annual distribution you will
receive will vary from that set forth above with changes in the Trust's
fees and expenses, in dividends received and with the sale of
Securities. See "Fee Table" and "Expenses and Charges."Distributions
from the Capital Account will be made monthly on the last day of each
month to Unit holders of record on the fifteenth day of such month if
the amount available for distribution equals at least $1.00 per 100
Units. In any case, we will distribute any funds in the Capital Account
in December of each year.
(6) See "Amending or Terminating the Indenture."
</FN>
</TABLE>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of the Trust. See "Public
Offering" and "Expenses and Charges." Although the Trust has a term of
approximately 11 years and is a unit investment trust rather than a
mutual fund, this information allows you to compare fees.
<TABLE>
<CAPTION>
Amount
per Unit
_____
<S> <C> <C>
Unit Holder Sales Fees (as a percentage of public offering price)
Maximum Sales Charge
Initial sales charge 1.00%(a) $.100
Deferred sales charge 3.40%(b) $.340
Creation and development fee cap over the life of the Trust 0.55%(c) $.055
_______ _______
(the annual creation and development fee is .35% of average daily net
assets and is only charged while a Unit holder remains invested)
Maximum Sales Charges (including creation and development
fee cap over the life of the Trust) (c) 4.95% $.495
======= =======
Organization Costs (as a percentage of public offering price)
Estimated organization costs .260%(d) $.0260
======= =======
Estimated Annual Trust Operating Expenses(e)
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative and evaluation fees .100% $.0098
Trustee's fee and other operating expenses .155%(f) $.0152
Underlying Closed-End Fund expenses 1.140%(g) $.1116
_______ _______
Total 1.395% $.1366
======= =======
Example
This example is intended to help you compare the cost of investing in
the Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trust for the periods
shown and then sell your Units at the end of those periods. The example
also assumes a 5% return on your investment each year and that the
Trust's operating expenses stay the same. Although your actual costs may
vary, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
______ _______ _______ _______
$641 $940 $1,240 $2,090
The example will not differ if you hold rather than sell your Units at
the end of each period.
_____________
<FN>
(a) The combination of the initial and deferred sales charge comprises
what we refer to as the "transactional sales charge." The initial sales
charge is actually equal to the difference between the maximum
transactional sales charge of 4.4% and any remaining deferred sales
charge.
(b) The deferred sales charge is a fixed dollar amount equal to $.340 per
Unit which, as a percentage of the Public Offering Price, will vary
over time. The deferred sales charge will be deducted in ten monthly
installments commencing February 20, 2001.
(c) The creation and development fee compensates the Sponsor for creating
and developing the Trust. For as long as you own Units, this fee will be
accrued daily based on the Trust's net asset value at the annual rate of
.35%. You will only be charged the creation and development fee while
you own Units. The Trust pays the amount of any accrued creation and
development fee to the Sponsor monthly from the Trust's assets. Because
the creation and development fee is accrued daily on the basis of the
Trust's current net asset value, if the value of your Units increases,
the annual creation and development fee as a percentage of your initial
investment will be greater than .35%. However, in no event will we
collect over the life of the Trust more than .55% of your initial
investment.
(d) Estimated organization costs will be deducted from the assets of the
Trust at the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period.
(e) With the exception of the underlying Closed-End Fund expenses, each
of the fees listed herein is assessed on a fixed dollar amount per Unit
basis which, as a percentage of average net assets, will vary over time.
(f) Other operating expenses, however, do not include brokerage costs and
other portfolio transaction fees. In certain circumstances the Trust may
incur additional expenses not set forth above. See "Expenses and Charges."
(g) Although not an actual Trust operating expense, the Trust, and
therefore Unit holders, will indirectly bear similar operating expenses
of the Closed-End Funds in which the Trust invests in the estimated
amount set forth in the table. These expenses are estimated based on the
actual Closed-End Fund expenses charged in a fund's most recent fiscal
year, but are subject to change in the future. An investor in the Trust
will therefore indirectly pay higher expenses than if the underlying
Closed-End Fund shares were held directly.
</FN>
</TABLE>
Page 4
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
FT 495
We have audited the accompanying statement of net assets, including the
schedule of investments, of FT 495, comprised of the Income & Treasury
Portfolio Series, as of the opening of business on December 26, 2000.
This statement of net assets is the responsibility of the Trust's
Sponsor. Our responsibility is to express an opinion on this statement
of net assets based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
statement of net assets is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of net assets. Our procedures included
confirmation of the letter of credit held by the Trustee and deposited
in the Trust on December 26, 2000. An audit also includes assessing the
accounting principles used and significant estimates made by the
Sponsor, as well as evaluating the overall presentation of the statement
of net assets. We believe that our audit of the statement of net assets
provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of FT 495,
comprised of the Income & Treasury Portfolio Series, at the opening of
business on December 26, 2000 in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
December 26, 2000
Page 5
Statement of Net Assets
Income & Treasury Portfolio Series
FT 495
At the Opening of Business on the
Initial Date of Deposit-December 26, 2000
<TABLE>
<CAPTION>
<S> <C>
NET ASSETS
Investment in Securities represented by purchase contracts (1) (2) $148,525
Less liability for reimbursement to Sponsor for organization costs (3) (390)
Less liability for deferred sales charge (4) (5,100)
________
Net assets $143,035
========
Units outstanding 15,000
ANALYSIS OF NET ASSETS
Cost to investors (5) $150,026
Less maximum transactional sales charge (5) (6,601)
Less estimated reimbursement to Sponsor for organization costs (3) (390)
________
Net assets $143,035
========
_____________
<FN>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by The Chase Manhattan Bank,
of which $200,000 will be allocated to the Trust, has been deposited
with the Trustee as collateral, covering the monies necessary for the
purchase of the Securities according to their purchase contracts.
(3) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trust. These costs have been estimated at $.0260 per
Unit for the Trust. A payment will be made as of the earlier of six
months after the Initial Date of Deposit or the end of the initial
offering period to an account maintained by the Trustee from which the
obligation of the investors to the Sponsor will be satisfied. To the
extent that actual organization costs are greater than the estimated
amount, only the estimated organization costs added to the Public
Offering Price will be reimbursed to the Sponsor and deducted from the
assets of the Trust.
(4) Represents the amount of mandatory deferred sales charge
distributions of $.340 per Unit, payable to us in ten equal monthly
installments beginning on February 20, 2001 and on the twentieth day of
each month thereafter (or if such day is not a business day, on the
preceding business day) through November 20, 2001. If you redeem Units
before November 20, 2001 you will have to pay the remaining amount of
the deferred sales charge applicable to such Units when you redeem them.
(5) The aggregate cost to investors in the Trust includes a maximum
transactional sales charge (comprised of an initial and a deferred sales
charge) computed at the rate of 4.4% of the Public Offering Price per
Unit (equivalent to 4.444% of the net amount invested, exclusive of the
deferred sales charge), assuming no reduction of the transactional sales
charge as set forth under "Public Offering."
</FN>
</TABLE>
Page 6
Schedule of Investments
Income & Treasury Portfolio Series
FT 495
At the Opening of Business on the Initial Date of Deposit-December 26, 2000
<TABLE>
<CAPTION>
Percentage Market Value Cost of
Maturity of Aggregate per Share of Securities to
Value Name of Issuer and Title of Treasury Obligation (1) Offering Price Equity Securities the Trust (2)
________ ___________________________________________________ ________ _________________ ____________
<C> <S> <C> <C> <C>
$75,000 Zero coupon U.S. Treasury bonds
maturing November 15, 2011 28.69% N.A. $ 42,617
Number Ticker Symbol and
of Shares Name of Issuer of Closed-End Funds (1)
________ ________________________________
835 AWF Alliance World Dollar Government Fund II 4.85% $ 8.625 7,202
129 CIM CIM High Yield Securities 0.39% 4.438 572
177 CNN CNA Income Shares 0.86% 7.250 1,283
810 HIS Cigna High Income Share 2.35% 4.313 3,494
301 CIF Colonial Intermediate High Income Fund 0.96% 4.750 1,430
457 COY Corporate High Yield Fund 2.71% 8.813 4,027
123 KYT Corporate High Yield Fund II 0.72% 8.750 1,076
429 CYE Corporate High Yield Fund III 2.51% 8.688 3,727
765 CIK Credit Suisse Income Fund 2.87% 5.563 4,256
176 CGF Credit Suisse Strategic Global Income Fund 0.78% 6.563 1,155
136 DHY DLJ High Yield Bond Fund 0.49% 5.313 723
1,652 DSU Debt Strategies Fund II, Inc. 7.30% 6.563 10,842
562 DHF Dreyfus High Yield Strategies Fund 2.55% 6.750 3,793
340 EDF Emerging Markets Income Fund II 2.39% 10.438 3,549
238 GDF Global Partners Income Fund 1.63% 10.188 2,425
818 HIO High Income Opportunity Fund 4.47% 8.125 6,646
220 HYI High Yield Income Fund, Inc. 0.74% 5.000 1,100
182 HYP The High Yield Plus Fund, Inc. 0.66% 5.350 974
742 MHY Managed High Income Portfolio, Inc. 3.97% 7.938 5,890
389 HYF Managed High Yield Plus Fund, Inc. 1.75% 6.688 2,602
103 MSY Morgan Stanley Dean Witter High Yield Fund 0.67% 9.688 998
2,476 HYB The New America High Income Fund 4.58% 2.750 6,809
235 PHF Pacholder High Yield Fund 1.66% 10.500 2,467
611 PHY Prospect Street High Income Portfolio Fund 1.83% 4.438 2,712
110 PTM Putnam Managed High Yield Fund 0.73% 9.813 1,079
707 HIX Salomon Brothers High Income Fund II 5.30% 11.125 7,865
927 ARK Senior High Income Portfolio 3.71% 5.938 5,505
704 TEI Templeton Emerging Markets Income Fund 4.71% 9.938 6,996
421 VIT Van Kampen High Income Trust 1.20% 4.250 1,789
196 VLT Van Kampen High Income Trust II 0.74% 5.620 1,102
455 ZIF Zenix Income Fund 1.23% 4.000 1,820
_______ _______
Total Closed-End Funds 71.31% 105,908
_______ _______
Total Investments 100% $148,525
====== ========
______________
<FN>
See "Notes to Schedule of Investments" on page 8.
Page 7
NOTES TO SCHEDULE OF INVESTMENTS
(1) The Treasury Obligations were purchased at a discount from their par
value because there is no stated interest income thereon (such
securities are often referred to as zero coupon U.S. Treasury bonds).
Over the life of the Treasury Obligations the value increases, so that
upon maturity the holders will receive 100% of the principal amount
thereof. All Securities are represented by regular way contracts to
purchase such Securities which are backed by an irrevocable letter of
credit deposited with the Trustee. We entered into purchase contracts
for the Securities on December 26, 2000.
(2) The cost of the Securities to the Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by either the last sale prices of the listed Closed-End Funds
or the ask prices of the over-the-counter Closed-End Funds and the
offering side price of the Treasury Obligations at the Evaluation Time
on the business day preceding the Initial Date of Deposit). The offering
side price of the Treasury Obligations is greater than the bid side
price of the Treasury Obligations which is the basis on which the
Redemption Price per Unit will be determined. The value of the
Securities based on the bid side price of the Treasury Obligations and
the aggregate underlying value of the Closed-End Funds is $148,389. The
valuation of the Securities has been determined by the Evaluator, an
affiliate of ours. The cost of the Securities to us and our loss
(which is the difference between the cost of the Securities to us
and the cost of the Securities to the Trust) are $149,038 and $513,
respectively.
</FN>
</TABLE>
Page 8
The FT Series
The FT Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created hundreds of
similar yet separate series of a unit investment trust which we have
named the FT Series. The series to which this prospectus relates, FT
495, consists of a single portfolio known as Income & Treasury Portfolio
Series.
The Trust was created under the laws of the State of New York by a Trust
Agreement (the "Indenture") dated the Initial Date of Deposit. This
agreement, entered into among Nike Securities L.P., as Sponsor, The
Chase Manhattan Bank as Trustee and First Trust Advisors L.P. as
Portfolio Supervisor and Evaluator, governs the operation of the Trust.
YOU MAY GET MORE SPECIFIC DETAILS CONCERNING THE NATURE, STRUCTURE AND
RISKS OF THIS PRODUCT IN AN "INFORMATION SUPPLEMENT" BY CALLING THE
TRUSTEE AT 1-800-682-7520.
How We Created the Trust.
On the Initial Date of Deposit, we deposited a portfolio of zero coupon
U.S. Treasury bonds and common stocks of Closed-End Funds with the
Trustee, and in turn, the Trustee delivered documents to us representing
our ownership of the Trust in the form of units ("Units").
After the Initial Date of Deposit, we may deposit additional Securities
in the Trust, or cash (including a letter of credit) with instructions
to buy more Securities, to create new Units for sale. If we create
additional Units, we will attempt, to the extent practicable, to
maintain the percentage relationship established among the Securities on
the Initial Date of Deposit (as set forth in "Schedule of Investments"),
and not the actual percentage relationship existing on the day we are
creating new Units, since the two may differ. This difference may be due
to the sale, redemption or liquidation of any of the Securities.
Since the prices of the Securities will fluctuate daily, the ratio of
Securities in the Trust, on a market value basis, will also change
daily. The portion of Securities represented by each Unit will not
change as a result of the deposit of additional Securities or cash in
the Trust. If we deposit cash, you and new investors may experience a
dilution of your investment. This is because prices of Securities will
fluctuate between the time of the cash deposit and the purchase of the
Securities, and because the Trust pays the associated brokerage fees. To
reduce this dilution, the Trust will try to buy the Securities as close
to the Evaluation Time and as close to the evaluation price as possible.
In addition, because the Trust pays the brokerage fees associated with
the creation of new Units and with the sale of Securities to meet
redemption and exchange requests, frequent redemption and exchange
activity will likely result in higher brokerage expenses.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may retain and pay us (or our affiliate) to act as agent for the
Trust to buy Securities. If we or an affiliate of ours act as agent to
the Trust, we will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
We cannot guarantee that the Trust will keep its present size and
composition for any length of time. Securities may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. However, Securities will not be sold to take
advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation, or if they no longer meet the criteria by
which they were selected. You will not be able to dispose of or vote any
of the Securities in the Trust. As the holder of the Securities, the
Trustee will vote all of the Equity Securities and will do so based on
our instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in the Trust fails, unless we can
purchase substitute Securities ("Replacement Securities") we will refund
to you that portion of the purchase price and transactional sales charge
resulting from the failed contract on the next Income Distribution Date.
Any Replacement Security the Trust acquires will be identical to those
from the failed contract.
Portfolio
Objectives.
The Trust's objective is to provide investors with high current income
and protection of a portion of your principal investment for investors
Page 9
who hold their investment until termination of the Trust. To achieve
this, the Trust invests approximately 28.69% of the Trust's portfolio in
zero coupon U.S. Treasury Obligations and approximately 71.31% of the
Trust's portfolio in shares of Closed-End Funds.
The Treasury Obligations have been purchased at a discount from their
face amount and while their market value will fluctuate during the life
of the Trust, they are designed to return $5 per Unit at the Mandatory
Termination Date to investors who hold their Units until the termination
of the Trust. The Treasury Obligations are backed by the full faith and
credit of the U.S. Government and will mature on November 15, 2011. The
Trust only has a right to receive a fixed payment at the maturity of the
Treasury Obligations.
The Closed-End Funds are concentrated in high-yield corporate bonds. In
selecting Closed-End Funds for the Trust, we selected those Closed-End
Funds which satisfied most, but not necessarily all, of the following
factors:
1. Consistent dividend distributions;
2. Manager's average tenure of more than three years; and
3. Average Morningstar rating of 2 stars or better.
Halfway through the decade of the eighties, the yield on bank
certificates of deposit dropped below 10%. Today, interest rates are at
such historically low levels that yields on a number of new high yield
corporate debt issues are below 10%. One thing that has not changed over
the past 15 years is the need for some investors to earn high current
income. Investors willing to assume certain credit and market risks have
the potential to earn a high level of current monthly income by
investing in high-yield corporate bonds. The following factors support
our positive outlook for high-yield corporate bonds:
- As a result of lower interest rates, the cost of capital is
significantly lower today than it was in the 1980s.
- The yield spread between high-yield bonds and other investment grade
bonds, such as treasuries, continues to reflect value in the high-yield
market.
- The combination of economic prosperity and low inflation makes the
inflation adjusted return on high-yield bonds attractive.
- Although subject to greater risks, high-yield bond investors have
historically received greater returns from their high-yield investments
than investment grade corporate bond investors.
Benefits of the Closed-End Funds include:
- Portfolio Control. Since closed-end funds maintain a relatively fixed
pool of investment capital, portfolio managers are better able to adhere
to their investment philosophies through greater flexibility and
control. In addition, closed-end funds don't have to manage fund
liquidity to meet potentially large redemptions.
- Greater Diversification. The Trust offers investors diversification by
investing in a broad range of high yield closed-end funds that are
further diversified across many industries and hundreds of companies.
The average quality rating of the bonds in the Closed-End Funds is
"B+/B."
- Consistent Income. Closed-end funds are structured to generally
provide a more stable income stream than other managed fixed-income
investment products because they are not subjected to cash inflows and
outflows, which can dilute dividends over time. However, as a result of
bond calls, redemptions and advanced refundings, which can dilute a
fund's income, a stable income cannot be assured.
You should be aware that, as with any similar investment, there can be
no guarantee that the objective of the Trust will be achieved. See "Risk
Factors" for a discussion of the risks of investing in the Trust.
Risk Factors
Price Volatility. The Trust invests in Treasury Obligations and common
stock of Closed-End Funds. The value of the Trust's Units will fluctuate
with changes in the value of these Treasury Obligations and Closed-End
Funds. Common stock prices fluctuate for several reasons including
changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, or when
political or economic events affecting the issuers occur. In addition,
common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase.
The value of the Treasury Obligations will be adversely affected by
decreases in bond prices and increases in interest rates. Zero coupon
Page 10
bonds do not provide for the payment of any current interest. The buyer
receives only the right to receive a final payment of the face amount of
the bond at its maturity. Zero coupon bonds are subject to substantially
greater price fluctuations during periods of changing market interest
rates than are bonds of comparable quality that pay interest currently.
Because the Trust is not managed, the Trustee will not sell Securities
in response to or in anticipation of market fluctuations, as is common
in managed investments. As with any investment, we cannot guarantee that
the performance of the Trust will be positive over any period of time or
that you won't lose money. Units of the Trust are not deposits of any
bank and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Closed-End Funds. Closed-End Funds are actively managed investment
companies which invest in various types of securities. Closed-End Funds
issue shares of common stock that are traded on a securities exchange.
Closed-End Funds are subject to various risks, including management's
ability to meet the Closed-End Fund's investment objective, and to
manage the Closed-End Fund portfolio when the underlying securities are
redeemed or sold, during periods of market turmoil and as investors'
perceptions regarding Closed-End Funds or their underlying investments
change.
Shares of Closed-End Funds frequently trade at a discount from their net
asset value in the secondary market. This risk is separate and distinct
from the risk that the net asset value of Closed-End Fund shares may
decrease. The amount of such discount from net asset value is subject to
change from time to time in response to various factors.
High-Yield Corporate Bonds. Each of the Closed-End Funds held by
the Trust invests in high-yield corporate bonds. High-yield, high risk
corporate bonds are subject to greater market fluctuations and risk of
loss than corporate bonds with higher investment ratings. The value of
these bonds will decline significantly with increases in interest rates,
not only because increases in rates generally decrease values, but also
because increased rates may indicate an economic slowdown. An economic
slowdown, or a reduction in an issuer's creditworthiness, may result in
the issuer being unable to maintain earnings at a level sufficient to
maintain interest and principal payments.
High-yield or "junk" bonds, the generic names for corporate bonds rated
below "Triple B" by Standard & Poor's or Moody's, are frequently issued
by corporations in the growth stage of their development or by
established companies who are highly leveraged or whose operations or
industries are depressed. Obligations rated below "Triple B" should be
considered speculative as these ratings indicate a quality of less than
investment grade. Because high-yield bonds are generally subordinated
obligations and are perceived by investors to be riskier than higher
rated bonds, their prices tend to fluctuate more than higher rated bonds
and are affected by short-term credit developments to a greater degree.
The market for high-yield bonds is smaller and less liquid than that for
investment grade bonds. High-yield bonds are generally not listed on a
national securities exchange but trade in the over-the-counter markets.
Due to the smaller, less liquid market for high-yield bonds, the bid-
offer spread on such bonds is generally greater than it is for
investment grade bonds and the purchase or sale of such bonds may take
longer to complete.
Distributions. As stated under "Summary of Essential Information," the
Trust will make monthly distributions of income. The Treasury
Obligations are zero coupon bonds, which means that they pay no interest
until their maturity. The Closed-End Funds make distributions monthly;
however, as a result of changing interest rates and other factors, there
is no guarantee that distributions will either remain at current levels
or increase over time.
Because the Treasury Obligations pay no interest until their maturity,
distributions from the Closed-End Funds will be used to pay Trust
expenses or meet redemption requests. If these distributions are
insufficient, shares of the Closed-End Funds may have to be sold to pay
Trust expenses or meet redemption requests. As the Treasury Obligations
ensure that the Trust will be able to provide $5.00 per Unit at the
Trust's termination, they will not be sold to pay expenses of the Trust
or to meet redemption requests unless their sale will not reduce the per
Unit termination value below $5.00. The sale of a portion of the Closed-
End Funds shares in these situations will reduce the amount of income
the Trust will receive in the future. In addition, although the Treasury
Obligations pay no interest until they mature, they are deemed for
Page 11
federal income tax purposes to have been issued with original issue
discount which accrues on a daily basis over their life. Each year you
must include as part of your taxable income the amount of any accreted
original issue discount on the Treasury Obligations. Therefore, you will
be taxed on the Treasury Obligations even prior to receiving any cash
distributions. See "Tax Status" for further information.
Foreign Securities. Certain or all of the underlying bonds held by
certain of the Closed-End Funds in the Trust are issued by foreign
companies, which makes the Trust subject to more risks than if it only
invested in Closed-End Funds which invest solely in domestic bonds.
Risks of foreign bonds include losses due to future political and
economic developments, foreign currency devaluations, restrictions on
foreign investments and exchange of securities, inadequate financial
information and lack of liquidity of certain foreign markets. In
addition, brokerage and other transaction costs on foreign securities
exchanges are often higher than in the United States and there is
generally less government supervision and regulation of exchanges,
brokers and issuers in foreign countries.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed which may have a negative impact on the prices
of Treasury Obligations or certain of the corporate bonds owned by the
Closed-End Funds represented in the Trust. In addition, litigation
regarding any of the issuers of the corporate bonds owned by such Closed-
End Funds, or of the industries represented by such issuers, may
negatively impact the share prices of these Securities. We cannot
predict what impact any pending or proposed legislation or pending or
threatened litigation will have on the share prices of the Securities or
of the issuers of the underlying bonds in which they invest.
Termination Value. The Trust has been designed to return to investors at
least $5.00 per Unit only at its termination. If you redeem or sell your
Units prior to termination of the Trust, the amount you will receive
will be affected by the values at that time of the Treasury Obligations
and of the Closed-End Funds, and you may receive less than $5.00 per Unit.
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the per Unit price of
which is comprised of the following:
- The aggregate offering side evaluation of the Treasury Obligations;
- The aggregate underlying value of the Closed-End Funds;
- The amount of any cash in the Income and Capital Accounts;
- Dividends receivable on the Closed-End Funds; and
- The maximum transactional sales charge (which combines an initial up-
front sales charge and a deferred sales charge).
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the prices of the Securities and changes in
the value of the Income and/or Capital Accounts.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Organization Costs. Closed-End Fund shares purchased with the portion of
the Public Offering Price intended to be used to reimburse the Sponsor
for the Trust's organization costs (including costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission ("SEC")
and states, the initial audit of the Trust portfolio, legal fees and the
initial fees and expenses of the Trustee) will be purchased in the same
proportionate relationship as all the Closed-End Fund shares contained
in the Trust. Closed-End Fund shares will be sold to reimburse the
Sponsor for the Trust's organization costs at the earlier of six months
after the Initial Date of Deposit or the end of the initial offering
period (a significantly shorter time period than the life of the Trust).
During the period ending with the earlier of six months after the
Initial Date of Deposit or the end of the initial offering period, there
may be a decrease in the value of the Closed-End Fund shares. To the
extent the proceeds from the sale of these Closed-End Fund shares are
Page 12
insufficient to repay the Sponsor for the Trust organization costs, the
Trustee will sell additional Closed-End Fund shares to allow the Trust
to fully reimburse the Sponsor. In that event, the net asset value per
Unit will be reduced by the amount of additional Closed-End Fund shares
sold. Although the dollar amount of the reimbursement due to the Sponsor
will remain fixed and will never exceed the per Unit amount set forth
for the Trust in "Statement of Net Assets," this will result in a
greater effective cost per Unit to Unit holders for the reimbursement to
the Sponsor. To the extent actual organization costs are less than the
estimated amount, only the actual organization costs will be deducted
from the assets of the Trust. When Closed-End Fund shares are sold to
reimburse the Sponsor for organization costs, the Trustee will sell such
Closed-End Fund shares, to the extent practicable, which will maintain
the same proportionate relationship among the Closed-End Fund shares
contained in the Trust as existed prior to such sale.
Minimum Purchase.
The minimum amount you can purchase of the Trust is $1,000 worth of
Units ($500 if you are purchasing Units for your Individual Retirement
Account or any other qualified retirement plan).
Transactional Sales Charge.
The transactional sales charge you will pay has both an initial and a
deferred component. The initial sales charge, which you will pay at the
time of purchase, is equal to the difference between the maximum
transactional sales charge (4.4% of the Public Offering Price) and the
maximum remaining deferred sales charge (initially equal to $.340 per
Unit). This initial sales charge is initially equal to approximately
1.00% of the Public Offering Price of a Unit, but will vary from 1.00%
depending on the purchase price of your Units and as deferred sales
charge payments are made. When the Public Offering Price exceeds $10.00
per Unit, the initial sales charge will exceed 1.00% of the Public
Offering Price.
Monthly Deferred Sales Charge. In addition, ten monthly deferred sales
charge payments of $.034 per Unit will be deducted from the Trust's
assets on approximately the twentieth day of each month from February
20, 2001 through November 20, 2001. If you buy Units at a price of less
than $10.00 per Unit, the dollar amount of the deferred sales charge
will not change, but the deferred sales charge on a percentage basis
will be more than 3.40% of the Public Offering Price.
If you purchase Units after the last deferred sales charge payment has
been assessed, your transactional sales charge will consist of a one-
time initial sales charge of 4.4% of the Public Offering Price per Unit
(equivalent to 4.603% of the net amount invested). The transactional
sales charge will be reduced by 1/2 of 1% on each subsequent December
31, commencing December 31, 2001, to a minimum transactional sales
charge of 3.00%.
Discounts for Certain Persons.
If you invest at least $50,000 (except if you are purchasing for "Fee
Accounts" as described below), the maximum transactional sales charge is
reduced as described below.
Your maximum
If you invest transactional sales
(in thousands):* charge will be:
_________________ ________________
$50 but less than $100 4.15%
$100 but less than $250 3.90%
$250 but less than $500 3.40%
$500 but less than $1,000 2.40%
$1,000 or more 1.50%
* Breakpoint transactional sales charges are also applied on a Unit
basis utilizing a breakpoint equivalent in the above table of $10 per
Unit and will be applied on whichever basis is more favorable to the
investor. The breakpoints will be adjusted to take into consideration
purchase orders stated in dollars which cannot be completely fulfilled
due to the requirement that only whole Units be issued.
The reduced transactional sales charge for quantity purchases will apply
only to purchases made by the same person on any one day from any one
dealer. To help you reach the above levels, you can combine the Units
you purchase of the Trust with any other same day purchases of other
trusts for which we are Principal Underwriter and are currently in the
initial offering period. In addition, we will also consider Units you
purchase in the name of your spouse or child under 21 years of age to be
purchases by you. The reduced transactional sales charges will also
apply to a trustee or other fiduciary purchasing Units for a single
trust estate or single fiduciary account. You must inform your dealer of
any combined purchases before the sale in order to be eligible for the
reduced transactional sales charge. Broker/dealers will receive a
concession of 1.00% of the Public Offering Price on Units sold subject
to the transactional sales charge reduction for purchases of $1 million
or more. Any reduced transactional sales charge is the responsibility of
the party making the sale.
You may use redemption or termination proceeds from any unit investment
trust we sponsor to purchase Units of the Trust during the initial
Page 13
offering period at the Public Offering Price less 1.00%. Please note
that any deferred sales charge remaining on units you redeem to buy
Units of the Trust will be deducted from those redemption proceeds.
Investors purchasing Units through registered broker/dealers who charge
periodic fees in lieu of commissions or who charge for financial
planning, investment advisory or asset management services or provide
these or comparable services as part of an investment account where a
comprehensive "wrap fee" or similar charge is imposed ("Fee Accounts")
will not be assessed the transactional sales charge described in this
section on the purchase of Units. We reserve the right to limit or deny
purchases of Units not subject to the transactional sales charge by
investors whose frequent trading activity we determine to be detrimental
to the Trust.
Employees, officers and directors (and immediate family members) of the
Sponsor, our related companies, dealers and their affiliates, and
vendors providing services to us may purchase Units at the Public
Offering Price less the applicable dealer concession. Immediate family
members include spouses, children, grandchildren, parents, grandparents,
siblings, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law,
brothers-in-law and sisters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons.
You will be charged the deferred sales charge per Unit regardless of any
discounts. However, if you are eligible to receive a discount such that
the maximum transactional sales charge you must pay is less than the
applicable maximum deferred sales charge, including Fee Accounts Units,
you will be credited the difference between your maximum transactional
sales charge and the maximum deferred sales charge at the time you buy
your Units. The dollar value of these additional credited Units (as with
all Units) will fluctuate over time, and may be less on the dates
deferred sales charges are collected than their value at the time they
were issued.
As Sponsor, we will also receive a creation and development fee. See
"Expenses and Charges" for a description of the services provided for
this fee.
The Value of the Securities.
The Evaluator will appraise the aggregate underlying value of the
Securities in the Trust as of the Evaluation Time on each business day
and will adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and certain national holidays
on which the NYSE is closed.
The aggregate underlying value of the Closed-End Funds will be
determined as follows: if the Closed-End Funds are listed on a
securities exchange or The Nasdaq Stock Market, their value is generally
based on the closing sale prices on that exchange or system (unless it
is determined that these prices are not appropriate as a basis for
valuation). However, if there is no closing sale price on that exchange
or system, they are valued based on the closing ask prices. If the
Closed-End Funds are not so listed, or, if so listed and the principal
market for them is other than on that exchange or system, their value
will generally be based on the current ask prices on the over-the-
counter market (unless it is determined that these prices are not
appropriate as a basis for valuation). If current ask prices are
unavailable, the valuation is generally determined:
a) On the basis of current ask prices for comparable securities;
b) By appraising the value of the Closed-End Funds on the ask side of the
market; or
c) By any combination of the above.
The aggregate underlying value of the Treasury Obligations will be
determined on the basis of current offering prices.
After the initial offering period is over, the aggregate underlying
value of the Securities will be determined as set forth above, except
that bid prices are used instead of ask or offer prices when necessary.
Distribution of Units
We intend to qualify Units of the Trust for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
Page 14
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
reflect a concession or agency commission of 3.50% of the Public
Offering Price per Unit (or 65% of the maximum transactional sales
charge after December 31, 2001). However, for Units subject to a
transactional sales charge which are purchased using redemption or
termination proceeds, this amount will be reduced to 2.50% of the sales
price of these Units.
Dealers and other selling agents who sell Units of the Trust during the
initial offering period in the dollar amounts shown below will be
entitled to the following additional sales concessions as a percentage
of the Public Offering Price:
Total Sales Additional
(in millions): Concession:
_________________ ___________
$5 but less than $10 .10%
$10 but less than $15 .15%
$15 but less than $20 .20%
$20 or more .30%
Dealers and other selling agents will not receive a concession on the
sale of Units which are not subject to a transactional sales charge, but
such Units will be included in determining whether the above volume
sales levels are met. In addition, dealers and other selling agents who,
during any consecutive 12-month period, sell at least $2 billion worth
of primary market units of unit investment trusts sponsored by us will
receive a concession of $30,000 in the month following the achievement
of this level. We reserve the right to change the amount of concessions
or agency commissions from time to time. Certain commercial banks may be
making Units of the Trusts available to their customers on an agency
basis. A portion of the transactional sales charge paid by these
customers is kept by or given to the banks in the amounts shown above.
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trust. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable transactional sales charge on Units sold by such
persons during such programs. We make these payments out of our own
assets and not out of Trust assets. These programs will not change the
price you pay for your Units.
Investment Comparisons.
From time to time we may compare the estimated returns of the Trust
(which may show performance net of the expenses and charges the Trust
would have incurred) and returns over specified periods of other similar
trusts we sponsor in our advertising and sales materials, with (1)
returns on other taxable investments such as the common stocks
comprising various market indexes, corporate or U.S. Government bonds,
bank CDs and money market accounts or funds, (2) performance data from
Morningstar Publications, Inc. or (3) information from publications such
as Money, The New York Times, U.S. News and World Report, BusinessWeek,
Forbes or Fortune. The investment characteristics of the Trust differ
from other comparative investments. You should not assume that these
performance comparisons will be representative of the Trust's future
performance.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum
transactional sales charge per Unit less any reduction as stated in
"Public Offering." We will also receive the amount of any accrued and
collected creation and development fee. Also, any difference between our
cost to purchase the Securities and the price at which we sell them to
the Trust is considered a profit or loss. (See Note 2 of "Schedule of
Investments.") During the initial offering period, dealers and others
may also realize profits or sustain losses as a result of fluctuations
after the Date of Deposit in the Public Offering Price they receive when
they sell the Units.
In maintaining a market for Units, any difference between the price at
which we purchase Units and the price at which we sell or redeem them
will be a profit or loss to us.
The Secondary Market
Although not obligated, we intend to maintain a market for the Units
after the initial offering period and continuously offer to purchase
Units at prices based on the Redemption Price per Unit.
Page 15
We will pay all expenses to maintain a secondary market, except the
Evaluator fees, Trustee costs to transfer and record the ownership of
Units and costs incurred in annually updating the Trust's registration
statement. We may discontinue purchases of Units at any time. IF YOU
WISH TO DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET
PRICES BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. If you sell
or redeem your Units before you have paid the total deferred sales
charge on your Units, you will have to pay the remainder at that time.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid at that time is equal to or greater than the Redemption Price per
Unit, we may purchase the Units. You will receive your proceeds from the
sale no later than if they were redeemed by the Trustee. We may tender
Units we hold to the Trustee for redemption as any other Units. If we
elect not to purchase Units, the Trustee may sell tendered Units in the
over-the-counter market, if any. However, the amount you will receive is
the same as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trust are listed under "Fee Table."
If actual expenses exceed the estimate, the Trust will bear the excess.
The Trustee will pay operating expenses of the Trust from the Income
Account of the Trust if funds are available, and then from the Capital
Account. The Income and Capital Accounts are noninterest-bearing to Unit
holders, so the Trustee may earn interest on these funds, thus
benefiting from their use. In addition, investors will also indirectly
pay a portion of the expenses of the underlying Closed-End Funds.
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to the Trust, and will receive brokerage fees
when the Trust uses us (or an affiliate of ours) as agent in buying or
selling Securities. Legal, typesetting, electronic filing and regulatory
filing fees and expenses associated with updating the Trust's
registration statement are also now chargeable to the Trust.
Historically, we paid these fees and expenses. First Trust Advisors
L.P., an affiliate of ours, acts as both Portfolio Supervisor and
Evaluator to the Trust and will receive the fees set forth under "Fee
Table" for providing portfolio supervisory and evaluation services to
the Trust. In providing portfolio supervisory services, the Portfolio
Supervisor may purchase research services from a number of sources,
which may include underwriters or dealers of the Trust.
The fees payable to us, First Trust Advisors L.P. and the Trustee are
based on the largest aggregate number of Units of the Trust outstanding
at any time during the calendar year, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fees paid to us or our
affiliates for providing a given service to all unit investment trusts
for which we provide such services be more than the actual cost of
providing such service in such year.
As Sponsor, we will receive a fee from the Trust for creating and
developing the Trust, including determining the Trust's objectives,
policies, composition and size, selecting service providers and
information services and for providing other similar administrative and
ministerial functions. The "creation and development fee" is accrued
(and becomes a liability of the Trust) on a daily basis. The dollar
amount of the creation and development fee accrued each day, which will
vary with fluctuations in the Trust's net asset value, is determined by
multiplying the net asset value of the Trust on that day by 1/365 of the
annual creation and development fee of .35%. The total amount of any
accrued but unpaid creation and development fee is paid to the Sponsor
on a monthly basis from the assets of the Trust. If you redeem your
Units, you will only be responsible for any accrued and unpaid creation
and development fee through the date of redemption. In connection with
the creation and development fee, in no event will the Sponsor collect
more than .55% of a Unit holder's initial investment. We do not use this
fee to pay distribution expenses or as compensation for sales efforts.
In addition to the Trust's operating expenses, and the fees described
above, the Trust may also incur the following charges:
- All legal expenses of the Trustee according to its responsibilities
under the Indenture;
- The expenses and costs incurred by the Trustee to protect the Trust
and your rights and interests;
Page 16
- Fees for any extraordinary services the Trustee performed under the
Indenture;
- Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of the Trust;
- Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of
the Trust; and/or
- All taxes and other government charges imposed upon the Securities or
any part of the Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
the Trust. Since distribution amounts on the Closed-End Fund shares can
be unpredictable, we cannot guarantee that dividends will be sufficient
to meet any or all expenses of the Trust. If there is not enough cash in
the Income or Capital Account, the Trustee has the power to sell
Securities to make cash available to pay these charges which may result
in capital gains or losses to you. See "Tax Status." However, Treasury
Obligations will not be sold to pay expenses unless their sale will not
reduce the per Unit termination value below $5.00.
The Trust will be audited on an annual basis. So long as we are making a
secondary market for Units, we will bear the cost of these annual audits
to the extent the cost exceeds $0.0050 per Unit. Otherwise, the Trust
will pay for the audit. You can receive a copy of the audited financial
statements by notifying the Trustee.
Tax Status
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trust. This section is current as of
the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe your state or foreign taxes. As
with any investment, you should consult your own tax professional about
your particular consequences.
Assets of the Trust.
The Trust will hold shares of closed-end funds ("Closed-End Funds")
qualifying as regulated investment companies ("RICs") and zero coupon
U.S. Treasury bonds ("Treasury Obligations.") Each Closed-End Fund
invests primarily in high-yield corporate bonds.
Trust Status and Distributions.
The Trust will not be taxed as a corporation for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of the Securities and other assets held by the Trust, and
as such you will be considered to have received a pro rata share of
income (i.e., interest, dividends, accruals of original issue discount,
and capital gains, if any) from each Security when such income is
considered to be received by the Trust. In addition, the income from the
Trust which you must take into account for federal income tax purposes
is not reduced by amounts used to pay Trust expenses (including the
deferred sales charge, if any).
Distributions received by the Trust from the Closed-End Funds, other
than distributions which are designated as capital gain dividends or
exempt-interest dividends, will be taxable to you as ordinary income.
Distributions from the Trust attributable to dividends received from
the Closed-End Funds will not be eligible for the dividends received
deduction for corporations.
Your Tax Basis and Income or Loss upon Disposition.
If your Trust disposes of Securities, you will generally recognize gain
or loss. If you dispose of your Units or redeem your Units for cash, you
will also generally recognize gain or loss. To determine the amount of
this gain or loss, you must subtract your tax basis in the related
Securities from your share of the total amount received in the
transaction. You can generally determine your initial tax basis in each
Security or other Trust asset by apportioning the cost of your Units,
generally including sales charges, among each Security or other Trust
asset ratably according to their value on the date you purchase your
Units. In certain circumstances, however, you may have to adjust your
tax basis after you purchase your Units. For example, you will have to
adjust your tax basis after you acquire your Units to reflect original
issue discount (and possibly market discount or premium), as discussed
Page 17
below, or in the case of certain dividends that exceed the RIC's
accumulated earnings and profits.
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the lowest
tax bracket). For tax years beginning after December 31, 2000, the 20%
rate is reduced to 18% and the 10% rate is reduced to 8% for long-term
gains from most property held for more than five years. However, the
reduction of the 20% rate to 18% applies only if the holding period for
the property begins after December 31, 2000. Therefore, you will not be
eligible for the 18% capital gain rate on assets for which your holding
period began before January 1, 2001. However, if you are an individual,
you may elect to treat certain assets you hold on January 1, 2001 as
having been sold for their fair market value on the next business day
after January 1, 2001 for purposes of this holding period requirement.
If you make this election for an asset, the asset would be eligible for
the 18% rate if it is held by you for more than five years after this
deemed sale. If you make this election, you must recognize any gain from
this deemed sale, but any loss is not recognized. Net capital gain
equals net long-term capital gain minus net short-term capital loss for
the taxable year. Capital gain or loss is long-term if the holding
period for the asset is more than one year and is short-term if the
holding period for the asset is one year or less. You must exclude the
date you purchase your Units or the date the Trust purchases a Security
to determine the holding period of your Units. The tax rates for capital
gains realized from assets held for one year or less are generally the
same as for ordinary income. The tax code may, however, treat certain
capital gains as ordinary income in special situations. In the case of
capital gain 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 10% (or 8%)
tax rate will be made based on regulations prescribed by the United
States Treasury.
Dividends from Closed-End Funds.
Some dividends on the Closed-End Funds may qualify as "capital gain
dividends," taxable to you as long-term capital gains. If you hold a
Unit for six months or less or if the Trust holds a RIC Share for six
months or less, any loss incurred by you related to the disposition of
such RIC Share will be treated as a long-term capital loss to the extent
of any long-term capital gain distributions received (or deemed to have
been received) with respect to such Closed-End Fund. Distributions of
income or capital gains declared on the Closed-End Funds in October,
November or December will be deemed to have been paid to you on December
31 of the year they are declared, even when paid by the RIC during the
following January.
Discount, Accrued Interest and Premium.
The Treasury Obligations will generally be treated as having original
issue discount. This original issue discount is generally equal to the
difference between the amount payable on the due date and your purchase
price allocable to the Treasury Obligations. Original issue discount
accrues on a daily basis and is generally treated as interest income for
federal income tax purposes as it accrues. The basis of your Units and
of each Treasury Obligation must be increased as original issue discount
accrues. The rules relating to original issue discount are very complex
and special rules apply in numerous circumstances. You should consult
your tax advisor with respect to the accrual of original issue discount.
In-Kind Distributions.
Under certain circumstances, you may request a distribution of
Securities (an "In-Kind Distribution") when you redeem your Units
(except for Fee Accounts) or at the Trust's termination. If you request
an In-Kind Distribution you will be responsible for any expenses related
to this distribution. By electing to receive an In-Kind Distribution,
you will receive whole shares of Closed-End Funds and zero coupon U.S.
Treasury bonds plus, possibly, cash.
You will not recognize gain or loss if you only receive Securities in
exchange for your pro rata portion of the Securities held by the Trust.
However, if you also receive cash in exchange for a fractional share of
a Security held by the Trust, you will generally recognize gain or loss
based on the difference between the amount of cash you received and your
tax basis in such fractional share of the Security.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of the Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
Page 18
of each expense paid by the Trust to the same extent as if you directly
paid the expense. You may, however, be required to treat some or all of
the expenses of the Trust as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Foreign, State and Local Taxes.
Interest and dividend payments on the Trust Assets of foreign companies
that are paid to the Trust may be subject to foreign withholding taxes.
Any income withheld will still be treated as income to you. Under the
grantor trust rules, you are considered to have paid directly your share
of foreign taxes. Therefore, for U.S. tax purposes, you may be entitled
to a foreign tax credit or deduction for those foreign taxes.
If you are a foreign investor (i.e. an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or
trust), you may not be subject to U.S. federal income taxes, including
withholding taxes, on some of the income from the Trust or on any gain
from the sale or redemption of your Units, provided that certain
conditions are met. You should consult your tax advisor with respect to
the conditions you must meet in order to be exempt for U.S. tax purposes.
Under the existing income tax laws of the State and City of New York,
the Trust will not be taxed as a corporation, and the income of the
Trust will be treated as the income of the Unit holders in the same
manner as for federal income tax purposes. You should consult your tax
advisor regarding potential foreign, state or local taxation with
respect to your Units.
Retirement Plans
You may purchase Units of the Trust for:
- Individual Retirement Accounts
- Keogh Plans
- Pension funds, and
- Other tax-deferred retirement plans.
Generally, the federal income tax on capital gains and income received
in each of the above plans is deferred until you receive distributions.
These distributions are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred rollover
treatment. Before participating in a plan like this, you should review
the tax laws regarding these plans and consult your attorney or tax
advisor. Brokerage firms and other financial institutions offer these
plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
you become Record Owner, but normally your broker/dealer provides this
notice. You may elect to hold your Units in either certificated or
uncertificated form. All Fee Accounts Units, however, will be held in
uncertificate form.
Certificated Units. When you purchase your Units, you can request that
they be evidenced by certificates, which will be delivered shortly after
your order. Certificates will be issued in fully registered form,
transferable only on the books of the Trustee in denominations of one
Unit or any multiple thereof. You can transfer or redeem your
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with your
signature guaranteed by an eligible institution. In certain cases the
Trustee may require additional documentation before they will transfer
or redeem your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- A written initial transaction statement containing a description of
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your Trust;
- The number of Units issued or transferred;
- Your name, address and Taxpayer Identification Number ("TIN");
- A notation of any liens or restrictions of the issuer and any adverse
claims; and
- The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of income (if any)
distributed. After the end of each calendar year, the Trustee will
provide you:
- A summary of transactions in the Trust for the year;
- A list of any Securities sold during the year and the Securities held
at the end of that year by the Trust;
- The Redemption Price per Unit, computed on the 31st day of December of
such year (or the last business day before); and
- Amounts of income and capital distributed during the year.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Income and Capital Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit any dividends received on
the Trust's Securities to the Income Account. All other receipts, such
as return of capital, are credited to the Capital Account.
The Trustee will distribute any net income in the Income Account on or
near the Income Distribution Dates to Unit holders of record on the
preceding Income Distribution Record Date. See "Summary of Essential
Information." No income distribution will be paid if accrued expenses of
the Trust exceed amounts in the Income Account on the Income
Distribution Dates. Distribution amounts will vary with changes in the
Trust's fees and expenses, in dividends received and with the sale of
Securities. Income from original issue discount on the Treasury
Obligations will not be distributed currently, but you will be subject
to federal income tax as if a distribution had occurred. See "Tax
Status." The Trustee will distribute amounts in the Capital Account, net
of amounts designated to meet redemptions, pay the deferred sales charge
or pay expenses, on the last day of each month to Unit holders of record
on the fifteenth day of each month provided the amount equals at least
$1.00 per 100 Units. If the Trustee does not have your TIN it is
required to withhold a certain percentage of your distribution and
deliver such amount to the Internal Revenue Service ("IRS"). You may
recover this amount by giving your TIN to the Trustee, or when you file
a tax return. However, you should check your statements to make sure the
Trustee has your TIN to avoid this "back-up withholding."
We anticipate that there will be enough money in the Capital Account to
pay the deferred sales charge. If not, the Trustee may sell Securities
to meet the shortfall. However, Treasury Obligations will not be sold to
pay the deferred sales charge unless their sale will not reduce the per
Unit termination value below $5.00.
Within a reasonable time after the Trust is terminated you will receive
a pro rata share of the money from the sale of the Securities. However,
if you are eligible, you may elect to receive an In-Kind Distribution as
described under "Amending or Terminating the Indenture." You will
receive a pro rata share of any other assets remaining in the Trust,
after deducting any unpaid expenses.
The Trustee may establish reserves (the "Reserve Account") within the
Trust to cover anticipated state and local taxes and any governmental
charges to be paid out of the Trust.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by sending the
certificates representing the Units you want to redeem to the Trustee at
its unit investment trust office. If your Units are uncertificated, you
need only deliver a request for redemption to the Trustee. In either
case, the certificates or the redemption request must be properly
endorsed with proper instruments of transfer and signature guarantees as
Page 20
explained in "Rights of Unit Holders-Unit Ownership" (or by providing
satisfactory indemnity if the certificates were lost, stolen, or
destroyed). No redemption fee will be charged, but you are responsible
for any governmental charges that apply. Three business days after the
day you tender your Units (the "Date of Tender") you will receive cash
in an amount for each Unit equal to the Redemption Price per Unit
calculated at the Evaluation Time on the Date of Tender.
The Date of Tender is considered to be the date on which the Trustee
receives your certificates or redemption request (if such day is a day
the NYSE is open for trading). However, if your certificates or
redemption request are received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing income will be withdrawn
from the Income Account if funds are available for that purpose, or from
the Capital Account. All other amounts paid on redemption will be taken
from the Capital Account. The IRS will require the Trustee to withhold a
portion of your redemption proceeds if the Trustee does not have your
TIN, as generally discussed under "Income and Capital Distributions."
If you tender 2,000 Units or more for redemption (except for Fee
Accounts), rather than receiving cash, you may elect to receive an In-
Kind Distribution in an amount equal to the Redemption Price per Unit by
making this request in writing to the Trustee at the time of tender.
However, no In-Kind Distribution requests submitted during the nine
business days prior to the Trust's Mandatory Termination Date will be
honored. Where possible, the Trustee will make an In-Kind Distribution
by distributing each of the Securities in book-entry form to your bank
or broker/dealer account at the Depository Trust Company. The Trustee
will subtract any customary transfer and registration charges from your
In-Kind Distribution. As a tendering Unit holder, you will receive your
pro rata number of whole shares of the Securities that make up the
portfolio, and cash from the Capital Account equal to the fractional
shares to which you are entitled.
The Trustee may sell Securities to make funds available for redemption.
However, Treasury Obligations will not be sold to the extent that it
affects the Trust's ability to pay its minimum maturity value at
termination. If Securities are sold, the size and diversification of the
Trust will be reduced. These sales may result in lower prices than if
the Securities were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- If the NYSE is closed (other than customary weekend and holiday
closings);
- If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Income and Capital Accounts not designated to purchase
Securities;
2. the aggregate underlying value of the Securities held in the Trust; and
3. dividends receivable on the Closed-End Fund shares as of the date
of computation; and
deducting
1. any applicable taxes or governmental charges that need to be paid out
of the Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of the Trust, if any;
4. cash held for distribution to Unit holders of record of the Trust as
of the business day before the evaluation being made; and
5. other liabilities incurred by the Trust; and
dividing
1. the result by the number of outstanding Units of the Trust.
Any remaining deferred sales charge on the Units when you redeem them
will be deducted from your redemption proceeds. In addition, until the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period, the Redemption Price per Unit will include
estimated organization costs as set forth under "Fee Table."
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Removing Securities from the Trust
The portfolio of the Trust is not managed. However, we may, but are not
required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- The issuer of a Security defaults in the payment of a declared dividend;
- Any action or proceeding prevents the payment of dividends;
- There is any legal question or impediment affecting a Security;
- The issuer of a Security has breached a covenant which would affect
the payment of dividends, the issuer's credit standing, or otherwise
damage the sound investment character of such Security;
- The issuer has defaulted on the payment on any other of its
outstanding obligations;
- There has been a public tender offer made for a Security or a merger
or acquisition is announced affecting a Security, and that in our
opinion the sale or tender of the Security is in the best interest of
Unit holders; or
- The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to the Trust.
Except in the limited instance in which the Trust acquires Replacement
Securities, as described in "The FT Series," the Trust may not acquire
any securities or other property other than the Securities. The Trustee,
on behalf of the Trust, will reject any offer for new or exchanged
securities or property in exchange for a Security, such as those
acquired in a merger or other transaction. If such exchanged securities
or property are nevertheless acquired by the Trust, at our instruction,
they will either be sold or held in the Trust. In making the
determination as to whether to sell or hold the exchanged securities or
property we may get advice from the Portfolio Supervisor. Any proceeds
received from the sale of Securities, exchanged securities or property
will be credited to the Capital Account for distribution to Unit holders
or to meet redemption requests. The Trustee may retain and pay us or an
affiliate of ours to act as agent for the Trust to facilitate selling
Securities, exchanged securities or property from the Trust. If we or
our affiliate act in this capacity, we will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Securities designated by us; or, absent our
direction, at its own discretion, in order to meet redemption requests
or pay expenses. Treasury Obligations will not be sold to meet
redemption requests or pay expenses unless their sale will not reduce
the per Unit termination value below $5.00. In designating Securities to
be sold, we will try to maintain the proportionate relationship among
the Securities. If this is not possible, the composition and
diversification of the Trust may be changed. To get the best price for
the Trust we may specify minimum amounts (generally 100 shares) in which
blocks of Securities are to be sold. We may consider sales of units of
unit investment trusts we sponsor when we make recommendations to the
Trustee as to which broker/dealers they select to execute the Trust's
portfolio transactions, or when acting as agent for the Trust in
acquiring or selling Securities on behalf of the Trust.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- To cure ambiguities;
- To correct or supplement any defective or inconsistent provision;
- To make any amendment required by any governmental agency; or
- To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, the Trust will terminate on
the Mandatory Termination Date. The Trust may be terminated prior to the
Mandatory Termination Date:
- Upon the consent of 100% of the Unit holders; or
- In the event that Units of the Trust not yet sold aggregating more
than 60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination, the Trustee will send written notice to all Unit
holders which will specify how you should tender your certificates, if
any, to the Trustee. If the Trust is terminated due to this last reason,
we will refund your entire transactional sales charge; however,
termination of the Trust before the Mandatory Termination Date for any
Page 22
other stated reason will result in all remaining unpaid deferred sales
charges on your Units being deducted from your termination proceeds.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of the Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Securities. Because the Trustee must sell the Securities within a
relatively short period of time, the sale of the Securities as part of
the termination process may result in a lower sales price than might
otherwise be realized if such sale were not required at this time.
If you own at least 2,000 Units of the Trust the Trustee will send you a
form at least 30 days prior to the Mandatory Termination Date which will
enable you to receive an In-Kind Distribution (reduced by customary
transfer and registration charges and subject to any additional
restrictions imposed on Fee Accounts Units by "wrap fee" plans) rather
than the typical cash distribution. See "Tax Status" for additional
information. You must notify the Trustee at least ten business days
prior to the Mandatory Termination Date if you elect this In-Kind
Distribution option. If you do not elect to participate in the In-Kind
Distribution option, you will receive a cash distribution from the sale
of the remaining Securities, along with your interest in the Income and
Capital Accounts, within a reasonable time after the Trust is
terminated. Regardless of the distribution involved, the Trustee will
deduct from the Trust any accrued costs, expenses, advances or
indemnities provided for by the Indenture, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to pay any taxes or other governmental charges.
Information on
Gibraltar Securities, the Sponsor, Trustee and Evaluator
Gibraltar Securities.
Gibraltar Securities is a full service brokerage firm offering
a wide array of products and services. Gibraltar Securities is
a Division of Tucker Anthony Inc., a Tucker Anthony Sutro Company
[NYSE: TA], and is headquartered at 25 Hanover Road, Florham Park,
New Jersey 07932. Gibraltar Securities has dozens of branch offices.
Its main headquarters location can be reached at 1-800-322-3240.
Tucker Anthony is a member of the NYSE, other principal exchanges
and SIPC.
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- The First Trust Combined Series
- FT Series (formerly known as The First Trust Special Situations Trust)
- The First Trust Insured Corporate Trust
- The First Trust of Insured Municipal Bonds
- The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $27 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1999, the total partners' capital of
Nike Securities L.P. was $19,881,035 (audited).
This information refers only to us and not to the Trust or to any series
of the Trust or to any other dealer. We are including this information
only to inform you of our financial responsibility and our ability to
carry out our contractual obligations. We will provide more detailed
financial information on request.
Code of Ethics. The Sponsor and the Trust have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to the Trust.
The Trustee.
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th Floor, New York, New
York, 10004-2413. If you have questions regarding the Trust, you may
Page 23
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee has not participated in selecting the Securities; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC,
- Terminate the Indenture and liquidate the Trust, or
- Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel, as well as special New York tax
counsel for the Trust.
Experts.
Ernst & Young LLP, independent auditors, have audited the Trust's
statement of net assets, including the schedule of investments, at the
opening of business on the Initial Date of Deposit, as set forth in
their report. We've included the Trust's statement of net assets,
including the schedule of investments, in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
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Page 27
FIRST TRUST(R)
Income & Treasury Portfolio Series
FT 495
GIBRALTAR SECURITIES
A Division of Tucker Anthony Inc.
25 Hanover Road
Florham Park, New Jersey 07932
1-800-322-3240
Trustee:
THE CHASE MANHATTAN BANK
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to Income & Treasury
Portfolio Series, but does not contain all of the information about this
investment company as filed with the Securities and Exchange Commission
in Washington, D.C. under the:
- Securities Act of 1933 (file no. 333-52466) and
- Investment Company Act of 1940 (file no. 811-05903)
Information about the Trust can be reviewed and copied at the Securities
and Exchange Commission's Public Reference Room in Washington D.C.
Information regarding the operation of the Commission's Public Reference
Room may be obtained by calling the Commission at 1-202-942-8090.
Information about the Trust is available on the EDGAR Database on the
Commission's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0102
e-mail address: [email protected]
December 26, 2000
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 28
First Trust (R)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in FT 495 not found in the prospectus for the Trust. This
Information Supplement is not a prospectus and does not include all of
the information you should consider before investing in the Trust. This
Information Supplement should be read in conjunction with the prospectus
for the Trust in which you are considering investing.
This Information Supplement is dated December 26, 2000. Capitalized
terms have been defined in the prospectus.
Table of Contents
Risk Factors
Treasury Obligations 1
Securities 1
High-Yield Corporate Bonds 2
Risk Factors
Treasury Obligations. An investment in Units should be made with an
understanding of the risks which an investment in zero coupon U.S.
Treasury Obligations entails. Such Treasury Obligations are purchased at
a deep discount because the buyer obtains only the right to a fixed
payment at a fixed date in the future and does not receive any periodic
interest payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the Treasury Obligations) is
that a fixed yield is earned not only on the original investment, but
also, in effect, on all earnings during the life of the discount
obligation. This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount
obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, the Treasury
Obligations are subject to substantially greater price fluctuations
during periods of changing interest rates than are securities of
comparable quality which make regular interest payments.
Securities. Certain of the Securities in the Trust represent shares of
closed-end mutual funds which invest in high-yield corporate debt
obligations. As such, an investment in Units of the Trust should be made
with an understanding of the risks of investing in both closed-end fund
shares and high-yield corporate debt obligations.
Closed-end mutual funds' portfolios are managed and their shares are
generally listed on a securities exchange. The net asset value of closed-
end fund shares will fluctuate with changes in the value of the
underlying securities which the closed-end fund owns. In addition, for
various reasons closed-end fund shares frequently trade at a discount
from their net asset value in the secondary market. The amount of such
discount from net asset value is subject to change from time to time in
response to various factors. Closed-end funds' articles of incorporation
may contain certain anti-takeover provisions that may have the effect of
inhibiting a fund's possible conversion to open-end status and limiting
the ability of other persons to acquire control of a fund. In certain
circumstances, these provisions might also inhibit the ability of
stockholders (including the Trust) to sell their shares at a premium
over prevailing market prices. This characteristic is a risk separate
and distinct from the risk that a fund's net asset value will decrease.
In particular, this characteristic would increase the loss or reduce the
return on the sale of those closed-end fund shares which were purchased
by the Trust at a premium. In the unlikely event that a closed-end fund
converts to open-end status at a time when its shares are trading at a
premium there would be an immediate loss in value to the Trust since
shares of open-end funds trade at net asset value. Certain closed-end
funds may have in place or may put in place in the future plans pursuant
to which the fund may repurchase its own shares in the marketplace.
Typically, these plans are put in place in an attempt by a fund's board
of directors to reduce a discount on its share price. To the extent such
a plan was implemented and shares owned by the Trust are repurchased by
a fund, the Trust's position in that fund would be reduced and the cash
would be distributed.
The Trust is prohibited from subscribing to a rights offering for shares
of any of the closed-end funds in which they invest. In the event of a
rights offering for additional shares of a fund, Unit holders should
expect that the Trust will, at the completion of the offer, own a
smaller proportional interest in such fund that would otherwise be the
case. It is not possible to determine the extent of this dilution in
share ownership without knowing what proportion of the shares in a
rights offering will be subscribed. This may be particularly serious
when the subscription price per share for the offer is less than the
Page 1
fund's net asset value per share. Assuming that all rights are exercised
and there is no change in the net asset value per share, the aggregate
net asset value of each shareholder's shares of common stock should
decrease as a result of the offer. If a fund's subscription price per
share is below that fund's net asset value per share at the expiration
of the offer, shareholders would experience an immediate dilution of the
aggregate net asset value of their shares of common stock as a result of
the offer, which could be substantial.
Closed-end funds may utilize leveraging in their portfolios. Leveraging
can be expected to cause increased price volatility for those fund's
shares, and as a result, increased volatility for the price of the Units
of the Trust. There can be no assurance that a leveraging strategy will
be successful during any period in which it is employed.
The following is a discussion of certain of the risks associated with
specific types of bonds.
High-Yield Corporate Bonds. An investment in Units of the Income &
Treasury Portfolio Series should be made with an understanding of the
risks that an investment in "high-yield, high-risk," fixed-rate,
domestic and foreign corporate debt obligations or "junk bonds" may
entail, including increased credit risks and the risk that the value of
the Units will decline, and may decline precipitously, with increases in
interest rates. In recent years there have been wide fluctuations in
interest rates and thus in the value of fixed-rate, debt obligations
generally. Bonds such as those included in the funds in the Trust are,
under most circumstances, subject to greater market fluctuations and
risk of loss of income and principal than are investments in lower-
yielding, higher-rated bonds, and their value may decline precipitously
because of increases in interest rates, not only because the increases
in rates generally decrease values, but also because increased rates may
indicate a slowdown in the economy and a decrease in the value of assets
generally that may adversely affect the credit of issuers of high-yield,
high-risk bonds resulting in a higher incidence of defaults among high-
yield, high-risk bonds. A slowdown in the economy, or a development
adversely affecting an issuer's creditworthiness, may result in the
issuer being unable to maintain earnings or sell assets at the rate and
at the prices, respectively, that are required to produce sufficient
cash flow to meet its interest and principal requirements. For an issuer
that has outstanding both senior commercial bank debt and subordinated
high-yield, high-risk bonds, an increase in interest rates will increase
that issuer's interest expense insofar as the interest rate on the bank
debt is fluctuating. However, many leveraged issuers enter into interest
rate protection agreements to fix or cap the interest rate on a large
portion of their bank debt. This reduces exposure to increasing rates,
but reduces the benefit to the issuer of declining rates. The Sponsor
cannot predict future economic policies or their consequences or,
therefore, the course or extent of any similar market fluctuations in
the future.
"High-yield" or "junk" bonds, the generic names for corporate bonds
rated below BBB by Standard & Poor's, or below Baa by Moody's, are
frequently issued by corporations in the growth stage of their
development, by established companies whose operations or industries are
depressed or by highly leveraged companies purchased in leveraged buyout
transactions. The market for high-yield bonds is very specialized and
investors in it have been predominantly financial institutions. High-
yield bonds are generally not listed on a national securities exchange.
Trading of high-yield bonds, therefore, takes place primarily in over-
the-counter markets which consist of groups of dealer firms that are
typically major securities firms. Because the high-yield bond market is
a dealer market, rather than an auction market, no single obtainable
price for a given bond prevails at any given time. Prices are determined
by negotiation between traders. The existence of a liquid trading market
for the bonds may depend on whether dealers will make a market in the
bonds. There can be no assurance that a market will be made for any of
the bonds, that any market for the bonds will be maintained or of the
liquidity of the bonds in any markets made. Not all dealers maintain
markets in all high-yield bonds. Therefore, since there are fewer
traders in these bonds than there are in "investment grade" bonds, the
bid-offer spread is usually greater for high-yield bonds than it is for
investment grade bonds. The price at which the bonds may be sold to meet
redemptions and the value of the Trust will be adversely affected if
trading markets for the bonds are limited or absent. If the rate of
redemptions is great, the value of the Trust may decline to a level that
requires liquidation.
Lower-rated bonds tend to offer higher yields than higher-rated bonds
with the same maturities because the creditworthiness of the issuers of
lower-rated bonds may not be as strong as that of other issuers.
Moreover, if a bond is recharacterized as equity by the Internal Revenue
Service for federal income tax purposes, the issuer's interest deduction
with respect to the bond will be disallowed and this disallowance may
adversely affect the issuer's credit rating. Because investors generally
perceive that there are greater risks associated with the lower-rated
bonds in the Income & Treasury Portfolio Series, the yields and prices
of these bonds tend to fluctuate more than higher-rated bonds with
changes in the perceived quality of the credit of their issuers. In
addition, the market value of high-yield, high-risk, fixed-income bonds
may fluctuate more than the market value of higher-rated bonds since
high-yield, high-risk, fixed-income bonds tend to reflect short-term
credit development to a greater extent than higher-rated bonds. Lower-
rated bonds generally involve greater risks of loss of income and
principal than higher-rated bonds. Issuers of lower-rated bonds may
possess fewer creditworthiness characteristics than issuers of higher-
rated bonds and, especially in the case of issuers whose obligations or
credit standing have recently been downgraded, may be subject to claims
by debtholders, owners of property leased to the issuer or others which,
if sustained, would make it more difficult for the issuers to meet their
Page 2
payment obligations. High-yield, high-risk bonds are also affected by
variables such as interest rates, inflation rates and real growth in the
economy. Therefore, investors should consider carefully the relative
risks associated with investment in bonds which carry lower ratings.
The value of the Units reflects the value of the portfolio bonds,
including the value (if any) of bonds in default. Should the issuer of
any bond default in the payment of principal or interest, the funds in
the Trust may incur additional expenses seeking payment on the defaulted
bond. Because amounts (if any) recovered by the funds in payment under
the defaulted bond may not be reflected in the value of the fund shares
until actually received by the funds, and depending upon when a Unit
holder purchases or sells his or her Units, it is possible that a Unit
holder would bear a portion of the cost of recovery without receiving
any portion of the payment recovered.
High-yield, high-risk bonds are generally subordinated obligations. The
payment of principal (and premium, if any), interest and sinking fund
requirements with respect to subordinated obligations of an issuer is
subordinated in right of payment to the payment of senior obligations of
the issuer. Senior obligations generally include most, if not all,
significant debt obligations of an issuer, whether existing at the time
of issuance of subordinated debt or created thereafter. Upon any
distribution of the assets of an issuer with subordinated obligations
upon dissolution, total or partial liquidation or reorganization of or
similar proceeding relating to the issuer, the holders of senior
indebtedness will be entitled to receive payment in full before holders
of subordinated indebtedness will be entitled to receive any payment.
Moreover, generally no payment with respect to subordinated indebtedness
may be made while there exists a default with respect to any senior
indebtedness. Thus, in the event of insolvency, holders of senior
indebtedness of an issuer generally will recover more, ratably, than
holders of subordinated indebtedness of that issuer.
Obligations that are rated lower than "BBB" by Standard & Poor's, or Baa
by Moody's, respectively, should be considered speculative as such
ratings indicate a quality of less than investment grade. Investors
should carefully review the objective of the Trust and consider their
ability to assume the risks involved before making an investment in such
Trust.
Page 3
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being
National Union Fire Insurance Company of Pittsburgh.
B. This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
The Registrant, FT 495, hereby identifies The First Trust
Special Situations Trust, Series 4; The First Trust Special
Situations Trust, Series 18; The First Trust Special Situations
Trust, Series 69; The First Trust Special Situations Trust,
Series 108; The First Trust Special Situations Trust, Series 119;
The First Trust Special Situations Trust, Series 190; FT 286; The
First Trust Combined Series 272; FT 412; and FT 438 for purposes
of the representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from
those deposited in such previous series;
(2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide
essential financial information for, the series with respect to
the securities of which this Registration Statement is being
filed, this Registration Statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities
Act of 1933.
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 495, has duly caused this Amendment to
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on December 26, 2000.
FT 495
By NIKE SECURITIES L.P.
Depositor
By Robert M. Porcellino
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
David J. Allen Sole Director )
of Nike Securities )
Corporation, the ) December 26, 2000
General Partner of )
Nike Securities L.P. )
)
)
) Robert M. Porcellino
) Attorney-in-Fact**
)
)
* The title of the person named herein represents his
capacity in and relationship to Nike Securities L.P.,
Depositor.
** An executed copy of the related power of attorney
was filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of The
First Trust Combined Series 258 (File No. 33-63483) and
the same is hereby incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated December 26, 2000 in
Amendment No. 1 to the Registration Statement (Form S-6) (File
No. 333-52466) and related Prospectus of FT 495.
ERNST & YOUNG LLP
Chicago, Illinois
December 26, 2000
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement
will be filed as Exhibit 4.1 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 18 and
certain subsequent Series, effective October 15, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and First Trust
Advisors L.P. as Portfolio Supervisor (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
43683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.1.1 Form of Trust Agreement for FT 495 among Nike Securities
L.P., as Depositor, The Chase Manhattan Bank, as
Trustee, First Trust Advisors L.P., as Evaluator, and
First Trust Advisors L.P., as Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities
L.P., Depositor (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-
6 [File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-49555] filed on
behalf of The First Trust Special Situations Trust,
Series 19).
2.1 Copy of Certificate of Ownership (included in Exhibit
1.1 filed herewith on page 2 and incorporated herein by
reference).
2.2 Copy of Code of Ethics (incorporated by reference to
Amendment No. 1 to form S-6 [File No. 333-31176] filed
on behalf of FT 415).
S-5
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion of counsel as to New York income tax status of
securities being registered.
3.4 Opinion of counsel as to advancement of funds by
Trustee.
4.1 Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on
page S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
63483] filed on behalf of The First Trust Combined
Series 258).
S-6
