SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 500
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN & CUTLER
Attention: Eric F. Fess
111 West Monroe Street
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 the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION DATED JANUARY 9, 2001
COMMUNICATIONS SELECT PORTFOLIO, SERIES 8
ENERGY SELECT PORTFOLIO, SERIES 9
FINANCIAL SERVICES SELECT PORTFOLIO, SERIES 10
INTERNET SELECT PORTFOLIO, SERIES 12
LEADING BRANDS SELECT PORTFOLIO, SERIES 9
PHARMACEUTICAL SELECT PORTFOLIO, SERIES 11
TECHNOLOGY SELECT PORTFOLIO, SERIES 14
COMMUNICATIONS PORTFOLIO, SERIES 8
ENERGY PORTFOLIO, SERIES 9
FINANCIAL SERVICES PORTFOLIO, SERIES 10
INTERNET PORTFOLIO, SERIES 12
LEADING BRANDS PORTFOLIO, SERIES 9
PHARMACEUTICAL PORTFOLIO, SERIES 11
REIT GROWTH & INCOME PORTFOLIO, SERIES 4
TECHNOLOGY PORTFOLIO, SERIES 14
FT 500
FT 500 is a series of a unit investment trust, the FT Series. FT 500
consists of 15 separate portfolios listed above (each, a "Trust," and
collectively, the "Trusts"). Each Trust invests in a diversified
portfolio of common stocks ("Securities") issued by companies in the
industry sector or investment focus for which each Trust is named. The
objective of each Trust is to provide above-average capital
appreciation. Each Select Portfolio Series has an expected maturity of
approximately 18 months. Each Portfolio Series has an expected maturity
of approximately five and one-half years.
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.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
First Trust (R)
1-800-621-9533
The date of this prospectus is January __, 2001
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 7
Report of Independent Auditors 8
Statements of Net Assets 9
Schedules of Investments 13
The FT Series 29
Portfolios 30
Risk Factors 35
Public Offering 37
Distribution of Units 40
The Sponsor's Profits 41
The Secondary Market 41
How We Purchase Units 41
Expenses and Charges 41
Tax Status 43
Retirement Plans 44
Rights of Unit Holders 44
Income and Capital Distributions 45
Redeeming Your Units 45
Removing Securities from a Trust 46
Amending or Terminating the Indenture 47
Information on the Sponsor, Trustee and Evaluator 48
Other Information 49
Page 2
Summary of Essential Information
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
Communications Energy Financial Internet
Select Select Services Select
Portfolio Portfolio Portfolio Portfolio
Series 8 Series 9 Series 10 Series 12
__________ __________ _________ _________
<S> <C> <C> <C> <C>
Initial Number of Units (1)
Fractional Undivided Interest
in the Trust per Unit (1) 1/ 1/ 1/ 1/
Public Offering Price:
Aggregate Offering Price Evaluation
of Securities per Unit (2) $ 9.900 $ 9.900 $ 9.900 $ 9.900
Maximum Transactional Sales Charge of % of the
Public Offering Price per Unit ( % of the net
amount
invested, exclusive of the deferred sales $ $ $ $
charge) (3)
Less Deferred Sales Charge per Unit $( ) $( ) $( ) $( )
Public Offering Price per Unit (4) $ 10.000 $ 10.000 $ 10.000 $ 10.000
Sponsor's Initial Repurchase Price per Unit (5) $ $ $ $
Redemption Price per Unit
(based on aggregate underlying value
of Securities less deferred sales charge) (5) $ $ $ $
Cash CUSIP Number
Reinvestment CUSIP Number
Fee Accounts Cash CUSIP Number
Fee Accounts Reinvestment CUSIP Number
Security Code
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date January __, 2001
Mandatory Termination Date (6) ________, 2002
Income Distribution Record Date Fifteenth day of each June and December, commencing June 15, 2001.
Income Distribution Date (7) Last day of each June and December, commencing June 30, 2001.
_____________
<FN>
See "Notes to Summary of Essential Information" on page 6.
</FN>
</TABLE>
Page 3
Summary of Essential Information
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
Leading Pharmaceutical Technology
Brands Select Select
Select Portfolio Portfolio Portfolio
Series 9 Series 11 Series 14
__________ __________ _________
<S> <C> <C> <C>
Initial Number of Units (1)
Fractional Undivided Interest in the Trust per Unit (1) 1/ 1/ 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 9.900 $ 9.900 $ 9.900
Maximum Transactional Sales Charge of % of the Public Offering
Price per Unit ( % of the net amount invested, exclusive of the
deferred sales charge) (3) $ $ $
Less Deferred Sales Charge per Unit $( ) $( ) $( )
Public Offering Price per Unit (4) $ 10.000 $ 10.000 $ 10.000
Sponsor's Initial Repurchase Price per Unit (5) $ $ $
Redemption Price per Unit
(based on aggregate underlying value of Securities
less deferred sales charge) (5) $ $ $
Cash CUSIP Number
Reinvestment CUSIP Number
Fee Accounts Cash CUSIP Number
Fee Accounts Reinvestment CUSIP Number
Security Code
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date January __, 2001
Mandatory Termination Date (6) ________, 2002
Income Distribution Record Date Fifteenth day of each June and December, commencing June 15, 2001.
Income Distribution Date (7) Last day of each June and December, commencing June 30, 2001.
_____________
<FN>
See "Notes to Summary of Essential Information" on page 6.
</FN>
</TABLE>
Page 4
Summary of Essential Information
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
Financial
Communications Energy Services Internet
Portfolio Portfolio Portfolio Portfolio
Series 8 Series 9 Series 10 Series 12
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
Initial Number of Units (1)
Fractional Undivided Interest
in the Trust per Unit (1) 1/ 1/ 1/ 1/
Public Offering Price:
Aggregate Offering Price Evaluation
of Securities per Unit (2) $ 9.900 $ 9.900 $ 9.900 $ 9.900
Maximum Transactional Sales Charge of % of the Public
Offering Price per Unit ( % of the net amount
invested, exclusive of the deferred sales charge) (3)$ $ $ $
Less Deferred Sales Charge per Unit $( ) $( ) $( ) $( )
Public Offering Price per Unit (4) $ 10.000 $ 10.000 $ 10.000 $ 10.000
Sponsor's Initial Repurchase Price per Unit (5) $ $ $ $
Redemption Price per Unit
(based on aggregate underlying value
of Securities less deferred sales charge) (5) $ $ $ $
Cash CUSIP Number
Reinvestment CUSIP Number
Fee Accounts Cash CUSIP Number
Fee Accounts Reinvestment CUSIP Number
Security Code
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date January __, 2001
Mandatory Termination Date (6) ________, 2006
Income Distribution Record Date Fifteenth day of each June and December, commencing June 15, 2001.
Income Distribution Date (7) Last day of each June and December, commencing June 30, 2001.
_____________
<FN>
See "Notes to Summary of Essential Information" on page 6.
</FN>
</TABLE>
Page 5
Summary of Essential Information
FT 500
At the Opening of Business on the Initial Date of Deposit-January __, 2001
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
Leading REIT Growth
Brands Pharmaceutical & Income Technology
Portfolio Portfolio Portfolio Portfolio
Series 9 Series 11 Series 4 Series 14
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
Initial Number of Units (1)
Fractional Undivided Interest
in the Trust per Unit (1) 1/ 1/ 1/ 1/
Public Offering Price:
Aggregate Offering Price Evaluation
of Securities per Unit (2) $ 9.900 $ 9.900 $ 9.900 $ 9.900
Maximum Transactional Sales Charge of % of the Public
Offering Price per Unit ( % of the net amount
invested, exclusive of the deferred sales charge) (3) $ $ $ $
Less Deferred Sales Charge per Unit $( ) $( ) $( ) $( )
Public Offering Price per Unit (4) $ 10.000 $ 10.000 $ 10.000 $ 10.000
Sponsor's Initial Repurchase Price per Unit (5) $ $ $ $
Redemption Price per Unit
(based on aggregate underlying value
of Securities less deferred sales charge) (5) $ $ $ $
Cash CUSIP Number
Reinvestment CUSIP Number
Fee Accounts Cash CUSIP Number
Fee Accounts Reinvestment CUSIP Number
Security Code
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date January __, 2001
Mandatory Termination Date (6) ________, 2006
Income Distribution Record Date Fifteenth day of each June and December, commencing June 15, 2001.
Income Distribution Date (7) Last day of each June and December, commencing June 30, 2001.
______________
<FN>
NOTES TO SUMMARY OF ESSENTIAL INFORMATION
(1) As of the close of business on the Initial Date of Deposit, we may
adjust the number of Units of a Trust so that the Public Offering Price
per Unit will equal approximately $10.00. If we make such an adjustment,
the fractional undivided interest per Unit will vary from the amounts
indicated above.
(2) Each listed Security is valued at its last closing sale price. If a
Security is not listed, or if no closing sale price exists, it is valued
at its closing ask price. Evaluations for purposes of determining the
purchase, sale or redemption price of Units are made as of the close of
trading on the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern time) on each day on which it is open (the "Evaluation Time").
(3) The maximum transactional sales charge consists of an initial sales
charge and a deferred sales charge, but does not include the creation
and development fee. See "Fee Table" and "Public Offering."
(4) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit. No
investor will purchase Units at this price. The price you pay for your
Units will be based on their valuation at the Evaluation Time on the
date you purchase your Units. On the Initial Date of Deposit the Public
Offering Price per Unit will not include any accumulated dividends on
the Securities. After this date, a pro rata share of any accumulated
dividends on the Securities will be included.
(5) 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."
(6) See "Amending or Terminating the Indenture."
(7) Distributions from the Capital Account will be made monthly on the
last day of the month to Unit holders of record on the fifteenth day of
such month if the amount available for distribution equals at least
$1.00 per 100 Units. In any case, we will distribute any funds in the
Capital Account in December of each year.
</FN>
</TABLE>
Page 6
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of a Trust. See "Public
Offering" and "Expenses and Charges." Although each Select Portfolio
Series has a term of approximately 18 months, each Portfolio Series has
a term of approximately five and one-half years, and each is a unit
investment trust rather than a mutual fund, this information allows you
to compare fees.
<TABLE>
<CAPTION>
Select
Portfolio Series Portfolio Series
______________________ ______________________
Amount Amount
per Unit per Unit
_____ _____
<S> <C> <C> <C> <C>
Unit Holder Sales Fees (as a percentage of public offering price)
Maximum Sales Charge
Initial sales charge 1.00%(a) $.100 1.00%(a) $.100
Deferred sales charge %(b) $ %(b) $
Creation and development fee cap over the life of the Trust %(c) $ %(c) $
_______ _______ _______ _______
(the annual creation and development fee is ___% and ___% of average
daily net assets for the Select Portfolio Series and Portfolio Series,
respectively, 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) % $ % $
======= ======= ======= =======
Organization Costs (as a percentage of public offering price)
Estimated organization costs .260%(d) $.0260 .225%(d) $.0225
======= ======= ======= =======
Estimated Annual Trust Operating Expenses(e)
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative and evaluation fees .081% $.0080 .100% $.0098
Trustee's fee and other operating expenses .119%(f) $.0118 .153%(f) $.0150
_______ _______ _______ _______
Total .200% $.0198 .253% $.0248
======= ======= ======= =======
</TABLE>
Example
This example is intended to help you compare the cost of investing in a
Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in a Trust for the periods shown
and sell your Units at the end of those periods. The example also
assumes a 5% return on your investment each year and that a Trust's
operating expenses stay the same. Although your actual costs may vary,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 18 Months(g) 3 Years 5 Years 51/2 Years
______ __________ _______ _______ __________
<S> <C> <C> <C> <C> <C>
Select Portfolio Series $ $ $ $ $
Portfolio Series
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 (____% for each Select Portfolio Series and
____% for each Portfolio Series) and any remaining deferred sales charge.
(b) The deferred sales charge is a fixed dollar amount equal to $____
per Unit for each Select Portfolio Series and $____ per Unit for each
Portfolio Series which, as a percentage of the Public Offering Price,
will vary over time. The deferred sales charge will be deducted in five
monthly installments commencing ________, 2001.
(c) The creation and development fee compensates the Sponsor for creating
and developing the Trusts. For as long as you own Units, this fee will
be accrued daily based on each Trust's net asset value at the annual
rate of ___% for each Select Portfolio Series or ___% for each Portfolio
Series. You will only be charged the creation and development fee while
you own Units. Each Trust pays the amount of any accrued creation and
development fee to the Sponsor monthly from such 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 ___% or ___% for each Select Portfolio
Series or Portfolio Series, respectively. However, in no event will we
collect over the life of a Trust more than ____% for each Select
Portfolio Series or more than ____% for each Portfolio Series of your
initial investment.
(d) Estimated organization costs will be deducted from the assets of a
Trust at the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period.
(e) 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) For each Portfolio Series, other operating expenses include the
costs incurred by each Portfolio Series for annually updating such
Trust's registration statements. Historically, we paid these costs.
Other operating expenses, however, do not include brokerage costs and
other portfolio transaction fees for any of the Trusts. In certain
circumstances the Trusts may incur additional expenses not set forth
above. See "Expenses and Charges."
(g) For each Select Portfolio Series, the example represents the
estimated costs incurred through each Trust's approximate 18-month life.
</FN>
</TABLE>
Page 7
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
FT 500
We have audited the accompanying statements of net assets, including the
schedules of investments, of FT 500, comprised of the Communications
Select Portfolio, Series 8; Energy Select Portfolio, Series 9; Financial
Services Select Portfolio, Series 10; Internet Select Portfolio, Series
12; Leading Brands Select Portfolio, Series 9; Pharmaceutical Select
Portfolio, Series 11; Technology Select Portfolio, Series 14;
Communications Portfolio, Series 8; Energy Portfolio, Series 9;
Financial Services Portfolio, Series 10; Internet Portfolio, Series 12;
Leading Brands Portfolio, Series 9; Pharmaceutical Portfolio, Series 11;
REIT Growth & Income Portfolio, Series 4 and Technology Portfolio,
Series 14, as of the opening of business on January __, 2001. These
statements of net assets are the responsibility of the Trusts' Sponsor.
Our responsibility is to express an opinion on these statements of net
assets based on our audit.
We conducted our audit in accordance with 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
statements of net assets are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statements of net assets. Our procedures included
confirmation of the letter of credit allocated among the Trusts on
January __, 2001. An audit also includes assessing the accounting
principles used and significant estimates made by the Sponsor, as well
as evaluating the overall presentation of the statements of net assets.
We believe that our audit of the statements of net assets provides a
reasonable basis for our opinion.
In our opinion, the statements of net assets referred to above present
fairly, in all material respects, the financial position of FT 500,
comprised of the Communications Select Portfolio, Series 8; Energy
Select Portfolio, Series 9; Financial Services Select Portfolio, Series
10; Internet Select Portfolio, Series 12; Leading Brands Select
Portfolio, Series 9; Pharmaceutical Select Portfolio, Series 11;
Technology Select Portfolio, Series 14; Communications Portfolio, Series
8; Energy Portfolio, Series 9; Financial Services Portfolio, Series 10;
Internet Portfolio, Series 12; Leading Brands Portfolio, Series 9;
Pharmaceutical Portfolio, Series 11; REIT Growth & Income Portfolio,
Series 4 and Technology Portfolio, Series 14, at the opening of business
on January __, 2001 in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
January __, 2001
Page 8
Statements of Net Assets
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Energy Financial
Communications Select Services Internet
Select Portfolio Portfolio Select Portfolio Select Portfolio
Series 8 Series 9 Series 10 Series 12
__________ ____________ __________ ________________
<S> <C> <C> <C> <C>
NET ASSETS
Investment in Securities represented
by purchase contracts (1) (2) $ $ $ $
Less liability for reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( ) ( )
Less liability for deferred sales charge (4) ( ) ( ) ( ) ( )
________ ________ ________ ________
Net assets $ $ $ $
======== ======== ======== ========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $ $ $ $
Less maximum transactional sales charge (5) ( ) ( ) ( ) ( )
Less estimated reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( ) ( )
________ ________ ________ ________
Net assets $ $ $ $
======== ======== ======== ========
______________
<FN>
See "Notes to Statements of Net Assets" on page 12.
</FN>
</TABLE>
Page 9
Statements of Net Assets
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Leading Brands Pharmaceutical Technology
Select Select Select
Portfolio Portfolio Portfolio
Series 9 Series 11 Series 14
__________ ____________ _________
<S> <C> <C> <C>
NET ASSETS
Investment in Securities represented
by purchase contracts (1) (2) $ $ $
Less liability for reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( )
Less liability for deferred sales charge (4) ( ) ( ) ( )
________ ________ ________
Net assets $ $ $
======== ======== ========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $ $ $
Less maximum transactional sales charge (5) ( ) ( ) ( )
Less estimated reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( )
________ ________ ________
Net assets $ $ $
======== ======== ========
______________
<FN>
See "Notes to Statements of Net Assets" on page 12.
</FN>
</TABLE>
Page 10
Statements of Net Assets
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Financial
Communications Energy Services Internet
Portfolio Portfolio Portfolio Portfolio
Series 8 Series 9 Series 10 Series 12
__________ ___________ __________ __________
<S> <C> <C> <C> <C>
NET ASSETS
Investment in Securities represented
by purchase contracts (1) (2) $ $ $ $
Less liability for reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( ) ( )
Less liability for deferred sales charge (4) ( ) ( ) ( ) ( )
________ ________ ________ ________
Net assets $ $ $ $
======== ======== ======== ========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $ $ $ $
Less maximum transactional sales charge (5) ( ) ( ) ( ) ( )
Less estimated reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( ) ( )
________ ________ ________ ________
Net assets $ $ $ $
======== ======== ======== ========
______________
<FN>
See "Notes to Statements of Net Assets" on page 12.
</FN>
</TABLE>
Page 11
Statements of Net Assets
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Leading REIT Growth
Brands Pharmaceutical & Income Technology
Portfolio Portfolio Portfolio Portfolio
Series 9 Series 11 Series 4 Series 14
__________ ____________ __________ __________
<S> <C> <C> <C> <C>
NET ASSETS
Investment in Securities represented
by purchase contracts (1) (2) $ $ $ $
Less liability for reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( ) ( )
Less liability for deferred sales charge (4) ( ) ( ) ( ) ( )
________ ________ ________ ________
Net assets $ $ $ $
======== ======== ======== ========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $ $ $ $
Less maximum transactional sales charge (5) ( ) ( ) ( ) ( )
Less estimated reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( ) ( )
________ ________ ________ ________
Net assets $ $ $ $
======== ======== ======== ========
_____________
<FN>
NOTES TO STATEMENTS OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" for each Trust is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by The Chase Manhattan Bank,
of which $30,000,000 will be allocated among each of the 15 Trusts in FT
500, has been deposited with the Trustee as collateral, covering the
monies necessary for the purchase of the Securities according to their
purchase contracts.
(3) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trusts. These costs have been estimated at $ per Unit
for each Select Portfolio Series and $ per Unit for each Portfolio
Series. A payment will be made at 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 of a Trust are greater than the estimated amount,
only the estimated organization costs added to the Public Offering Price
will be reimbursed to the Sponsor and deducted from the assets of such
Trust.
(4) Represents the amount of mandatory deferred sales charge
distributions of $ per Unit for each Select Portfolio Series, or $
per Unit for each Portfolio Series, payable to us in five equal monthly
installments beginning on ________, 2001 and on the twentieth day of
each month thereafter (or if such date is not a business day, on the
preceding business day) through ________, 2001. If you redeem your Units
before ________, 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 includes a maximum transactional
sales charge (comprised of an initial sales charge and a deferred sales
charge) computed at the rate of % of the Public Offering Price per
Unit for each Select Portfolio Series (equivalent to % of the net
amount invested, exclusive of the deferred sales charge) or % of the
Public Offering Price per Unit for each Portfolio Series (equivalent to
% 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 12
Schedule of Investments
Communications Select Portfolio, Series 8
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 13
Schedule of Investments
Energy Select Portfolio, Series 9
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 14
Schedule of Investments
Financial Services Select Portfolio, Series 10
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 15
Schedule of Investments
Internet Select Portfolio, Series 12
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 16
Schedule of Investments
Leading Brands Select Portfolio, Series 9
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 17
Schedule of Investments
Pharmaceutical Select Portfolio, Series 11
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 18
Schedule of Investments
Technology Select Portfolio, Series 14
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 19
Schedule of Investments
Communications Portfolio, Series 8
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 20
Schedule of Investments
Energy Portfolio, Series 9
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 21
Schedule of Investments
Financial Services Portfolio, Series 10
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 22
Schedule of Investments
Internet Portfolio, Series 12
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 23
Schedule of Investments
Leading Brands Portfolio, Series 9
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 24
Schedule of Investments
Pharmaceutical Portfolio, Series 11
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 25
Schedule of Investments
REIT Growth & Income Portfolio, Series 4
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
</FN>
</TABLE>
Page 26
Schedule of Investments
Technology Portfolio, Series 14
FT 500
At the Opening of Business on the
Initial Date of Deposit-January __, 2001
<TABLE>
<CAPTION>
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value per Securities to
of Shares Name of Issuer of Securities (1) Offering Price Share the Trust (2)
_________ _____________________________________ _________ ______ _____________
<S> <C> <C> <C> <C>
% $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ _________
Total Investments 100% $
====== =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 28.
Page 27
NOTES TO SCHEDULES OF INVESTMENTS
(1) All Securities are represented by regular way contracts to purchase
such Securities which are backed by an irrevocable letter of credit
deposited with the Trustee. We entered into purchase contracts for the
Securities on January __, 2001. Each Select Portfolio Series has a
Mandatory Termination Date of ________, 2002. Each Portfolio Series has
a Mandatory Termination Date of ________, 2006.
(2) The cost of the Securities to a Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the closing sale prices of the listed Securities and the
ask prices of the over-the-counter traded Securities at the Evaluation
Time on the business day preceding the Initial Date of Deposit). The
valuation of the Securities has been determined by the Evaluator, an
affiliate of ours. The cost of the Securities to us and our profit or
loss (which is the difference between the cost of the Securities to us
and the cost of the Securities to a Trust) are set forth below:
Cost of
Securities Profit
to Sponsor (Loss)
_________ _______
Communications Select Portfolio, Series 8 $ $
Energy Select Portfolio, Series 9
Financial Services Select Portfolio, Series 10
Internet Select Portfolio, Series 12
Leading Brands Select Portfolio, Series 9
Pharmaceutical Select Portfolio, Series 11
Technology Select Portfolio, Series 14
Communications Portfolio, Series 8
Energy Portfolio, Series 9
Financial Services Portfolio, Series 10
Internet Portfolio, Series 12
Leading Brands Portfolio, Series 9
Pharmaceutical Portfolio, Series 11
REIT Growth & Income Portfolio, Series 4
Technology Portfolio, Series 14
</FN>
</TABLE>
Page 28
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
500, consists of 15 separate portfolios set forth below:
- Communications Select Portfolio, Series 8
- Energy Select Portfolio, Series 9
- Financial Services Select Portfolio, Series 10
- Internet Select Portfolio, Series 12
- Leading Brands Select Portfolio, Series 9
- Pharmaceutical Select Portfolio, Series 11
- Technology Select Portfolio, Series 14
- Communications Portfolio, Series 8
- Energy Portfolio, Series 9
- Financial Services Portfolio, Series 10
- Internet Portfolio, Series 12
- Leading Brands Portfolio, Series 9
- Pharmaceutical Portfolio, Series 11
- REIT Growth & Income Portfolio, Series 4
- Technology Portfolio, Series 14
Each Trust was created under the laws of the State of New York by a
Trust Agreement (the "Indenture") dated the Initial Date of Deposit.
This agreement, entered into among Nike Securities L.P., as Sponsor, The
Chase Manhattan Bank as Trustee and First Trust Advisors L.P. as
Portfolio Supervisor and Evaluator, governs the operation of the Trusts.
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 Trusts.
On the Initial Date of Deposit, we deposited portfolios of common stocks
with the Trustee and in turn, the Trustee delivered documents to us
representing our ownership of the Trusts in the form of units ("Units").
After the Initial Date of Deposit, we may deposit additional Securities
in the Trusts, 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"
for each Trust), and not the 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 Trusts, on a market value basis, will also change
daily. The portion of Securities represented by each Unit will not
change as a result of the deposit of additional Securities or cash in a
Trust. If we deposit cash, you and new investors may experience a
dilution of your investment. This is because prices of Securities will
fluctuate between the time of the cash deposit and the purchase of the
Securities, and because the Trusts pay the associated brokerage fees. To
reduce this dilution, the Trusts will try to buy the Securities as close
to the Evaluation Time and as close to the evaluation price as possible.
In addition, because the Trusts pay 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
Trusts to buy Securities. If we or an affiliate of ours act as agent to
the Trusts, we will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Securities may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. However, Securities will not be sold to take
advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation, or if they no longer meet the criteria by
which they were selected. You will not be able to dispose of or vote any
of the Securities in the Trusts. As the holder of the Securities, the
Trustee will vote all of the Securities and will do so based on our
instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in a Trust fails, unless we can purchase
substitute Securities ("Replacement Securities"), we will refund to you
Page 29
that portion of the purchase price and transactional sales charge
resulting from the failed contract on the next Income Distribution Date.
Any Replacement Security a Trust acquires will be identical to those
from the failed contract.
Portfolios
Objectives.
The objective of each Trust is to provide investors with the potential
for above-average capital appreciation through an investment in a
diversified portfolio of common stocks of companies in the sector or
investment focus for which the Trust is named. A diversified portfolio
helps to offset the risks normally associated with such an investment,
although it does not eliminate them entirely. The companies selected for
the Trusts have been researched and evaluated using database screening
techniques, fundamental analysis, and the judgment of the Sponsor's
research analysts. Each Select Portfolio Series has an expected maturity
of approximately 18 months whereas each Portfolio Series has an expected
maturity of approximately five and one-half years.
Communications Select Portfolio, Series 8 and Communications Portfolio,
Series 8 each consist of a portfolio of common stocks of communications
companies, diversified across domestic and international companies
involved in communications services, communications equipment, fiber
optics, networking products and wireless communications.
The focus of the communications industry is constantly being reshaped.
It is due in large part to increasing competition, consolidation and
technology. Technology has been playing a particularly crucial role. So
much so that many communications companies are beginning to concentrate
on more high-tech and high-growth areas such as wireless communications,
the Internet and digital technology. With Internet usage continuing to
increase and the number of wireless subscribers worldwide nearly
tripling over the last three years, we believe the potential opportunity
for growth in these areas is becoming more evident.
Because of increasing competition, communications companies are
realizing that the quality of their offerings may ultimately determine
their level of success. Many companies have already turned to mergers
and acquisitions as a means of attaining new technologies in an effort
to reach more consumers. Others have forged strategic alliances with
companies outside the industry to broaden their exposure.
Regardless of the avenue they choose, the dream of converging services
is becoming reality. Consumers can now get multiple services such as
Internet access, wireless and traditional telephone service, and cable
from one company, on one bill.
Consider the following factors:
- The U.S. Telecommunications Act of 1996 and the 1997
Telecommunications Agreement, passed by the World Trade Organization,
have opened markets domestically and internationally to encourage
competition and capital investment.
- The growing popularity of the Internet is creating greater demand for
data traffic. Advanced technologies like high-speed digital systems
using fiber optic cables are one means being utilized to satisfy this
demand.
- According to market research company Forrester Research, revenues from
wireless operations have the potential to grow exponentially over the
next several years.
- Cahners In-Stat Group predicts that approximately 1.5 billion
handsets, personal digital assistants and Internet appliances could be
equipped with wireless capabilities by the end of 2004.
Energy Select Portfolio, Series 9 and Energy Portfolio, Series 9 each
consist of a portfolio of common stocks of energy companies which the
Sponsor believes are positioned to take advantage of the world's
increasing demand for energy. The demand for energy, in all of its
forms, tends to be driven largely by economic prosperity and is,
therefore, cyclical in nature. The United States consumes approximately
25% of the world's supply of oil; however, we anticipate that emerging
countries, along with Asia, may experience the highest rate of growth in
demand in the not too distant future. According to Standard & Poor's,
emerging countries are expected to account for more than 50% of world
demand by the year 2015. In the 1990s, oil and natural gas stocks were
mostly out of favor, but the companies in the industry began
consolidating and cutting costs to position themselves to benefit from
upward cycles.
The technologies that are presently being employed in the field of oil
and gas exploration are helping reduce the cost of extracting oil and
Page 30
natural gas by saving detection time and allowing companies to capture a
higher percentage of tapped reserves.
3-D Seismic Imaging. This is a relatively new technology that utilizes
the vibration from sound waves to construct a three-dimensional,
computer generated, picture of a geological formation. This process has
the potential to greatly improve the odds of locating oil and gas.
Horizontal Drilling. New instrumentation can now be attached to a drill
bit to generate real time geological information, without impeding the
drilling process. It is estimated that horizontal drilling has the
potential to out-produce a vertical well by as much as sevenfold. This
technique has been especially cost-effective in offshore drilling.
By the year 2020, the Energy Information Administration projects that
the world will consume approximately three times as much energy as it
did 30 years ago.
Consider the following factors:
- Oil prices have a significant influence on capital spending. Oil
companies need a sustained upward trend in oil prices to justify risking
large amounts of investment capital on rigs and exploration. For this
reason, the oil industry tends to experience longer peaks and troughs
than most cyclical industries.
- Forrester Research estimates that online sales of gas and electricity
will exceed $250 billion in 2004, up from a modest $11 billion in 1999.
[Standard & Poor's Industry Surveys]
- Technological advances, including the Internet, continue to shape the
oil business, enhancing producers' ability to obtain greater quantities
of oil and gas, while political and regulatory issues surface in the
public arena.
Financial Services Select Portfolio, Series 10 and Financial Services
Portfolio, Series 10 each consist of a portfolio of common stocks of
companies that provide a wide variety of financial services.
The financial industry has undergone several significant changes during
its storied history. Perhaps none have been more noteworthy than the
recent overturn of the Glass-Steagall Act. Firms can now create
"financial supermarkets" that offer services including traditional
banking, insurance underwriting, securities underwriting, investment
brokerage and merchant banking.
We believe that there are a few major trends that should continue
pushing the financial industry. The first is an aging population. Nearly
three out of ten people in the United States are baby boomers. Scores of
them have already started, or soon will start, planning for their
retirement just as they are entering their peak earning years. Another
driving factor behind the industry is technological innovation. Improved
technology has enabled financial companies to increase their volume and
reduce transaction costs in order to attract consumers. E-commerce, once
viewed as a threat, is now being embraced by many in the industry.
Because most purchases made over the Internet are charged, companies
that offer credit card services are realizing that e-commerce represents
a significant source of potential revenue. Others have begun offering
products and services over the Internet simply to satisfy growing demand
or as an effective cross-selling tool.
For much of the industry, however, the greatest impact may come from
merger and acquisition ("M&A") activity. U.S. M&A activity continues to
remain strong, led by the telecommunications, radio and TV, and banking
industries. Now that the Glass-Steagall Act is no longer a barrier,
companies throughout the financial industry can now use consolidation as
a way to compete more effectively and implement new growth strategies
just as other industries have done.
Consider the following factors:
- In 2000, trading volume on the New York Stock Exchange was up nearly
30% versus the previous year. [NYSE.com]
- The banking industry is generally healthy due to a strong economy,
relatively low interest rates and recent favorable regulatory changes.
- We believe that the recent proposal to eliminate the pooling method of
accounting will add further pressure for consolidation within the
industry.
- In the decade of the 1990s, assets under management grew from just
over $1.07 trillion to more than $6.84 trillion. Much of this growth can
be attributed to increased retirement savings and gains in the stock
market. [Standard & Poor's Industry Surveys]
Internet Select Portfolio, Series 12 and Internet Portfolio, Series 12
each consist of a portfolio of common stocks of technology companies
Page 31
which provide products or services for, or conduct business on the
Internet.
The number of individuals connecting to the Internet is growing daily. A
recent report by the Computer Industry Almanac projects that there could
potentially be over 600 million people around the world with Internet
access by the year 2002. The report also suggests that by the end of the
year 2002, there will be 23 countries where over 30 percent of the
population will be Internet users.
Although the potential scope of the Internet is impressive, its effects
may be even more dramatic. One of the Internet's most significant
effects is to cut the cost of interaction-the searching, coordinating,
and monitoring that people and companies must do when they exchange
goods, services or ideas. McKinsey & Company estimates that the costs
associated with these activities could drop by as much as 80 percent or
more if they are handled electronically. Pervading all economies, these
costs account for more than a third of economic activity in the United
States. Though still considered to be in its infancy, the Internet has
already had an impact on business, consumers and nearly every aspect of
today's society. Whether this rate of change will continue and where it
will take us may be determined, in our opinion, in large part by the
companies in these Trusts.
New technologies continue to be accepted faster than ever. While it took
35 years before one-quarter of U.S. households owned a telephone, the
Internet took only seven years to reach the same level of penetration.
[Red Herring]
Consider the following factors:
- More than 120 million people are online in the United States alone,
and the number of online users is expected to dramatically increase in
the future. [The Industry Standard]
- People are spending an average of 10 hours online per month, a 23%
jump over 1999. [The Industry Standard]
- Business-to-business online revenues are forecasted to grow
significantly over the next several years. [The Industry Standard]
- Improved security measures are helping fuel consumer transactions over
the Web. Global e-commerce spending for the fourth quarter of 2000 was
expected to jump 85.5 percent, to $19.5 billion, from $10.5 billion in
the fourth quarter of 1999. [The Industry Standard]
- Almost 100 million U.S. adults are now going online every month. That
is half of American adults and a 27% increase over 1999 in the number
who surf the Web. [The Industry Standard]
- There are approximately 2.7 billion pages on the Web, a 80% increase
from 1999. [The Industry Standard]
Leading Brands Select Portfolio, Series 9 and Leading Brands Portfolio,
Series 9 each consist of a portfolio of common stocks of companies in
the consumer products industry. Almost every American is familiar with
brand name companies. Many have become household names and their
products can be found in almost every home across the country. This is
also increasingly becoming the case overseas as more markets open in
developing countries. Typically, leading brands companies have large
advertising budgets and strong research and development enabling them to
further expand into new markets. Today's consumer environment is
becoming increasingly competitive, placing a stronger emphasis on
establishing a powerful global brand. In any given year, thousands of
new products in categories from toothpaste to bleach inundate the
marketplace. By marketing aggressively both domestically and
internationally, these blue-chip companies are able to establish a
widely recognized brand name in an effort to attain market dominance.
Considering that the United States and Canada together make up
approximately 5% of the world's population, it is evident that there are
abundant opportunities for consumer products overseas. Realizing this,
leading companies have been expanding into many untapped foreign markets
where the growth rates in per capita income and spending are generally
forecasted to outpace those of developed countries over the next decade.
The companies in the Leading Brands Portfolios have been chosen for
their financial strength and market dominance, competitive advantages,
skilled management and essential products and services.
Consider the following factors:
- Relaxed trade agreements and improved political climates are opening
more markets for producers of leading brand name products.
- Generally, the products and services of consumer goods companies
remain in demand, even during uncertain economic times.
- A relatively healthy U.S. economy and the creation of the euro in Europe,
which has the potential to encourage companies to increase their global
Page 32
branding efforts in that region, are both positive factors for consumer
goods companies, considering that these regions have been two of the
largest consumers of brand name products historically. [Standard &
Poor's Industry Surveys]
- Some 80% of the world's population is in developing countries, which
represents a potential growth opportunity. [Standard & Poor's Industry
Surveys]
Pharmaceutical Select Portfolio, Series 11 and Pharmaceutical Portfolio,
Series 11 each consist of a portfolio of common stocks of pharmaceutical
companies. According to Standard & Poor's, the pharmaceutical industry
was projected to generate over $360 billion in sales worldwide in 2000,
an increase of around 8% over 1999. The industry is highly competitive
and extremely capital intensive. Drugmakers spend billions of dollars on
researching and developing new products. In fact, according to the
Pharmaceutical Research and Manufacturers of America, the amount of
capital invested in R&D has nearly doubled every five years since 1970.
There are approximately 78 million baby boomers living in the United
States, some of whom will begin turning 65 after 2010. Currently, it is
estimated that 70% of Americans over the age of 65 suffer from
cardiovascular disease. We believe that as average life expectancies
increase, the number of people at risk for disease will increase.
The Food & Drug Administration. In 1997, the Food and Drug
Administration (FDA) relaxed its restrictions on pharmaceutical
companies advertising drugs directly to the public. The FDA, which now
has a faster review process in place, is creating a business environment
that could make it quicker and more economical for some drugmakers to
bring new products to market.
Demand Driven By Need. The bottom line is that the demand for
prescription and over-the-counter drugs is driven more by need than
price. We believe that an aging population coupled with longer life
expectancies should help support demand for drugs in the future.
Research-based pharmaceutical companies continue to invest record-
setting amounts in research and development. According to the
Pharmaceutical Research and Manufacturers of America, spending has grown
from approximately $2.5 billion in 1980 to a new record level of
approximately $26.4 billion in 2000.
Consider the following factors:
- The Pharmaceutical Research and Manufacturers of America reported that
the industry currently has over 1,000 new medicines in development to
treat hundreds of serious diseases.
- Pharmaceutical companies have initiated a number of cost-containment
measures such as using the Internet to reduce administrative costs, and
forging alliances with biotechnology companies.
- Drugmakers are promoting their products to the public through all of
the major media outlets. According to IMS Health, direct-to-consumer
advertising totaled $1.3 billion in the first half of 2000, an increase
of approximately 44% over the previous six months.
- Managed care providers, especially HMOs, encourage the use of
pharmaceuticals because they are regarded as a relatively inexpensive
form of treatment and are less invasive.
REIT Growth & Income Portfolio, Series 4 consists of a portfolio of
common stocks of Real Estate Investment Trusts ("REITs"). A REIT is a
company that buys, develops, and manages income producing real estate
such as apartments, shopping centers, offices, and warehouses. In short,
a REIT is a corporation that pools the capital of many investors to
purchase all forms of real estate.
The REIT Growth & Income Portfolio invests in a number of these REITs,
offering a simple and convenient way to achieve a diversified portfolio
with one purchase. The portfolio offers diversification among different
types of properties as well as regional diversification. This type of
diversification helps to reduce some of the fluctuations in the real
estate market as a result of economic downturns or changes in supply and
demand in a specific region or type of property. REITs allow investors
to participate in a growing real estate industry. The market
capitalization of REITs has grown from roughly $8.7 billion in 1990 to
approximately $124.3 billion in 1999 [National Association of Real
Estate Investment Trusts].
REITs offer investors several advantages over ownership of individual
properties. REITs are currently required to annually distribute a
majority of their income as dividends to shareholders, making them a
great source of steady income without forcing investors to manage the
properties themselves. Investors can enjoy the benefits of capital
Page 33
appreciation if properties are sold at a profit. Another advantage is
liquidity. Compared to traditional privately held real estate, which may
be difficult to sell, REITs are traded on major stock exchanges making
them highly liquid. REIT investors also gain the advantage of skilled
management since REIT management teams tend to be experts within their
specific property or geographic niches.
Consider the following factors:
- The REIT Modernization Act allows REITs to own taxable REIT
subsidiaries. This act will enable REITs to grow non-rental income
through various initiatives such as offering their tenants telephone or
energy services.
- The REIT Modernization Act will reduce the income distribution
requirement from 95% to 90%, allowing REIT management teams more
flexibility with available cash, including the ability to initiate stock
repurchase programs.
- REIT property fundamentals are currently strong due to stable rental
income and consistent occupancy rates.
- We believe fears of oversupply from new real estate developments have
diminished.
- Because the correlation of REIT returns with the returns of other
market sectors is relatively low, we feel REITs provide an added
diversification benefit to your overall portfolio.
Technology Select Portfolio, Series 14 and Technology Portfolio, Series
14 each consist of a portfolio of common stocks of technology companies
involved in the manufacturing, sales or servicing of computers and
peripherals, computer software and services, networking products,
communications equipment, semiconductor equipment and semiconductors.
If you are looking to invest in cutting-edge technology, you may not
need to look any further than the Internet. It is now estimated that
over 300 million people are connected to the Web worldwide. The
technology that makes it all possible is developed by computer,
software, networking and communications companies. Now that the
infrastructure is in place, we believe the focus of technology is
shifting to e-commerce.
E-commerce can be divided into two main categories: business-to-consumer
and business-to-business. Business-to-business online revenues were
roughly $213 billion in 2000, while business-to-consumer revenues were
estimated to be as much as $45 billion.
Software Solutions. E-commerce and business-to-business commerce are
creating demand and opportunity for software products in many areas
including supply-chain management (SCM) and database software. These
software systems can navigate massive amounts of data to help streamline
manufacturing and distribution, monitor inventories, and perform
transaction management.
Higher Productivity. Technology has played an integral part in the
economic prosperity enjoyed by the United States during the 1990s.
It has helped increase productivity and curb inflation. We believe
that the Internet should continue to fuel technological innovation
for years to come as businesses of all sizes go online to increase
distributions and boost efficiency.
Data Networking. The value of information lies in its application.
Computer networks connect computers and peripheral equipment so that
information can be shared. As e-commerce evolves, the need for
businesses to network with suppliers and customers should create strong
demand for those companies that provide equipment and data networking
services.
The Impact of E-Commerce Improved Productivity.
We expect the expanding use of e-commerce to result in significant
cost savings in transactions.
Tighter Inventory. Using the Internet to improve forecasting and
replenishment of products, companies should be able to reduce inventory
costs as suppliers are linked by just-in-time inventory systems.
Better Customer Service. E-commerce should dramatically reduce the
amount of time it takes to process orders. In addition, customer service
costs should be reduced through the use of a Web customer service
interface to decrease errors.
Consider the following factors:
- Half of all U.S. households own a computer. Lower-income households
are buying personal computers at a faster rate than any other segment,
in part, because of the introduction of models that retail below $1,000.
[The Industry Standard]
- More than 120 million people are online in the United States alone,
and the number of online users is expected to dramatically increase in
the future. [The Industry Standard]
- Investment in technology is growing. The worldwide IT market was
Page 34
valued at $360 billion in 1993. By 2002, IBM expects the overall IT
market to grow to approximately $1.6 trillion. [PricewaterhouseCoopers
LLP]
- More than half of the traffic now carried over telecommunications
networks is data. [The Industry Standard]
- Semiconductor sales rose 31% from 1999 to a record $221.1 billion in
2000. [Infobeads]
You should be aware that predictions stated herein for the above
industries or sectors may not be realized. In addition, the Securities
contained in each Trust are not intended to be representative of the
selected industry or sector as a whole and the performance of each Trust
is expected to differ from that of its comparative industry or sector.
Of course, as with any similar investments, there can be no guarantee
that the objective of the Trusts will be achieved. See "Risk Factors"
for a discussion of the risks of investing in the Trusts.
Risk Factors
Price Volatility. The Trusts invest in common stocks of U.S. and, for
certain Trusts, foreign companies. The value of a Trust's Units will
fluctuate with changes in the value of these common stocks. Common stock
prices fluctuate for several reasons including changes in investors'
perceptions of the financial condition of an issuer or the general
condition of the relevant stock market, or when political or economic
events affecting the issuers occur. In addition, common stock prices may
be particularly sensitive to rising interest rates, as the cost of
capital rises and borrowing costs increase.
Because the Trusts are not managed, the Trustee will not sell stocks in
response to or in anticipation of market fluctuations, as is common in
managed investments. As with any investment, we cannot guarantee that
the performance of any Trust will be positive over any period of time,
especially the relatively short 18-month life of each Select Portfolio
Series, or that you won't lose money. Units of the Trusts are not
deposits of any bank and are not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
Certain of the Securities in certain of the Trusts may be issued by
companies with market capitalizations of less than $1 billion. The share
prices of these small-cap companies are often more volatile than those
of larger companies as a result of several factors common to many such
issuers, including limited trading volumes, products or financial
resources, management inexperience and less publicly available
information.
Dividends. There is no guarantee that the issuers of the Securities will
declare dividends in the future or that if declared they will either
remain at current levels or increase over time.
Communications Industry. Because more than 25% of the Communications
Portfolios are invested in communications companies, these Trusts are
considered to be concentrated in the communications industry. A
portfolio concentrated in a single industry may present more risks than
a portfolio which is broadly diversified over several industries. The
market for high technology communications products and services is
characterized by rapidly changing technology, rapid product obsolescence
or loss of patent protection, cyclical market patterns, evolving
industry standards and frequent new product introductions. Certain
communications/bandwidth companies are subject to substantial
governmental regulation, which among other things, regulates permitted
rates of return and the kinds of services that a company may offer. The
communications industry has experienced substantial deregulation in
recent years. Deregulation may lead to fierce competition for market
share and can have a negative impact on certain companies. Competitive
pressures are intense and communications stocks can experience rapid
volatility.
Consumer Products Industry. The Leading Brands Portfolios are considered
to be concentrated in the consumer products industry. General risks of
these companies include cyclicality of revenues and earnings, economic
recession, currency fluctuations, changing consumer tastes, extensive
competition, product liability litigation and increased governmental
regulation. Generally, spending on consumer products is affected by
the economic health of consumers. A weak economy and its effect on
consumer spending would adversely affect consumer products companies.
Energy Industry. The Energy Portfolios are considered to be concentrated
in companies that explore for, produce, refine, distribute or sell
petroleum or gas products, or provide parts or services to petroleum or
gas companies. General problems of the petroleum and gas products
industry include volatile fluctuations in price and supply of energy
fuels, international politics, reduced demand as a result of increases
in energy efficiency and energy conservation, the success of exploration
projects, clean-up and litigation costs relating to oil spills and
Page 35
environmental damage, and tax and other regulatory policies of various
governments. Oil production and refining companies are subject to
extensive federal, state and local environmental laws and regulations
regarding air emissions and the disposal of hazardous materials. In
addition, declines in U.S. and Russian crude oil production will likely
lead to a greater world dependence on oil from OPEC nations which may
result in more volatile oil prices.
Financial Services Industry. The Financial Services Portfolios are
considered to be concentrated in the financial services industry which
includes banks and thrifts, financial services and insurance companies,
and investment firms. Banks, thrifts and their holding companies are
especially subject to the adverse effects of economic recession;
volatile interest rates; portfolio concentrations in geographic markets
and in commercial and residential real estate loans; and competition
from new entrants in their fields of business. Although recently-enacted
legislation repealed most of the barriers which separated the banking,
insurance and securities industries, these industries are still
extensively regulated at both the federal and state level and may be
adversely affected by increased regulations.
Banks and thrifts face increased competition from nontraditional lending
sources as regulatory changes, such as the recently enacted financial-
services overhaul legislation, permit new entrants to offer various
financial products. Technological advances such as the Internet allow
these nontraditional lending sources to cut overhead and permit the more
efficient use of customer data.
Brokerage firms, broker/dealers, investment banks, finance companies and
mutual fund companies are also financial services providers. These
companies compete with banks and thrifts to provide traditional
financial service products, in addition to their traditional services,
such as brokerage and investment advice. In addition, all financial
service companies face shrinking profit margins due to new competitors,
the cost of new technology and the pressure to compete globally.
Companies involved in the insurance industry are engaged in
underwriting, selling, distributing or placing of property and casualty,
life or health insurance. Insurance company profits are affected by many
factors, including interest rate movements, the imposition of premium
rate caps, competition and pressure to compete globally. Property and
casualty insurance profits may also be affected by weather catastrophes
and other disasters. Life and health insurance profits may be affected
by mortality rates. Already extensively regulated, insurance companies'
profits may also be adversely affected by increased government
regulations or tax law changes.
Pharmaceutical Industries. The Pharmaceutical Portfolios are considered
to be concentrated in the biotechnology and pharmaceutical industries.
Biotechnology and pharmaceutical companies are subject to changing
government regulation, including price controls, national health
insurance, managed care regulation and tax incentives or penalties
related to medical insurance premiums, which could have a negative
effect on the price and availability of their products and services. In
addition, such companies face increasing competition from generic drug
sales, the termination of their patent protection for certain drugs and
technological advances which render their products or services obsolete.
The research and development costs required to bring a drug to market
are substantial and may include a lengthy review by the government, with
no guarantee that the product will ever go to market or show a profit.
In addition, the potential for an increased amount of required
disclosure of proprietary scientific information could negatively impact
the competitive position of these companies. Many of these companies may
not offer certain drugs or products for several years, and as a result,
may have significant losses of revenue and earnings.
Real Estate Investment Trusts. The REIT Growth & Income Portfolio is
considered to be concentrated in Real Estate Investment Trusts
("REITs"). REITs are financial vehicles that pool investors' capital to
purchase or finance real estate. REITs may concentrate their investments
in specific geographic areas or in specific property types, i.e.,
hotels, shopping malls, residential complexes and office buildings. The
value of the REITs and the ability of the REITs to distribute income may
be adversely affected by several factors, including rising interest
rates, changes in the national, state and local economic climate and
real estate conditions, perceptions of prospective tenants of the
safety, convenience and attractiveness of the properties, the ability of
the owner to provide adequate management, maintenance and insurance, the
Page 36
cost of complying with the Americans with Disabilities Act, increased
competition from new properties, the impact of present or future
environmental legislation and compliance with environmental laws,
changes in real estate taxes and other operating expenses, adverse
changes in governmental rules and fiscal policies, adverse changes in
zoning laws, and other factors beyond the control of the issuers of the
REITs.
Technology Industry. The Internet Portfolios and the Technology
Portfolios are considered to be concentrated in the technology industry.
Technology companies are generally subject to the risks of rapidly
changing technologies; short product life cycles; fierce competition;
aggressive pricing and reduced profit margins; the loss of patent,
copyright and trademark protections; cyclical market patterns; evolving
industry standards and frequent new product introductions. Technology
companies may be smaller and less experienced companies, with limited
product lines, markets or financial resources and fewer experienced
management or marketing personnel. Technology company stocks, especially
those which are Internet-related, have experienced extreme price and
volume fluctuations that are often unrelated to their operating
performance. Also, the stocks of many Internet companies have
exceptionally high price-to-earnings ratios with little or no earnings
histories.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed in the United States and abroad which may have
a negative impact on certain of the companies represented in the Trusts.
In addition, litigation regarding any of the issuers of the Securities,
such as that concerning Microsoft Corporation, or of the industries
represented by such issuers may negatively impact the share prices of
these Securities. We cannot predict what impact any pending or proposed
legislation or pending or threatened litigation will have on the share
prices of the Securities.
Foreign Stocks. Certain of the Securities in certain of the Trusts are
issued by foreign companies, which makes the Trusts subject to more
risks than if they invested solely in domestic common stocks. These
Securities are either directly listed on a U.S. securities exchange or
are in the form of American Depositary Receipts ("ADRs") which are
listed on a U.S. securities exchange. Risks of foreign common stocks
include higher brokerage costs; different accounting standards;
expropriation, nationalization or other adverse political or economic
developments; currency devaluations, blockages or transfer restrictions;
restrictions on foreign investments and exchange of securities;
inadequate financial information; and lack of liquidity of certain
foreign markets.
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the per Unit price of
which is comprised of the following:
- The aggregate underlying value of the Securities;
- The amount of any cash in the Income and Capital Accounts;
- Dividends receivable on Securities; and
- The maximum transactional sales charge (which combines an initial
upfront 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. Securities purchased with the portion of the Public
Offering Price intended to be used to reimburse the Sponsor for a
Trust's organization costs (including costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission ("SEC")
and states, the initial audit of each Trust portfolio, legal fees and
the initial fees and expenses of the Trustee) will be purchased in the
same proportionate relationship as all the Securities contained in a
Trust. Securities will be sold to reimburse the Sponsor for a Trust's
organization costs at the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period (a significantly
Page 37
shorter time period than the life of the Trusts). During the period
ending with the earlier of six months after the Initial Date of Deposit
or the end of the initial offering period, there may be a decrease in
the value of the Securities. To the extent the proceeds from the sale of
these Securities are insufficient to repay the Sponsor for Trust
organization costs, the Trustee will sell additional Securities to allow
a Trust to fully reimburse the Sponsor. In that event, the net asset
value per Unit of a Trust will be reduced by the amount of additional
Securities sold. Although the dollar amount of the reimbursement due to
the Sponsor will remain fixed and will never exceed the per Unit amount
set forth for a Trust in "Notes to Statements of Net Assets," this will
result in a greater effective cost per Unit to Unit holders for the
reimbursement to the Sponsor. To the extent actual organization costs
are less than the estimated amount, only the actual organization costs
will be deducted from the assets of a Trust. When Securities are sold to
reimburse the Sponsor for organization costs, the Trustee will sell
Securities, to the extent practicable, which will maintain the same
proportionate relationship among the Securities contained in a Trust as
existed prior to such sale.
Minimum Purchase.
The minimum amount you can purchase of a Trust is $1,000 worth of Units
($500 if you are purchasing Units for your Individual Retirement Account
or any other qualified retirement plan).
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 ( % of the Public Offering Price for each
Select Portfolio Series and % of the Public Offering Price for each
Portfolio Series) and the maximum remaining deferred sales charge
(initially equal to $ per Unit for each Select Portfolio Series and $
per Unit for each Portfolio Series). 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, five monthly deferred sales
charge payments of $ per Unit for each Select Portfolio Series or $
per Unit for each Portfolio Series will be deducted from a Trust's
assets on approximately the 20th day of each month from ________, 2001
through ________, 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 % of the Public Offering Price for each Select Portfolio Series
or more than % of the Public Offering Price for each Portfolio Series.
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 % of the Public Offering Price per Unit
(equivalent to % of the net amount invested) for each Select Portfolio
Series and % of the Public Offering Price per Unit (equivalent to %
of the net amount invested) for each Portfolio Series. For each
Portfolio Series, the transactional sales charge will be reduced by 1/2
of 1% on each subsequent ________, commencing ________, 2002, 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:
For each Select Portfolio Series:
Your maximum
transactional
If you invest sales charge
(in thousands):* will be:
_________________ _____________
$ but less than $ %
$ but less than $ %
$ but less than $ %
$ but less than $ %
$ or more %
Page 38
For each Portfolio Series:
Your maximum
transactional
If you invest sales charge
(in thousands):* will be:
_________________ _____________
$ but less than $ %
$ but less than $ %
$ but less than $ %
$ but less than $ %
$ or more %
* 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 Trusts in this prospectus with any other same day
purchases of other trusts for which we are Principal Underwriter and are
currently in the initial offering period. In addition, we will also
consider Units you purchase in the name of your spouse or child under 21
years of age to be purchases by you. The reduced transactional sales
charge 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 Portfolio
Series' Units sold subject to the transactional sales charge reduction
for purchases of $1 million or more. In all other instances, 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 Trusts during the initial
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 Trusts 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 Trusts.
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. If you elect to have distributions reinvested into
additional Units of your Trust, in addition to the reinvestment Units
you receive you will also be credited additional Units with a dollar
value at the time of reinvestment sufficient to cover the amount of any
remaining deferred sales charge to be collected on such reinvestment
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 determine the aggregate underlying value of the
Securities in a Trust as of the Evaluation Time on each business day and
will adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
Page 39
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and certain national holidays
on which the NYSE is closed.
The aggregate underlying value of the Securities in a Trust will be
determined as follows: if the Securities are listed on a securities
exchange or The Nasdaq Stock Market, their value is generally based on
the closing sale prices on that exchange or system (unless it is
determined that these prices are not appropriate as a basis for
valuation). However, if there is no closing sale price on that exchange
or system, they are valued based on the closing ask prices. If the
Securities are not so listed, or, if so listed and the principal market
for them is other than on that exchange or system, their value will
generally be based on the current ask prices on the over-the-counter
market (unless it is determined that these prices are not appropriate as
a basis for valuation). If current ask prices are unavailable, the
valuation is generally determined:
a) On the basis of current ask prices for comparable securities;
b) By appraising the value of the Securities on the ask side of the
market; or
c) By any combination of the above.
After the initial offering period is over, the aggregate underlying
value of the Securities will be determined as set forth above, except
that bid prices are used instead of ask prices when necessary.
Distribution of Units
We intend to qualify Units of the Trusts for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
Dealer Concessions.
For each Select Portfolio Series, dealers and other selling agents can
purchase Units at prices which reflect a concession or agency commission
of ____% of the Public Offering Price per Unit. However, for Units
subject to a transactional sales charge which are purchased using
redemption or termination proceeds, this amount will be reduced to ____%
of the sales price of these Units.
For each Portfolio Series, dealers and other selling agents can purchase
Units at prices which reflect a concession or agency commission of ___%
of the Public Offering Price per Unit (or __% of the maximum
transactional sales charge after ________, 2002). However, for Units
subject to a transactional sales charge which are purchased using
redemption or termination proceeds, this amount will be reduced to ____%
of the sales price of these Units. Dealers and other selling agents will
receive an additional volume concession or agency commission on all
Portfolio Series Units they sell equal to ___% of the Public Offering
Price if they purchase at least $100,000 worth of Units of the Trusts on
the Initial Date of Deposit or $250,000 on any day thereafter or if they
were eligible to receive a similar concession in connection with sales
of similarly structured trusts sponsored by us which are currently in
the initial offering period.
Dealers and other selling agents who sell Units of a Trust during the
initial offering period in the dollar amounts shown below will be
entitled to the following additional sales concessions as a percentage
of the Public Offering Price:
Total Sales per Trust Additional
(in millions): Concession:
_________________ ___________
$ but less than $ %
$ or more %
Dealers and other selling agents can combine Units of a Select Portfolio
Series and its related Portfolio Series they sell for purposes of
reaching the additional concessions levels set forth in the above table.
In addition, 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. For all Trusts, dealers and other
selling agents who, during any consecutive 12-month period, sell at
least $1.75 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
Page 40
dealer's registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trusts. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable 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 Trusts
(which may show performance net of the expenses and charges the Trusts
would have incurred) and returns over specified periods of other similar
trusts we sponsor in our advertising and sales materials, with (1)
returns on other taxable investments such as the common stocks
comprising various market indexes, corporate or U.S. Government bonds,
bank CDs and money market accounts or funds, (2) performance data from
Morningstar Publications, Inc. or (3) information from publications such
as Money, The New York Times, U.S. News and World Report, BusinessWeek,
Forbes or Fortune. The investment characteristics of each Trust differ
from other comparative investments. You should not assume that these
performance comparisons will be representative of a Trust's future
performance.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum
transactional sales charge per Unit of a Trust 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 a Trust is considered a profit or loss (see Note 2 of
"Notes to Schedules of Investments"). During the initial offering
period, dealers and others may also realize profits or sustain losses as
a result of fluctuations in the Public Offering Price they receive when
they sell the Units.
In maintaining a market for the Units, any difference between the price
at which we purchase Units and the price at which we sell or redeem them
will be a profit or loss to us.
The Secondary Market
Although not obligated, we intend to maintain a market for the Units
after the initial offering period and continuously offer to purchase
Units at prices based on the Redemption Price per Unit.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees, Trustee costs to transfer and record the ownership of
Units and in the case of each Portfolio Series, costs incurred in
annually updating each Portfolio Series' registration statements. 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 that we hold to the Trustee for redemption as any other Units. If
we elect not to purchase Units, the Trustee may sell tendered Units in
the over-the-counter market, if any. However, the amount you will
receive is the same as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of each Trust are listed under "Fee
Table." If actual expenses of a Trust exceed the estimate, that Trust
will bear the excess. The Trustee will pay operating expenses of a Trust
from the Income Account of such Trust if funds are available, and then
from the Capital Account. The Income and Capital Accounts are
noninterest-bearing to Unit holders, so the Trustee may earn interest on
these funds, thus benefiting from their use.
Page 41
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to the Trusts, and will receive brokerage fees
when a Trust uses us (or an affiliate of ours) as agent in buying or
selling Securities. For each Portfolio Series, legal, typesetting,
electronic filing and regulatory filing fees and expenses associated
with updating those Trusts' registration statements yearly are also now
chargeable to such Trusts. Historically, we paid these fees and
expenses. There are no such fees and expenses that will be charged to
each Select Portfolio Series. First Trust Advisors L.P., an affiliate of
ours, acts as both Portfolio Supervisor and Evaluator to the Trusts and
will receive the fees set forth under "Fee Table" for providing
portfolio supervisory and evaluation services to the Trusts. In
providing portfolio supervisory services, the Portfolio Supervisor may
purchase research services from a number of sources, which may include
underwriters or dealers of the Trusts.
The fees payable to us, First Trust Advisors L.P. and the Trustee are
based on the largest aggregate number of Units of a Trust outstanding at
any time during the calendar year, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fees paid to us or our
affiliates for providing a given service to all unit investment trusts
for which we provide such services be more than the actual cost of
providing such services in such year.
As Sponsor, we will receive a fee from each Trust for creating and
developing the Trusts, including determining each 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 each Trust) on a daily basis. The dollar
amount of the creation and development fee accrued each day, which will
vary with fluctuations in a 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 ___% for each Select Portfolio
Series or ___% for each Portfolio Series. 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 your 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 ___% for each Select Portfolio Series and ____% for each
Portfolio Series 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 a Trust's operating expenses and those fees described
above, each Trust may also incur the following charges:
- All legal and annual auditing expenses of the Trustee according to its
responsibilities under the Indenture;
- The expenses and costs incurred by the Trustee to protect a Trust and
your rights and interests;
- Fees for any extraordinary services the Trustee performed under the
Indenture;
- Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of a Trust;
- Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of a
Trust; and/or
- All taxes and other government charges imposed upon the Securities or
any part of a Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
the Trusts. Since the Securities are all common stocks and dividend
income is unpredictable, we cannot guarantee that dividends will be
sufficient to meet any or all expenses of the Trusts. If there is not
enough cash in the Income or Capital Account, the Trustee has the power
to sell Securities in a Trust to make cash available to pay these
charges which may result in capital gains or losses to you. See "Tax
Status."
Each Portfolio Series will be audited annually. So long as we are making
a secondary market for Units, we will bear the cost of these annual
audits to the extent the costs exceed $0.0050 per Unit. Otherwise, each
Portfolio Series will pay for the audit. You can request a copy of the
audited financial statements from the Trustee.
Page 42
Tax Status
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trusts. This section is current as
of the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe your state or foreign taxes. As
with any investment, you should consult your own tax professional about
your particular consequences.
Trust Status.
The Trusts will not be taxed as corporations for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of the Securities and other assets held by your Trust, and
as such you will be considered to have received a pro rata share of
income (i.e., dividends and capital gains, if any) from each Security
when such income is considered to be received by your Trust. This is
true even if you elect to have your distributions automatically
reinvested into additional Units. In addition, the income from a Trust
which you must take into account for federal income tax purposes is not
reduced by amounts used to pay Trust expenses (including the deferred
sales charge, if any).
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
among each Security or other Trust asset ratably according to their
value on the date you purchase your Units. In certain circumstances,
however, you may have to adjust your tax basis after you purchase your
Units (for example, in the case of certain dividends that exceed a
corporation's accumulated earnings and profits).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the lowest
tax bracket). 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. Because each
Select Portfolio Series has a maturity of approximately 18 months, the
reduction in the capital gains rate for property held for more than five
years could only possibly apply to your interest in those securities if
you are eligible for and elect to receive an in-kind distribution at
redemption or termination. Net capital gain equals net long-term
capital gain minus net short-term capital loss for the taxable year.
Capital gain or loss is long-term if the holding period for the asset is
more than one year and is short-term if the holding period for the asset
is one year or less. You must exclude the date you purchase your Units
to determine the holding period of your Units. The tax rates for capital
gains realized from assets held for one year or less are generally the
same as for ordinary income. The tax code may, however, treat certain
capital gains as ordinary income in special situations.
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 a 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 stock plus, possibly, cash.
You will not recognize gain or loss if you only receive Securities in
exchange for your pro rata portion of the Securities held by a Trust.
However, if you also receive cash in exchange for a fractional share of
a Security held by a Trust, you will generally recognize gain or loss
based on the difference between the amount of cash you receive and your
tax basis in such fractional share of the Security.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of a Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by a Trust to the same extent as if you directly
Page 43
paid the expense. You may, however, be required to treat some or all of
the expenses of the Trusts as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Foreign, State and Local Taxes.
Some distributions by a Trust may be subject to foreign withholding
taxes. Any dividends withheld will nevertheless be treated as income to
you. However, because you are deemed to have paid directly your share of
foreign taxes that have been paid or accrued by a Trust, you may be
entitled to a foreign tax credit or deduction for U.S. tax purposes with
respect to such taxes.
Under the existing income tax laws of the State and City of New York,
the Trusts will not be taxed as corporations, and the income of the
Trusts will be treated as the income of the Unit holders in the same
manner as for federal income tax purposes.
Retirement Plans
You may purchase Units of the Trusts for:
- Individual Retirement Accounts;
- Keogh Plans;
- Pension funds; and
- Other tax-deferred retirement plans.
Generally, the federal income tax on capital gains and income received
in each of the above plans is deferred until you receive distributions.
These distributions are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred rollover
treatment. Before participating in a plan like this, you should review
the tax laws regarding these plans and consult your attorney or tax
advisor. Brokerage firms and other financial institutions offer these
plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
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
uncertificated form.
Certificated Units. When you purchase your Units you can request that
they be evidenced by certificates, which will be delivered shortly after
your order. Certificates will be issued in fully registered form,
transferable only on the books of the Trustee in denominations of one
Unit or any multiple thereof. You can transfer or redeem your
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with your
signature guaranteed by an eligible institution. In certain cases the
Trustee may require additional documentation before they will transfer
or redeem your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- A written initial transaction statement containing a description of
the Trust;
- A list of the number of Units issued or transferred;
- Your name, address and Taxpayer Identification Number ("TIN");
- A notation of any liens or restrictions of the issuer and any adverse
claims; and
- The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of income (if any)
distributed. After the end of each calendar year, the Trustee will
Page 44
provide you with the following information:
- A summary of transactions in your Trust for the year;
- A list of any Securities sold during the year and the Securities held
at the end of that year by your Trust;
- The Redemption Price per Unit, computed on the 31st day of December of
such year (or the last business day before); and
- Amounts of income and capital distributed during the year.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Income and Capital Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit dividends received on a
Trust's Securities to the Income Account of such Trust. All other
receipts, such as return of capital, are credited to the Capital Account
of such Trust.
The Trustee will distribute any net income in the Income Account on or
near the Income Distribution Dates to Unit holders of record on the
preceding Income Distribution Record Date. See "Summary of Essential
Information." No income distribution will be paid if accrued expenses of
a Trust exceed amounts in the Income Account on the Income Distribution
Dates. Distribution amounts will vary with changes in a Trust's fees and
expenses, in dividends received and with the sale of Securities. The
Trustee will distribute amounts in the Capital Account, net of amounts
designated to meet redemptions, pay the deferred sales charge or pay
expenses on the last day of each month to Unit holders of record on the
fifteenth day of each month provided the amount equals at least $1.00
per 100 Units. If the Trustee does not have your TIN, it is required to
withhold a certain percentage of your distribution and deliver such
amount to the Internal Revenue Service ("IRS"). You may recover this
amount by giving your TIN to the Trustee, or when you file a tax return.
However, you should check your statements to make sure the Trustee has
your TIN to avoid this "back-up withholding."
We anticipate that there will be enough money in the Capital Account of
a Trust to pay the deferred sales charge. If not, the Trustee may sell
Securities to meet the shortfall.
Within a reasonable time after a Trust is terminated, you will receive
the pro rata share of the money from the sale of the Securities.
However, if you are eligible, you may elect to receive an In-Kind
Distribution as described under "Amending or Terminating the Indenture."
You will receive a pro rata share of any other assets remaining in your
Trust after deducting any unpaid expenses.
The Trustee may establish reserves (the "Reserve Account") within a
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of such Trust.
Distribution Reinvestment Option. You may elect to have each
distribution of income and/or capital reinvested into additional Units
of your Trust by notifying the Trustee at least 10 days before any
Record Date. Each later distribution of income and/or capital on your
Units will be reinvested by the Trustee into additional Units of your
Trust. There is no transactional sales charge on Units acquired through
the Distribution Reinvestment Option, as discussed under "Public
Offering." This option may not be available in all states. PLEASE NOTE
THAT EVEN IF YOU REINVEST DISTRIBUTIONS, THEY ARE STILL CONSIDERED
DISTRIBUTIONS FOR INCOME TAX PURPOSES.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by sending the
certificates representing the Units you want to redeem to the Trustee at
its unit investment trust office. If your Units are uncertificated, you
need only deliver a request for redemption to the Trustee. In either
case, the certificates or the redemption request must be properly
endorsed with proper instruments of transfer and signature guarantees as
explained in "Rights of Unit Holders-Unit Ownership" (or by providing
satisfactory indemnity if the certificates were lost, stolen, or
destroyed). No redemption fee will be charged, but you are responsible
for any governmental charges that apply. Three business days after the
day you tender your Units (the "Date of Tender") you will receive cash
in an amount for each Unit equal to the Redemption Price per Unit
calculated at the Evaluation Time on the Date of Tender.
Page 45
The Date of Tender is considered to be the date on which the Trustee
receives your certificates or redemption request (if such day is a day
the NYSE is open for trading). However, if your certificates or
redemption request are received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing income will be withdrawn
from the Income Account if funds are available for that purpose, or from
the Capital Account. All other amounts paid on redemption will be taken
from the Capital Account. The IRS will require the Trustee to withhold a
portion of your redemption proceeds if it does not have your TIN, as
generally discussed under "Income and Capital Distributions."
If you tender 1,000 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 a Trust's Mandatory Termination Date will be
honored. Where possible, the Trustee will make an In-Kind Distribution
by distributing each of the Securities in book-entry form to your bank
or broker/dealer account at the Depository Trust Company. The Trustee
will subtract any customary transfer and registration charges from your
In-Kind Distribution. As a tendering Unit holder, you will receive your
pro rata number of whole shares of the Securities that make up the
portfolio, and cash from the Capital Account equal to the fractional
shares to which you are entitled.
The Trustee may sell Securities to make funds available for redemption.
If Securities are sold, the size and diversification of a Trust will be
reduced. These sales may result in lower prices than if the Securities
were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- If the NYSE is closed (other than customary weekend and holiday
closings);
- If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Income and Capital Accounts of a Trust not designated to
purchase Securities;
2. the aggregate value of the Securities held in a Trust; and
3. dividends receivable on the Securities trading ex-dividend as of the
date of computation; and
deducting
1. any applicable taxes or governmental charges that need to be paid out
of a Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of a Trust, if any;
4. cash held for distribution to Unit holders of record of a Trust as of
the business day before the evaluation being made;
5. liquidation costs for foreign Securities, if any; and
6. other liabilities incurred by a Trust; and
dividing
1. the result by the number of outstanding Units of a Trust.
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."
Removing Securities from a Trust
The portfolios of the Trusts are not managed. However, we may, but are
not required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- The issuer of the Security defaults in the payment of a declared
dividend;
- Any action or proceeding prevents the payment of dividends;
- There is any legal question or impediment affecting the Security;
Page 46
- The issuer of the Security has breached a covenant which would affect
the payment of dividends, the issuer's credit standing, or otherwise
damage the sound investment character of the Security;
- The issuer has defaulted on the payment of any other of its
outstanding obligations;
- There has been a public tender offer made for a Security or a merger
or acquisition is announced affecting a Security, and that in our
opinion the sale or tender of the Security is in the best interest of
Unit holders; or
- The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to a Trust.
Except in the limited instance in which a Trust acquires Replacement
Securities, as described in "The FT Series," a Trust may not acquire any
securities or other property other than the Securities. The Trustee, on
behalf of the Trusts, will reject any offer for new or exchanged
securities or property in exchange for a Security, such as those
acquired in a merger or other transaction. If such exchanged securities
or property are nevertheless acquired by a Trust, at our instruction,
they will either be sold or held in such Trust. In making the
determination as to whether to sell or hold the exchanged securities or
property we may get advice from each Portfolio Supervisor. Any proceeds
received from the sale of Securities, exchanged securities or property
will be credited to the Capital Account for distribution to Unit holders
or to meet redemption requests. The Trustee may retain and pay us or an
affiliate of ours to act as agent for a Trust to facilitate selling
Securities, exchanged securities or property from the Trusts. If we or
our affiliate act in this capacity, we will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Securities designated by us or, absent our
direction, at its own discretion, in order to meet redemption requests
or pay expenses. In designating Securities to be sold, we will try to
maintain the proportionate relationship among the Securities. If this is
not possible, the composition and diversification of a Trust may be
changed. To get the best price for a Trust we may specify minimum
amounts (generally 100 shares) in which blocks of Securities are to be
sold. We may consider sales of units of unit investment trusts which we
sponsor when we make recommendations to the Trustee as to which
broker/dealers they select to execute a Trust's portfolio transactions,
or when acting as agent for a Trust in acquiring or selling Securities
on behalf of the Trusts.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- To cure ambiguities;
- To correct or supplement any defective or inconsistent provision;
- To make any amendment required by any governmental agency; or
- To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, the Trusts will terminate on
the Mandatory Termination Date as stated in the "Summary of Essential
Information" for each Trust. The Trusts may be terminated earlier:
- Upon the consent of 100% of the Unit holders of a Trust;
- If the value of the Securities owned by a Trust as shown by any
evaluation is less than the lower of $2,000,000 or 20% of the total
value of Securities deposited in such Trust during the initial offering
period ("Discretionary Liquidation Amount"); or
- In the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination, the Trustee will send written notice to all Unit
holders which will specify how you should tender your certificates, if
any, to the Trustee. If a Trust is terminated due to this last reason,
we will refund your entire transactional sales charge; however,
termination of a Trust before the Mandatory Termination Date for any
other stated reason will result in all remaining unpaid deferred sales
charges on your Units being deducted from your termination proceeds. For
various reasons, a Trust may be reduced below the Discretionary
Liquidation Amount and could therefore be terminated before the
Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
Page 47
connection with the termination of a Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Securities. Because the Trustee must sell the Securities within a
relatively short period of time, the sale of Securities as part of the
termination process may result in a lower sales price than might
otherwise be realized if such sale were not required at this time.
If you own at least 1,000 Units of a Trust the Trustee will send you a
form at least 30 days prior to the Mandatory Termination Date which will
enable you to receive an In-Kind Distribution (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 such Trust is
terminated. Regardless of the distribution involved, the Trustee will
deduct from the Trusts any accrued costs, expenses, advances or
indemnities provided for by the Indenture, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to pay any taxes or other governmental charges.
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- The First Trust Combined Series
- FT Series (formerly known as The First Trust Special Situations Trust)
- The First Trust Insured Corporate Trust
- The First Trust of Insured Municipal Bonds
- The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $27 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1999, the total partners' capital of
Nike Securities L.P. was $19,881,035 (audited).
This information refers only to us and not to the Trusts or to any
series of the Trusts or to any other dealer. We are including this
information only to inform you of our financial responsibility and our
ability to carry out our contractual obligations. We will provide more
detailed financial information on request.
Code of Ethics. The Sponsor and the Trusts have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to the Trusts.
The Trustee.
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th Floor, New York, New
York, 10004-2413. If you have questions regarding the Trusts, you may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee has not participated in selecting the Securities for the
Trusts; it only provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
Page 48
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC;
- Terminate the Indenture and liquidate the Trusts; or
- Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel, as well as special New York tax
counsel for the Trusts.
Experts.
Ernst & Young LLP, independent auditors, have audited the Trusts'
statements of net assets, including the schedules of investments, at the
opening of business on the Initial Date of Deposit, as set forth in
their report. We've included the Trusts' statements of net assets,
including the schedules of investments, in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
Page 49
This page is intentionally left blank.
Page 50
This page is intentionally left blank.
Page 51
FIRST TRUST (R)
COMMUNICATIONS SELECT PORTFOLIO, SERIES 8
ENERGY SELECT PORTFOLIO, SERIES 9
FINANCIAL SERVICES SELECT PORTFOLIO, SERIES 10
INTERNET SELECT PORTFOLIO, SERIES 12
LEADING BRANDS SELECT PORTFOLIO, SERIES 9
PHARMACEUTICAL SELECT PORTFOLIO, SERIES 11
TECHNOLOGY SELECT PORTFOLIO, SERIES 14
COMMUNICATIONS PORTFOLIO, SERIES 8
ENERGY PORTFOLIO, SERIES 9
FINANCIAL SERVICES PORTFOLIO, SERIES 10
INTERNET PORTFOLIO, SERIES 12
LEADING BRANDS PORTFOLIO, SERIES 9
PHARMACEUTICAL PORTFOLIO, SERIES 11
REIT GROWTH & INCOME PORTFOLIO, SERIES 4
TECHNOLOGY PORTFOLIO, SERIES 14
FT 500
Sponsor:
NIKE SECURITIES L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to the above-mentioned
unit investment trusts, but does not contain all of the information
about this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- Securities Act of 1933 (file no. 333-_____) and
- Investment Company Act of 1940 (file no. 811-05903)
Information about the Trusts, including their Codes of Ethics, can be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington D.C. Information regarding the operation of
the Commission's Public Reference Room may be obtained by calling the
Commission at 1-202-942-8090.
Information about the Trusts, including their Codes of Ethics, 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]
January __, 2001
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 52
First Trust (R)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of unit investment trusts ("Trusts")
contained in FT 500 not found in the prospectus for the Trusts. This
Information Supplement is not a prospectus and does not include all of
the information that a prospective investor should consider before
investing in a Trust. This Information Supplement should be read in
conjunction with the prospectus for the Trust in which an investor is
considering investing.
This Information Supplement is dated January __, 2001. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors
Securities 1
Dividends 1
Foreign Issuers 1
Litigation
Microsoft Corporation 2
Concentrations
Communications 2
Consumer Products 3
Energy 3
Financial Services 4
Pharmaceutical 7
Real Estate Investment Trusts 7
Technology 8
Portfolios
Communications 9
Energy 10
Financial Services 10
Internet 11
Leading Brands 11
Pharmaceutical 12
REIT Growth & Income 13
Technology 13
Risk Factors
Securities. An investment in Units should be made with an understanding
of the risks which an investment in common stocks entails, including the
risk that the financial condition of the issuers of the Securities or
the general condition of the relevant stock market may worsen, and the
value of the Securities and therefore the value of the Units may
decline. Common stocks are especially susceptible to general stock
market movements and to volatile increases and decreases of value, as
market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors, including expectations
regarding government, economic, monetary and fiscal policies, inflation
and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Both U.S. and foreign
markets have experienced substantial volatility and significant declines
recently as a result of certain or all of these factors.
Dividends. Shareholders of common stocks have rights to receive payments
from the issuers of those common stocks that are generally subordinate
to those of creditors of, or holders of debt obligations or preferred
stocks of, such issuers. Common stocks do not represent an obligation of
the issuer and, therefore, do not offer any assurance of income or
provide the same degree of protection of capital as do debt securities.
The issuance of additional debt securities or preferred stock will
create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the issuer
to declare or pay dividends on its common stock or the rights of holders
of common stock with respect to assets of the issuer upon liquidation or
bankruptcy.
Foreign Issuers. Since certain of the Securities included in certain
Trusts consist of securities of foreign issuers, an investment in the
Page 1
Trusts involves certain investment risks that are different in some
respects from an investment in a trust which invests entirely in the
securities of domestic issuers. These investment risks include future
political or governmental restrictions which might adversely affect the
payment or receipt of payment of dividends on the relevant Securities,
the possibility that the financial condition of the issuers of the
Securities may become impaired or that the general condition of the
relevant stock market may worsen (both of which would contribute
directly to a decrease in the value of the Securities and thus in the
value of the Units), the limited liquidity and relatively small market
capitalization of the relevant securities market, expropriation or
confiscatory taxation, economic uncertainties and foreign currency
devaluations and fluctuations. In addition, for foreign issuers that are
not subject to the reporting requirements of the Securities Exchange Act
of 1934, there may be less publicly available information than is
available from a domestic issuer. Also, foreign issuers are not
necessarily subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those
applicable to domestic issuers. The securities of many foreign issuers
are less liquid and their prices more volatile than securities of
comparable domestic issuers. In addition, fixed brokerage commissions
and other transaction costs on foreign securities exchanges are
generally higher than in the United States and there is generally less
government supervision and regulation of exchanges, brokers and issuers
in foreign countries than there is in the United States. However, due to
the nature of the issuers of the Securities selected for the Trusts, the
Sponsor believes that adequate information will be available to allow
the Supervisor to provide portfolio surveillance for the Trusts.
Securities issued by non-U.S. issuers generally pay dividends in foreign
currencies and are principally traded in foreign currencies. Therefore,
there is a risk that the U.S. dollar value of these securities will vary
with fluctuations in the U.S. dollar foreign exchange rates for the
various Securities.
On the basis of the best information available to the Sponsor at the
present time, none of the Securities in the Trusts are subject to
exchange control restrictions under existing law which would materially
interfere with payment to the Trusts of dividends due on, or proceeds
from the sale of, the Securities. However, there can be no assurance
that exchange control regulations might not be adopted in the future
which might adversely affect payment to the Trusts. The adoption of
exchange control regulations and other legal restrictions could have an
adverse impact on the marketability of international securities in the
Trusts and on the ability of the Trusts to satisfy its obligation to
redeem Units tendered to the Trustee for redemption. In addition,
restrictions on the settlement of transactions on either the purchase or
sale side, or both, could cause delays or increase the costs associated
with the purchase and sale of the foreign Securities and correspondingly
could affect the price of the Units.
Investors should be aware that it may not be possible to buy all
Securities at the same time because of the unavailability of any
Security, and restrictions applicable to the Trusts relating to the
purchase of a Security by reason of the federal securities laws or
otherwise.
Foreign securities generally have not been registered under the
Securities Act of 1933 and may not be exempt from the registration
requirements of such Act. Sales of non-exempt Securities by a Trust in
the United States securities markets are subject to severe restrictions
and may not be practicable. Accordingly, sales of these Securities by
the Trusts will generally be effected only in foreign securities
markets. Although the Sponsor does not believe that the Trusts will
encounter obstacles in disposing of the Securities, investors should
realize that the Securities may be traded in foreign countries where the
securities markets are not as developed or efficient and may not be as
liquid as those in the United States. The value of the Securities will
be adversely affected if trading markets for the Securities are limited
or absent.
Litigation
Microsoft Corporation. Microsoft Corporation is currently engaged in
litigation with Sun Microsystems, Inc., the U.S. Department of Justice
and several state Attorneys General. The complaints against Microsoft
include copyright infringement, unfair competition and anti-trust
violations. The claims seek injunctive relief and monetary damages. The
District Court handling the antitrust case recently held that Microsoft
exercised monopoly power in violation of the Sherman Antitrust Act and
various state antitrust laws. The court entered into a final judgment on
June 7, 2000 in which it called for Microsoft to be broken up into two
separate companies, one composed of the company's operating systems and
the other containing its applications software business. The court also
called for significant operating restrictions to be placed on the
company until such time as the separation was completed. Microsoft has
stated that it will appeal the rulings against it after the penalty
phase and final decree. It is impossible to predict what impact the
penalties will have on Microsoft or the value of its stock.
Concentrations
Communications. An investment in Units of the Communications Portfolios
should be made with an understanding of the problems and risks such an
investment may entail. The market for high-technology communications
products and services is characterized by rapidly changing technology,
rapid product obsolescence, cyclical market patterns, evolving industry
standards and frequent new product introductions. The success of the
Page 2
issuers of the Securities depends in substantial part on the timely and
successful introduction of new products and services. An unexpected
change in one or more of the technologies affecting an issuer's products
or in the market for products based on a particular technology could
have a material adverse affect on an issuer's operating results.
Furthermore, there can be no assurance that the issuers of the
Securities will be able to respond in a timely manner to compete in the
rapidly developing marketplace.
The communications industry is subject to governmental regulation.
However, as market forces develop, the government will continue to
deregulate the communications industry, promoting vigorous economic
competition and resulting in the rapid development of new communications
technologies. The products and services of communications companies may
be subject to rapid obsolescence. These factors could affect the value
of the Trusts' Units. For example, while telephone companies in the
United States are subject to both state and federal regulations
affecting permitted rates of returns and the kinds of services that may
be offered, the prohibition against phone companies delivering video
services has been lifted. This creates competition between phone
companies and cable operators and encourages phone companies to
modernize their communications infrastructure. Certain types of
companies represented in the Trusts' portfolios are engaged in fierce
competition for a share of the market for their products. As a result,
competitive pressures are intense and the stocks are subject to rapid
price volatility.
Many communications companies rely on a combination of patents,
copyrights, trademarks and trade secret laws to establish and protect
their proprietary rights in their products and technologies. There can
be no assurance that the steps taken by the issuers of the Securities to
protect their proprietary rights will be adequate to prevent
misappropriation of their technology or that competitors will not
independently develop technologies that are substantially equivalent or
superior to such issuers' technology.
Consumer Products. An investment in the Leading Brands Portfolios should
be made with an understanding of the problems and risks inherent in an
investment in the consumer products industry in general. These include
the cyclicality of revenues and earnings, changing consumer demands,
regulatory restrictions, product liability litigation and other
litigation resulting from accidents, extensive competition (including
that of low-cost foreign competition), unfunded pension fund liabilities
and employee and retiree benefit costs and financial deterioration
resulting from leveraged buy-outs, takeovers or acquisitions. In
general, expenditures on consumer products will be affected by the
economic health of consumers. A weak economy with its consequent effect
on consumer spending would have an adverse effect on consumer products
companies. Other factors of particular relevance to the profitability of
the industry are the effects of increasing environmental regulation on
packaging and on waste disposal, the continuing need to conform with
foreign regulations governing packaging and the environment, the outcome
of trade negotiations and the effect on foreign subsidies and tariffs,
foreign exchange rates, the price of oil and its effect on energy costs,
inventory cutbacks by retailers, transportation and distribution costs,
health concerns relating to the consumption of certain products, the
effect of demographics on consumer demand, the availability and cost of
raw materials and the ongoing need to develop new products and to
improve productivity.
Energy. An investment in Units of the Energy Portfolios should be made
with an understanding of the problems and risks such an investment may
entail. The Energy Portfolios invest in Securities of companies involved
in the energy industry. The business activities of companies held in the
Energy Portfolios may include: production, generation, transmission,
marketing, control, or measurement of gas and oil; the provision of
component parts or services to companies engaged in the above
activities; energy research or experimentation; and environmental
activities related to the solution of energy problems, such as energy
conservation and pollution control.
The securities of companies in the energy field are subject to changes
in value and dividend yield which depend, to a large extent, on the
price and supply of energy fuels. Swift price and supply fluctuations
may be caused by events relating to international politics, energy
conservation, the success of exploration projects, and tax and other
regulatory policies of various governments. As a result of the
foregoing, the Securities in the Energy Portfolios may be subject to
rapid price volatility. The Sponsor is unable to predict what impact the
foregoing factors will have on the Securities during the life of the
Energy Portfolios.
According to the U.S. Department of Commerce, the factors which will
most likely shape the energy industry include the price and availability
of oil from the Middle East, changes in U.S. environmental policies and
the continued decline in U.S. production of crude oil. Possible effects
of these factors may be increased U.S. and world dependence on oil from
the Organization of Petroleum Exporting Countries ("OPEC") and highly
uncertain and potentially more volatile oil prices. Factors which the
Sponsor believes may increase the profitability of oil and petroleum
operations include increasing demand for oil and petroleum products as a
result of the continued increases in annual miles driven and the
improvement in refinery operating margins caused by increases in average
domestic refinery utilization rates. The existence of surplus crude oil
production capacity and the willingness to adjust production levels are
the two principal requirements for stable crude oil markets. Without
excess capacity, supply disruptions in some countries cannot be
compensated for by others. Surplus capacity in Saudi Arabia and a few
other countries and the utilization of that capacity prevented, during
the Persian Gulf crisis, and continues to prevent, severe market
disruption. Although unused capacity contributed to market stability in
1990 and 1991, it ordinarily creates pressure to overproduce and
Page 3
contributes to market uncertainty. The restoration of a large portion of
Kuwait and Iraq's production and export capacity could lead to such a
development in the absence of substantial growth in world oil demand.
Formerly, OPEC members attempted to exercise control over production
levels in each country through a system of mandatory production quotas.
Because of the 1990-1991 crisis in the Middle East, the mandatory system
has since been replaced with a voluntary system. Production under the
new system has had to be curtailed on at least one occasion as a result
of weak prices, even in the absence of supplies from Kuwait and Iraq.
The pressure to deviate from mandatory quotas, if they are reimposed, is
likely to be substantial and could lead to a weakening of prices. In the
longer term, additional capacity and production will be required to
accommodate the expected large increases in world oil demand and to
compensate for expected sharp drops in U.S. crude oil production and
exports from the Soviet Union. Only a few OPEC countries, particularly
Saudi Arabia, have the petroleum reserves that will allow the required
increase in production capacity to be attained. Given the large-scale
financing that is required, the prospect that such expansion will occur
soon enough to meet the increased demand is uncertain.
Declining U.S. crude oil production will likely lead to increased
dependence on OPEC oil, putting refiners at risk of continued and
unpredictable supply disruptions. Increasing sensitivity to
environmental concerns will also pose serious challenges to the industry
over the coming decade. Refiners are likely to be required to make heavy
capital investments and make major production adjustments in order to
comply with increasingly stringent environmental legislation, such as
the 1990 amendments to the Clean Air Act. If the cost of these changes
is substantial enough to cut deeply into profits, smaller refiners may
be forced out of the industry entirely. Moreover, lower consumer demand
due to increases in energy efficiency and conservation, gasoline
reformulations that call for less crude oil, warmer winters or a general
slowdown in economic growth in this country and abroad could negatively
affect the price of oil and the profitability of oil companies. No
assurance can be given that the demand for or prices of oil will
increase or that any increases will not be marked by great volatility.
Some oil companies may incur large cleanup and litigation costs relating
to oil spills and other environmental damage. Oil production and
refining operations are subject to extensive federal, state and local
environmental laws and regulations governing air emissions and the
disposal of hazardous materials. Increasingly stringent environmental
laws and regulations are expected to require companies with oil
production and refining operations to devote significant financial and
managerial resources to pollution control. General problems of the oil
and petroleum products industry include the ability of a few influential
producers to significantly affect production, the concomitant volatility
of crude oil prices, increasing public and governmental concern over air
emissions, waste product disposal, fuel quality and the environmental
effects of fossil-fuel use in general.
In addition, any future scientific advances concerning new sources of
energy and fuels or legislative changes relating to the energy industry
or the environment could have a negative impact on the petroleum
products industry. While legislation has been enacted to deregulate
certain aspects of the oil industry, no assurances can be given that new
or additional regulations will not be adopted. Each of the problems
referred to could adversely affect the financial stability of the
issuers of any petroleum industry stocks in each of the Energy Portfolios.
Financial Services. An investment in Units of the Financial Services
Portfolios should be made with an understanding of the problems and
risks inherent in the bank and financial services sector in general.
Banks, thrifts and their holding companies are especially subject to the
adverse effects of economic recession, volatile interest rates,
portfolio concentrations in geographic markets and in commercial and
residential real estate loans, and competition from new entrants in
their fields of business. Banks and thrifts are highly dependent on net
interest margin. Recently, bank profits have come under pressure as net
interest margins have contracted, but volume gains have been strong in
both commercial and consumer products. There is no certainty that such
conditions will continue. Bank and thrift institutions had received
significant consumer mortgage fee income as a result of activity in
mortgage and refinance markets. As initial home purchasing and
refinancing activity subsided, this income diminished. Economic
conditions in the real estate markets, which have been weak in the past,
can have a substantial effect upon banks and thrifts because they
generally have a portion of their assets invested in loans secured by
real estate. Banks, thrifts and their holding companies are subject to
extensive federal regulation and, when such institutions are state-
chartered, to state regulation as well. Such regulations impose strict
capital requirements and limitations on the nature and extent of
business activities that banks and thrifts may pursue. Furthermore, bank
regulators have a wide range of discretion in connection with their
supervisory and enforcement authority and may substantially restrict the
permissible activities of a particular institution if deemed to pose
significant risks to the soundness of such institution or the safety of
the federal deposit insurance fund. Regulatory actions, such as
increases in the minimum capital requirements applicable to banks and
thrifts and increases in deposit insurance premiums required to be paid
by banks and thrifts to the Federal Deposit Insurance Corporation
("FDIC"), can negatively impact earnings and the ability of a company to
pay dividends. Neither federal insurance of deposits nor governmental
regulations, however, insures the solvency or profitability of banks or
their holding companies, or insures against any risk of investment in
the securities issued by such institutions.
The statutory requirements applicable to and regulatory supervision of
banks, thrifts and their holding companies have increased significantly
Page 4
and have undergone substantial change in recent years. To a great
extent, these changes are embodied in the Financial Institutions Reform,
Recovery and Enforcement Act; enacted in August 1989, the Federal
Deposit Insurance Corporation Improvement Act of 1991, the Resolution
Trust Corporation Refinancing, Restructuring, and Improvement Act of
1991 and the regulations promulgated under these laws. Many of the
regulations promulgated pursuant to these laws have only recently been
finalized and their impact on the business, financial condition and
prospects of the Securities in the Trusts' portfolios cannot be
predicted with certainty. The recently enacted Gramm-Leach-Bliley Act
repealed most of the barriers set up by the 1933 Glass-Steagall Act
which separated the banking, insurance and securities industries. Now
banks, insurance companies and securities firms can merge to form one-
stop financial conglomerates marketing a wide range of financial service
products to investors. This legislation will likely result in increased
merger activity and heightened competition among existing and new
participants in the field. Efforts to expand the ability of federal
thrifts to branch on an interstate basis have been initially successful
through promulgation of regulations, and legislation to liberalize
interstate banking has recently been signed into law. Under the
legislation, banks will be able to purchase or establish subsidiary
banks in any state, one year after the legislation's enactment. Since
mid-1997, banks have been allowed to turn existing banks into branches.
Consolidation is likely to continue. The Securities and Exchange
Commission and the Financial Accounting Standards Board require the
expanded use of market value accounting by banks and have imposed rules
requiring market accounting for investment securities held in trading
accounts or available for sale. Adoption of additional such rules may
result in increased volatility in the reported health of the industry,
and mandated regulatory intervention to correct such problems.
Additional legislative and regulatory changes may be forthcoming. For
example, the bank regulatory authorities have proposed substantial
changes to the Community Reinvestment Act and fair lending laws, rules
and regulations, and there can be no certainty as to the effect, if any,
that such changes would have on the Securities in the Trusts'
portfolios. In addition, from time to time the deposit insurance system
is reviewed by Congress and federal regulators, and proposed reforms of
that system could, among other things, further restrict the ways in
which deposited moneys can be used by banks or reduce the dollar amount
or number of deposits insured for any depositor. Such reforms could
reduce profitability as investment opportunities available to bank
institutions become more limited and as consumers look for savings
vehicles other than bank deposits. Banks and thrifts face significant
competition from other financial institutions such as mutual funds,
credit unions, mortgage banking companies and insurance companies, and
increased competition may result from legislative broadening of regional
and national interstate banking powers as has been recently enacted.
Among other benefits, the legislation allows banks and bank holding
companies to acquire across previously prohibited state lines and to
consolidate their various bank subsidiaries into one unit. The Sponsor
makes no prediction as to what, if any, manner of bank and thrift
regulatory actions might ultimately be adopted or what ultimate effect
such actions might have on the Trusts' portfolios.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5%
of the outstanding shares of any class of voting securities of a bank or
bank holding company, (2) acquiring control of a bank or another bank
holding company, (3) acquiring all or substantially all the assets of a
bank, or (4) merging or consolidating with another bank holding company,
without first obtaining Federal Reserve Board ("FRB") approval. In
considering an application with respect to any such transaction, the FRB
is required to consider a variety of factors, including the potential
anti-competitive effects of the transaction, the financial condition and
future prospects of the combining and resulting institutions, the
managerial resources of the resulting institution, the convenience and
needs of the communities the combined organization would serve, the
record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the
prospective availability to the FRB of information appropriate to
determine ongoing regulatory compliance with applicable banking laws. In
addition, the federal Change In Bank Control Act and various state laws
impose limitations on the ability of one or more individuals or other
entities to acquire control of banks or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends
by bank holding companies. In the policy statement, the FRB expressed
its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends which exceed its net income or which could
only be funded in ways that would weaken its financial health, such as
by borrowing. The FRB also may impose limitations on the payment of
dividends as a condition to its approval of certain applications,
including applications for approval of mergers and acquisitions. The
Sponsor makes no prediction as to the effect, if any, such laws will
have on the Securities or whether such approvals, if necessary, will be
obtained.
Companies involved in the insurance industry are engaged in
underwriting, reinsuring, selling, distributing or placing of property
and casualty, life or health insurance. Other growth areas within the
insurance industry include brokerage, reciprocals, claims processors and
multiline insurance companies. Insurance company profits are affected by
interest rate levels, general economic conditions, and price and
marketing competition. Property and casualty insurance profits may also
be affected by weather catastrophes and other disasters. Life and health
insurance profits may be affected by mortality and morbidity rates.
Individual companies may be exposed to material risks including reserve
Page 5
inadequacy and the inability to collect from reinsurance carriers.
Insurance companies are subject to extensive governmental regulation,
including the imposition of maximum rate levels, which may not be
adequate for some lines of business. Proposed or potential tax law
changes may also adversely affect insurance companies' policy sales, tax
obligations, and profitability. In addition to the foregoing, profit
margins of these companies continue to shrink due to the commoditization
of traditional businesses, new competitors, capital expenditures on new
technology and the pressures to compete globally.
In addition to the normal risks of business, companies involved in the
insurance industry are subject to significant risk factors, including
those applicable to regulated insurance companies, such as: (i) the
inherent uncertainty in the process of establishing property-liability
loss reserves, particularly reserves for the cost of environmental,
asbestos and mass tort claims, and the fact that ultimate losses could
materially exceed established loss reserves which could have a material
adverse effect on results of operations and financial condition; (ii)
the fact that insurance companies have experienced, and can be expected
in the future to experience, catastrophe losses which could have a
material adverse impact on their financial condition, results of
operations and cash flow; (iii) the inherent uncertainty in the process
of establishing property-liability loss reserves due to changes in loss
payment patterns caused by new claims settlement practices; (iv) the
need for insurance companies and their subsidiaries to maintain
appropriate levels of statutory capital and surplus, particularly in
light of continuing scrutiny by rating organizations and state insurance
regulatory authorities, and in order to maintain acceptable financial
strength or claims-paying ability rating; (v) the extensive regulation
and supervision to which insurance companies' subsidiaries are subject,
various regulatory initiatives that may affect insurance companies, and
regulatory and other legal actions; (vi) the adverse impact that
increases in interest rates could have on the value of an insurance
company's investment portfolio and on the attractiveness of certain of
its products; (vii) the need to adjust the effective duration of the
assets and liabilities of life insurance operations in order to meet the
anticipated cash flow requirements of its policyholder obligations; and
(vii) the uncertainty involved in estimating the availability of
reinsurance and the collectibility of reinsurance recoverables.
The state insurance regulatory framework has, during recent years, come
under increased federal scrutiny, and certain state legislatures have
considered or enacted laws that alter and, in many cases, increase state
authority to regulate insurance companies and insurance holding company
systems. Further, the National Association of Insurance Commissioners
("NAIC") and state insurance regulators are re-examining existing laws
and regulations, specifically focusing on insurance companies,
interpretations of existing laws and the development of new laws. In
addition, Congress and certain federal agencies have investigated the
condition of the insurance industry in the United States to determine
whether to promulgate additional federal regulation. The Sponsor is
unable to predict whether any state or federal legislation will be
enacted to change the nature or scope of regulation of the insurance
industry, or what effect, if any, such legislation would have on the
industry.
All insurance companies are subject to state laws and regulations that
require diversification of their investment portfolios and limit the
amount of investments in certain investment categories. Failure to
comply with these laws and regulations would cause non-conforming
investments to be treated as non-admitted assets for purposes of
measuring statutory surplus and, in some instances, would require
divestiture.
Environmental pollution clean-up is the subject of both federal and
state regulation. By some estimates, there are thousands of potential
waste sites subject to clean up. The insurance industry is involved in
extensive litigation regarding coverage issues. The Comprehensive
Environmental Response Compensation and Liability Act of 1980
("Superfund") and comparable state statutes ("mini-Superfund") govern
the clean-up and restoration by "Potentially Responsible Parties"
("PRP's"). Superfund and the mini-Superfunds ("Environmental Clean-up
Laws or "ECLs") establish a mechanism to pay for clean-up of waste sites
if PRP's fail to do so, and to assign liability to PRP's. The extent of
liability to be allocated to a PRP is dependent on a variety of factors.
The extent of clean-up necessary and the assignment of liability has not
been fully established. The insurance industry is disputing many such
claims. Key coverage issues include whether Superfund response costs are
considered damages under the policies, when and how coverage is
triggered, applicability of pollution exclusions, the potential for
joint and several liability and definition of an occurrence. Similar
coverage issues exist for clean up and waste sites not covered under
Superfund. To date, courts have been inconsistent in their rulings on
these issues. An insurer's exposure to liability with regard to its
insureds which have been, or may be, named as PRPs is uncertain.
Superfund reform proposals have been introduced in Congress, but none
have been enacted. There can be no assurance that any Superfund reform
legislation will be enacted or that any such legislation will provide
for a fair, effective and cost-efficient system for settlement of
Superfund related claims.
While current federal income tax law permits the tax-deferred
accumulation of earnings on the premiums paid by an annuity owner and
holders of certain savings-oriented life insurance products, no
assurance can be given that future tax law will continue to allow such
tax deferrals. If such deferrals were not allowed, consumer demand for
the affected products would be substantially reduced. In addition,
proposals to lower the federal income tax rates through a form of flat
tax or otherwise could have, if enacted, a negative impact on the demand
for such products.
Page 6
Companies engaged in investment banking/brokerage and investment
management include brokerage firms, broker/dealers, investment banks,
finance companies and mutual fund companies. Earnings and share prices
of companies in this industry are quite volatile, and often exceed the
volatility levels of the market as a whole. Recently, ongoing
consolidation in the industry and the strong stock market has benefited
stocks which investors believe will benefit from greater investor and
issuer activity. Major determinants of future earnings of these
companies are the direction of the stock market, investor confidence,
equity transaction volume, the level and direction of long-term and
short-term interest rates, and the outlook for emerging markets.
Negative trends in any of these earnings determinants could have a
serious adverse effect on the financial stability, as well as the stock
prices, of these companies. Furthermore, there can be no assurance that
the issuers of the Securities included in the Financial Services
Portfolios will be able to respond in a timely manner to compete in the
rapidly developing marketplace. In addition to the foregoing, profit
margins of these companies continue to shrink due to the commoditization
of traditional businesses, new competitors, capital expenditures on new
technology and the pressures to compete globally.
Pharmaceutical. An investment in Units of the Pharmaceutical Portfolios
should be made with an understanding of the problems and risks such an
investment may entail. Companies involved in advanced medical devices
and instruments, drugs and biotech have potential risks unique to their
sector of the healthcare field. These companies are subject to
governmental regulation of their products and services, a factor which
could have a significant and possibly unfavorable effect on the price
and availability of such products or services. Furthermore, such
companies face the risk of increasing competition from new products or
services, generic drug sales, the termination of patent protection for
drug or medical supply products and the risk that technological advances
will render their products obsolete. The research and development costs
of bringing a drug to market are substantial, and include lengthy
governmental review processes with no guarantee that the product will
ever come to market. Many of these companies may have losses and may not
offer certain products for several years. Such companies may also have
persistent losses during a new product's transition from development to
production, and revenue patterns may be erratic.
As the population of the United States ages, the companies involved in
the healthcare field will continue to search for and develop new drugs,
medical products and medical services through advanced technologies and
diagnostics. On a worldwide basis, such companies are involved in the
development and distributions of drugs, vaccines, medical products and
medical services. These activities may make the
biotechnology/pharmaceuticals sector very attractive for investors
seeking the potential for growth in their investment portfolio. However,
there are no assurances that the Trusts' objectives will be met.
Legislative proposals concerning healthcare are proposed in Congress
from time to time. These proposals span a wide range of topics,
including cost and price controls (which might include a freeze on the
prices of prescription drugs). The Sponsor is unable to predict the
effect of any of these proposals, if enacted, on the issuers of
Securities in the Trusts.
Real Estate Investment Trusts ("REITs"). An investment in Units of the REIT
Growth & Income Trust should be made with an understanding of risks inherent
in an investment in REITs specifically and real estate generally (in addition
to securities market risks). Generally, these include economic recession,
the cyclical nature of real estate markets, competitive overbuilding,
unusually adverse weather conditions, changing demographics, changes in
governmental regulations (including tax laws and environmental, building,
zoning and sales regulations), increases in real estate taxes or costs of
material and labor, the inability to secure performance guarantees or
insurance as required, the unavailability of investment capital and the
inability to obtain construction financing or mortgage loans at rates
acceptable to builders and purchasers of real estate. Additional risks
include an inability to reduce expenditures associated with a property
(such as mortgage payments and property taxes) when rental revenue declines,
and possible loss upon foreclosure of mortgaged properties if mortgage
payments are not paid when due.
REITs are financial vehicles that have as their objective the pooling of
capital from a number of investors in order to participate directly in
real estate ownership or financing. REITs are generally fully integrated
operating companies that have interests in income-producing real estate.
Equity REITs emphasize direct property investment, holding their invested
assets primarily in the ownership of real estate or other equity interests.
REITs obtain capital funds for investment in underlying real estate assets
by selling debt or equity securities in the public or institutional capital
markets or by bank borrowing. Thus, the returns on common equities of the
REITs in which the Trust invests will be significantly affected by changes
in costs of capital and, particularly in the case of highly "leveraged"
REITs (i.e., those with large amounts of borrowings outstanding), by changes
in the level of interest rates. The objective of an equity REIT is to
purchase income-producing real estate properties in order to generate high
levels of cash flow from rental income and a gradual asset appreciation, and
they typically invest in properties such as office, retail, industrial, hotel
and apartment buildings and healthcare facilities.
REITs are a creation of the tax law. REITs essentially operate as a
corporation or business trust with the advantage of exemption from corporate
income taxes provided the REIT satisfies the requirements of Sections 856
through 860 of the Internal Revenue Code. The major tests for tax-qualified
status are that the REIT (i) be managed by one or more trustees or directors,
(ii) issue shares of transferable interest to its owners, (iii) have at least
Page 7
100 shareholders, (iv) have no more than 50% of the shares held by five or
fewer individuals, (v) invest substantially all of its capital in real estate
related assets and derive substantially all of its gross income from real
estate related assets and (vi) distributed at least 95% of its taxable income
to its shareholders each year. If any REIT in the Trust's portfolio should
fail to qualify for such tax status, the related shareholders (including the
Trust) could be adversely affected by the resulting tax consequences.
The underlying value of the Securities and the Trust's ability to make
distributions to Unit holders may be adversely affected by changes in national
economic conditions, changes in local market conditions due to changes in
general or local economic conditions and neighborhood characteristics,
increased competition from other properties, obsolescence of property,
changes in the availability, cost and terms of mortgage funds, the impact
of present or future environmental legislation and compliance with
environmental laws, the ongoing need for capital improvements, particularly
in older properties, changes in real estate tax rates and other operating
expenses, regulatory and economic impediments to raising rents, adverse
changes in governmental rules and fiscal policies, dependency on management
skill, civil unrest, acts of God, including earthquakes and other natural
disasters (which may result in uninsured losses), acts of war, adverse
changes in zoning laws, and other factors which are beyond the control of
the issuers of the REITs in a Trust. The value of the REITs may at times be
particularly sensitive to devaluation in the event of rising interest rates.
REITs may concentrate investments in specific geographic areas or in specific
property types, i.e., hotels, shopping malls, residential complexes and
office buildings. The impact of economic conditions on REITs can also be
expected to vary with geographic location and property type. Investors should
be aware the REITs may not be diversified and are subject to the risks of
financing projects. REITs are also subject to defaults by borrowers, self-
liquidation, the market's perception of the REIT industry generally, and the
possibility of failing to qualify for pass-through of income under the
Internal Revenue Code, and to maintain exemption from the Investment
Company Act of 1940. A default by a borrower or lessee may cause the REIT
to experience delays in enforcing its right as mortgagee or lessor and to
incur significant costs related to protecting its investments. In addition,
because real estate generally is subject to real property taxes, the REITs
in the Trust may be adversely affected by increases or decreases in property
tax rates and assessments or reassessments of the properties underlying the
REITs by taxing authorities. Furthermore, because real estate is relatively
illiquid, the ability of REITs to vary their portfolios in response to
changes in economic and other conditions may be limited and may adversely
affect the value of the Units. There can be no assurance that any REIT will
be able to dispose of its underlying real estate assets when advantageous or
necessary.
The issuer of REITs generally maintains comprehensive insurance on presently
owned and subsequently acquired real property assets, including liability,
fire and extended coverage. However, certain types of losses may be
uninsurable or not be economically insurable as to which the underlying
properties are at risk in their particular locales. There can be no
assurance that insurance coverage will be sufficient to pay the full current
market value or current replacement cost of any lost investment. Various
factors might make it impracticable to use insurance proceeds to replace
a facility after it has been damaged or destroyed. Under such circumstances,
the insurance proceeds received by a REIT might not be adequate to restore
its economic position with respect to such property.
Under various environmental laws, a current or previous owner or operator of
real property may be liable for the costs of removal or remediation of
hazardous or toxic substances on, under or in such property. Such laws
often impose liability whether or not the owner or operator caused or
knew of the presence of such hazardous or toxic substances and whether
or not the storage of such substances was in violation of a tenant's lease.
In addition, the presence of hazardous or toxic substances, or the failure
to remediate such property properly, may adversely affect the owner's
ability to borrow using such real property as collateral. No assurance can
be given that one or more of the REITs in the Trust may not be presently
liable or potentially liable for any such costs in connection with real
estate assets they presently own or subsequently acquire while such REITs
are held in the REIT Growth & Income Portfolio.
Technology. An investment in Units of the Internet Portfolios and the
Technology Portfolios should be made with an understanding of the
characteristics of the problems and risks such an investment may entail.
Technology companies generally include companies involved in the
development, design, manufacture and sale of computers and peripherals,
software and services, data networking/communications equipment,
internet access/information providers, semiconductors and semiconductor
equipment and other related products, systems and services. The market
for these products, especially those specifically related to the
Internet, is characterized by rapidly changing technology, rapid product
obsolescence, cyclical market patterns, evolving industry standards and
frequent new product introductions. The success of the issuers of the
Securities depends in substantial part on the timely and successful
introduction of new products. An unexpected change in one or more of the
technologies affecting an issuer's products or in the market for
products based on a particular technology could have a material adverse
affect on an issuer's operating results. Furthermore, there can be no
assurance that the issuers of the Securities will be able to respond in
a timely manner to compete in the rapidly developing marketplace.
Based on trading history of common stock, factors such as announcements
of new products or development of new technologies and general
Page 8
conditions of the industry have caused and are likely to cause the
market price of high-technology common stocks to fluctuate
substantially. In addition, technology company stocks have experienced
extreme price and volume fluctuations that often have been unrelated to
the operating performance of such companies. This market volatility may
adversely affect the market price of the Securities and therefore the
ability of a Unit holder to redeem Units at a price equal to or greater
than the original price paid for such Units.
Some key components of certain products of technology issuers are
currently available only from single sources. There can be no assurance
that in the future suppliers will be able to meet the demand for
components in a timely and cost effective manner. Accordingly, an
issuer's operating results and customer relationships could be adversely
affected by either an increase in price for, or an interruption or
reduction in supply of, any key components. Additionally, many
technology issuers are characterized by a highly concentrated customer
base consisting of a limited number of large customers who may require
product vendors to comply with rigorous industry standards. Any failure
to comply with such standards may result in a significant loss or
reduction of sales. Because many products and technologies of technology
companies are incorporated into other related products, such companies
are often highly dependent on the performance of the personal computer,
electronics and telecommunications industries. There can be no assurance
that these customers will place additional orders, or that an issuer of
Securities will obtain orders of similar magnitude as past orders from
other customers. Similarly, the success of certain technology companies
is tied to a relatively small concentration of products or technologies.
Accordingly, a decline in demand of such products, technologies or from
such customers could have a material adverse impact on issuers of the
Securities.
Many technology companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their
proprietary rights in their products and technologies. There can be no
assurance that the steps taken by the issuers of the Securities to
protect their proprietary rights will be adequate to prevent
misappropriation of their technology or that competitors will not
independently develop technologies that are substantially equivalent or
superior to such issuers' technology. In addition, due to the increasing
public use of the Internet, it is possible that other laws and
regulations may be adopted to address issues such as privacy, pricing,
characteristics, and quality of Internet products and services. For
example, recent proposals would prohibit the distribution of obscene,
lascivious or indecent communications on the Internet. The adoption of
any such laws could have a material adverse impact on the Securities in
the Trusts.
Like many areas of technology, the semiconductor business environment is
highly competitive, notoriously cyclical and subject to rapid and often
unanticipated change. Recent industry downturns have resulted, in part,
from weak pricing, persistent overcapacity, slowdown in Asian demand and
a shift in retail personal computer sales toward the low end, or "sub-
$1,000" segment. Industry growth is dependent upon several factors,
including: the rate of global economic expansion; demand for products
such as personal computers and networking and communications equipment;
excess productive capacity and the resultant effect on pricing; and the
rate of growth in the market for low-priced personal computers.
Portfolios
Equity Securities Selected for Communications Select Portfolio, Series 8
and Communications Portfolio, Series 8
Both the Communications Select Portfolio, Series 8 and the
Communications Portfolio, Series 8 contain common stocks of the
following companies:
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Page 9
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Equity Securities Selected for Energy Select Portfolio, Series 9 and
Energy Portfolio, Series 9
Both the Energy Select Portfolio, Series 9 and the Energy Portfolio,
Series 9 contain common stocks of the following companies:
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Equity Securities Selected for Financial Services Select Portfolio,
Series 10 and Financial Services Portfolio, Series 10
Both the Financial Services Select Portfolio, Series 10 and the
Financial Services Portfolio, Series 10 contain common stocks of the
following companies:
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Page 10
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Equity Securities Selected for Internet Select Portfolio, Series 12 and
Internet Portfolio, Series 12
Both the Internet Select Portfolio, Series 12 and the Internet
Portfolio, Series 12 contain common stocks of the following companies:
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Equity Securities Selected for Leading Brands Select Portfolio, Series 9
and Leading Brands Portfolio, Series 9
Both the Leading Brands Select Portfolio, Series 9 and the Leading
Brands Portfolio, Series 9 contain common stocks of the following
companies:
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Page 11
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Equity Securities Selected for Pharmaceutical Select Portfolio, Series
11 and Pharmaceutical Portfolio, Series 11
Both the Pharmaceutical Select Portfolio, Series 11 and the
Pharmaceutical Portfolio, Series 11 contain common stocks of the
following companies:
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Page 12
Equity Securities Selected for REIT Growth & Income Portfolio, Series 4
The REIT Growth & Income Portfolio, Series 4 contains stocks of the
following companies:
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Equity Securities Selected for Technology Select Portfolio, Series 14 and
Technology Portfolio, Series 14
Both the Technology Select Portfolio, Series 14 and the Technology
Portfolio, Series 14 contain common stocks of the following companies:
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Page 13
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
We have obtained the foregoing descriptions from sources we deem
reliable. We have not independently verified the provided information
either in terms of accuracy or completeness.
Page 14
MEMORANDUM
Re: FT 500
The only difference of consequence (except as described
below) between FT 451, which is the current fund, and FT 500, the
filing of which this memorandum accompanies, is the change in the
series number. The list of securities comprising the Fund, the
evaluation, record and distribution dates and other changes
pertaining specifically to the new series, such as size and
number of Units in the Fund and the statement of condition of the
new Fund, will be filed by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of Templeton Growth and Treasury Trust, Series 1
and subsequent series (File No. 811-05903) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 451 Prospectus relate to the series number and size and
the date and various items of information which will be derived
from and apply specifically to the securities deposited in the
Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Broker's Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
ITEM B This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 500 has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Village of Lisle and State of
Illinois on January 9, 2001.
FT 500
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this 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 January 9, 2001
Corporation, the
General Partner of
Nike Securities L.P. Robert M. Porcellino
Attorney-in-Fact**
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to form S-6 of The First Trust Combined
Series 258 (File No. 33-63483) and the same is hereby
incorporated by this reference.
S-2
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 ERNST & YOUNG LLP
The consent of Ernst & Young LLP to the use of its name and
to the reference to such firm in the Prospectus included in this
Registration Statement will be filed by amendment.
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 is
filed as Exhibit 4.1 to the Registration Statement.
S-3
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and Nike
Financial Advisory Services L.P. as Portfolio Supervisor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-43693] filed on behalf of The First Trust
Special Situations Trust, Series 22).
1.1.1* Form of Trust Agreement for FT 500 among Nike Securities
L.P., as Depositor, The Chase Manhattan Bank, as Trustee
and First Trust Advisors L.P., as Evaluator and 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).
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).
3.1* Opinion of counsel as to legality of Securities being
registered.
S-4
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).
___________________________________
* To be filed by amendment.
S-5
