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 620
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 MARCH 12, 2002
Preferred Income Portfolio, Series 7
FT 620
FT 620 is a series of a unit investment trust, the FT Series. FT 620
consists of a single portfolio known as Preferred Income Portfolio,
Series 7 (the "Trust"). The Trust invests in a diversified portfolio of
preferred stocks and trust preferred securities (the "Securities")
selected to provide diversification and the potential for a high level
of current income.
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.
1-800-621-9533
The date of this prospectus is March __, 2002
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statement of Net Assets 6
Schedule of Investments 7
The FT Series 9
Portfolio 9
Risk Factors 10
Public Offering 10
Distribution of Units 13
The Sponsor's Profits 14
The Secondary Market 14
How We Purchase Units 14
Expenses and Charges 15
Tax Status 15
Retirement Plans 17
Rights of Unit Holders 17
Income and Capital Distributions 18
Redeeming Your Units 19
Removing Securities from the Trust 20
Amending or Terminating the Indenture 20
Information on the Sponsor, Trustee and Evaluator 21
Other Information 22
Standard & Poor's Issue Credit Rating Definitions 22
Page 2
Summary of Essential Information
Preferred Income Portfolio, Series 7
FT 620
At the Opening of Business on the
Initial Date of Deposit-March __, 2002
Sponsor: Nike Securities L.P.
Trustee: JPMorgan Chase Bank
Evaluator: First Trust Advisors L.P.
Initial Number of Units (1)
Fractional Undivided Interest in the Trust per Unit (1) 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 9.900
Maximum Sales Charge of 4.85% of the Public Offering Price per Unit
(4.899% of the net amount invested, exclusive of the deferred sales charge
and creation and development fee) (3) $ .485
Less Deferred Sales Charge per Unit $ (.360)
Less Creation and Development Fee per Unit $ (.025)
Public Offering Price per Unit (4) $ 10.000
Sponsor's Initial Repurchase Price per Unit (5) $ 9.540
Redemption Price per Unit
(based on aggregate underlying value of Securities less deferred sales charge) (5) $ 9.540
Estimated Net Annual Distribution per Unit for the first year (6) $
CUSIP Number 30266V 503
Fee Accounts CUSIP Number 30266V 529
Security Code
Ticker Symbol
First Settlement Date , 2002
Mandatory Termination Date (7) September 14, 2007
Income Distribution Record Date Fifteenth day of each month, commencing April 15, 2002.
Income Distribution Date (6) Last day of each month, commencing April 30, 2002.
______________
<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 the 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 sales charge consists of an initial sales charge, a
deferred sales charge and 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
creation and development fee and 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 creation and
development fee and estimated organization costs. See "Redeeming Your
Units."
(6) The estimated net annual distribution for subsequent years, $____ per
Unit, is expected to be less than that set forth above for the first
year because a portion of the Securities included in the Trust will be
sold during the first year to pay for organization costs and the
deferred sales charge. The actual net annual distribution you will
receive will vary from that set forth above with changes in the Trust's
fees and expenses, in dividends received and with the sale of
Securities. See "Fee Table" and "Expenses and Charges." Distributions
from the Capital Account will be made monthly on the last day of 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.
(7) See "Amending or Terminating the Indenture."
</FN>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of the Trust. See "Public
Offering" and "Expenses and Charges." Although the Trust has a term of
approximately five and one-half years and is a unit investment trust
rather than a mutual fund, this information allows you to compare fees.
Amount
per Unit
_____
Unit Holder Sales Fees (as a percentage of public offering price)
Maximum Sales Charge
Initial sales charge 1.00%(a) $.100
Deferred sales charge 3.60%(b) $.360
Creation and development fee 0.25%(c) $.025
_______ _______
Maximum Sales Charges (including creation and development fee) 4.85% $.485
======= =======
Organization Costs (as a percentage of public offering price)
Estimated organization costs %(d) $
======= =======
Estimated Annual Trust Operating Expenses(e)
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative and evaluation fees % $
Trustee's fee and other operating expenses %(f) $
_______ _______
Total % $
======= =======
Example
This example is intended to help you compare the cost of investing in
the Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trust for the periods
shown and sell your Units at the end of those periods. The example also
assumes a 5% return on your investment each year and that the Trust's
operating expenses stay the same. The example does not take into
consideration transaction fees which may be charged by certain
broker/dealers for processing redemption requests. Although your actual
costs may vary, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 5 1/2 Years
__________ __________ __________ __________
$ $ $ $
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 sales
charge of 4.85% and the sum of any remaining deferred sales charge and
creation and development fee.
(b) The deferred sales charge is a fixed dollar amount equal to $.360 per
Unit which, as a percentage of the Public Offering Price, will vary over
time. The deferred sales charge will be deducted in three monthly
installments commencing September 20, 2002.
(c) The creation and development fee compensates the Sponsor for creating
and developing the Trust. The creation and development fee is a charge
of $.025 per Unit collected at the end of the initial offering period
which is expected to be approximately six months from the Initial Date
of Deposit. If the price you pay for your Units exceeds $10 per Unit,
the creation and development fee will be less than .25%; if the price
you pay for your Units is less than $10 per Unit, the creation and
development fee will exceed .25%.
(d) Estimated organization costs will be deducted from the assets of the
Trust at the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period.
(e) Each of the fees listed herein is assessed on a fixed dollar amount
per Unit basis which, as a percentage of average net assets, will vary
over time.
(f) Other operating expenses include the costs incurred by the Trust for
annually updating the Trust's registration statement. Other operating
expenses, however, do not include brokerage costs and other portfolio
transaction fees. In certain circumstances the Trust may incur
additional expenses not set forth above. See "Expenses and Charges."
</FN>
Page 4
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
FT 620
We have audited the accompanying statement of net assets, including the
schedule of investments, of FT 620, comprising the Preferred Income
Portfolio, Series 7 (the "Trust"), as of the opening of business on
March __, 2002 (Initial Date of Deposit). This statement of net assets
is the responsibility of the Trust's Sponsor. Our responsibility is to
express an opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the statement of net assets is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the statement of net assets. Our procedures
included confirmation of the irrevocable letter of credit held by
JPMorgan Chase Bank, the Trustee, and deposited in the Trust for the
purchase of Securities, as shown in the statement of net assets as of
the opening of business on March __, 2002, by correspondence with the
Trustee. An audit also includes assessing the accounting principles used
and significant estimates made by the Trust's Sponsor, as well as
evaluating the overall presentation of the statement of net assets. We
believe that our audit of the statement of net assets provides a
reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of FT 620,
comprising the Preferred Income Portfolio, Series 7, at the opening of
business on March __, 2002 (Initial Date of Deposit) in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
March __, 2002
Page 5
Statement of Net Assets
Preferred Income Portfolio, Series 7
FT 620
At the Opening of Business on the
Initial Date of Deposit-March __, 2002
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) ( )
________
Less liability for creation and development fee (5) ( )
Net assets $
========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (6) $
Less maximum sales charge (6) ( )
Less estimated reimbursement to Sponsor for organization costs (3) ( )
________
Net assets $
========
_____________
<FN>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by JPMorgan Chase Bank of
which $200,000 will be allocated to the Trust, has been deposited with
the Trustee as collateral, covering the monies necessary for the
purchase of the Securities according to their purchase contracts.
(3) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trust. These costs have been estimated at $ per Unit
for the Trust. 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 the 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 the
Trust.
(4) Represents the amount of mandatory deferred sales charge
distributions from the Trust ($.360 per Unit), payable to the Sponsor in
three equal monthly installments beginning on September 20, 2002 and on
the twentieth day of each month thereafter (or if such date is not a
business day, on the preceding business day) through November 20, 2002.
If Unit holders redeem Units before November 20, 2002, they will have to
pay the remaining amount of the deferred sales charge applicable to such
Units when they redeem them.
(5) The creation and development fee is payable by the Trust on behalf of
Unit holders out of assets of the Trust at the end of the initial
offering period. If Units are redeemed prior to the close of the initial
offering period, the fee will not be deducted from the proceeds.
(6) The aggregate cost to investors in the Trust includes a maximum sales
charge (comprised of an initial sales charge, a deferred sales charge
and the creation and development fee) computed at the rate of 4.85% of
the Public Offering Price per Unit (equivalent to 4.899% of the net
amount invested, exclusive of the deferred sales charge and the creation
and development fee), assuming no reduction of the maximum sales charge
as set forth under "Public Offering."
</FN>
Page 6
Schedule of Investments
Preferred Income Portfolio, Series 7
FT 620
At the Opening of Business on the
Initial Date of Deposit-March __, 2002
Percentage
Number of Aggregate Market Cost of
of Rating (2) Offering Redemption Value per Securities to
Shares Name of Issue of Securities (1) (Unaudited) Price (6) Provisions (3) Share the Trust (4)
____ _________________________ _______ ________ ________ ______ ______
$ $
Page 7
Schedule of Investments (cont'd.)
Preferred Income Portfolio, Series 7
FT 620
At the Opening of Business on the
Initial Date of Deposit-March __, 2002
Percentage
Number of Aggregate Market Cost of
of Rating (2) Offering Redemption Value per Securities to
Shares Name of Issue of Securities (1) (Unaudited) Price (6) Provisions (3) Share the Trust (4)
____ _________________________ _______ ________ ________ ______ ______
$ $
_______ ________
Total Investments 100% $
======= ========
__________
<FN>
(1) Shown under this heading is the stated dividend rate of each of the
Securities, expressed as a percentage of par or stated value. All
Securities are represented by regular way contracts to purchase such
Securities for the performance of which an irrevocable letter of credit
has been deposited with the Trustee. The Sponsor entered into purchase
contracts for the Securities on , 2002. Each Security was
originally issued with a par or stated value per share equal to $25.
(2) The ratings are by Standard & Poor's. For a brief description of the
rating symbols and their related meanings, see "Standard & Poor's Issue
Credit Ratings Definitions." Such ratings were obtained from an
information reporting service other than Standard & Poor's.
(3) The Securities are first redeemable on such date and at such price as
listed above. Optional redemption provisions, which may be exercised in
whole or in part, are at prices of par or stated value. Optional
redemption provisions generally will occur at times when the redeemed
Securities have an offering side evaluation which represents a premium
over par or stated value. To the extent that the Securities were
acquired at a price higher than the redemption price, this will
represent a loss of capital when compared with the Public Offering Price
of the Units when acquired. Distributions to Unit holders will generally
be reduced by the amount of the dividends which otherwise would have
been paid with respect to redeemed Securities, and any principal amount
received on such redemption after satisfying any redemption requests for
Units received by the Trust will be distributed to Unit holders. Certain
of the Securities have provisions which would allow for their redemption
prior to the earliest stated call date pursuant to the occurrence of
certain extraordinary events.
(4) The cost of the Securities to the 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 to the
Sponsor). The valuation of the Securities has been determined by the
Evaluator, an affiliate of the Sponsor. The cost of the Securities to
the Sponsor and the Sponsor's profit or loss (which is the difference
between the cost of the Securities to the Sponsor and the cost of the
Securities to the Trust) are $ and $ , respectively.
</FN>
Page 8
The FT Series
The FT Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created hundreds of
similar yet separate series of a unit investment trust which we have
named the FT Series. The series to which this prospectus relates, FT
620, consists of a single portfolio known as Preferred Income Portfolio,
Series 7.
The Trust was created under the laws of the State of New York by a Trust
Agreement (the "Indenture") dated the Initial Date of Deposit. This
agreement, entered into among Nike Securities L.P., as Sponsor, JPMorgan
Chase Bank as Trustee and First Trust Advisors L.P. as Portfolio
Supervisor and Evaluator, governs the operation of the Trust.
YOU MAY GET MORE SPECIFIC DETAILS CONCERNING THE NATURE, STRUCTURE AND
RISKS OF THIS PRODUCT IN AN "INFORMATION SUPPLEMENT" BY CALLING THE
TRUSTEE AT 1-800-682-7520.
How We Created the Trust.
On the Initial Date of Deposit, we deposited a portfolio of preferred
stock and trust preferred securities with the Trustee and in turn, the
Trustee delivered documents to us representing our ownership of the
Trust in the form of units ("Units").
After the Initial Date of Deposit, we may deposit additional Securities
in the Trust, or cash (including a letter of credit) with instructions
to buy more Securities to create new Units for sale. If we create
additional Units, we will attempt, to the extent practicable, to
maintain the percentage relationship established among the Securities on
the Initial Date of Deposit (as set forth under "Schedule of
Investments"), 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 Trust, on a market value basis, will also change
daily. The portion of Securities represented by each Unit will not
change as a result of the deposit of additional Securities or cash in
the Trust. If we deposit cash, you and new investors may experience a
dilution of your investment. This is because prices of Securities will
fluctuate between the time of the cash deposit and the purchase of the
Securities, and because the Trust pays the associated brokerage fees. To
reduce this dilution, the Trust will try to buy the Securities as close
to the Evaluation Time and as close to the evaluation price as possible.
In addition, because the Trust pays the brokerage fees associated with
its creation of new Units and with the sale of Securities to meet
redemption and exchange requests, frequent redemption and exchange
activity will likely result in higher brokerage expenses.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may retain and pay us (or our affiliate) to act as agent for the
Trust to buy Securities. If we or an affiliate of ours act as agent to
the Trust, we will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
We cannot guarantee that the Trust will keep its present size and
composition for any length of time. Securities may be called or redeemed
prior to the Mandatory Termination Date or may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. However, Securities will not be sold to take
advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation, or if they no longer meet the criteria by
which they were selected. You will not be able to dispose of or vote any
of the Securities in the Trust. As the holder of the Securities, the
Trustee will vote all of the Securities and will do so based on our
instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in the Trust fails, unless we can
purchase substitute Securities ("Replacement Securities"), we will
refund to you that portion of the purchase price and transactional sales
charge resulting from the failed contract on the next Income
Distribution Date. Any Replacement Security the Trust acquires will be
identical to those from the failed contract.
Portfolio
Objectives.
The objective of the Trust is to provide diversification and the
potential for a high level of current income by investing in a portfolio
of preferred stocks and trust preferred securities of foreign and
domestic corporations. The Trust is designed to pay monthly income.
Preferred securities are unique securities that combine some of the
characteristics of both stocks and bonds. Like bonds, the preferred
securities selected for the Trust generally pay a fixed rate of return
and are sold on the basis of current yield. However, like stocks, they
are traded on major exchanges.
The Trust is a unit investment trust that is diversified across
preferred securities from several companies, and because the portfolio
Page 9
remains fixed, you have the confidence of knowing what you own.
The Trust is designed to pay monthly income, allowing you to use the
income for any monthly needs you may have. Additionally, as of the
Initial Date of Deposit, each of the preferred securities in the Trust
carries a rating of "BBB" or better, which is considered an investment
grade rating by Standard & Poor's Corporation. This rating reflects a
current assessment of the ability of the companies to pay dividends.
Of course, as with any similar investments, there can be no guarantee
that the objective of the Trust will be achieved. See "Risk Factors" for
a discussion of the risks of investing in the Trust.
Risk Factors
Price Volatility. The Trust invests in preferred stocks and trust
preferred securities of U.S. and foreign companies. The value of the
Trust's Units will fluctuate with changes in the value of these
securities. Preferred stock and trust preferred securities 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, preferred stock and
trust preferred securities may be sensitive to interest rates, as the
cost of capital rises and borrowing costs increase. However, because
preferred stock dividends are fixed (though not guaranteed) and
preferred stocks typically have superior rights to common stocks in
dividend distributions and liquidation, they are generally less volatile
than common stocks.
Because the Trust is not managed, the Trustee will not sell securities
in response to or in anticipation of market fluctuations, as is common
in managed investments. As with any investment, we cannot guarantee that
the performance of the Trust will be positive over any period of time or
that you won't lose money. Units of the Trust are not deposits of any
bank and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
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. In addition, there is no
assurance that the issuers of the Securities included in the Trust will
be able to pay dividends at their stated rate in the future.
Preferred Stocks. Approximately __% of the Trust consists of preferred
stocks. Preferred stocks are unique securities that combine some of the
characteristics of both common stocks and bonds. Preferred stocks
generally pay a fixed rate of return and are sold on the basis of
current yield, like bonds. However, because they are equity securities,
preferred stocks provide equity ownership of a company and the income is
paid in the form of dividends. Preferred stocks typically have a yield
advantage over common stocks as well as comparably-rated fixed income
investments.
Trust Preferred Securities. Approximately ___% of the Trust consists of
trust preferred securities. Trust preferred securities are limited-life
preferred securities typically issued by corporations, generally in the
form of interest-bearing notes or preferred securities, or by an
affiliated business trust of a corporation, generally in the form of
beneficial interests in subordinated debentures or similarly structured
securities. Dividend payments of the trust preferred securities
generally coincide with interest payments on the underlying obligations.
Trust preferred securities generally have a yield advantage over
traditional preferred stocks, but unlike preferred stocks, distributions
are treated as interest rather than dividends for federal income tax
purposes and therefore, are not eligible for the dividends-received
deduction. Trust preferred securities are subject to unique risks which
include the fact that dividend payments will only be paid if interest
payments on the underlying obligations are made, which interest payments
are dependent on the financial condition of the issuer and may be
deferred for up to 20 consecutive quarters. During any deferral period,
investors are generally taxed as if the Trust had received current
income. In such a case, Unit holders will have income taxes due prior to
receiving cash distributions to pay such taxes. In addition, the
underlying obligations, and thus the trust preferred securities, may be
prepaid after a stated call date or as a result of certain tax or
regulatory events.
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 companies represented in the Trust. In
addition, litigation regarding any of the issuers of the Securities, or
the industries represented by these 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.
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;
Page 10
- - The amount of any cash in the Income and Capital Accounts;
- - Dividends receivable on Securities; and
- - The maximum sales charge (which combines an initial upfront sales
charge, a deferred sales charge and the creation and development fee).
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 the
Trust's organization costs (including costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission ("SEC")
and states, the initial audit of the Trust portfolio, legal fees and the
initial fees and expenses of the Trustee) will be purchased in the same
proportionate relationship as all the Securities contained in the Trust.
Securities will be sold to reimburse the Sponsor for the Trust's
organization costs at the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period (a significantly
shorter time period than the life of the Trust). During the period
ending with the earlier of six months after the Initial Date of Deposit
or the end of the initial offering period, there may be a decrease in
the value of the 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
the Trust to fully reimburse the Sponsor. In that event, the net asset
value per Unit of the 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 in "Notes to Statement of Net Assets," this will result in a
greater effective cost per Unit to Unit holders for the reimbursement to
the Sponsor. To the extent actual organization costs are less than the
estimated amount, only the actual organization costs will be deducted
from the assets of the Trust. When 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 the Trust as existed
prior to such sale.
Minimum Purchase.
The minimum amount you can purchase of the Trust is $1,000 worth of
Units ($500 if you are purchasing Units for your Individual Retirement
Account or any other qualified retirement plan).
Transactional Sales Charge.
The transactional sales charge you will pay has both an initial and a
deferred component. The initial sales charge, which you will pay at the
time of purchase, is equal to the difference between the maximum sales
charge of 4.85% of the Public Offering Price and the sum of the maximum
remaining deferred sales charge and creation and development fee
(initially $.385 per Unit). This initial sales charge is initially equal
to approximately 1.00% of the Public Offering Price of a Unit, but will
vary from 1.00% depending on the purchase price of your Units and as
deferred sales charge and creation and development fee payments are
made. When the Public Offering Price per Unit exceeds $10.00, the
initial sales charge will exceed 1.00% of the Public Offering Price.
After the initial offering period the initial sales charge will be
reduced by the amount of the creation and development fee.
Monthly Deferred Sales Charge. In addition, three monthly deferred sales
charge payments of $.12 per Unit will be deducted from the Trust's
assets on approximately the twentieth day of each month from September
20, 2002 through November 20, 2002. If you buy Units at a price of less
than $10.00 per Unit, the dollar amount of the deferred sales charge
will not change, but the deferred sales charge on a percentage basis
will be more than 3.60% of the Public Offering Price.
If you purchase Units after the last deferred sales charge payment has
been assessed, your transactional sales charge will consist of a one-
time initial sales charge of 4.60% of the Public Offering Price per Unit
(equivalent to 4.822% of the net amount invested). The transactional
sales charge will be reduced by 1/2 of 1% on each subsequent March 31,
commencing March 31, 2003, 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 sales charge is reduced as
follows:
Page 11
If you invest Your maximum sales
(in thousands):* charge will be:
_______________ ____________
$50 but less than $100 4.60%
$100 but less than $250 4.35%
$250 but less than $500 3.85%
$500 but less than $1,000 2.85%
$1,000 or more 1.95%
* Breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be
applied on whichever basis is more favorable to the investor. The
breakpoints will be adjusted to take into consideration purchase orders
stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
The reduced sales charge for quantity purchases will apply only to
purchases made by the same person on any one day from any one dealer. To
help you reach the above levels, you can combine the Units you purchase
of the Trust with any other same day purchases of other trusts for which
we are Principal Underwriter and are currently in the initial offering
period. In addition, we will also consider Units you purchase in the
name of your spouse or child under 21 years of age to be purchases by
you. The reduced sales charges will also apply to a trustee or other
fiduciary purchasing Units for a single trust estate or single fiduciary
account. You must inform your dealer of any combined purchases before
the sale in order to be eligible for the reduced sales charge.
Broker/dealers will receive a concession of .70% of the Public Offering
Price on Units sold subject to the sales charge reduction for purchases
of $1 million or more. In all other instances, any reduced sales charge
is the responsibility of the party making the sale.
You may use termination proceeds from other unit investment trusts with
a similar strategy as the Trust or your redemption or termination
proceeds from any unit investment trust we sponsor to purchase Units of
the Trust during the initial offering period at the Public Offering
Price less 1.00%. However, if you invest redemption or termination
proceeds of $500,000 or more in Units of the Trust, the maximum sales
charge on your Units will be limited to the maximum sales charge for the
applicable amount invested in the table set forth above. Please note
that if you purchase Units of the Trust in this manner using redemption
proceeds from trusts which assess the amount of any remaining deferred
sales charge at redemption, you should be aware that any deferred sales
charge remaining on these units 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. Certain Fee Accounts Unit holders may
be assessed transaction or other account fees on the purchase and/or
redemption of such Units by their broker/dealer or other processing
organizations for providing certain transaction or account activities.
We reserve the right to limit or deny purchases of Units not subject to
the transactional sales charge by investors whose frequent trading
activity we determine to be detrimental to the Trust.
Employees, officers and directors (and immediate family members) of the
Sponsor, our related companies, dealers and their affiliates, and
vendors providing services to us may purchase Units at the Public
Offering Price less the applicable dealer concession. Immediate family
members include spouses, children, grandchildren, parents, grandparents,
siblings, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law,
brothers-in-law and sisters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons.
The Sponsor and certain dealers may establish a schedule where
employees, officers and directors of such dealers can purchase Units of
the Trust at the Public Offering Price less the established schedule
amount, which is designed to compensate such dealers for activities
relating to the sale of Units (the "Employee Dealer Concession").
You will be charged the deferred sales charge per Unit regardless of any
discounts. However, if you are eligible to receive a discount such that
the maximum sales charge you must pay is less than the applicable
maximum deferred sales charge, including Fee Accounts Units, you will be
credited the difference between your maximum 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 the
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, and the Unit holders will pay, a
creation and development fee. See "Expenses and Charges" for a
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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 the Trust as of the Evaluation Time on each business day
and will adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and certain national holidays
on which the NYSE is closed.
The aggregate underlying value of the Securities in the 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 Trust for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
reflect a concession or agency commission of 3.30% of the Public
Offering Price per Unit (or 65% of the maximum transactional sales
charge after March 31, 2003). However, for Units subject to a
transactional sales charge which are purchased using redemption or
termination proceeds, this amount will be reduced to 2.30% of the sales
price of these Units (1.30% for purchases of $500,000 but less than
$1,000,000 and .70% for purchases of $1,000,000 or more). Dealers and
other selling agents will receive an additional volume concession or
agency commission of .30% of the Public Offering Price if they purchase
at least $100,000 worth of Units 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.
Eligible dealer firms and other selling agents who sell Units of the
Trust during the initial offering period in the dollar amounts shown
below will be entitled to the following additional sales concessions as
a percentage of the Public Offering Price:
Total Sales Additional
(in millions): Concession:
_________________ ________________
$1 but less than $5 .10%
$5 but less than $10 .15%
$10 or more .20%
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. Eligible dealer firms and other selling agents
include entities that are providing marketing support for First Trust
unit investment trusts by distributing or permitting the distribution of
marketing materials and other product information. Eligible dealer firms
and other selling agents will not include firms that solely provide
clearing services to other broker/dealer firms. Dealers and other
selling agents who, during any consecutive 12-month period, sell at
least $250 million or $500 million worth of primary market units of unit
investment trusts sponsored by us will receive a concession of $2,500 or
$5,000, respectively, 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 Trust 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.
Page 13
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trust. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable transactional sales charge on Units sold by such
persons during such programs. We make these payments out of our own
assets and not out of Trust assets. These programs will not change the
price you pay for your Units.
Advertising and Investment Comparisons.
Advertising materials regarding the Trust may discuss several topics,
including: developing a long-term financial plan; working with your
financial professional; the nature and risks of various investment
strategies and unit investment trusts that could help you reach your
financial goals; the importance of discipline; how the Trust operates;
how securities are selected; various unit investment trust features such
as convenience and costs; and options available for certain types of
unit investment trusts. These materials may include descriptions of the
principal businesses of the companies represented in the Trust, research
analysis of why they were selected and information relating to the
qualifications of the persons or entities providing the research
analysis. In addition, they may include research opinions on the economy
and industry sectors included and a list of investment products
generally appropriate for pursuing those recommendations.
From time to time we may compare the estimated returns of the Trust
(which may show performance net of the expenses and charges the Trust
would have incurred) and returns over specified periods of other similar
trusts we sponsor in our advertising and sales materials, with (1)
returns on other taxable investments such as the common stocks
comprising various market indexes, corporate or U.S. Government bonds,
bank CDs and money market accounts or funds, (2) performance data from
Morningstar Publications, Inc. or (3) information from publications such
as Money, The New York Times, U.S. News and World Report, BusinessWeek,
Forbes or Fortune. The investment characteristics of the Trust differ
from other comparative investments. You should not assume that these
performance comparisons will be representative of the Trust's future
performance. We may also, from time to time, use advertising which
classifies trusts according to capitalization and/or investment style.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum
transactional sales charge per Unit of the Trust less any reduction as
stated in "Public Offering." We will also receive the amount of any
collected creation and development fee. Also, any difference between our
cost to purchase the Securities and the price at which we sell them to
the Trust is considered a profit or loss (see Note 4 of "Schedule 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 costs incurred in annually updating the Trust's registration
statement. We may discontinue purchases of Units at any time. IF YOU
WISH TO DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET
PRICES BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. If you sell
or redeem your Units before you have paid the total deferred sales
charge on your Units, you will have to pay the remainder at that time.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid at that time is equal to or greater than the Redemption Price per
Unit, we may purchase the Units. You will receive your proceeds from the
sale no later than if they were redeemed by the Trustee. We may tender
Units 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.
Page 14
Expenses and Charges
The estimated annual expenses of the Trust are listed under "Fee Table."
If actual expenses of the Trust exceed the estimate, the Trust will bear
the excess. The Trustee will pay operating expenses of the Trust from
the Income Account 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.
First Trust Advisors L.P., an affiliate of ours, will be compensated for
providing bookkeeping and other administrative services to the Trust and
as Sponsor, we will receive brokerage fees when the Trust uses us (or an
affiliate of ours) as agent in buying or selling Securities. Legal,
typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Trust's registration statement yearly are
also now chargeable to the Trust. In addition, First Trust Advisors L.P.
acts as both Portfolio Supervisor and Evaluator to the Trust and will
receive the fees set forth under "Fee Table" for providing portfolio
supervisory and evaluation services to the Trust. In providing portfolio
supervisory services, the Portfolio Supervisor may purchase research
services from a number of sources, which may include underwriters or
dealers of the Trust.
The fees payable to First Trust Advisors L.P. and the Trustee are based
on the largest aggregate number of Units of the Trust outstanding at any
time during the calendar year, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fees paid to us or our
affiliates for providing services to all unit investment trusts be more
than the actual cost of providing such services in such year.
As Sponsor, we will receive a fee from the Trust for creating and
developing the Trust, including determining the Trust's objectives,
policies, composition and size, selecting service providers and
information services and for providing other similar administrative and
ministerial functions. The "creation and development fee" is a charge of
$.025 per Unit outstanding at the end of the initial offering period.
The Trustee will deduct this amount from the Trust's assets as of the
close of the initial offering period. We do not use this fee to pay
distribution expenses or as compensation for sales efforts. This fee
will not be deducted from your proceeds if you sell or redeem your Units
before the end of the initial offering period.
In addition to the 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 the 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 the Trust;
- - Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of
the Trust; and/or
- - All taxes and other government charges imposed upon the Securities or
any part of the Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
the Trust. Since the Securities are preferred stocks and trust preferred
securities and dividend income is unpredictable, we cannot guarantee
that dividends will be sufficient to meet any or all expenses of the
Trust. If there is not enough cash in the Income or Capital Account, the
Trustee has the power to sell Securities in the Trust to make cash
available to pay these charges which may result in capital gains or
losses to you. See "Tax Status."
The Trust 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, the Trust will pay
for the audit. You can request a copy of the audited financial
statements from the Trustee.
Tax Status
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trust. This section is current as of
the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a corporation, 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. In addition, the Internal Revenue Service
issued new withholding and reporting regulations effective January 1,
Page 15
2001. Foreign investors should consult their own tax advisors regarding
the tax consequences of these regulations.
Assets of the Trust.
The Trust will hold (i) preferred stocks in domestic and foreign
corporations (the "Stocks") and (ii) trust preferred securities of
domestic and foreign corporations (the "Debt Obligations"). All of the
assets held by the Trust constitute the "Trust Assets." For purposes of
this federal tax discussion, it is assumed that the Stocks constitute
equity and the Debt Obligations constitute debt, the interest on which
is includible in gross income for federal income tax purposes.
Trust Status.
The Trust will not be taxed as a corporation for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of each of the Trust Assets, and as such you will be
considered to have received a pro rata share of income (e.g., interest,
accruals of original issue discount and market discount, and capital
gains, if any) from each Trust Asset when such income would be
considered to be received by you if you directly owned the Trust Assets.
In addition, the income from the Trust which you must take into account
for federal income tax purposes is not reduced by amounts used to pay
Trust expenses (including the deferred sales charge, if any).
Your Tax Basis and Income or Loss upon Disposition.
If the Trust disposes of Trust Assets, you will generally recognize gain
or loss. If you dispose of your Units or redeem your Units for cash, you
will also generally recognize gain or loss. To determine the amount of
this gain or loss, you must subtract your tax basis in the related Trust
Assets from your share of the total amount received in the transaction.
You can generally determine your initial tax basis in each Trust Asset
by apportioning the cost of your Units, generally including sales
charges, among each Trust Asset ratably according to its value on the
date you 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 accruals of original issue discount, market
discount, premium and accrued interest, as discussed below).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the 10% and
15% tax brackets). The 20% rate is reduced to 18% and the 10% rate is
reduced to 8% for long-term gains from most property acquired after
December 31, 2000, with a holding period of more than five years.
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 your holding
period. The tax rates for capital gains realized from assets held for
one year or less are generally the same as for ordinary income. The
Internal Revenue Code, however, treats certain capital gains as ordinary
income in special situations.
Discount, Accrued Interest and Premium on Debt Obligations.
Some Debt Obligations may have been sold with original issue discount.
This generally means that the Debt Obligations were originally issued at
a price below their face (or par) value. Original issue discount accrues
on a daily basis and generally is treated as interest income for federal
income tax purposes. Your basis of each Debt Obligation which was issued
with original issue discount must be increased as original issue
discount accrues.
Some of the Debt Obligations may give the issuers a right to defer
payments on the Debt Obligations. Such Debt Obligations are subject to
special treatment under the original issue discount rules. Among other
things, this treatment may result in you being required to recognize
income for federal income tax purposes in a particular year with respect
to a Debt Obligation even though the actual cash payments on the Debt
Obligation have been deferred to a later year.
Some Debt Obligations may have been purchased by you or the Trust at a
market discount. Market discount is generally the excess of the stated
redemption price at maturity for the Debt Obligation over the purchase
price of the Debt Obligation. Market discount can arise based on the
price the Trust pays for a Debt Obligation or on the price you pay for
your Units. Market discount is taxed as ordinary income. You will
recognize this income when the Trust receives principal payments on the
Debt Obligation, when the Debt Obligation is sold or redeemed, or when
you sell or redeem your Units. Alternatively, you may elect to include
market discount in taxable income as it accrues. Whether or not you make
this election will affect how you calculate your basis and the timing of
certain interest expense deductions.
Alternatively, some Debt Obligations may have been purchased by you or
the Trust at a premium. Generally, if the tax basis of your pro rata
portion of any Debt Obligation (generally including sales charges)
exceeds the amount payable at maturity, such excess is considered
premium. You may elect to amortize premium. If you make this election,
you may reduce your interest income received on the Debt Obligation by
the amount of the premium that is amortized and your tax basis will be
reduced.
Page 16
If the price of your Units included accrued interest on a Debt
Obligation, you must include the accrued interest in your tax basis in
that Debt Obligation. When the Trust receives this accrued interest, you
must treat it as a return of capital and reduce your tax basis in the
Debt Obligation.
This discussion provides only the general rules with respect to the tax
treatment of original issue discount, market discount and premium. The
rules, however, are complex and special rules apply in certain
circumstances. For example, the accrual of market discount or premium
may differ from the discussion set forth above in the case of Debt
Obligations that were issued with original issue discount.
Dividends Received Deduction.
Because the Debt Obligations are treated as debt (not equity) for
federal income tax purposes, distributions from the Debt Obligations are
not eligible for the dividends received deduction.
In-Kind Distributions.
Under certain circumstances, as described in this prospectus, you may
request a distribution of Trust Assets (an "In-Kind Distribution") when
you redeem your Units or at the Trust's termination. By electing to
receive an In-Kind Distribution, you will receive Trust Assets plus,
possibly, cash.
You will not recognize gain or loss if you only receive Trust Assets in
exchange for your pro rata portion of the Trust Assets held by the
Trust. However, if you also receive cash in exchange for a Trust Asset
or a fractional portion of a Trust Asset, you will generally recognize
gain or loss based on the difference between the amount of cash you
receive and your tax basis in such Trust Asset or fractional portion.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of the Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by the Trust to the same extent as if you directly
paid the expense. You may, however, be required to treat some or all of
the expenses of the Trust as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Foreign, State and Local Taxes.
If you are a foreign investor (i.e., an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or
trust), you will not be subject to U.S. federal income taxes, including
withholding taxes, on some of the income from the Trust or on gain from
the sale or redemption of your Units, provided that certain conditions
are met. You should consult your tax advisor with respect to the
conditions you must meet in order to be exempt for U.S. tax purposes.
Some distributions by the Trust may be subject to foreign withholding
taxes. Any income 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 the 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 Trust will not be taxed as a corporation, and the income of the
Trust will be treated as the income of the Unit holders in the same
manner as for federal income tax purposes.
Retirement Plans
You may purchase Units of the Trust for:
- - Individual Retirement Accounts;
- - Keogh Plans;
- - Pension funds; and
- - Other tax-deferred retirement plans.
Generally, the federal income tax on capital gains and income received
in each of the above plans is deferred until you receive distributions.
These distributions are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred rollover
treatment. Before participating in a plan like this, you should review
the tax laws regarding these plans and consult your attorney or tax
advisor. Brokerage firms and other financial institutions offer these
plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
you become Record Owner, but normally your broker/dealer provides this
notice. You may elect to hold your Units in either certificated or
uncertificated form. All Fee Accounts Units, however, will be held in
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
Page 17
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with your
signature guaranteed by an eligible institution. In certain cases the
Trustee may require additional documentation before they will transfer
or redeem your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- - A written initial transaction statement containing a description of
the Trust;
- - A list of the number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of income (if any)
distributed. After the end of each calendar year, the Trustee will
provide you with the following information:
- - A summary of transactions in the Trust for the year;
- - A list of any Securities sold during the year and the Securities held
at the end of that year by the Trust;
- - The Redemption Price per Unit, computed on the 31st day of December of
such year (or the last business day before); and
- - Amounts of income and capital distributed during the year.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Income and Capital Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit dividends received on the
Trust's Securities to the Income Account of the Trust. All other
receipts, such as return of capital, are credited to the Capital Account
of the 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
the Trust exceed amounts in the Income Account on the Income
Distribution Dates. Distribution amounts will vary with changes in the
Trust's fees and expenses, in dividends received and with the sale of
Securities. 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
the Trust to pay the deferred sales charge. If not, the Trustee may sell
Securities to meet the shortfall.
Within a reasonable time after the 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 the
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of the Trust.
Page 18
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. Certain broker/dealers may
charge a transaction fee for processing redemption requests. Units
redeemed directly through the Trustee are not subject to such
transaction fees. Three business days after the day you tender your
Units (the "Date of Tender") you will receive cash in an amount for each
Unit equal to the Redemption Price per Unit calculated at the Evaluation
Time on the Date of Tender.
The Date of Tender is considered to be the date on which the Trustee
receives your certificates or redemption request (if such day is a day
the NYSE is open for trading). However, if your certificates or
redemption request are received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing income will be withdrawn
from the Income Account if funds are available for that purpose, or from
the Capital Account. All other amounts paid on redemption will be taken
from the Capital Account. The IRS will require the Trustee to withhold a
portion of your redemption proceeds if it does not have your TIN, as
generally discussed under "Income and Capital Distributions."
If you tender at least 2,500 Units, or such other amount as required by
your broker/dealer, for redemption, rather than receiving cash, you may
elect to receive an In-Kind Distribution in an amount equal to the
Redemption Price per Unit by making this request in writing to the
Trustee at the time of tender. However, to be eligible to participate in
the In-Kind Distribution option at redemption, Fee Accounts Unit holders
must hold their Units through the end of the initial offering period. No
In-Kind Distribution requests submitted during the nine business days
prior to the Trust's Mandatory Termination Date will be honored. Where
possible, the Trustee will make an In-Kind Distribution by distributing
each of the Securities in book-entry form to your bank or broker/dealer
account at the Depository Trust Company. The Trustee will subtract any
customary transfer and registration charges from your In-Kind
Distribution. As a tendering Unit holder, you will receive your pro rata
number of whole shares of the Securities that make up the portfolio, and
cash from the Capital Account equal to the fractional shares to which
you are entitled.
The Trustee may sell Securities to make funds available for redemption.
If Securities are sold, the size and diversification of the Trust will
be reduced. These sales may result in lower prices than if the
Securities were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- - If the NYSE is closed (other than customary weekend and holiday
closings);
- - If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- - For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Income and Capital Accounts of the Trust not designated
to purchase Securities;
2. the aggregate value of the Securities held in the 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 the Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of the Trust, if any;
4. cash held for distribution to Unit holders of record of the Trust as
of the business day before the evaluation being made;
5. liquidation costs for foreign Securities, if any; and
6. other liabilities incurred by the Trust; and
dividing
1. the result by the number of outstanding Units of the Trust.
Any remaining deferred sales charge on the Units when you redeem them
Page 19
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 the Trust
The portfolio of the Trust is not managed. However, we may, but are not
required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- - The issuer of the Security defaults in the payment of a declared
dividend;
- - Any action or proceeding prevents the payment of dividends;
- - There is any legal question or impediment affecting the Security;
- - The issuer of the Security has breached a covenant which would affect
the payment of dividends, the issuer's credit standing, or otherwise
damage the sound investment character of the Security;
- - The issuer has defaulted on the payment of any other of its
outstanding obligations;
- - There has been a public tender offer made for a Security or a merger
or acquisition is announced affecting a Security, and that in our
opinion the sale or tender of the Security is in the best interest of
Unit holders; or
- - The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to the Trust.
Except in the limited instance in which the Trust acquires Replacement
Securities, as described in "The FT Series," the Trust may not acquire
any securities or other property other than the Securities. The Trustee,
on behalf of the Trust, will reject any offer for new or exchanged
securities or property in exchange for a Security, such as those
acquired in a merger or other transaction. If such exchanged securities
or property are nevertheless acquired by the Trust, at our instruction,
they will either be sold or held in the Trust. In making the
determination as to whether to sell or hold the exchanged securities or
property we may get advice from 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 the Trust to facilitate selling
Securities, exchanged securities or property from the Trust. If we or
our affiliate act in this capacity, we will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Securities designated by us or, absent our
direction, at its own discretion, in order to meet redemption requests
or pay expenses. In designating Securities to be sold, we will try to
maintain the proportionate relationship among the Securities. If this is
not possible, the composition and diversification of the Trust may be
changed. To get the best price for the Trust we may specify minimum
amounts (generally 100 shares) in which blocks of Securities are to be
sold. We may consider sales of units of unit investment trusts which we
sponsor when we make recommendations to the Trustee as to which
broker/dealers they select to execute the Trust's portfolio
transactions, or when acting as agent for the Trust in acquiring or
selling Securities on behalf of the Trust.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- - To cure ambiguities;
- - To correct or supplement any defective or inconsistent provision;
- - To make any amendment required by any governmental agency; or
- - To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, the Trust will terminate on
the Mandatory Termination Date as stated in the "Summary of Essential
Information." The Trust may be terminated earlier:
- - Upon the consent of 100% of the Unit holders of the Trust;
- - If the value of the Securities owned by the 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 the Trust during the initial offering
period ("Discretionary Liquidation Amount"); or
- - In the event that Units of the Trust not yet sold aggregating more
than 60% of the Units of the Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination, the Trustee will send written notice to all Unit
holders which will specify how you should tender your certificates, if
any, to the Trustee. If the Trust is terminated due to this last reason,
we will refund your entire transactional sales charge; however,
termination of the Trust before the Mandatory Termination Date for any
Page 20
other stated reason will result in all remaining unpaid deferred sales
charges on your Units being deducted from your termination proceeds. For
various reasons, the Trust may be reduced below the Discretionary
Liquidation Amount and could therefore be terminated before the
Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of the Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Securities. Because the Trustee must sell the Securities within a
relatively short period of time, the sale of Securities as part of the
termination process may result in a lower sales price than might
otherwise be realized if such sale were not required at this time.
If you own at least 2,500 Units of the Trust, or such other amount as
required by your broker/dealer, the Trustee will send the registered
account holders 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 by "wrap
fee" plans) rather than the typical cash distribution. See "Tax Status"
for additional information. You must notify the Trustee at least ten
business days prior to the Mandatory Termination Date if you elect this
In-Kind Distribution option. If you do not elect to participate in the
In-Kind Distribution option, you will receive a cash distribution from
the sale of the remaining Securities, along with your interest in the
Income and Capital Accounts, within a reasonable time after the Trust is
terminated. Regardless of the distribution involved, the Trustee will
deduct from the Trust any accrued costs, expenses, advances or
indemnities provided for by the Indenture, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to pay any taxes or other governmental charges.
Information on
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 $40 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, 2001, the total partners' capital of
Nike Securities L.P. was $17,560,001 (audited).
This information refers only to us and not to the Trust or to any series
of the Trust or to any other dealer. We are including this information
only to inform you of our financial responsibility and our ability to
carry out our contractual obligations. We will provide more detailed
financial information on request.
Code of Ethics. The Sponsor and the Trust have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to the Trust.
The Trustee.
The Trustee is JPMorgan Chase Bank with its principal executive office
located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th Floor, New York, New
York, 10004-2413. If you have questions regarding the Trust, you may
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
Trust; it only provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
Page 21
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- - Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC;
- - Terminate the Indenture and liquidate the Trust; or
- - Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel, as well as special New York tax
counsel for the Trust.
Experts.
The Trust's statement of net assets, including the schedule of
investments, as of the opening of business on the Initial Date of
Deposit included in this prospectus and elsewhere in the registration
statement has been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and elsewhere in
the registration statement, and is included in reliance upon the report
of such firm given upon 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.
Standard & Poor's
Issue Credit Rating Definitions
A Standard & Poor's issue credit rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial
obligation, a specific class of financial obligations, or a specific
financial program (including ratings on medium term note programs and
commercial paper programs). It takes into consideration the
creditworthiness of guarantors, insurers, or other forms of credit
enhancement on the obligation and takes into account the currency in
which the obligation is denominated. The issue credit rating is not a
recommendation to purchase, sell, or hold a financial obligation,
inasmuch as it does not comment as to market price or suitability for
particular investor.
Issue credit ratings are based on current information furnished by the
obligors or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit in
connection with any credit rating and may, on occasion, rely on
unaudited financial information. Credit ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of,
such information, or based on other circumstances.
Issue credit ratings can be either long-term or short-term. Short-term
ratings are generally assigned to those obligations considered short-
term in the relevant market. In the United States, for example, that
means obligations with an original maturity of no more than 365 days-
including commercial paper. Short-term ratings are also used to indicate
the creditworthiness of an obligor with respect to put features on long-
term obligations. The result is a dual rating, in which the short-term
rating addresses the put feature, in addition to the usual long-term
rating. Medium-term notes are assigned long-term ratings.
Long-Term Issue Credit Ratings.
Issue credit ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of payment: capacity and willingness of the obligor to
meet its financial commitment on an obligation in accordance with the
Page 22
terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
The issue rating definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior
obligations are typically rated lower than senior obligations, to
reflect the lower priority in bankruptcy, as noted above. (Such
differentiation applies when an entity has both senior and subordinated
obligations, secured and unsecured obligations, or operating company and
holding company obligations.) Accordingly, in the case of junior debt,
the rating may not conform exactly with the category definition.
AAA An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligator's capacity to meet its financial
commitment on the obligation is extremely strong.
AA An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
BBB An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation. Obligations rated "BB," "B,"
"CCC," "CC" and "C" are regarded as having significant speculative
characteristics. "BB" indicates the least degree of speculation and "C"
the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the
obligation.
CCC An obligation rated "CCC" is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitment on the obligation.
CC An obligation rated "CC" is currently highly vulnerable to nonpayment.
C A subordinated debt or preferred stock obligation rated "C" is
currently highly vulnerable to nonpayment. The "C" rating may be used to
cover a situation where a bankruptcy petition has been filed or similar
action taken, but payments on this obligation are being continued. A "C"
also will be assigned to a preferred stock issue in arrears on dividends
or sinking fund payments, but that is currently paying.
D An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date
due even if the applicable grace period has not expired, unless Standard
& Poor's believes that such payments will be made during such grade
period. The "D" rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation
are jeopardized.
Plus(+) or Minus(-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
Page 23
First Trust(R)
Preferred Income Portfolio, Series 7
FT 620
Sponsor:
NIKE SECURITIES L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
JPMorgan Chase 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 Preferred Income
Portfolio, Series 7, 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 Trust, including its Code 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 Trust is available on the EDGAR Database on the
Commission's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0102
e-mail address: publicinfo@sec.gov
March __, 2002
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 24
First Trust(R)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in FT 620 not found in the prospectus for the Trust. This
Information Supplement is not a prospectus and does not include all of
the information you should consider before investing in the Trust. This
Information Supplement should be read in conjunction with the prospectus
for the Trust in which you are considering investing.
This Information Supplement is dated March __, 2002. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors
Preferred Stocks 1
Trust Preferred Securities 1
Dividends 2
Risk Factors
Preferred Stocks. An investment in Units should be made with an
understanding of the risks which an investment in preferred stocks
entails, including the risk that the financial condition of the issuers
of the Securities or the general condition of the preferred stock market
may worsen, and the value of the preferred stocks and therefore the
value of the Units may decline. Preferred stocks may be 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, market liquidity, and global or regional political,
economic or banking crises. Preferred stocks are also vulnerable to
Congressional reductions in the dividends-received deduction which would
adversely affect the after-tax return to the investors who can take
advantage of the deduction. Such a reduction might adversely affect the
value of preferred stocks in general. Holders of preferred stocks, as
owners of the entity, have rights to receive payments from the issuers
of those preferred stocks that are generally subordinate to those of
creditors of, or holders of debt obligations or, in some cases, other
senior preferred stocks of, such issuers. Preferred 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
senior preferred stocks will create prior claims for payment of
principal and interest and senior dividends which could adversely affect
the ability and inclination of the issuer to declare or pay dividends on
its preferred stock or the rights of holders of preferred stock with
respect to assets of the issuer upon liquidation or bankruptcy. The
value of preferred stocks is subject to market fluctuations for as long
as the preferred stocks remain outstanding, and thus the value of the
Securities may be expected to fluctuate over the life of the Trust to
values higher or lower than those prevailing on the Initial Date of
Deposit.
Trust Preferred Securities. Holders of trust preferred securities incur
risks in addition to or slightly different than the typical risks of
holding preferred stocks. As previously discussed, trust preferred
securities are limited-life preferred securities that are typically
issued by corporations, generally in the form of interest-bearing notes
or preferred securities issued by corporations, or by an affiliated
business trust of a corporation, generally in the form of beneficial
interests in subordinated debentures issued by the corporation, or
similarly structured securities. The maturity and dividend rate of the
trust preferred securities are structured to match the maturity and
coupon interest rate of the interest-bearing notes, preferred securities
or subordinated debentures. Trust preferred securities usually mature on
the stated maturity date of the interest-bearing notes, preferred
securities or subordinated debentures and may be redeemed or liquidated
prior to the stated maturity date of such instruments for any reason on
or after their stated call date or upon the occurrence of certain
extraordinary circumstances at any time. Trust preferred securities
generally have a yield advantage over traditional preferred stocks, but
unlike preferred stocks, distributions on the Trust preferred securities
Page 1
are treated as interest rather than dividends for Federal income tax
purposes. Unlike most preferred stocks, distributions received from
trust preferred securities are not eligible for the dividends-received
deduction. Certain of the risks unique to trust preferred securities
include: (i) distributions on trust preferred securities will be made
only if interest payments on the interest-bearing notes, preferred
securities or subordinated debentures are made; (ii) a corporation
issuing the interest-bearing notes, preferred securities or subordinated
debentures may defer interest payments on these instruments for up to 20
consecutive quarters and if such election is made, distributions will
not be made on the trust preferred securities during the deferral
period; (iii) certain tax or regulatory events may trigger the
redemption of the interest-bearing notes, preferred securities or
subordinated debentures by the issuing corporation and result in
prepayment of the trust preferred securities prior to their stated
maturity date; (iv) future legislation may be proposed or enacted that
may prohibit the corporation from deducting its interest payments on the
interest-bearing notes, preferred securities or subordinated debentures
for tax purposes, making redemption of these instruments likely; (v) a
corporation may redeem the interest-bearing notes, preferred securities
or subordinated debentures in whole at any time or in part from time to
time on or after a stated call date; (vi) trust preferred securities
holders have very limited voting rights; and (vii) payment of interest
on the interest-bearing notes, preferred securities or subordinated
debentures, and therefore distributions on the trust preferred
securities, is dependent on the financial condition of the issuing
corporation.
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.
Page 2
MEMORANDUM
Re: FT 620
The only difference of consequence (except as described
below) between FT 570, which is the current fund, and FT 620, 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. 811-05703) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 570 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 $2,000,000, 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 620 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 March 12, 2002.
FT 620
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
David J. Allen Director )
of Nike Securities )
Corporation, the ) March 12, 2002
General Partner of )
Nike Securities L.P.)
)
Judith M. Van Kampen Director )
of Nike Securities ) Robert M. Porcellino
Corporation, the ) Attorney-in-Fact**
General Partner of )
Nike Securities L.P.)
Karla M. Van Kampen-Pierre Director )
of Nike Securities )
Corporation, the )
General Partner of )
Nike Securities L.P.)
David G. Wisen Director )
of Nike Securities )
Corporation, the )
General Partner of )
Nike Securities L.P.)
* The title of the person named herein represents his
capacity in and relationship to Nike Securities L.P.,
Depositor.
** An executed copy of the related power of attorney
was filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of FT 597
(File No. 333-76518) and the same is hereby incorporated
herein by this reference.
S-3
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 DELOITTE & TOUCHE LLP
The consent of Deloitte & Touche 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-4
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 620 among Nike Securities
L.P., as Depositor, JPMorgan Chase 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-5
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 Directors listed on
page S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
333-76518] filed on behalf of FT 597).
___________________________________
* To be filed by amendment.
S-6