Registration No. 333-69561
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3 to Form S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
FT 320
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
E. Title of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as
amended
F. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
| |Check box if it is proposed that this filing will become
effective on ____________ at 2:00 p.m. pursuant to Rule
487.
________________________________
High-Yield Corporate Closed-End Portfolio Series
Municipal Closed-End Portfolio Series
FT 320
FT 320 consists of two unit investment trusts known as High-Yield
Corporate Closed-End Portfolio Series and Municipal Closed-End Portfolio
Series, respectively (each, a "Trust" and collectively, the "Trusts").
Each Trust consists of a diversified portfolio of publicly traded common
stocks ("Securities") issued by closed-end investment companies.
High-Yield Corporate Closed-End Portfolio Series invests in a portfolio
of closed-end investment companies, the portfolios of which are
concentrated in high-yield corporate bonds ("Corporate Bonds"). High-
Yield Corporate Closed-End Portfolio Series seeks to provide investors
with high current income, with capital appreciation being a secondary
objective of the Trust.
Municipal Closed-End Portfolio Series invests in a portfolio of closed-
end investment companies, the portfolios of which are concentrated in
tax-exempt municipal bonds ("Municipal Bonds"). Municipal Closed-End
Portfolio Series seeks to provide investors with federally tax-exempt
income and to preserve capital.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First Trust (registered trademark)
1-800-621-9533
The date of this prospectus is May 25, 1999
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statements of Net Assets 6
Schedules of Investments 7
The FT Series 9
Portfolios 10
Risk Factors 11
Public Offering 13
Distribution of Units 15
The Sponsor's Profits 16
The Secondary Market 16
How We Purchase Units 16
Expenses and Charges 17
Tax Status 17
Retirement Plans 19
Rights of Unit Holders 19
Income and Capital Distributions 20
Redeeming Your Units 21
Removing Securities from a Trust 22
Amending or Terminating the Indenture 23
Information on the Sponsor, Trustee and Evaluator 24
Other Information 25
Page 2
Summary of Essential Information
FT 320
At the Opening of Business on the Initial Date of Deposit-May 25, 1999
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
High-Yield Corporate Municipal
Closed-End Closed-End
Portfolio Series Portfolio Series
_______________ _____________
Initial Number of Units (1) 15,075 15,010
Fractional Undivided Interest in the Trust per Unit (1) 1/15,075 1/15,010
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 9.900 $ 9.900
Maximum Sales Charge of 4.50% of the Public Offering Price
per Unit(4.545% of the net amount invested,
exclusive of the deferred sales charge) (3) $ .450 $ .450
Less Deferred Sales Charge per Unit $ (.350) $ (.350)
Public Offering Price per Unit (4) $10.000 $10.000
Sponsor's Initial Repurchase Price per Unit (5) $ 9.550 $ 9.550
Redemption Price per Unit (based on aggregate underlying
value of Securities less the deferred sales charge) (5) $ 9.550 $ 9.550
Estimated Net Annual Distributions per Unit (6) $ 1.0720 $ .5984
Cash CUSIP Number 30264W 370 30264W 396
Reinvestment CUSIP Number 30264W 388 30264W 404
Security Code 56892 56894
First Settlement Date May 28, 1999
Mandatory Termination Date (7) May 28, 2004
Income Distribution Record Date Fifteenth day of each month, commencing July 15, 1999.
Income Distribution Date (8) Last day of each month, commencing July 31, 1999.
______________
<FN>
(1) As of the close of business on the Initial Date of Deposit, we may
adjust the number of Units of a Trust so that the Public Offering Price
per Unit will equal approximately $10.00. If we make such an adjustment,
the fractional undivided interest per Unit will vary from the amount
indicated above.
(2) Each Security, if listed on a securities exchange, 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
(generally 4:00 p.m. Eastern time) on each day on which it is open (the
"Evaluation Time").
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" and "Public Offering" for
additional information regarding these charges.
(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. Additional Units may be
created during the day of the Initial Date of Deposit which, along with
the Units described above, will be valued as of the Evaluation Time on
the Initial Date of Deposit and sold to investors at the Public Offering
Price per Unit based on this valuation. On the Initial Date of Deposit
the Public Offering Price per Unit will not include any accumulated cash
in the Income Account. After the Initial Date of Deposit, the Public
Offering Price will include a pro rata share of any cash in the Income
Account.
(5) Until the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period the Sponsor's Initial Repurchase
Price per Unit and the Redemption Price per Unit will include the
estimated organization costs per Unit set forth under "Fee Table." After
such date, the Sponsor's Initial Repurchase Price and Redemption Price
per Unit will not include such estimated organization costs. See
"Redeeming Your Units."
(6)The Estimated Net Annual Distribution per Unit set forth above is
based on the most recent monthly ordinary dividend declared with respect
to the Securities in a Trust. This estimate will vary with changes in a
Trust's fees and expenses, actual dividends received, and with the sale
of Securities.
(7) See "Amending or Terminating the Indenture."
(8) Distributions from the Capital Account will be made monthly payable
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. Notwithstanding, distributions of funds in
the Capital Account, if any, will be made in December of each year.
</FN>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may pay if you
buy and hold Units of a Trust. See "Public Offering" and "Expenses and
Charges." Although the Trusts have a term of approximately five years
and are unit investment trusts rather than mutual funds, this
information allows you to compare fees.
High-Yield Corporate
Closed-End Municipal Closed-End
Portfolio Series Portfolio Series
______________________ ______________________
Amount Amount
per Unit per Unit
________ ________
Unit Holder Transaction Expenses
(as a percentage of public offering price)
Initial sales charge imposed on purchase 1.00%(a) $ .100 1.00%(a) $ .100
Deferred sales charge 3.50%(b) .350 3.50%(b) .350
________ ________ ________ ________
Maximum Sales Charge 4.50% $ .450 4.50% $ .450
======== ======== ======== ========
Maximum sales charge imposed on reinvested dividends 3.50%(c) $ .350 3.50%(c) $ .350
Organization Costs
(as a percentage of public offering price)
Estimated organization costs .190%(d) $.0190 .190%(d) $.0190
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative and evaluation fees .100% $.0098 .100% $.0098
Trustee's fee and other operating expenses .148% .0145 .148% .0145
Underlying Closed-End Fund Expenses(e) 1.250% .1224 1.140% .1116
________ ________ ________ ________
Total 1.498% $.1467 1.388%(e) $.1359
======== ======== ======== ========
This example is intended to help you compare the cost of investing in
the Trusts with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trusts for the periods
shown and sell all your Units at the end of those periods. The example
also assumes a 5% return on your investment each year and that the
Trusts' operating expenses stay the same. Although your actual costs may
vary, based on these assumptions your costs would be:
1 Year 3 Years 5 Years
______ _______ _______
High-Yield Corporate Closed-End Portfolio Series $619 $920 $1,243
Municipal Closed-End Portfolio Series 608 887 1,187
<FN>
The example will not differ if you hold rather than sell your Units at
the end of each period. The example does not reflect sales charges on
reinvested dividends and other distributions. If these sales charges
were included, your costs would be higher.
(a) The amount of the initial sales charge will vary depending on the
purchase price of your Units. The amount of the initial sales charge is
actually the difference between the maximum sales charge (4.50% of the
Public Offering Price) and the maximum remaining deferred sales charge
(initially $.350 per Unit). When the Public Offering Price exceeds
$10.00 per Unit, the initial sales charge will exceed 1.00% of the
Public Offering Price per Unit.
(b) The deferred sales charge is a fixed dollar amount equal to $.350
per Unit which will be deducted in five monthly installments of $.07 per
Unit beginning December 20, 1999 and on the 20th day of each month
thereafter (or if such day is not a business day, on the previous
business day) through April 20, 2000. If you buy Units at a price of
less than $10.00 per Unit, the dollar amount of the deferred sales
charge will not change but the deferred sales charge on a percentage
basis will be more than 3.5% of the Public Offering Price. If you
purchase Units after the first deferred sales charge payment has been
deducted, your purchase price will include both the initial sales charge
and any remaining deferred sales charge payments.
(c) Reinvested dividends will be subject only to the deferred sales
charge remaining at the time of reinvestment. See "Income and Capital
Distribution."
(d) You will bear all or a portion of the costs incurred in organizing
your respective Trust. These estimated organization costs are included
in the Public Offering Price per Unit and will be deducted from the
assets of a Trust at the earlier of six months after the Initial Date of
Deposit or the end of the initial offering period.
(e) Although not an actual Trust operating expense, each Trust, and
therefore Unit holders, will indirectly bear similar operating expenses
of the closed-end funds in which the Trusts invest in the estimated
amounts set forth in the table. These expenses are estimated based on
the actual closed-end fund expenses charged in a fund's most recent
fiscal year but are subject to change in the future. An investor in a
Trust will therefore indirectly pay higher expenses than if the
underlying closed-end fund shares were held directly.
</FN>
Page 4
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
FT 320
We have audited the accompanying statements of net assets, including the
schedules of investments, of FT 320, comprised of the High-Yield
Corporate Closed-End Portfolio Series and Municipal Closed-End Portfolio
Series, as of the opening of business on May 25, 1999. These statements
of net assets are the responsibility of the Trusts' Sponsor. Our
responsibility is to express an opinion on these statements of net
assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of net assets
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
statements of net assets. Our procedures included confirmation of the
letter of credit held by the Trustee and allocated among the Trusts on
May 25, 1999. An audit also includes assessing the accounting principles
used and significant estimates made by the Sponsor, as well as
evaluating the overall presentation of the statements of net assets. We
believe that our audit of the statements of net assets provides a
reasonable basis for our opinion.
In our opinion, the statements of net assets referred to above present
fairly, in all material respects, the financial position of FT 320,
comprised of the High-Yield Corporate Closed-End Portfolio Series and
Municipal Closed-End Portfolio Series, at the opening of business on May
25, 1999 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
May 25, 1999
Page 5
Statements of Net Assets
FT 320
At the Opening of Business on the Initial Date of Deposit-May 25, 1999
High-Yield Corporate Municipal
Closed-End Closed-End
Portfolio Series Portfolio Series
_______________ ____________
NET ASSETS
Investment in Securities represented by purchase contracts (1) (2) $149,244 $148,602
Less liability for reimbursement to Sponsor
for organization costs (3) (286) (285)
Less liability for deferred sales charge (4) (5,276) (5,254)
________ ________
Net assets $143,682 $143,063
======== ========
Units outstanding 15,075 15,010
ANALYSIS OF NET ASSETS
Cost to investors (5) $150,752 $150,103
Less sales charge (5) (6,784) (6,755)
Less estimated reimbursement to Sponsor for organization costs (3) (286) (285)
________ ________
Net assets $143,682 $143,063
======== ========
_____________
<FN>
NOTES TO STATEMENTS OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" for each Trust is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by The Chase Manhattan Bank,
of which $400,000 will be allocated among the two Trusts in FT 320, has
been deposited with the Trustee as collateral, covering the monies
necessary for the purchase of the Securities according to their purchase
contracts.
(3) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trusts. These costs have been estimated at $.0190 per
Unit for each Trust. A payment will be made as of the earlier of six
months after the Initial Date of Deposit or the end of the initial
offering period to an account maintained by the Trustee from which the
obligation of the investors to the Sponsor will be satisfied. To the
extent that actual organization costs are greater than the estimated
amount, only the estimated organization costs added to the Public
Offering Price will be reimbursed to the Sponsor and deducted from the
assets of a Trust.
(4) Represents the amount of mandatory deferred sales charge
distributions from a Trust ($.350 per Unit), payable to us in five equal
monthly installments beginning on December 20, 1999 and on the twentieth
day of each month thereafter (or if such date is not a business day, on
the preceding business day) through April 20, 2000. If you redeem Units
before April 20, 2000 you will have to pay the remaining amount of the
deferred sales charge applicable to such Units when you redeem them.
(5) The aggregate cost to investors in the Trusts includes a maximum
sales charge (comprised of an initial and a deferred sales charge)
computed at the rate of 4.50% of the Public Offering Price per Unit
(equivalent to 4.545% of the net amount invested, exclusive of the
deferred sales charge), assuming no reduction of sales charge as set
forth under "Public Offering."
</FN>
Page 6
Schedule of Investments
HIGH-YIELD CORPORATE CLOSED-END PORTFOLIO SERIES
FT 320
At the Opening of Business on the Initial Date of Deposit-May 25, 1999
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value Securities to
of Shares Name of Issuer of Securities (1) Offering Price per Share the Trust (2)
_________ ________________________________ ____________ __________ __________
1,195 AWF Alliance World Dollar Government Fund II 7.91% $ 9.875 $ 11,801
57 CIM CIM High Yield Securities 0.25% 6.500 371
515 HIS Cigna High Income Share 2.63% 7.625 3,927
247 CIF Colonial Intermediate High Income Fund 1.11% 6.688 1,652
309 COY Corporate High Yield Fund 2.50% 12.063 3,727
100 KYT Corporate High Yield Fund II 0.74% 11.063 1,106
537 DBS Debt Strategies Fund 2.81% 7.813 4,196
1,242 DSU Debt Strategies Fund II 6.97% 8.375 10,402
930 DHF Dreyfus High Yield Strategies Fund 7.75% 12.438 11,567
377 EDF Emerging Markets Income Fund II 2.98% 11.813 4,454
236 FT Franklin Universal Trust 1.44% 9.125 2,153
167 GDF Global Partners Income Fund 1.35% 12.063 2,015
933 HIO High Income Opportunity Fund 6.57% 10.500 9,797
54 HYI High Yield Income Fund Inc. 0.25% 6.813 368
383 HYP High Yield Plus Fund Inc. 2.01% 7.813 2,992
424 KHI Kemper High Income Trust 2.50% 8.813 3,737
655 MCR MFS Charter Income Trust 3.98% 9.063 5,936
568 MHY Managed High Income Portfolio Inc. 3.83% 10.063 5,716
72 PHT Managed High Yield Fund 0.55% 11.375 819
386 YLD Morgan Stanley Dean Witter High Income Advantage Trust 1.29% 5.000 1,930
523 YLT Morgan Stanley Dean Witter High Income Advantage Trust II 1.88% 5.375 2,811
147 YLH Morgan Stanley Dean Witter High Income Advantage Trust III 0.60% 6.063 891
119 MSY Morgan Stanley High Yield Fund 1.25% 15.625 1,859
809 HYB New America High Income Fund 2.44% 4.500 3,640
185 PHF Pacholder Fund Inc. 1.84% 14.875 2,752
854 PHY Prospect Street High Income Portfolio 5.22% 9.125 7,793
71 PTM Putnam Managed High Yield Fund 0.65% 13.563 963
1,453 PPT Putnam Premier Income Trust 7.42% 7.625 11,079
37 HIF Salomon Brothers High Income Fund 0.34% 13.875 513
946 HIX Salomon Brothers High Income Fund II 7.96% 12.563 11,885
637 ARK Senior High Income Portfolio 3.39% 7.938 5,057
809 TEI Templeton Emerging Markets Income Fund 5.79% 10.688 8,647
140 VIT Van Kampen High Income Trust 0.60% 6.438 901
82 VLT Van Kampen High Income Trust II 0.45% 8.188 671
188 ZIF Zenix Income Fund 0.75% 5.938 1,116
______ _________
Total Investments 100% $149,244
====== =========
__________
<FN>
See "Notes to Schedules of Investments" on page 8.
</FN>
Page 7
Schedule of Investments
MUNICIPAL CLOSED-END PORTFOLIO SERIES
FT 320
At the Opening of Business on the Initial Date of Deposit-May 25, 1999
Percentage Market Cost of
Number Ticker Symbol and of Aggregate Value Securities to
of Shares Name of Issuer of Securities (1) Offering Price per Share the Trust (2)
_________ ________________________________ ____________ _________ __________
99 AMU ACM Municipal Securities Income Fund 0.90% $13.438 $ 1,330
279 APX Apex Municipal Fund Inc. 1.89% 10.063 2,808
420 CXE Colonial High Income Municipal Trust 2.30% 8.125 3,413
358 CMU Colonial Municipal Income Trust 1.75% 7.250 2,595
1,038 LEO Dreyfus Strategic Municipals Fund 6.59% 9.438 9,797
1,017 DSM Dreyfus Strategic Municipal Bond Fund 6.29% 9.188 9,344
702 KTF Kemper Municipal Income Trust 5.85% 12.375 8,687
87 KSM Kemper Strategic Municipal Income Trust 0.70% 11.875 1,033
495 MFM MFS Municipal Income Trust 2.79% 8.375 4,146
190 IMT Morgan Stanley Dean Witter Insured Municipal Trust 1.89% 14.813 2,814
267 OIA Morgan Stanley Dean Witter Municipal Income Opportunities Trust 1.70% 9.438 2,520
321 IQI Morgan Stanley Dean Witter Quality Municipal Income Trust 3.20% 14.813 4,755
246 MHF Municipal High Income Fund 1.54% 9.313 2,291
634 MVF MuniVest Fund Inc. 3.92% 9.188 5,825
212 MVT MuniVest Fund II Inc. 1.91% 13.375 2,836
326 MYD MuniYield Fund Inc. 3.21% 14.625 4,768
234 MQT MuniYield Quality Fund II 2.10% 13.313 3,115
428 NQM Nuveen Investment Quality Municipal Fund, Inc. 4.39% 15.250 6,527
431 NMA Nuveen Municipal Advantage Fund 4.50% 15.500 6,680
594 NMO Nuveen Municipal Market Opportunity Fund 6.22% 15.563 9,244
141 NNP Nuveen New York Performance Plus Municipal Fund 1.55% 16.375 2,309
910 NPP Nuveen Performance Plus Municipal Fund 8.76% 14.313 13,025
204 NPF Nuveen Premier Municipal Income Fund 2.15% 15.688 3,200
233 PYM Putnam High Yield Municipal Trust 1.71% 10.875 2,534
337 PGM Putnam Investment Grade Municipal Trust 3.29% 14.500 4,887
147 PMG Putnam Investment Grade Municipal Trust II 1.50% 15.188 2,233
834 PMM Putnam Managed Municipal Income Trust 6.24% 11.125 9,278
162 PMO Putnam Municipal Opportunities Trust 1.55% 14.250 2,308
317 VMT Van Kampen Municipal Income Fund 2.21% 10.375 3,289
348 VKQ Van Kampen Municipal Trust 3.61% 15.438 5,372
358 VGM Van Kampen Trust for Investment Grade Municipals 3.79% 15.750 5,639
______ _________
Total Investments 100% $148,602
====== =========
_____________
<FN>
NOTES TO SCHEDULES OF INVESTMENTS
(1) 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. We entered into purchase
contracts for the Securities on May 24, 1999.
(2) The cost of the Securities to a Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the last sale prices of the listed Securities and the ask
prices of the over-the-counter traded Securities on the business day
preceding the Initial Date of Deposit). The valuation of the Securities
has been determined by the Evaluator, an affiliate of ours. The cost of
the Securities to us and our profit or loss (which is the difference
between the cost of the Securities to us and the cost of the Securities
to a Trust) are set forth below:
Cost of
Securities Profit
to Sponsor (Loss)
___________ ________
High-Yield Corporate Closed-End Portfolio Series $149,735 $(491)
Municipal Closed-End Portfolio Series 148,963 (361)
</FN>
Page 8
The FT Series
The FT Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created several similar
yet separate series of an investment company which we have named the FT
Series. We designate each of these investment company series, the FT
Series, with a different series number.
YOU MAY GET MORE SPECIFIC DETAILS ON SOME OF THE INFORMATION IN THIS
PROSPECTUS IN AN "INFORMATION SUPPLEMENT" BY CALLING THE TRUSTEE AT 1-
800-682-7520.
What We Call the Trusts.
This FT Series consists of two unit investment trusts known as High-
Yield Corporate Closed-End Portfolio Series and Municipal Closed-End
Portfolio Series.
Mandatory Termination Date.
The Trusts will terminate on the Mandatory Termination Date,
approximately five years from the date of this prospectus. This date is
shown in "Summary of Essential Information." Each Trust was created
under the laws of the State of New York by a Trust Agreement (the
"Indenture") dated the Initial Date of Deposit. This agreement, entered
into between Nike Securities L.P., as Sponsor, The Chase Manhattan Bank
as Trustee and First Trust Advisors L.P. as Portfolio Supervisor and
Evaluator, governs the operation of the Trusts.
How We Created the Trusts.
On the Initial Date of Deposit, we deposited contracts to buy the
Securities (fully backed by an irrevocable letter of credit of a
financial institution) with the Trustee. In return for depositing the
Securities, the Trustee delivered documents to us representing our
ownership of the Trusts, in the form of units ("Units").
With the deposit of the contracts to buy the Securities on the Initial
Date of Deposit we established a percentage relationship among the
Securities in each Trust's portfolio, as stated under "Schedule of
Investments." After the Initial Date of Deposit, we may deposit
additional Securities in a Trust, or cash (including a letter of credit)
with instructions to buy more Securities, in order to create new Units
for sale. If we create additional Units, we will attempt, to the extent
practicable, to maintain the original percentage relationship
established among the Securities on the Initial Date of Deposit, and not
the actual percentage relationship existing on the day we are creating
Units, since the two may differ. This difference may be due to the sale,
redemption or liquidation of any of the Securities.
Since the prices of the Securities will fluctuate daily, the ratio of
Securities in a Trust, on a market value basis, will also change daily.
The portion of Securities represented by each Unit will not change as a
result of the deposit of additional Securities or cash in a Trust. If we
deposit cash, you and new investors may experience a dilution of your
investment. This is because prices of Securities will fluctuate between
the time of the cash deposit and the purchase of the Securities, and
because the Trusts will pay brokerage fees to buy Securities. To reduce
this dilution, the Trusts will try to buy the Securities as close to the
Evaluation Time and as close to the evaluation price as possible.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may, from time to time, retain and pay us (or our affiliate) to
act as agent for the Trusts to buy Securities. If we or an affiliate of
ours act as agent to the Trusts we will be subject to the restrictions
under the Investment Company Act of 1940, as amended.
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Securities may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. The Trusts will not, however, sell Securities to take
advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation, or if the Securities no longer meet the
criteria by which they were selected. You will not be able to dispose of
any of the Securities in a Trust or vote the Securities. As the holder
of the Securities, the Trustee will vote all of the Securities and will
do so based on our instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in a Trust fails, unless we can purchase
substitute Securities ("Replacement Securities") we will refund to you
that portion of the purchase price and sales charge resulting from the
failed contract on the next Income Distribution Date. Any Replacement
Page 9
Security a Trust acquires will be identical to those from the failed
contract. The Trustee must purchase the replacement Securities within 20
days after it receives notice of a failed contract, and the purchase
price may not be more than the amount of funds reserved for the purchase
of the failed contract.
Portfolios
Objectives.
High-Yield Corporate Closed-End Portfolio Series. The objective of the
High-Yield Corporate Closed-End Portfolio Series is to provide investors
with high current income, with capital appreciation being a secondary
objective of the Trust. The High-Yield Corporate Closed-End Portfolio
Series seeks to achieve its objective by investing in a diversified
portfolio of common stocks of closed-end investment companies ("Closed-
End Funds"), the portfolios of which are concentrated in high-yield
corporate bonds. In selecting Securities for the High-Yield Corporate
Closed-End Portfolio Series, we selected those Closed-End Funds which
satisfied most, but not necessarily all, of the following factors:
1. Consistent dividend distributions;
2. Manager's average tenure of more than three years; and
3. Average Morningstar rating of 2 stars or better.
As bond yields have fallen over the past 15 years, one thing that has
not changed is the need for some investors to earn high current income.
Investors willing to assume certain credit and market risks have the
potential to earn a high level of current monthly income by investing in
high-yield corporate bonds. The High-Yield Corporate Closed-End
Portfolio Series invests in a diversified portfolio of high-yield Closed-
End Funds that are further diversified across many industries and
hundreds of companies. The average quality rating of the bonds in these
Closed-End Funds is BB-. The following factors support our positive
outlook for high-yield corporate bonds:
- - Currently, a healthy U.S. economy is generally helping corporations
achieve strong earnings, thereby reducing the likelihood of issuers
defaulting on scheduled interest and principal payments.
- - As a result of lower interest rates, the cost of capital is
significantly lower today than it was in the 1980s.
- - The yield spread between high-yield bonds and other investment grade
bonds, such as treasuries, continues to reflect value in the high-yield
market.
- - The combination of economic prosperity and low inflation makes the
inflation adjusted return on high-yield bonds attractive.
- - Although subject to greater risks, high-yield bond investors have
historically received greater returns from their high-yield investments
than investment grade corporate bond investors.
Municipal Closed-End Portfolio Series. The objective of the Municipal
Closed-End Portfolio Series is to provide investors with federally tax-
exempt income and to preserve capital. The Municipal Closed-End
Portfolio Series seeks to achieve its objective by investing in a
diversified portfolio of common stocks of Closed-End Funds, the
portfolios of which are concentrated in tax-exempt municipal bonds. In
selecting Securities for the Municipal Closed-End Portfolio Series, we
began by eliminating all tax-exempt municipal Closed-End Funds with net
assets under $120 million and an indicated yield of less than 6%. We
then selected those Closed-End Funds which satisfied most, but not
necessarily all, of the following factors:
1. Consistent dividend distributions;
2. Manager's average tenure of more than three years;
3. Average credit quality of the underlying assets of at least
investment grade;
4. Average Morningstar rating of 3 stars or better; and
5. Five-year annualized total market return that is greater than the
total average annual indicated yield.
With the U.S. economy now entering its ninth year of expansion and many
investors having profited from a strong stock market, it might be
prudent for some investors to preserve profits by reallocating gains
into the municipal bond market. For others, tax-free income may be
reason enough to invest. Owning municipal bonds in the current low
inflation environment has the potential to add value to an investment
portfolio. The Municipal Closed-End Portfolio Series invests in a
diversified portfolio of municipal Closed-End Funds that are further
diversified across hundreds of tax-free municipal issues. The average
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quality rating of the bonds in these Closed-End Funds is A+. The
following factors support our positive outlook for municipal bonds:
- - On a taxable equivalent yield basis, the yields available in the
municipal market are currently attractive relative to taxable bonds for
individuals who are in the 28% tax bracket and higher. A large universe
of potential investors.
- - The strong U.S. economy has made a positive impact on municipal
revenues generated from taxes and services. Increased revenues can
enhance the credit-worthiness of the issuers as well as boost the
confidence of investors.
- - As a result of lower interest rates, the cost of capital is
significantly lower today than it was in the 1980s.
Advantages of the Closed-End Fund structure include portfolio control,
diversification and consistent income. Since Closed-End Funds maintain a
relatively fixed pool of investment capital, portfolio managers are
better able to adhere to their investment philosophies through greater
flexibility and control. In addition, Closed-End Funds don't have to
manage fund liquidity to meet potentially large redemptions. Closed-End
Funds are also structured to generally provide a more stable income
stream than other managed fixed-income investment products because they
are not subjected to cash inflows and outflows, which can dilute
dividends over time. However, as a result of bond calls, redemptions and
advanced refundings, which can dilute a fund's income, stable income
cannot be assured.
Of course, as with any similar investments, there can be no guarantee
that the objective of the Trusts will be achieved. See "Risk Factors"
for a discussion of the risks of investing in the Trusts.
Risk Factors
Price Volatility. The Trusts invest in common stocks of Closed-End
Funds. The value of a Trust's Units will fluctuate with changes in the
value of these common stocks. Common stock prices fluctuate for several
reasons including changes in investors' perceptions of the financial
condition of an issuer or the general condition of the relevant stock
market, or when political or economic events affecting the issuers occur.
Because the Trusts are not managed, the Trustee will not sell stocks in
response to or in anticipation of market fluctuations, as is common in
managed investments. As with any investment, we cannot guarantee that
the performance of a Trust will be positive over any period of time or
that you won't lose money. Units of the Trusts are not deposits of any
bank and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Alternative Minimum Tax. While distributions of interest from the
Municipal Closed-End Portfolio Series are generally exempt from federal
income taxes, a portion of such interest may be taken into account in
computing the alternative minimum tax.
Closed-End Funds. Closed-End Funds are actively managed investment
companies which invest in various types of securities. Closed-End Funds
issue shares of common stock that are traded on a securities exchange.
Closed-End Funds are subject to various risks, including management's
ability to meet the Closed-End Fund's investment objective, and to
manage the Closed-End Fund portfolio when the underlying securities are
redeemed or sold, during periods of market turmoil and as investors'
perceptions regarding Closed-End Funds or their underlying investments
change.
Shares of Closed-End Funds frequently trade at a discount from their net
asset value in the secondary market. This risk is separate and distinct
from the risk that the net asset value of Closed-End Fund shares may
decrease. The amount of such discount from net asset value is subject to
change from time to time in response to various factors.
High-Yield Corporate Bonds. Each of the Closed-End Funds held by the
High-Yield Corporate Closed-End Portfolio Series invests in high-yield
corporate bonds. High-yield, high risk corporate bonds are subject to
greater market fluctuations and risk of loss than corporate bonds with
higher investment ratings. The value of these bonds will decline
significantly with increases in interest rates, not only because
increases in rates generally decrease values, but also because increased
rates may indicate an economic slowdown. An economic slowdown, or a
reduction in an issuer's creditworthiness, may result in the issuer
being unable to maintain earnings at a level sufficient to maintain
interest and principal payments.
High-yield or "junk" bonds, the generic names for corporate bonds rated
Page 11
below "Triple B" by Standard & Poor's or Moody's, are frequently issued
by corporations in the growth stage of their development or by
established companies who are highly leveraged or whose operations or
industries are depressed. Obligations rated below "Triple B" should be
considered speculative as these ratings indicate a quality of less than
investment grade. Because high-yield bonds are generally subordinated
obligations and are perceived by investors to be riskier than higher
rated bonds, their prices tend to fluctuate more than higher rated bonds
and are affected by short-term credit developments to a greater degree.
The market for high-yield bonds is smaller and less liquid than that for
investment grade bonds. High-yield bonds are generally not listed on a
national securities exchange but trade in the over-the-counter markets.
Due to the smaller, less liquid market for high-yield bonds, the bid-
offer spread on such bonds is generally greater than it is for
investment grade bonds and the purchase or sale of such bonds may take
longer to complete.
Municipal Bonds. Each of the Closed-End Funds held by the Municipal
Closed-End Portfolio Series invests in tax-exempt municipal bonds.
Municipal bonds are debt obligations issued by states or political
subdivisions or authorities of states. Municipal bonds are typically
designated as general obligation bonds, which are general obligations of
a governmental entity that are backed by the taxing power of such
entity, or revenue bonds, which are payable from the income of a
specific project or authority and are not supported by the issuer's
power to levy taxes. Municipal bonds are long-term fixed rate debt
obligations that generally decline in value with increases in interest
rates, when an issuer's financial condition worsens or when the rating
on a bond is decreased. Many municipal bonds may be called or redeemed
prior to their stated maturity, an event which is more likely to occur
when interest rates fall. In such an occurrence, a Closed-End Fund may
not be able to reinvest the money it receives in other bonds that have
as high a yield or as long a maturity.
Many municipal bonds are subject to continuing requirements as to the
actual use of the bond proceeds or manner of operation of the project
financed from bond proceeds that may affect the exemption of interest on
such bonds from federal income taxation. The market for municipal bonds
is generally less liquid than for other securities and therefore the
price of municipal bonds may be more volatile and subject to greater
price fluctuations than securities with greater liquidity. In addition,
an issuer's ability to make income distributions generally depends on
several factors including the financial condition of the issuer and
general economic conditions. Any of these factors may negatively impact
the price of municipal bonds held by a Closed-End Fund and would
therefore impact the price of both the Securities and the Units.
Foreign Securities. Certain or all of the underlying bonds held by
certain of the Closed-End Funds in the High-Yield Corporate Closed-End
Portfolio Series are issued by foreign companies, which makes this Trust
subject to more risks than if it only invested in Closed-End Funds which
invest solely in domestic bonds. Risks of foreign bonds include losses
due to future political and economic developments, foreign currency
devaluations, restrictions on foreign investments and exchange of
securities, inadequate financial information and lack of liquidity of
certain foreign markets. In addition, brokerage and other transaction
costs on foreign securities exchanges are often higher than in the U.S.
and there is generally less government supervision and regulation of
exchanges, brokers and issuers in foreign countries.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed which may have a negative impact on the prices
of certain of the corporate or municipal bonds owned by the Closed-End
Funds represented in the Trusts. In addition, litigation regarding any
of the issuers of the corporate or municipal bonds owned by such Closed-
End Funds or of the industries represented by such issuers, such as
litigation affecting the validity of certain municipal bonds or the tax-
free nature of the interest thereon, may negatively impact the share
prices of these Securities. We cannot predict what impact any pending or
proposed legislation or pending or threatened litigation will have on
the share prices of the Securities or of the issuers of the underlying
bonds in which they invest.
Year 2000 Problem. Many computer systems were not designed to properly
process information and data involving dates of January 1, 2000 and
thereafter. This is commonly known as the "Year 2000 Problem." We do not
Page 12
expect that any of the computer system changes necessary to prepare for
January 1, 2000 will cause any major operational difficulties for the
Trusts. However, we are unable to predict what impact the Year 2000
Problem will have on any of the issuers of the Securities or on any of
the issuers of the underlying bonds in which they invest. You should
note that issuers of municipal bonds may have greater Year 2000 issues
than other issuers.
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price. The Public Offering
Price per Unit for each Trust is comprised of the following:
- - The aggregate underlying value of the Securities;
- - The amount of any cash in the Income and Capital Accounts of a Trust;
and
- - The total sales charge (which combines an initial up-front sales
charge and a deferred sales charge).
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the prices of the Securities and changes in
the value of the Income and/or Capital Accounts.
Securities purchased with the portion of the Public Offering Price
intended to be used to reimburse the Sponsor for a Trust's organization
costs (including costs of preparing the registration statement, the
Indenture and other closing documents, registering Units with the
Securities and Exchange Commission ("SEC") and states, the initial audit
of 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 a Trust. Securities will be sold to
reimburse the Sponsor for a Trust's organization costs at the earlier of
six months after the Initial Date of Deposit or the end of the initial
offering period (a significantly shorter time period than the life of a
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 the Trust organization costs, the Trustee will sell
additional Securities to allow a Trust to fully reimburse the Sponsor.
In that event, the net asset value per Unit will be reduced by the
amount of additional Securities sold. Although the dollar amount of the
reimbursement will remain fixed and will never exceed the per Unit
amount set forth in "Statements of Net Assets" for such Trust, this will
result in a greater effective cost per Unit to Unit holders for the
reimbursement to the Sponsor. To the extent actual organization costs
are less than the estimated amount, only the actual organization costs
will be deducted from the assets of a Trust. When Securities are sold to
reimburse the Sponsor for organization costs, the Trustee will sell such
Securities, to the extent practicable, which will maintain the same
proportionate relationship among the Securities contained in a Trust as
existed prior to such sale.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Minimum Purchase.
The minimum amount you can purchase of a Trust is $1,000 worth of Units
($500 if you are purchasing Units for your Individual Retirement Account
or any other qualified retirement plan).
Sales Charges.
The maximum sales charge you will pay has both an initial and deferred
component. The initial sales charge, which you will pay at the time of
purchase, is initially equal to approximately 1% of the Public Offering
Price of a Unit. This initial sales charge is actually equal to the
difference between the maximum total sales charge of 4.50% and the
maximum remaining deferred sales charge (initially $.350 per Unit). The
initial sales charge will vary from 1% with changes in the aggregate
underlying value of the Securities, changes in the Income and Capital
Accounts and as deferred sales charge payments are made. In addition,
five monthly deferred sales charges of $.07 per Unit will be deducted
from a Trust's assets on approximately the twentieth day of each month
Page 13
from December 20, 1999 through April 20, 2000. The maximum sales charge
assessed during the initial offering period will be 4.50% of the Public
Offering Price per Unit (equivalent to 4.545% of the net amount
invested, exclusive of the deferred sales charge).
After the initial offering period, if you purchase Units after the last
deferred sales charge payment has been assessed your sales charge will
consist of a one-time initial sales charge of 4.50% of the Public
Offering Price (equivalent to 4.712% of the net amount invested), which
will be reduced by 1/2 of 1% on each subsequent May 31, commencing May
31, 2000 to a minimum sales charge of 3.0%.
Discounts for Certain Persons.
If you invest at least $50,000 (except if you are purchasing for a "wrap
fee account" as described below), the maximum sales charge is reduced,
as follows:
Your maximum
If you invest sales charge
(in thousands):* will be:
______________ ____________
$ 50 but less than $100 4.25%
$100 but less than $150 4.00%
$150 but less than $500 3.50%
$500 or more 2.50%
* The 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.
You may combine same day purchases of Units of the Trusts and units of
other similarly structured unit trusts for which we act as Principal
Underwriter and which are currently in the initial offering period to
meet the above volume purchase levels. We will consider Units you
purchase in the name of your spouse or your child under 21 years of age
to be purchases by you for determining the reduced sales charge. The
reduced sales charges will also apply to a trustee or other fiduciary
purchasing Units for a single trust estate or single fiduciary account.
You must inform your dealer of any combined purchases before the sale in
order to be eligible for the reduced sales charge. Any reduced sales
charge is the responsibility of the broker/dealer or other selling agent
making the sale.
If you own units of any other unit investment trusts sponsored by us,
you may use your redemption or termination proceeds from these trusts to
purchase Units of the Trusts subject only to any remaining deferred
sales charge to be collected on such Units. Please note that you will be
charged the amount of any remaining deferred sales charge on the units
you redeem when you redeem them.
The following persons may purchase Units at the Public Offering Price
less the applicable dealer concession:
- - Employees, officers and directors of the Sponsor, our related
companies, dealers and their affiliates, and vendors providing services
to us.
- - Immediate family members of the above (spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law and daughters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons).
If you purchase Units through registered broker/dealers who charge
periodic fees for financial planning, investment advisory or asset
management services or provide these services as part of an investment
account where a comprehensive "wrap fee" charge is imposed, you may
purchase Units in the primary or secondary market at the Public Offering
Price, subject only to the Sponsor's retention of the sales charge. See
"Distribution of Units-Dealer Concessions."
Every investor will be charged the deferred sales charge per Unit
regardless of any discounts. However, if you are eligible to receive a
discount such that the maximum sales charge you must pay is less than
the applicable maximum deferred sales charge, you will be credited the
difference between your maximum sales charge and the maximum deferred
sales charge at the time you buy your Units.
The Value of the Securities.
The aggregate underlying value of the Securities in a Trust will be
determined as follows: if the Securities are listed on a securities
exchange or The Nasdaq Stock Market, their value is generally based on
the closing sale prices on that exchange or system (unless it is
determined that these prices are not appropriate as a basis for
valuation). However, if there is no closing sale price on that exchange
or system, they are valued based on the closing ask prices. If the
Page 14
Securities are not so listed, or, if so listed and the principal market
for them is other than on that exchange or system, the evaluation 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 evaluation). If current ask prices are unavailable, the
evaluation is generally determined:
a) On the basis of current ask prices for comparable securities,
b) By appraising the value of the Securities on the ask side of the
market, or
c) By any combination of the above.
The Evaluator will appraise the value of the underlying Securities in
each 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 the following holidays as
observed by the New York Stock Exchange ("NYSE"): New Year's Day, Martin
Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day.
After the initial offering period is over, the secondary market Public
Offering Price will be determined based on the aggregate underlying
value of the Securities in a Trust, plus or minus cash, if any, in the
Income and Capital Accounts of such Trust plus the applicable sales
charge. We calculate the aggregate underlying value of the Securities
during the secondary market the same way as described above for sales
made during the initial offering period, except that bid prices are used
instead of ask prices when necessary.
Distribution of Units
We intend to qualify Units of the Trusts for sale in a number of states.
During the initial offering period, Units will be sold at the current
Public Offering Price. When the initial offering period ends, Units we
have reacquired may be offered by this prospectus at the secondary
market Public Offering Price (see "The Secondary Market").
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
represent a concession or agency commission of 3.2% of the Public
Offering Price per Unit (or 65% of the maximum sales charge after May
31, 2000). However, dealers and other selling agents will receive a
concession on the sale of Units subject only to any remaining deferred
sales charge equal to $.22 per Unit on Units sold subject to the maximum
deferred sales charge or 63% of the then current maximum remaining
deferred sales charge on Units sold subject to less than the maximum
deferred sales charge. Dealers and selling agents will receive an
additional volume concession or agency commission of 0.30% of the Public
Offering Price if they purchase at least $100,000 worth of Units of a
Trust on the Initial Date of Deposit or $250,000 on any day thereafter
or if they were eligible to receive a similar concession in connection
with sales of similarly structured trusts sponsored by us which are
currently in the initial offering period.
Dealers and other selling agents who sell Units of a Trust during the
initial offering period in the dollar amounts below will be entitled to
the following additional sales concessions as a percentage of the Public
Offering Price:
Total sales per Trust Additional
(in millions) Concession
_____________________ __________
$ 1 but less than $2 .10%
$ 2 but less than $3 .15%
$ 3 but less than $10 .20%
$10 or more .30%
We reserve the right to change the amount of concessions or agency
commissions from time to time. Certain commercial banks may be making
Units of the Trusts available to their customers on an agency basis. A
portion of the sales charge paid by these customers is kept by or given
to the banks in the amounts shown above. Under the Glass-Steagall Act,
banks are prohibited from underwriting Trust Units. However, the Glass-
Steagall Act does allow certain agency transactions and these appear to
be permitted under the Act. In Texas and in certain other states, any
banks making Units available must be registered as broker/dealers under
state law.
Page 15
Award Programs.
From time to time we may sponsor programs which award our dealers'
registered representatives who have sold a minimum number of Units
during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trusts. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to criteria we
establish or participate in sales programs we sponsor, amounts equal to
no more than the total applicable sales charges on the unit sales
generated by such persons during such programs. We make these payments
out of our own assets, and not out of a Trust's assets. These programs
will not change the price you pay for your Units or the amount that a
Trust will receive from the Units sold.
Investment Comparisons.
From time to time we may compare the then current estimated returns of
the Trusts (which may show performance net of the expenses and charges
such 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 or tax-exempt investments such as the
securities comprising various investment indices, corporate or U.S.
Government bonds, bank CDs and money market accounts or funds, (2)
performance data from Morningstar Publications, Inc. or (3) information
from publications such as Money, the New York Times, U.S. News and World
Report, Business Week, Forbes or Fortune. The investment characteristics
of each Trust, which are described more fully elsewhere in this
prospectus, differ from other comparative investments. You should not
assume that these performance comparisons will be representative of a
Trust's future relative performance.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum sales
charge per Unit for a Trust less any reduced sales charge as stated in
"Public Offering." Also, any difference between our cost to purchase the
Securities and the price we sell them to a Trust is considered a profit
or loss (see Note 2 of "Notes to Schedules of Investments"). During the
initial offering period, dealers and others may also realize profits or
sustain losses as a result of fluctuations in the Public Offering Price
they receive when they sell the Units.
In maintaining a market for the Units, any difference between the price
at which Units are purchased and the price at which they are sold (which
includes a maximum sales charge for a Trust) or redeemed will be a
profit or loss to us. The secondary market public offering price of
Units may be more or less than the cost of those Units to us.
The Secondary Market
Although we are not obligated to, we intend to maintain a market for the
Units after the initial offering period and continuously offer to
purchase Units at prices based on the Redemption Price per Unit.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees and Trustee costs to transfer and record the ownership of
Units. We may discontinue purchases of Units at any time. IF YOU WISH TO
DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET PRICES
BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. If you sell Units
for redemption 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 the proceeds from the
sale of Units we purchase no later than if they were redeemed by the
Trustee. We may tender Units we hold to the Trustee for redemption as
any other Units. If we elect not to purchase Units, the Trustee may sell
Units tendered for redemption 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.
The Public Offering Price of any Units we acquire will be consistent
with the Public Offering Price described in the then effective
prospectus. Any profit or loss from the resale or redemption of such
Units will belong to us.
Page 16
Expenses and Charges
The estimated annual expenses of the Trusts are listed under "Fee
Table." If actual expenses exceed the estimate, the appropriate Trust
will bear the excess. The Trustee will pay operating expenses of a Trust
from the Income Account of such Trust if funds are available, and then
from the Capital Account. The Income and Capital Accounts are
noninterest-bearing to Unit holders, so the Trustee benefits from the
use of these funds. In addition, investors will also indirectly pay a
portion of the expenses of the underlying Closed-End Funds.
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to the Trusts, and will receive brokerage fees
when the Trusts use us (or an affiliate of ours) as agent in buying or
selling Securities. First Trust Advisors L.P., an affiliate of ours,
acts as both Portfolio Supervisor and Evaluator to the Trusts and will
receive the fees set forth under "Fee Table." In providing portfolio
supervisory services, the Portfolio Supervisor may purchase research
services from a number of sources, which may include underwriters or
dealers of the Trusts.
The fees payable to the Portfolio Supervisor, Evaluator and Trustee are
based on the largest aggregate number of Units of a Trust outstanding at
any time during the calendar year, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fees paid to us or our
affiliate for providing services to all unit investment trusts for which
we provide such services be more than the actual cost of providing such
services in such year. Because these fees are generally calculated based
on the largest aggregate number of Units outstanding during a calendar
year, the per Unit amounts will be higher during any year in which
redemptions of Units occur.
In addition to a Trust's operating expenses, and the fees set forth
above, each Trust may also incur the following charges:
- - All legal and annual auditing expenses of the Trustee according to
its responsibilities under the Indenture;
- - The expenses and costs incurred by the Trustee to protect a Trust and
the rights and interests of the Unit holders;
- - Fees for any extraordinary services the Trustee performed under the
Indenture;
- - Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of a Trust;
- - Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of a
Trust; and/or
- - All taxes and other government charges imposed upon the Securities or
any part of a Trust. (No such taxes or charges are now in place or
planned as far as we know.)
The above expenses and the Trustee's annual fee (when paid or owing to
the Trustee) are secured by a lien on the respective Trust. In addition,
if there is not enough cash in the Income or Capital Accounts of a
Trust, the Trustee has the power to sell Securities to make cash
available to pay these charges. We cannot guarantee that distributions
from the Securities will be sufficient to meet any or all expenses of a
Trust. These sales may result in capital gains or losses to the Unit
holders. See "Tax Status."
The Trusts will be audited on an annual basis. So long as we are making
a secondary market for Units, we will bear the cost of these annual
audits to the extent the cost exceeds $0.0050 per Unit. Otherwise, a
Trust will pay for the audit. You can receive a copy of the audited
financial statements by notifying the Trustee.
Tax Status
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trusts. This section is current as
of the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe your state or foreign taxes. As
with any investment, you should consult your own tax professional about
your particular consequences.
Page 17
Assets of the Trusts.
Each Trust will hold shares of Closed-End Funds qualifying as regulated
investment companies ("RICs"). The High Yield Corporate Closed-End
Portfolio Series is invested in high-yield corporate bonds and the
Municipal Closed-End Portfolio Series is invested in municipal bonds.
For purposes of this federal tax discussion, it is assumed that the
Securities constitute qualifying shares in regulated investment
companies for federal income tax purposes.
Trust Status and Distributions.
The Trusts will not be taxed as corporations for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of the Securities and other assets held by your Trust, and
as such you will be considered to have received a pro rata share of
income (i.e., dividends, interest and capital gains, if any) from each
Security when such income is considered to be received by your Trust.
This is true even if you elect to have your distributions automatically
reinvested into additional Units. In addition, the income from a Trust
which you must take into account for federal income tax purposes is not
reduced by amounts used to pay a deferred sales charge.
Distributions received by the Trusts from the Securities, other than
distributions which are designated as capital gain dividends or exempt-
interest dividends, will be taxable to you as ordinary income.
Distributions from the Trusts attributable to dividends received from
the Securities will not be eligible for the dividends received deduction
for corporations.
Your Tax Basis and Income or Loss upon Disposition.
If your Trust disposes of Securities, you will generally recognize gain
or loss. If you dispose of your Units or redeem your Units for cash, you
will also generally recognize gain or loss. To determine the amount of
this gain or loss, you must subtract your tax basis in the related
Securities from your share of the total proceeds received in the
transaction. You can generally determine your initial tax basis in each
Security or other Trust asset by apportioning the cost of your Units,
generally including sales charges, among each Security or other Trust
asset ratably according to their value on the date you purchase your
Units. In certain circumstances, however, you may have to adjust your
tax basis after you purchase your Units (for example, in the case of
certain dividends paid to the Trusts on the Securities that exceed the
RIC's accumulated earnings and profits).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the lowest
tax bracket). Net capital gain equals net long-term capital gain minus
net short-term capital loss for the taxable year. Capital gain or loss
is long-term if the holding period for the asset is more than one year
and is short-term if the holding period for the asset is one year or
less. You must exclude the date you purchase your Units to determine the
holding period of your Units. The tax rates for capital gains realized
from assets held for one year or less are generally the same as for
ordinary income. The tax code may, however, treat certain capital gains
as ordinary income in special situations.
Dividends from Securities.
Some dividends on the Securities may qualify as "capital gain
dividends," taxable to you as long-term capital gains. In addition, some
dividends on the Securities may qualify as "exempt interest dividends,"
which generally are excluded from your gross income for federal income
tax purposes. Some or all of the exempt-interest dividends, however, may
be taken into account in determining your alternative minimum tax, and
may have other tax consequences (e.g., they may affect the amount of
your social security benefits that are taxed).
If you hold a Unit for six months or less or if a Trust holds a Security
for six months or less, any loss incurred by you related to the
disposition of such Security will be disallowed to the extent of the
exempt-interest dividends you received. If such loss is not entirely
disallowed, it will be treated as long-term capital loss to the extent
of any long-term capital gain distributions received (or deemed to have
been received) with respect to such Security. Distributions of income or
capital gains declared on the Securities in October, November, or
December will be deemed to have been paid to you on December 31 of the
year they are declared, even when paid by the RIC during the following
January.
In-Kind Distributions.
Under certain circumstances, you may request an In-Kind Distribution of
Securities when you redeem your Units or at a Trust's termination. If
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you request an In-Kind Distribution you will be responsible for any
expenses related to this distribution. By electing to receive an In-Kind
Distribution, you will receive an undivided interest in the Securities
plus, possibly, cash.
You will not recognize gain or loss if you only receive Securities in
exchange for your pro rata portion of the Securities held by a Trust.
However, if you also receive cash in exchange for a fractional share of
a Security held by a Trust, you will generally recognize gain or loss
based on the difference between the amount of cash you receive and your
tax basis in such fractional share of the Security.
Limitations on the Deductibility of Trust Expenses and Your Interest
Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of a Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by a Trust to the same extent as if you directly
paid the expense. You may, however, be required to treat some or all of
the expenses of the Trusts as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Because some of the Securities pay exempt interest dividends, which are
treated as tax-exempt interest for federal income tax purposes, you will
not be able to deduct some of your share of the Trust expenses. In
addition, you will not be able to deduct some of your interest expense
for debt that you incur or continue to purchase or carry your Units.
Foreign, State and Local Taxes.
Some distributions by a Trust may be subject to foreign withholding
taxes. Any dividends withheld will nevertheless be treated as income to
you. However, because you are deemed to have paid directly your share of
foreign taxes that have been paid or accrued by a Trust, you may be
entitled to a foreign tax credit or deduction for U.S. tax purposes with
respect to such taxes.
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 a Trust or on any gain
from the sale or redemption of your Units, provided that certain
conditions are met. You should consult your tax advisor with respect to
the conditions you must meet in order to be exempt for U.S. tax
purposes. Under the existing income tax laws of the State and City of
New York, the Trusts will not be taxed as corporations, and the income
of the Trusts will be treated as the income of the Unit holders in the
same manner as for federal income tax purposes. You should consult your
tax advisor regarding potential foreign, state or local taxation with
respect to your Units.
Retirement Plans
You may purchase Units of the Trusts for:
- - Individual Retirement Accounts,
- - Keogh Plans,
- - Pension funds, and
- - Other tax-deferred retirement plans.
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. If you are considering participating in a plan like this, you
should review the tax laws regarding these plans and consult your
attorney or tax adviser. 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. If you request certificates representing the Units
you ordered for purchase they will be delivered three business days
after your order or shortly thereafter. You may transfer or redeem Units
represented by a certificate by endorsing it and surrendering it to the
Trustee, along with a written instrument(s) 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.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
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thereof, numbered serially for identification purposes.
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 to you, as the Record Owner:
- - A written initial transaction statement containing a description of
your Trust;
- - The number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
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. The Trustee does not
require such charge now, nor are they currently contemplating doing so.
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.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of income (if any)
distributed. After the end of each calendar year, the Trustee will
provide you with the following information:
- - A summary of transactions in your Trust for the year;
- - Any Securities sold during the year and the Securities held at the
end of that year by your Trust;
- - The Redemption Price per Unit, computed on the 31st day of December
of such year (or the last business day before); and
- - Amounts of income and capital distributed during the year.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Income and Capital Distributions
You will begin receiving distributions from your Units only after you
become a Record Owner. It is your responsibility to notify the Trustee
when you become Record Owner of the Units, but normally your
broker/dealer provides this notice. The Trustee will credit any
dividends received on a Trust's Securities to the Income Account of such
Trust. All other receipts, such as return of capital, are credited to
the Capital Account of such Trust.
The Trustee will distribute any net income in the Income Account on or
near the Income Distribution Dates to Unit holders of record on the
preceding Income Distribution Record Date. See "Summary of Essential
Information" for each Trust. 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 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. However, amounts in the Capital Account from the sale of
Securities designated to meet redemptions of Units, to pay the deferred
sales charge or to pay expenses will not be distributed. The Trustee is
not required to pay interest on funds held in the Income or Capital
Accounts of a Trust. However, the Trustee may earn interest on these
funds, thus benefiting from the use of such funds.
We anticipate that the deferred sales charge will be collected from the
Capital Account of a Trust and that the money in the Capital Account
will be sufficient to cover the cost of the deferred sales charge. If
there is not enough money in the Capital Account to pay the deferred
sales charge, the Trustee may sell Securities to meet the shortfall. We
will designate an account where distributions will be made to pay the
deferred sales charge.
The Trustee is required by the Internal Revenue Service to withhold a
certain percentage of any distribution a Trust makes and deliver such
amount to the Internal Revenue Service if the Trustee does not have your
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TIN. You may recover this amount by giving your TIN to the Trustee, or
when you file a tax return. Normally, the selling broker provides the
Trustee your TIN. However, you should check your statements from the
Trustee to make sure they have the number to avoid this "back-up
withholding." If not, you should provide it to the Trustee as soon as
possible.
Within a reasonable time after a Trust is terminated you will receive
the pro rata share of the money from the disposition 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."
All Unit holders will receive a pro rata share of any other assets
remaining in a Trust, less any unpaid expenses of such Trust.
The Trustee may establish reserves (the "Reserve Account") within a
Trust for any state and local taxes and any governmental charges to be
paid out of such Trust.
Distribution Reinvestment Option. You may elect to have each
distribution of income and/or capital reinvested into additional Units
of a Trust by notifying the Trustee at least 10 days before any Record
Date. Each later distribution of income and/or capital on your Units
will be reinvested by the Trustee into additional Units of a Trust. You
will have to pay any remaining deferred sales charge on any Units
acquired pursuant to this distribution reinvestment option. This option
may not be available in all states. PLEASE NOTE THAT EVEN IF YOU
REINVEST DISTRIBUTIONS, THEY ARE STILL CONSIDERED DISTRIBUTIONS FOR
INCOME TAX PURPOSES.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by sending the
certificates representing the Units you want to redeem to the Trustee at
its unit investment trust office. If your Units are held in
uncertificated form, you need only to deliver a request for redemption
to the Trustee. In either case, the certificates or the redemption
request you send to the Trustee must be properly endorsed with proper
instruments of transfer and signature guarantees as explained in "Rights
of Unit Holders-Unit Ownership" (or by providing satisfactory indemnity
if the certificates were lost, stolen, or destroyed). No redemption fee
will be charged, but you are responsible for any governmental charges
that apply. Three business days after the day you tender your Units (the
"Date of Tender") you will receive cash in an amount for each Unit equal
to the Redemption Price per Unit calculated at the Evaluation Time on
the Date of Tender.
The Date of Tender is considered to be the date on which the Trustee
receives your certificates or redemption request (if such day is a day
the NYSE is open for trading). However, if your certificates or
redemption request are received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing income will be withdrawn
from the Income Account of a Trust if funds are available for that
purpose, or from the Capital Account. All other amounts paid on
redemption will be taken from the Capital Account of a Trust.
If you are tendering 1,000 Units or more of a Trust for redemption,
rather than receiving cash you may elect to receive a distribution of
shares of Securities (an "In-Kind Distribution") in an amount and value
equal to the Redemption Price per Unit by making this request in writing
to the Trustee at the time of tender. However, no In-Kind Distribution
requests submitted during the nine business days prior to a Trust's
Mandatory Termination Date will be honored. Where possible, the Trustee
will make an In-Kind Distribution by distributing each of the Securities
in book-entry form to your bank or broker/dealer account at the
Depository Trust Company. The Trustee will subtract any customary
transfer and registration charges from your In-Kind Distribution. As a
tendering Unit holder, you will receive your pro rata number of whole
shares of the Securities that make up the portfolio, and cash from the
Capital Account equal to the fractional shares to which you are
entitled. If there is not enough money in the Capital Account to pay the
required cash distribution, the Trustee may have to sell Securities.
The Internal Revenue Service will require the Trustee to withhold a
portion of your redemption proceeds if the Trustee has not previously
been provided your TIN. For more information about this withholding, see
"Income and Capital Distribution." If the Trustee does not have your
TIN, you must provide it at the time of the redemption request.
The Trustee may sell Securities in a Trust to make funds available for
Page 21
redemption. If Securities are sold, the size and diversification of such
Trust will be reduced. These sales may result in lower prices than if
the Securities were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- - If the NYSE is closed (other than customary weekend and holiday
closings);
- - If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- - For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Income and Capital Accounts of a Trust not designated to
purchase Securities;
2. the aggregate underlying value of the Securities held in a Trust; and
3. dividends receivable on the Securities trading ex-dividend as of the
date of computation; and
deducting
1. any applicable taxes or governmental charges that need to be paid out
of a Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of a Trust, if any;
4. cash held for distribution to Unit holders of record of a Trust as of
the business day before the evaluation being made; and
5. other liabilities incurred by a Trust; and
dividing
1. the result by the number of outstanding Units of a Trust.
Any remaining deferred sales charge on the Units when you redeem them
will be deducted from your redemption proceeds. In addition, until the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period, the Redemption Price per Unit will include
estimated organization costs as set forth under "Fee Table."
The aggregate underlying value of the Securities for purposes of
calculating the Redemption Price during the secondary market is
determined in the same manner as that used to calculate the Secondary
Market Public Offering Price as discussed in "Public Offering-The Value
of the Securities."
Removing Securities from a Trust
The portfolios of the Trusts are not managed. However, we may, but are
not required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- - The issuer of the Security defaults in the payment of a declared
dividend;
- - Any action or proceeding prevents the payment of dividends;
- - There is any legal question or impediment affecting the Security;
- - The issuer of the Security has breached a covenant which would affect
the payment of dividends or the issuer's credit standing, or otherwise
damage the sound investment character of the Security; or
- - The issuer has defaulted on the payment of any other of its
outstanding obligations; or
- - The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to a Trust.
Except in the limited instance in which a Trust acquires Replacement
Securities to replace failed contracts to purchase Securities, as
described in "The FT Series," a Trust may not acquire any securities or
other property other than the Securities. The Trustee, on behalf of a
Trust, will reject any offer for new or exchanged securities or property
in exchange for a Security, such as those acquired in a merger or other
transaction. If such exchanged securities or property are nevertheless
acquired by a Trust, at our instruction, they will either be sold or
held in such Trust. In making the determination as to whether to sell or
hold the exchanged securities or property we may get advice from the
Portfolio Supervisor. Any proceeds received from the sale of Securities,
exchanged securities or property will be credited to the Capital Account
of a Trust for distributions to Unit holders or to meet redemption
requests. The Trustee may retain and pay us or an affiliate of ours to
act as agent for a Trust to facilitate selling Securities, exchanged
securities or property from a Trust. If we or our affiliate act in this
Page 22
capacity, we will be held subject to the restrictions under the
Investment Company Act of 1940, as amended.
The Trustee may also sell Securities that we designate; or, without our
direction, in its own discretion, in order to meet redemption requests
or pay expenses.
In designating which Securities should be sold, we will try to maintain
the proportionate relationship among the Securities. If this is not
possible, the composition and diversification of the Securities in a
Trust may be changed. To get the best price for a Trust we may have to
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 in making recommendations to the
Trustee on the selection of broker/dealers to execute a Trust's
portfolio transactions, or when acting as agent for a Trust in acquiring
or selling Securities on behalf of such 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, a Trust will terminate on the
Mandatory Termination Date. The Trust may be terminated prior to the
Mandatory Termination Date:
- - Upon the consent of 100% of the Unit holders;
- - If the value of the Securities owned by a Trust as shown by any
evaluation is less than the lower of $2,000,000 or 20% of the total
value of Securities deposited in such Trust during the initial offering
period ("Discretionary Liquidation Amount"); or
- - In the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
In the event of termination, the Trustee will send prior written notice
thereof to all Unit holders which will specify how you should tender
your certificates, if any, to the Trustee. If a Trust is terminated due
to this last reason, we will refund to each purchaser of Units of such
Trust the entire sales charge paid by such purchaser; however,
termination of a Trust prior to the Mandatory Termination Date for any
other stated reason will result in all remaining unpaid deferred sales
charges on your Units being deducted from your termination proceeds. For
various reasons, a Trust may be reduced below the Discretionary
Liquidation Amount and could therefore be terminated prior to the
Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of a Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner, timing and execution of
the sale of Securities as part of the termination of a Trust. 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 amount than might otherwise be realized if such sale
were not required at this time.
If you own at least 1,000 Units of a Trust, the Trustee will send you a
form at least 30 days prior to the Mandatory Termination Date which will
enable you to receive an In-Kind Distribution of Securities (reduced by
customary transfer and registration charges) rather than the typical
cash distribution representing your pro rata interest in a Trust. 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 for eligible Unit holders you will receive a cash distribution
from the sale of the remaining Securities, along with your interest in
the Income and Capital Accounts of a Trust, within a reasonable time
after such Trust is terminated. Regardless of the distribution involved,
the Trustee will deduct from a Trust any accrued costs, expenses,
advances or indemnities provided 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.
Page 23
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- - The First Trust Combined Series
- - FT Series (formerly known as The First Trust Special Situations Trust)
- - The First Trust Insured Corporate Trust
- - The First Trust of Insured Municipal Bonds
- - The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $25 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1998, the total partners' capital of
Nike Securities L.P. was $18,506,548 (audited).
This information refers only to the Sponsor and not to the Trusts or to
any series of the Trusts or to any other dealer. We are including this
information only to inform you of our financial responsibility and our
ability to carry out our contractual obligations. We will provide more
detailed financial information on request.
The Trustee.
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
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; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable to Unit holders for taking any
action or for not taking any action in good faith according to the
Indenture. We will also not be accountable for errors in judgment. We
will only be liable for our own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the Trustee's case) or reckless
disregard of our obligations and duties. The Trustee is not liable for
any loss or depreciation when the Securities are sold. If we fail to act
under the Indenture, the Trustee may do so, and the Trustee will not be
liable for any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- - Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC,
- - Terminate the Indenture and liquidate the Trusts, or
- - Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information.
However, the Evaluator will not be liable to the Trustee, Sponsor or
Unit holders for errors in judgment.
Page 24
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel, as well as special New York tax
counsel for the Trusts.
Experts.
Ernst & Young LLP, independent auditors, have audited the Trusts'
statements of net assets, including the schedules of investments, at the
opening of business on the Initial Date of Deposit, as set forth in
their report. We've included the Trusts' statements of net assets,
including the schedules of investments, in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific risk information about the Trusts.
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Page 27
FIRST TRUST (registered trademark)
High-Yield Corporate Closed-End Portfolio Series
Municipal Closed-End Portfolio Series
FT 320
Sponsor:
NIKE SECURITIES L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to High-Yield Corporate
Closed-End Portfolio Series and Municipal Closed-End Portfolio Series,
but does not contain all of the information about this investment
company as filed with the Securities and Exchange Commission in
Washington, D.C. under the:
- Securities Act of 1933 (file no. 333-69561) and
- Investment Company Act of 1940 (file no. 811-05903)
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W., Washington, D.C. 20549-6009
Call: 1-800-SEC-0330
Visit: http://www.sec.gov
May 25, 1999
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 28
First Trust (registered trademark)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trusts
contained in FT 320 not found in the prospectus for the Trusts. This
Information Supplement is not a prospectus and does not include all of
the information that you should consider before investing in the Trusts.
This Information Supplement should be read in conjunction with the
prospectus for the Trusts in which you are considering investing.
This Information Supplement is dated May 25, 1999. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors 1
Securities 1
High-Yield Corporate Bonds 2
High-Yield Obligations 2
Municipal Bonds 3
Healthcare Revenue Bonds 4
Single Family Mortgage Revenue Bonds 4
Multi-Family Mortgage Revenue Bonds 4
Water and Sewerage Revenue Bonds 5
Electric Utility Revenue Bonds 5
Lease Obligation Revenue Bonds 5
Industrial Revenue Bonds 5
Transportation Facility Revenue Bonds 6
Educational Obligation Revenue Bonds 6
Resource Recovery Facility Revenue Bonds 6
Discount Bonds 6
Original Issue Discount Bonds 7
Zero Coupon Bonds 7
Premium Bonds 7
Portfolio Securities Descriptions 7
High-Yield Corporate Closed-End Portfolio Series 7
Municipal Closed-End Portfolio Series 10
Risk Factors.
Securities. The Securities in the Trusts represent shares of closed-end
mutual funds which invest in either tax-exempt municipal bonds or high-
yield corporate debt obligations. As such, an investment in Units of the
Trusts should be made with an understanding of the risks of investing in
both closed-end fund shares and municipal bonds or high-yield corporate
debt obligations.
Closed-end mutual funds' portfolios are managed and their shares are
generally listed on a securities exchange. The net asset value of closed-
end fund shares will fluctuate with changes in the value of the
underlying securities which the closed-end fund owns. In addition, for
various reasons closed-end fund shares frequently trade at a discount
from their net asset value in the secondary market. The amount of such
discount from net asset value is subject to change from time to time in
response to various factors. Closed-end funds' articles of incorporation
may contain certain anti-takeover provisions that may have the effect of
inhibiting a fund's possible conversion to open-end status and limiting
the ability of other persons to acquire control of a fund. In certain
circumstances, these provisions might also inhibit the ability of
stockholders (including the Trusts) to sell their shares at a premium
over prevailing market prices. This characteristic is a risk separate
Page 1
and distinct from the risk that a fund's net asset value will decrease.
In particular, this characteristic would increase the loss or reduce the
return on the sale of those closed-end fund shares which were purchased
by a Trust at a premium. In the unlikely event that a closed-end fund
converts to open-end status at a time when its shares are trading at a
premium there would be an immediate loss in value to the Trust since
shares of open-end funds trade at net asset value. Certain closed-end
funds may have in place or may put in place in the future plans pursuant
to which the fund may repurchase its own shares in the marketplace.
Typically, these plans are put in place in an attempt by a fund's board
of directors to reduce a discount on its share price. To the extent such
a plan was implemented and shares owned by a Trust are repurchased by a
fund, the Trust's position in that fund would be reduced and the cash
would be distributed.
The Trusts are prohibited from subscribing to a rights offering for
shares of any of the closed-end funds in which they invest. In the event
of a rights offering for additional shares of a fund, Unit holders
should expect that their Trust will, at the completion of the offer, own
a smaller proportional interest in such fund that would otherwise be the
case. It is not possible to determine the extent of this dilution in
share ownership without knowing what proportion of the shares in a
rights offering will be subscribed. This may be particularly serious
when the subscription price per share for the offer is less than the
fund's net asset value per share. Assuming that all rights are exercised
and there is no change in the net asset value per share, the aggregate
net asset value of each shareholder's shares of common stock should
decrease as a result of the offer. If a fund's subscription price per
share is below that fund's net asset value per share at the expiration
of the offer, shareholders would experience an immediate dilution of the
aggregate net asset value of their shares of common stock as a result of
the offer, which could be substantial.
Closed-end funds may utilize leveraging in their portfolios. Leveraging
can be expected to cause increased price volatility for those fund's
shares, and as a result, increased volatility for the price of the Units
of a Trust. There can be no assurance that a leveraging strategy will be
successful during any period in which it is employed.
The following is a discussion of certain of the risks associated with
specific types of bonds.
High-Yield Corporate Bonds.
High-Yield Obligations. An investment in Units of the High-Yield
Corporate Closed-End Portfolio Series should be made with an
understanding of the risks that an investment in "high-yield, high-
risk," fixed-rate, domestic and foreign corporate debt obligations or
"junk bonds" may entail, including increased credit risks and the risk
that the value of the Units will decline, and may decline precipitously,
with increases in interest rates. In recent years there have been wide
fluctuations in interest rates and thus in the value of fixed-rate, debt
obligations generally. Bonds such as those included in the funds in the
Trust are, under most circumstances, subject to greater market
fluctuations and risk of loss of income and principal than are
investments in lower-yielding, higher-rated bonds, and their value may
decline precipitously because of increases in interest rates, not only
because the increases in rates generally decrease values, but also
because increased rates may indicate a slowdown in the economy and a
decrease in the value of assets generally that may adversely affect the
credit of issuers of high-yield, high-risk bonds resulting in a higher
incidence of defaults among high-yield, high-risk bonds. A slowdown in
the economy, or a development adversely affecting an issuer's
creditworthiness, may result in the issuer being unable to maintain
earnings or sell assets at the rate and at the prices, respectively,
that are required to produce sufficient cash flow to meet its interest
and principal requirements. For an issuer that has outstanding both
senior commercial bank debt and subordinated high-yield, high-risk
bonds, an increase in interest rates will increase that issuer's
interest expense insofar as the interest rate on the bank debt is
fluctuating. However, many leveraged issuers enter into interest rate
protection agreements to fix or cap the interest rate on a large portion
of their bank debt. This reduces exposure to increasing rates, but
reduces the benefit to the issuer of declining rates. The Sponsor cannot
predict future economic policies or their consequences or, therefore,
the course or extent of any similar market fluctuations in the future.
"High-yield" or "junk" bonds, the generic names for corporate bonds
rated below BBB by Standard & Poor's, or below Baa by Moody's, are
frequently issued by corporations in the growth stage of their
development, by established companies whose operations or industries are
depressed or by highly leveraged companies purchased in leveraged buyout
transactions. The market for high-yield bonds is very specialized and
investors in it have been predominantly financial institutions. High-
yield bonds are generally not listed on a national securities exchange.
Trading of high-yield bonds, therefore, takes place primarily in over-
the-counter markets which consist of groups of dealer firms that are
typically major securities firms. Because the high-yield bond market is
a dealer market, rather than an auction market, no single obtainable
price for a given bond prevails at any given time. Prices are determined
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by negotiation between traders. The existence of a liquid trading market
for the bonds may depend on whether dealers will make a market in the
bonds. There can be no assurance that a market will be made for any of
the bonds, that any market for the bonds will be maintained or of the
liquidity of the bonds in any markets made. Not all dealers maintain
markets in all high-yield bonds. Therefore, since there are fewer
traders in these bonds than there are in "investment grade" bonds, the
bid-offer spread is usually greater for high-yield bonds than it is for
investment grade bonds. The price at which the bonds may be sold to meet
redemptions and the value of the Trust will be adversely affected if
trading markets for the bonds are limited or absent. If the rate of
redemptions is great, the value of the Trust may decline to a level that
requires liquidation.
Lower-rated bonds tend to offer higher yields than higher-rated bonds
with the same maturities because the creditworthiness of the issuers of
lower-rated bonds may not be as strong as that of other issuers.
Moreover, if a bond is recharacterized as equity by the Internal Revenue
Service for federal income tax purposes, the issuer's interest deduction
with respect to the bond will be disallowed and this disallowance may
adversely affect the issuer's credit rating. Because investors generally
perceive that there are greater risks associated with the lower-rated
bonds in the High-Yield Corporate Closed-End Portfolio Series, the
yields and prices of these bonds tend to fluctuate more than higher-
rated bonds with changes in the perceived quality of the credit of their
issuers. In addition, the market value of high-yield, high-risk, fixed-
income bonds may fluctuate more than the market value of higher-rated
bonds since high-yield, high-risk, fixed-income bonds tend to reflect
short-term credit development to a greater extent than higher-rated
bonds. Lower-rated bonds generally involve greater risks of loss of
income and principal than higher-rated bonds. Issuers of lower-rated
bonds may possess fewer creditworthiness characteristics than issuers of
higher-rated bonds and, especially in the case of issuers whose
obligations or credit standing have recently been downgraded, may be
subject to claims by debtholders, owners of property leased to the
issuer or others which, if sustained, would make it more difficult for
the issuers to meet their payment obligations. High-yield, high-risk
bonds are also affected by variables such as interest rates, inflation
rates and real growth in the economy. Therefore, investors should
consider carefully the relative risks associated with investment in
bonds which carry lower ratings.
The value of the Units reflects the value of the portfolio bonds,
including the value (if any) of bonds in default. Should the issuer of
any bond default in the payment of principal or interest, the funds in
the Trust may incur additional expenses seeking payment on the defaulted
bond. Because amounts (if any) recovered by the funds in payment under
the defaulted bond may not be reflected in the value of the fund shares
until actually received by the funds, and depending upon when a Unit
holder purchases or sells his or her Units, it is possible that a Unit
holder would bear a portion of the cost of recovery without receiving
any portion of the payment recovered.
High-yield, high-risk bonds are generally subordinated obligations. The
payment of principal (and premium, if any), interest and sinking fund
requirements with respect to subordinated obligations of an issuer is
subordinated in right of payment to the payment of senior obligations of
the issuer. Senior obligations generally include most, if not all,
significant debt obligations of an issuer, whether existing at the time
of issuance of subordinated debt or created thereafter. Upon any
distribution of the assets of an issuer with subordinated obligations
upon dissolution, total or partial liquidation or reorganization of or
similar proceeding relating to the issuer, the holders of senior
indebtedness will be entitled to receive payment in full before holders
of subordinated indebtedness will be entitled to receive any payment.
Moreover, generally no payment with respect to subordinated indebtedness
may be made while there exists a default with respect to any senior
indebtedness. Thus, in the event of insolvency, holders of senior
indebtedness of an issuer generally will recover more, ratably, than
holders of subordinated indebtedness of that issuer.
Obligations that are rated lower than BBB by Standard & Poor's, or Baa
by Moody's, respectively, should be considered speculative as such
ratings indicate a quality of less than investment grade. Investors
should carefully review the objective of the High-Yield Corporate Closed-
End Portfolio Series and consider their ability to assume the risks
involved before making an investment in such Trust.
Municipal Bonds.
Certain of the bonds held by the Securities in the Municipal Closed-End
Portfolio Series may be general obligations of a governmental entity
that are backed by the taxing power of such entity. Other bonds in the
funds may be revenue bonds payable from the income of a specific project
or authority and are not supported by the issuer's power to levy taxes.
General obligation bonds are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and
interest. Revenue bonds, on the other hand, are payable only from the
revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other
Page 3
specific revenue source. There are, of course, variations in the
security of the different bonds in the funds, both within a particular
classification and between classifications, depending on numerous
factors. A description of certain types of revenue bonds follows.
Healthcare Revenue Bonds. Certain of the bonds may be healthcare revenue
bonds. Ratings of bonds issued for healthcare facilities are sometimes
based on feasibility studies that contain projections of occupancy
levels, revenues and expenses. A facility's gross receipts and net
income available for debt service may be affected by future events and
conditions including among other things, demand for services, the
ability of the facility to provide the services required, physicians'
confidence in the facility, management capabilities, competition with
other hospitals, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses,
government regulation, the cost and possible unavailability of
malpractice insurance and the termination or restriction of governmental
financial assistance, including that associated with Medicare, Medicaid
and other similar third party payor programs. Pursuant to recent Federal
legislation, Medicare reimbursements are currently calculated on a
prospective basis utilizing a single nationwide schedule of rates. Prior
to such legislation Medicare reimbursements were based on the actual
costs incurred by the health facility. The current legislation may
adversely affect reimbursements to hospitals and other facilities for
services provided under the Medicare program.
Single Family Mortgage Revenue Bonds. Certain of the bonds may be single
family mortgage revenue bonds, which are issued for the purpose of
acquiring from originating financial institutions notes secured by
mortgages on residences located within the issuer's boundaries and owned
by persons of low or moderate income. Mortgage loans are generally
partially or completely prepaid prior to their final maturities as a
result of events such as sale of the mortgaged premises, default,
condemnation or casualty loss. Because these bonds are subject to
extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will
probably be redeemed prior to their scheduled maturities or even prior
to their ordinary call dates. The redemption price of such issues may be
more or less than the offering price of such bonds. Extraordinary
mandatory redemption without premium could also result from the failure
of the originating financial institutions to make mortgage loans in
sufficient amounts within a specified time period or, in some cases,
from the sale by the bond issuer of the mortgage loans. Failure of the
originating financial institutions to make mortgage loans would be due
principally to the interest rates on mortgage loans funded from other
sources becoming competitive with the interest rates on the mortgage
loans funded with the proceeds of the single family mortgage revenue
bonds. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of
principal of or interest on such mortgage revenue bonds. Single family
mortgage revenue bonds issued after December 31, 1980 were issued under
Section 103A of the Internal Revenue Code, which Section contains
certain ongoing requirements relating to the use of the proceeds of such
bonds in order for the interest on such bonds to retain its tax-exempt
status. In each case, the issuer of the bonds has covenanted to comply
with applicable ongoing requirements and bond counsel to such issuer has
issued an opinion that the interest on the bonds is exempt from Federal
income tax under existing laws and regulations. There can be no
assurances that the ongoing requirements will be met. The failure to
meet these requirements could cause the interest on the bonds to become
taxable, possibly retroactively from the date of issuance.
Multi-Family Mortgage Revenue Bonds. Certain of the bonds may be
obligations of issuers whose revenues are primarily derived from
mortgage loans to housing projects for low to moderate income families.
The ability of such issuers to make debt service payments will be
affected by events and conditions affecting financed projects,
including, among other things, the achievement and maintenance of
sufficient occupancy levels and adequate rental income, increases in
taxes, employment and income conditions prevailing in local labor
markets, utility costs and other operating expenses, the managerial
ability of project managers, changes in laws and governmental
regulations, the appropriation of subsidies and social and economic
trends affecting the localities in which the projects are located. The
occupancy of housing projects may be adversely affected by high rent
levels and income limitations imposed under Federal and state programs.
Like single family mortgage revenue bonds, multi-family mortgage revenue
bonds are subject to redemption and call features, including
extraordinary mandatory redemption features, upon prepayment, sale or
non-origination of mortgage loans as well as upon the occurrence of
other events. Certain issuers of single or multi-family housing bonds
have considered various ways to redeem bonds they have issued prior to
the stated first redemption dates for such bonds. In one situation the
New York City Housing Development Corporation, in reliance on its
interpretation of certain language in the indenture under which one of
its bond issues was created, redeemed all of such issue at par in spite
of the fact that such indenture provided that the first optional
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redemption was to include a premium over par and could not occur prior
to 1992.
Water and Sewerage Revenue Bonds. Certain of the bonds may be
obligations of issuers whose revenues are derived from the sale of water
and/or sewerage services. Water and sewerage bonds are generally payable
from user fees. Problems faced by such issuers include the ability to
obtain timely and adequate rate increases, population decline resulting
in decreased user fees, the difficulty of financing large construction
programs, the limitations on operations and increased costs and delays
attributable to environmental considerations, the increasing difficulty
of obtaining or discovering new supplies of fresh water, the effect of
conservation programs and the impact of "no-growth" zoning ordinances.
All of such issuers have been experiencing certain of these problems in
varying degrees.
Electric Utility Revenue Bonds. Certain of the bonds may be obligations
of issuers whose revenues are primarily derived from the sale of
electric energy. Utilities are generally subject to extensive regulation
by state utility commissions which, among other things, establish the
rates which may be charged and the appropriate rate of return on an
approved asset base. The problems faced by such issuers include the
difficulty in obtaining approval for timely and adequate rate increases
from the governing public utility commission, the difficulty in
financing large construction programs, the limitations on operations and
increased costs and delays attributable to environmental considerations,
increased competition, recent reductions in estimates of future demand
for electricity in certain areas of the country, the difficulty of the
capital market in absorbing utility debt, the difficulty in obtaining
fuel at reasonable prices and the effect of energy conservation. All of
such issuers have been experiencing certain of these problems in varying
degrees. In addition, Federal, state and municipal governmental
authorities may from time to time review existing and impose additional
regulations governing the licensing, construction and operation of
nuclear power plants, which may adversely affect the ability of the
issuers of such bonds to make payments of principal and/or interest on
such bonds.
Lease Obligation Revenue Bonds. Certain of the bonds may be lease
obligations issued for the most part by governmental authorities that
have no taxing power or other means of directly raising revenues.
Rather, the governmental authorities are financing vehicles created
solely for the construction of buildings (schools, administrative
offices, convention centers and prisons, for example) or the purchase of
equipment (police cars and computer systems, for example) that will be
used by a state or local government (the "lessee"). Thus, these
obligations are subject to the ability and willingness of the lessee
government to meet its lease rental payments which include debt service
on the obligations. Lease obligations are subject, in almost all cases,
to the annual appropriation risk, i.e., the lessee government is not
legally obligated to budget and appropriate for the rental payments
beyond the current fiscal year. These obligations are also subject to
construction and abatement risk in many states-rental obligations cease
in the event that delays in building, damage, destruction or
condemnation of the project prevents its use by the lessee. In these
cases, insurance provisions designed to alleviate this risk become
important credit factors. In the event of default by the lessee
government, there may be significant legal and/or practical difficulties
involved in the re-letting or sale of the project. Some of these issues,
particularly those for equipment purchase, contain the so-called
"substitution safeguard," which bars the lessee government, in the event
it defaults on its rental payments, from the purchase or use of similar
equipment for a certain period of time. This safeguard is designed to
insure that the lessee government will appropriate, even though it is
not legally obligated to do so, but its legality remains untested in
most, if not all, states.
Industrial Revenue Bonds. Certain of the bonds may be industrial revenue
bonds ("IRBs"), including pollution control revenue bonds, which are tax-
exempt securities issued by states, municipalities, public authorities
or similar entities to finance the cost of acquiring, constructing or
improving various industrial projects. These projects are usually
operated by corporate entities. Issuers are obligated only to pay
amounts due on the IRBs to the extent that funds are available from the
unexpended proceeds of the IRBs or receipts or revenues of the issuer
under an arrangement between the issuer and the corporate operator of a
project. The arrangement may be in the form of a lease, installment sale
agreement, conditional sale agreement or loan agreement, but in each
case the payments to the issuer are designed to be sufficient to meet
the payments of amounts due on the IRBs. Regardless of the structure,
payment of IRBs is solely dependent upon the creditworthiness of the
corporate operator of the project or corporate guarantor. Corporate
operators or guarantors may be affected by many factors which may have
an adverse impact on the credit quality of the particular company or
industry. These include cyclicality of revenues and earnings, regulatory
and environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from a complete restructuring pursuant to a
leveraged buy-out, takeover or otherwise. Such a restructuring may
result in the operator of a project becoming highly leveraged which may
impact on such operator's creditworthiness, which in turn would have an
adverse impact on the rating and/or market value of such bonds. Further,
Page 5
the possibility of such a restructuring may have an adverse impact on
the market for and consequently the value of such bonds, even though no
actual takeover or other action is ever contemplated or affected. The
IRBs in a fund may be subject to special or extraordinary redemption
provisions which may provide for redemption at par or, with respect to
original issue discount bonds, at issue price plus the amount of
original issue discount accreted to the redemption date plus, if
applicable, a premium. The Sponsor cannot predict the causes or
likelihood of the redemption of IRBs or other bonds in the funds prior
to the stated maturity of such bonds.
Transportation Facility Revenue Bonds. Certain of the bonds may be
obligations which are payable from and secured by revenues derived from
the ownership and operation of facilities such as airports, bridges,
turnpikes, port authorities, convention centers and arenas. The major
portion of an airport's gross operating income is generally derived from
fees received from signatory airlines pursuant to use agreements which
consist of annual payments for leases, occupancy of certain terminal
space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under
the use agreements. The air transport industry is experiencing
significant variations in earnings and traffic, due to increased
competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing
severe financial difficulties. The Sponsor cannot predict what effect
these industry conditions may have on airport revenues which are
dependent for payment on the financial condition of the airlines and
their usage of the particular airport facility. Similarly, payment on
bonds related to other facilities is dependent on revenues from the
projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected
by reduction in revenues due to such factors as increased cost of
maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents.
Educational Obligation Revenue Bonds. Certain of the bonds may be
obligations of issuers which are, or which govern the operation of,
schools, colleges and universities and whose revenues are derived mainly
from ad valorem taxes, or for higher education systems, from tuition,
dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the state constitutionality
of financing public education in part from ad valorem taxes, thereby
creating a disparity in educational funds available to schools in
wealthy areas and schools in poor areas. Litigation or legislation on
this issue may affect the sources of funds available for the payment of
school bonds in the funds. General problems relating to college and
university obligations would include the prospect of a declining
percentage of the population consisting of "college" age individuals,
possible inability to raise tuitions and fees sufficiently to cover
increased operating costs, the uncertainty of continued receipt of
Federal grants and state funding and new government legislation or
regulations which may adversely affect the revenues or costs of such
issuers. All of such issuers have been experiencing certain of these
problems in varying degrees.
Resource Recovery Facility Revenue Bonds. Certain of the bonds may be
obligations which are payable from and secured by revenues derived from
the operation of resource recovery facilities. Resource recovery
facilities are designed to process solid waste, generate steam and
convert steam to electricity. Resource recovery bonds may be subject to
extraordinary optional redemption at par upon the occurrence of certain
circumstances, including but not limited to: destruction or condemnation
of a project; contracts relating to a project becoming void,
unenforceable or impossible to perform; changes in the economic
availability of raw materials, operating supplies or facilities
necessary for the operation of a project or technological or other
unavoidable changes adversely affecting the operation of a project;
administrative or judicial actions which render contracts relating to
the projects void, unenforceable or impossible to perform; or impose
unreasonable burdens or excessive liabilities. The Sponsor cannot
predict the causes or likelihood of the redemption of resource recovery
bonds in the funds prior to the stated maturity of the Bonds.
Discount Bonds. Certain of the bonds held by the Securities in the
Municipal Closed-End Portfolio Series may have been acquired at a market
discount from par value at maturity. The coupon interest rates on the
discount bonds at the time they were purchased and deposited in the
funds were lower than the current market interest rates for newly issued
bonds of comparable rating and type. If such interest rates for newly
issued comparable bonds increase, the market discount of previously
issued bonds will become greater, and if such interest rates for newly
issued comparable bonds decline, the market discount of previously
issued bonds will be reduced, other things being equal. Investors should
also note that the value of bonds purchased at a market discount will
increase in value faster than bonds purchased at a market premium if
interest rates decrease. Conversely, if interest rates increase, the
value of bonds purchased at a market discount will decrease faster than
bonds purchased at a market premium. In addition, if interest rates
rise, the prepayment risk of higher yielding, premium bonds and the
prepayment benefit for lower yielding, discount bonds will be reduced. A
Page 6
discount bond held to maturity will have a larger portion of its total
return in the form of taxable income and capital gain and less in the
form of tax-exempt interest income than a comparable bond newly issued
at current market rates. Market discount attributable to interest
changes does not indicate a lack of market confidence in the issue.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the bonds.
Original Issue Discount Bonds. Certain of the bonds held by the
Securities in the Municipal Closed-End Portfolio Series may be original
issue discount bonds. Under current law, the original issue discount,
which is the difference between the stated redemption price at maturity
and the issue price of the bonds, is deemed to accrue on a daily basis
and the accrued portion is treated as tax-exempt interest income for
Federal income tax purposes. On sale or redemption, any gain realized
that is in excess of the earned portion of original issue discount will
be taxable as capital gain unless the gain is attributable to market
discount in which case the accretion of market discount is taxable as
ordinary income. The current value of an original issue discount bond
reflects the present value of its stated redemption price at maturity.
The market value tends to increase in greater increments as the bonds
approach maturity.
Zero Coupon Bonds. Certain of the original issue discount bonds may be
zero coupon bonds (including bonds known as multiplier bonds, money
multiplier bonds, capital appreciation bonds, capital accumulator bonds,
compound interest bonds and money discount maturity payment bonds). Zero
coupon bonds do not provide for the payment of any current interest and
generally provide for payment at maturity at face value unless sooner
sold or redeemed. Zero coupon bonds may be subject to more price
volatility than conventional bonds. While some types of zero coupon
bonds, such as multipliers and capital appreciation bonds, define par as
the initial offering price rather than the maturity value, they share
the basic zero coupon bond features of (1) not paying interest on a semi-
annual basis and (2) providing for the reinvestment of the bond's semi-
annual earnings at the bond's stated yield to maturity. While zero
coupon bonds are frequently marketed on the basis that their fixed rate
of return minimizes reinvestment risk, this benefit can be negated in
large part by weak call protection, i.e., a bond's provision for
redemption at only a modest premium over the accreted value of the bond.
Premium Bonds. Certain of the bonds held by the Securities in the
Municipal Closed-End Portfolio Series may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the
premium bonds at the time they were purchased by the fund were higher
than the current market interest rates for newly issued bonds of
comparable rating and type. If such interest rates for newly issued and
otherwise comparable bonds decrease, the market premium of previously
issued bonds will be increased, and if such interest rates for newly
issued comparable bonds increase, the market premium of previously
issued bonds will be reduced, other things being equal. The current
returns of bonds trading at a market premium are initially higher than
the current returns of comparable bonds of a similar type issued at
currently prevailing interest rates because premium bonds tend to
decrease in market value as they approach maturity when the face amount
becomes payable. Because part of the purchase price is thus returned not
at maturity but through current income payments, early redemption of a
premium bond at par or early prepayments of principal will result in a
reduction in yield. Redemption pursuant to call provisions generally
will, and redemption pursuant to sinking fund provisions may, occur at
times when the redeemed bonds have an offering side valuation which
represents a premium over par or for original issue discount bonds a
premium over the accreted value.
Portfolios
High-Yield Corporate Closed-End Portfolio Series
Alliance World Dollar Government Fund II, headquartered in New York, New
York, is a closed-end mutual fund whose primary investment objective of
high current income is pursued by investing in U.S. dollar-denominated
debt obligations issued or guaranteed by foreign governments and high-
yielding, high-risk U.S. corporate fixed-income securities. Capital
appreciation is a secondary objective of the fund.
CIM High Yield Securities, headquartered in New York, New York, is a
diversified, closed-end mutual fund whose primary objectives of high
current income and preservation of capital are pursued by investing in
fixed-income securities of domestic corporate issuers, mostly in the
lower rating categories of the established rating services or non-rated.
Cigna High Income Share, headquartered in Waltham, Massachusetts, is a
diversified, closed-end mutual fund whose primary investment objective
of high current income while preserving shareholders' capital is pursued
by investing in a professionally-managed, diversified portfolio of high-
Page 7
yield, fixed-income securities. The fund's secondary objective is
capital appreciation when consistent with its first objective.
Colonial Intermediate High Income Fund, headquartered in Boston,
Massachusetts, is a closed-end, diversified mutual fund whose primary
investment objective of high current income is pursued by investing in
high-yield fixed income securities. The fund's debt securities have a
dollar-weighted average maturity of between three and ten years, with at
least 80% of total assets invested in the lower rating categories.
Corporate High Yield Fund, headquartered in Princeton, New Jersey, is a
closed-end mutual fund whose primary investment objective is to seek as
high a level of current income as is consistent with reasonable risk as
determined by the fund's investment advisor. This objective is pursued
by investing primarily in fixed-income securities which are rated in the
lower rating categories.
Corporate High Yield Fund II, headquartered in Princeton, New Jersey, is
a closed-end mutual fund whose primary investment objective is to seek
as high a level of current income as is consistent with reasonable risk
as determined by the fund's investment advisor. This objective is
pursued by investing primarily in fixed-income securities which are
rated in the lower rating categories.
Debt Strategies Fund, headquartered in Princeton, New Jersey, is a
closed-end mutual fund whose primary investment objective to provide
current income is pursued by investing in a diversified portfolio of
U.S. companies' debt instruments, including corporate loans which are
rated in the lower rating categories or unrated debt securities of
comparable quality.
Debt Strategies Fund II, headquartered in Princeton, New Jersey, is a
closed-end mutual fund whose primary investment objective to provide
current income is pursued by investing in a diversified portfolio of
U.S. companies' debt instruments, including corporate loans which are
rated in the lower rating categories or unrated debt securities of
comparable quality.
Dreyfus High Yield Strategies Fund, headquartered in New York, New York,
is a diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing primarily in
income securities of U.S. issuers rated below investment-grade quality.
The fund's secondary objective is capital growth.
Emerging Markets Income Fund II, headquartered in New York, New York, is
a non-diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in debt
securities of government issuers located in emerging market countries
and of entities organized to restructure the outstanding debt of such
issuers. The fund's secondary objective is capital appreciation.
Franklin Universal Trust, headquartered in San Mateo, California, is a
closed-end mutual fund whose primary investment objective to provide
high current income consistent with preservation of capital is pursued
by investing primarily in utilities securities and lower-rated, higher
yielding corporate bonds. The fund's secondary objective is growth of
income.
Global Partners Income Fund, headquartered in New York, New York, is a
non-diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in a portfolio
of U.S. dollar-denominated high-yield U.S. and non-U.S. corporate debt
securities and high-yielding foreign sovereign debt securities. The
fund's secondary objective is capital appreciation.
High Income Opportunity Fund, headquartered in New York, New York, is a
non-diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in high-
yielding corporate bonds, debentures and notes. The fund may also invest
in common stock or other equity-related securities, including warrants
and rights, with capital appreciation its secondary objective.
High Yield Income Fund Inc., headquartered in Newark, New Jersey, is a
closed-end mutual fund whose primary investment objective of maximizing
current income is pursued by investing in a portfolio of non-investment-
grade bonds rated BB or below. The fund's secondary objective is capital
appreciation.
High Yield Plus Fund Inc., headquartered in Newark, New Jersey, is a
diversified, closed-end management investment company whose primary
objective of high current income is pursued by investing primarily in
publicly or privately offered high-yield debt securities rated in the
medium to lower categories. The fund's secondary objective is capital
appreciation.
Kemper High Income Trust, headquartered in Chicago, Illinois, is a
closed-end mutual fund whose primary investment objective of seeking the
highest current income obtainable consistent with reasonable risk is
pursued by investing in fixed-income securities, debt obligations of the
U.S. government and debt obligations of foreign countries. The fund's
secondary objective is capital gains.
MFS Charter Income Trust, headquartered in Boston, Massachusetts, is a
closed-end non-diversified mutual fund whose primary objective of
Page 8
maximum current income is pursued by investing equally in the three
sectors of fixed-income securities-debt securities issued by foreign
governments, securities issued by the U.S. government and high-yielding
corporate fixed-income securities.
Managed High Income Portfolio Inc., headquartered in New York, New York,
is a diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in high-
yielding corporate bonds, debentures and notes. The fund's secondary
objective is capital appreciation.
Managed High Yield Fund, headquartered in New York, New York, is a
closed-end mutual fund whose primary investment objective of high
current income is pursued by investing in a diversified portfolio of
high-yield, high-risk income securities with at least 80% of total
assets in securities rated BB, B or the equivalent.
Morgan Stanley Dean Witter High Income Advantage Trust, headquartered in
New York, New York, is a closed-end mutual fund whose primary investment
objective of high current income is pursued by investing in a
diversified portfolio of fixed-income securities rated in the lower
rating categories. The fund's secondary objective is capital appreciation.
Morgan Stanley Dean Witter High Income Advantage Trust II, headquartered
in New York, New York, is a closed-end mutual fund whose investment
objectives of high current income and capital appreciation are pursued
by investing in lower-rated, fixed-income securities.
Morgan Stanley Dean Witter High Income Advantage Trust III,
headquartered in New York, New York, is a closed-end mutual fund whose
investment objectives of high current income and capital appreciation
are pursued by investing in lower-rated, fixed-income securities.
Morgan Stanley High Yield Fund, headquartered in New York, New York, is
a non-diversified, closed-end mutual fund whose primary investment
objective of high current income is pursued by investing primarily in
debt securities that are rated below investment-grade or are unrated and
considered to have a credit quality below investment-grade. The fund's
secondary objective is capital appreciation.
New America High Income Fund, headquartered in Boston, Massachusetts, is
a diversified, closed-end mutual fund whose investment objective of high
current income while seeking to preserve shareholders' capital is
pursued by investing in a portfolio of high-yield, fixed-income
securities which are principally lower or non-rated.
Pacholder Fund Inc., headquartered in Cincinnati, Ohio, is a closed-end
mutual fund whose investment objective of providing a high level of
total return through current income and capital appreciation is pursued
by investing primarily in high-yield, lower-rated fixed-income
securities of domestic companies.
Prospect Street High Income Portfolio, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective of high current income consistent with preservation of
shareholders' capital is pursued by investing in a professionally
managed portfolio of high-yield securities rated mainly in the lower
rating categories.
Putnam Managed High Yield Fund, headquartered in Boston, Massachusetts,
is a closed-end mutual fund whose primary investment objective of high
current income is pursued by investing primarily in higher risk
securities rated BB or B, or non-rated income securities of comparable
quality. The fund's secondary objective is capital growth.
Putnam Premier Income Trust, headquartered in Boston, Massachusetts, is
a non-diversified, closed-end mutual fund whose investment objective of
high current income is pursued by investing primarily in fixed income
and debt securities among three sectors-U.S. government, high yield and
international.
Salomon Brothers High Income Fund, headquartered in New York, New York,
is a closed-end mutual fund whose primary investment objective of high
current income is pursued by investing primarily in a diversified
portfolio of high-yield, U.S. corporate debt securities. The fund only
invests in U.S. dollar-denominated securities, and capital appreciation
is its secondary objective.
Salomon Brothers High Income Fund II, headquartered in New York, New
York, is a diversified, closed-end mutual fund whose primary investment
objective of maximizing current income is pursued by investing in a
portfolio of high-yield debt securities rated in the lower to medium
rating categories. The fund may also invest in unrated fixed income
securities, and capital appreciation is its secondary objective.
Senior High Income Portfolio, headquartered in Princeton, New Jersey, is
a closed-end mutual fund whose investment objective of high current
income is pursued by investing in a portfolio of senior debt
obligations, including corporate loans made by banks and other financial
institutions.
Templeton Emerging Markets Income Fund, headquartered in San Mateo,
California, is a non-diversified, closed-end mutual fund whose primary
investment objective of high current income is pursued by investing in a
Page 9
portfolio of high-yielding debt obligations of sovereign-related
entities and private sector companies in emerging market countries. The
fund's secondary objective is capital appreciation.
Van Kampen High Income Trust, headquartered in Oakbrook Terrace,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of high current income is pursued by investing in a portfolio
consisting of high-yield, fixed-income securities. The fund's
investments have a dollar-weighted average maturity of approximately ten
years and are mainly from the medium and lower ratings categories.
Van Kampen High Income Trust II, headquartered in Oakbrook Terrace,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of high current income while seeking to preserve shareholders'
capital is pursued by investing primarily in a portfolio of high income-
producing fixed-income securities.
Zenix Income Fund, headquartered in New York, New York, is a
diversified, closed-end mutual fund whose investment objective of high
current income is pursued by investing primarily in a professionally
managed portfolio of fixed-income securities rated in the lower
categories.
Municipal Closed-End Portfolio Series
ACM Municipal Securities Income Fund, headquartered in New York, New
York, is a closed-end mutual fund whose investment objective of high
current income that is exempt from federal income taxes is pursued by
investing in investment-grade municipal securities with up to 20% of
total assets invested in unrated municipal securities or equivalent
credit quality.
Apex Municipal Fund Inc., headquartered in Princeton, New Jersey, is a
closed-end mutual fund whose investment objective of high current income
that is exempt from federal income taxes is pursued by investing in a
portfolio of medium- to lower-grade or unrated municipal obligations.
Options and futures transactions may be used by the fund to hedge its
portfolio.
Colonial High Income Municipal Trust, headquartered in Boston,
Massachusetts, is a closed-end mutual fund whose investment objective of
high current income that is generally exempt from federal income taxes
is pursued by investing in medium- and lower-quality bonds and notes
issued by or on behalf of state and local governmental units whose
interest is exempt from federal income tax.
Colonial Municipal Income Trust, headquartered in Boston, Massachusetts,
is a closed-end mutual fund whose primary investment objective of high
current income that is exempt from federal income taxes is pursued by
investing in medium- and lower-quality bonds and notes issued by or on
behalf of state and local governmental units. The fund's secondary
objective is capital preservation.
Dreyfus Strategic Municipals Fund, headquartered in New York, New York,
is a closed-end mutual fund whose investment objective of maximizing
current income that is exempt from federal income tax to the extent
consistent with capital appreciation is pursued by investing in a
diversified portfolio of municipal obligations.
Dreyfus Strategic Municipal Bond Fund, headquartered in New York, New
York, is a closed-end mutual fund whose investment objective of
maximizing current income that is exempt from federal income tax to the
extent consistent with capital appreciation is pursued by investing in a
diversified portfolio of municipal obligations.
Kemper Municipal Income Trust, headquartered in Chicago, Illinois, is a
diversified, closed-end mutual fund whose investment objective of high
current income exempt from federal income tax is pursued by investing in
a portfolio of investment-grade tax-exempt municipal securities.
Kemper Strategic Municipal Income Trust, headquartered in Chicago,
Illinois, is a non-diversified, closed-end mutual fund whose investment
objective of high current income exempt from federal income tax is
pursued by investing primarily in a portfolio of tax-exempt municipal
securities and high-yield municipal securities that are below investment
grade.
MFS Municipal Income Trust, headquartered in Boston, Massachusetts, is a
non-diversified, closed-end mutual fund whose investment objective of
high current income exempt from federal income taxes is pursued by
investing primarily in medium- and lower-quality municipal bonds and
notes.
Morgan Stanley Dean Witter Insured Municipal Trust, headquartered in New
York, New York, is a closed-end mutual fund whose investment objective
of providing current income that is exempt from federal income tax is
pursued by investing primarily in insured tax-exempt municipal
obligations.
Morgan Stanley Dean Witter Municipal Income Opportunities Trust,
headquartered in New York, New York, is a closed-end fund whose
investment objective of optimum current income that is exempt from
federal income taxes is pursued by investing primarily in non-rated,
medium-quality municipal obligations such as bonds, notes and commercial
Page 10
paper.
Morgan Stanley Dean Witter Quality Municipal Income Trust, headquartered
in New York, New York, is a closed-end mutual fund whose investment
objective of current income that is exempt from federal income tax is
pursued by investing in a nationally diversified portfolio of municipal
obligations rated A or better.
Municipal High Income Fund, headquartered in New York, New York, is a
diversified, closed-end mutual fund whose investment objective of high,
tax-exempt current income is pursued by investing primarily in a variety
of obligations issued by states, territories and possessions of the
United States and by the District of Columbia.
MuniVest Fund Inc., headquartered in Princeton, New Jersey, is a non-
diversified, closed-end mutual fund whose investment objective of a high
level of current income that is exempt from federal income taxes is
pursued by investing in long-term, investment-grade municipal
obligations, the interest on which is exempt from federal income taxes.
MuniVest Fund II Inc., headquartered in Princeton, New Jersey, is a non-
diversified, closed-end mutual fund whose investment objective of a high
level of current income that is exempt from federal income taxes is
pursued by investing in long-term municipal obligations which are rated
investment-grade or are of comparable quality.
MuniYield Fund Inc., headquartered in Princeton, New Jersey, is a non-
diversified, closed-end mutual fund whose investment objective of a high
level of current income that is exempt from federal income taxes is
pursued by investing in a portfolio of longer-term municipal obligations.
MuniYield Quality Fund II, headquartered in Princeton, New Jersey, is a
non-diversified, closed-end mutual fund whose investment objective of a
high level of current income that is exempt from federal income taxes is
pursued by investing in a portfolio of long-term, high-grade municipal
obligations that are exempt from federal income taxes.
Nuveen Investment Quality Municipal Fund, Inc., headquartered in
Chicago, Illinois, is a closed-end, diversified management investment
company that invests in tax-exempt municipal obligations rated within
the four highest grades by Standard & Poor's.
Nuveen Municipal Advantage Fund, headquartered in Chicago, Illinois, is
a diversified, closed-end mutual fund whose investment objective of
current income that is exempt from regular federal income tax is pursued
by investing in tax-exempt municipal obligations within the four highest
grades. The fund's secondary objective is enhancement of portfolio value.
Nuveen Municipal Market Opportunity Fund, headquartered in Chicago,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of current income that is exempt from regular federal income
tax is pursued by investing in tax-exempt municipal obligations that are
considered underrated or undervalued. The fund's secondary objective is
enhancement of portfolio value.
Nuveen New York Performance Plus Municipal Fund, headquartered in
Chicago, Illinois, is a diversified, closed-end mutual fund whose
investment objective of current income that is exempt from federal, New
York State and New York City income taxes is pursued by investing in tax-
exempt New York municipal obligations. The fund's secondary objective is
enhancement of portfolio value.
Nuveen Performance Plus Municipal Fund, headquartered in Chicago,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of current income that is exempt from federal income tax is
pursued by investing in tax-exempt municipal obligations that are deemed
underrated or undervalued by the fund's investment advisor. The fund's
secondary objective is enhancement of portfolio value.
Nuveen Premier Municipal Income Fund, headquartered in Chicago,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of current income that is exempt from federal income tax is
pursued by investing in tax-exempt municipal obligations that are deemed
underrated or undervalued by the fund's investment advisor. The fund's
secondary objective is enhancement of portfolio value.
Putnam High Yield Municipal Trust, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective of high current income that is exempt from federal income tax
is pursued by investing primarily in high-yielding, tax-exempt municipal
securities rated Baa or lower by Moody's or BBB or lower by Standard &
Poor's.
Putnam Investment Grade Municipal Trust, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective of current income that is exempt from federal income tax is
pursued by investing primarily in investment-grade municipal securities.
Putnam Investment Grade Municipal Trust II, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective is to seek as high a level of current income that is exempt
from federal income tax as is consistent with preservation of capital.
This objective is pursued by investing in tax-exempt securities rated
Page 11
investment-grade at the time of investment, or of comparable quality.
Putnam Managed Municipal Income Trust, headquartered in Boston,
Massachusetts, is a diversified, closed-end mutual fund whose investment
objective of high current income that is exempt from federal income tax
is pursued by investing primarily in a portfolio of tax-exempt municipal
securities.
Putnam Municipal Opportunities Trust, headquartered in Boston,
Massachusetts, is a non-diversified, closed-end mutual fund whose
investment objective is to seek as high a level of current income that
is exempt from federal income tax as is consistent with preservation of
capital. This objective is pursued by investing in tax-exempt securities
rated investment-grade at the time of investment.
Van Kampen Municipal Income Fund, headquartered in Oakbrook Terrace,
Illinois, is a diversified, closed-end mutual fund whose investment
objective of high current income that is exempt from federal income taxes
and consistent with safety of principal is pursued by investing primarily
in a portfolio of investment-grade tax-exempt securities.
Van Kampen Municipal Trust, headquartered in Oakbrook Terrace, Illinois,
is a diversified, closed-end mutual fund whose investment objective of
high current income that is exempt from federal income taxes and
consistent with preservation of capital is pursued by investing in a
portfolio of investment-grade municipal securities.
Van Kampen Trust for Investment Grade Municipals, headquartered in
Oakbrook Terrace, Illinois, is a diversified, closed-end mutual fund
whose investment objective of high current income that is exempt from
federal income taxes and consistent with preservation of capital is
pursued by investing in a portfolio of investment-grade municipal
securities. The fund does not invest in unrated municipal securities.
We have obtained the foregoing descriptions from sources we deem
reliable. We have not independently verified the provided information
either in terms of accuracy or completeness.
Page 12
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being
National Union Fire Insurance Company of Pittsburgh.
B. This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 320, has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on May 25, 1999.
FT 320
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
Robert D. Van Kampen Director of )
Nike Securities )
Corporation, the ) May 25, 1999
General Partner of )
Nike Securities L.P. )
)
)
David J. Allen Director of ) Robert M. Porcellino
Nike Securities ) Attorney-in-Fact**
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 The
First Trust Combined Series 258 (File No. 33-63483) and
the same is hereby incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated May 25, 1999 in
Amendment No. 3 to the Registration Statement (Form S-6) (File
No. 333-69561) and related Prospectus of FT 320.
ERNST & YOUNG LLP
Chicago, Illinois
May 25, 1999
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement
will be filed as Exhibit 4.1 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 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 First Trust
Advisors 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 Series 320 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank,
as Trustee, First Trust Advisors L.P., as Evaluator, and
First Trust Advisors L.P., as Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities
L.P., Depositor (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-
6 [File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42755] filed on
behalf of The First Trust Special Situations Trust,
Series 19).
2.1 Copy of Certificate of Ownership (included in Exhibit
1.1 filed herewith on page 2 and incorporated herein by
reference).
S-5
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion of counsel as to New York income tax status of
securities being registered.
3.4 Opinion of counsel as to advancement of funds by
Trustee.
4.1 Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on
page S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
63483] filed on behalf of The First Trust Combined
Series 258).
S-6