SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: FT 386
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN & CUTLER
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
E. Title of Securities
Being Registered: An indefinite number of
Units pursuant to Rule
24f-2 promulgated under
the Investment Company Act
of 1940, as amended.
F. Approximate Date of Proposed
Sale to the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 1999
AS AMENDED DECEMBER 6, 1999
The Dow(sm) Target 5 Portfolio, January 2000 Series
The Dow(sm) Target 10 Portfolio, January 2000 Series
Global Target 15 Portfolio, January 2000 Series
The S&P Target 10 Portfolio, January 2000 Series
The Nasdaq Target 15 Portfolio, January 2000 Series
The Dow(sm) Dividend and Repurchase Target 5
Portfolio, January 2000 Series
The Dow(sm) Dividend and Repurchase Target 10
Portfolio, January 2000 Series
FT 386
FT 386 is a series of a unit investment trust, the FT Series. Each of
the seven portfolios listed above (each, a "Trust," and collectively,
the "Trusts") is a separate portfolio, or series, of FT 386 consisting
of a portfolio of common stocks ("Securities") selected by applying a
specialized strategy. The objective of each Trust is to provide an above-
average total return.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
First Trust (registered trademark)
1-800-621-9533
The date of this prospectus is December __, 1999
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 6
Report of Independent Auditors 8
Statements of Net Assets 9
Schedules of Investments 12
The FT Series 19
Portfolios 20
Risk Factors 22
Hypothetical Performance Information 24
Public Offering 27
Distribution of Units 29
The Sponsor's Profits 30
The Secondary Market 30
How We Purchase Units 30
Expenses and Charges 30
Tax Status 31
Retirement Plans 33
Rights of Unit Holders 34
Income and Capital Distributions 34
Redeeming Your Units 35
Investing in a New Trust 36
Removing Securities from a Trust 37
Amending or Terminating the Indenture 37
Information on the Sponsor, Trustee and Evaluator 38
Other Information 39
Page 2
Summary of Essential Information
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
The Dow(sm) The Dow(sm) Global
Target 5 Target 10 Target 15
Portfolio Portfolio Portfolio
January January January
2000 Series 2000 Series 2000 Series
____________ ____________ ____________
Initial Number of Units (1)
Fractional Undivided Interest in the Trust per Unit (1) 1/ 1/ 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities
per Unit (2) $ 9.900 $ 9.900 $ 9.900
Maximum Sales Charge of 2.75% of the Public Offering
Price per Unit (2.778% of the net amount invested,
exclusive of the deferred sales charge) (3) $ .275 $ .275 $ .275
Less Deferred Sales Charge per Unit $ (.175) $ (.175) $ (.175)
Public Offering Price per Unit (4) $10.000 $10.000 $10.000
Sponsor's Initial Repurchase Price per Unit (5) $ 9.725 $ 9.725 $ 9.725
Redemption Price per Unit (based on aggregate underlying value
of Securities less the deferred sales charge) (5) $ 9.725 $ 9.725 $ 9.725
Estimated Net Annual Distribution per Unit (6) $ $ $
Cash CUSIP Number 30264L 689 30264L 705 30264L 721
Reinvestment CUSIP Number 30264L 697 30264L 713 30264L 739
Security Code
First Settlement Date January __, 2000
Rollover Notification Date January 1, 2001
Special Redemption and Liquidation Period January 15, 2001 to January 31, 2001
Mandatory Termination Date (7) January 31, 2001
Income Distribution Record Date Fifteenth day of June and December, commencing June 15, 2000.
Income Distribution Date (6) Last day of June and December, commencing June 30, 2000.
______________
<FN>
See "Notes to Summary of Essential Information" on page 5.
</FN>
Page 3
Summary of Essential Information
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
The S&P The Nasdaq
Target 10 Target 15
Portfolio, January Portfolio, January
2000 Series 2000 Series
__________ __________
Initial Number of Units (1)
Fractional Undivided Interest in the Trust per Unit (1) 1/ 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 9.900 $ 9.900
Maximum Sales Charge of 2.75% of the Public Offering
Price per Unit (2.778% of the net amount invested,
exclusive of the deferred sales charge) (3) $ .275 $ .275
Less Deferred Sales Charge per Unit $ (.175) $ (.175)
Public Offering Price per Unit (4) $10.000 $10.000
Sponsor's Initial Repurchase Price per Unit (5) $ 9.725 $ 9.725
Redemption Price per Unit (based on aggregate underlying value of
Securities less the deferred sales charge) (5) $ 9.725 $ 9.725
Estimated Net Annual Distribution per Unit (6) $ N.A. $ N.A.
Cash CUSIP Number 30264L 747 30264L 762
Reinvestment CUSIP Number 30264L 754 30264L 770
Security Code
First Settlement Date January __, 2000
Rollover Notification Date January 1, 2001
Special Redemption and Liquidation Period January 15, 2001 to January 31, 2001
Mandatory Termination Date (7) January 31, 2001
Income Distribution Record Date Fifteenth day of June and December, commencing June 15, 2000.
Income Distribution Date (6) Last day of June and December, commencing June 30, 2000.
______________
<FN>
See "Notes to Summary of Essential Information" on page 5.
</FN>
Page 4
Summary of Essential Information
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
The Dow(sm) The Dow(sm)
DART 5 DART 10
Portfolio, January Portfolio, January
2000 Series 2000 Series
___________________ __________________
Initial Number of Units (1)
Fractional Undivided Interest in the Trust per Unit (1) 1/ 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 9.900 $ 9.900
Maximum Sales Charge of 2.75% of the Public Offering
Price per Unit (2.778% of the net amount invested,
exclusive of the deferred sales charge) (3) $ .275 $ .275
Less Deferred Sales Charge per Unit $ (.175) $ (.175)
Public Offering Price per Unit (4) $10.000 $10.000
Sponsor's Initial Repurchase Price per Unit (5) $ 9.725 $ 9.725
Redemption Price per Unit (based on aggregate underlying value of
Securities less the deferred sales charge) (5) $ 9.725 $ 9.725
Estimated Net Annual Distribution per Unit (6) $ $
Cash CUSIP Number 30264L 788 30264L 804
Reinvestment CUSIP Number 30264L 796 30264L 812
Security Code
First Settlement Date January __, 2000
Rollover Notification Date January 1, 2001
Special Redemption and Liquidation Period January 15, 2001 to January 31, 2001
Mandatory Termination Date (7) January 31, 2001
Income Distribution Record Date Fifteenth day of June and December, commencing June 15, 2000.
Income Distribution Date (6) Last day of June and December, commencing June 30, 2000.
_____________
<FN>
NOTES TO SUMMARY OF ESSENTIAL INFORMATION
(1) As of the close of business on January __, 2000, we may adjust the
number of Units of a Trust so that the Public Offering Price per Unit
will equal approximately $10.00. If we make such an adjustment, the
fractional undivided interest per Unit will vary from the amounts
indicated above.
(2) Each listed Security is valued at its last closing sale price on the
relevant stock exchange on the business day prior to the Initial Date of
Deposit. If a Security is not listed, or if no closing sale price
exists, it is valued at its closing ask price on such date. The value of
foreign Securities trading in non-U.S. currencies is determined by
converting the value of such Securities to their U.S. dollar equivalent
based on the offering side of the currency exchange rate for the
currency in which a Security is generally denominated at the Evaluation
Time on the business day prior to the Initial Date of Deposit.
Evaluations for purposes of determining the purchase, sale or redemption
price of Units are made as of the close of trading on the New York Stock
Exchange ("NYSE") (generally 4:00 p.m. Eastern time) on each day on
which it is open (the "Evaluation Time").
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" and "Public Offering."
(4) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit. No
investor will purchase Units at this price. The price you pay for your
Units will be based on their valuation at the Evaluation Time on the
date you purchase your Units. On the Initial Date of Deposit the Public
Offering Price per Unit will not include any accumulated dividends on
the Securities. After this date, a pro rata share of any accumulated
dividends on the Securities will be included.
(5) During the initial offering period the Sponsor's Initial Repurchase
Price per Unit and Redemption Price per Unit will include the estimated
organization costs per Unit set forth under "Fee Table." After the
initial offering period, the Sponsor's Initial Repurchase Price per Unit
and Redemption Price per Unit will not include such estimated
organization costs. See "Redeeming Your Units."
(6) The actual net annual distribution per Unit you receive will vary
from that set forth above with changes in a Trust's fees and expenses,
dividends received, currency exchange rates, foreign withholding and
with the sale of Securities. See "Fee Table" and "Expenses and Charges."
Dividend yield was not a selection criteria for The S&P Target 10
Portfolio or The Nasdaq Target 15 Portfolio. At the Rollover
Notification Date for Rollover Unit holders or upon termination of a
Trust for other Unit holders, amounts in the Income Account (which
consist of dividends on the Securities) will be included in amounts
distributed to Unit holders. We will distribute money from the Capital
Account monthly on the last day of each month to Unit holders of record
on the fifteenth day of such month if the amount available for
distribution equals at least $1.00 per 100 Units. In any case, we will
distribute any funds in the Capital Account as part of the final
liquidation distribution.
(7) See "Amending or Terminating the Indenture."
</FN>
Page 5
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of a Trust. See "Public
Offering" and "Expenses and Charges." Although the Trusts have a term of
approximately 13 months and are unit investment trusts rather than
mutual funds, this information allows you to compare fees, assuming that
when each Trust terminates, the principal amount and distributions are
rolled over into a New Trust, and you pay only the deferred sales charge.
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of a Trust. See "Public
Offering" and "Expenses and Charges." Although the Trusts have a term of
approximately 13 months and are unit investment trusts rather than
mutual funds, this information allows you to compare fees, assuming that
when each Trust terminates, the principal amount and distributions are
rolled over into a New Trust, and you pay only the deferred sales charge.
THE DOW (SM) THE DOW (SM) GLOBAL TARGET 15
TARGET 5 PORTFOLIO TARGET 10 PORTFOLIO PORTFOLIO
JANUARY 2000 SERIES JANUARY 2000 SERIES JANUARY 2000 SERIES
____________________ ____________________ ____________________
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 1.00%(a) $ .100
Deferred sales charge 1.75%(b) .175 1.75%(b) .175 1.75%(b) .175
______ ______ ______ ______ ______ ______
Maximum sales charge 2.75% $ .275 2.75% $ .275 2.75% $ .275
====== ====== ====== ====== ====== ======
Maximum sales charge imposed on reinvested dividends 1.75%(c) $ .175 1.75%(c) $ .175 1.75%(c) $ .175
====== ====== ====== ====== ====== ======
ORGANIZATION COSTS
(as a percentage of public offering price)
Estimated organization costs .130%(d) $.0130 .140%(d) $.0140 .150%(d) $.0150
====== ====== ====== ====== ====== ======
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative
and evaluation fees .050% $.0050 .050% $.0050 .060% $.0060
Trustee's fee and other operating expenses .094%(e) .0094 .094%(e) .0094 .172%(e) .0171
______ ______ ______ ______ ______ ______
Total .144% $.0144 .144% $.0144 .232% $.0231
====== ====== ====== ====== ====== ======
THE S&P TARGET THE NASDAQ
10 PORTFOLIO TARGET 15 PORTFOLIO
JANUARY 2000 SERIES JANUARY 2000 SERIES
____________________ ____________________
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 1.75%(b) .175 1.75%(b) .175
______ ______ ______ ______
Maximum sales charge 2.75 % $ .275 2.75% $ .275
====== ====== ====== ======
Maximum sales charge imposed on reinvested dividends 1.75%(c) $ .175 1.75%(c) $ .175
====== ====== ====== ======
ORGANIZATION COSTS
(as a percentage of public offering price)
Estimated organization costs .170%(d) $.0170 .170%(d) $.0170
====== ====== ====== ======
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative
and evaluation fees .060% $.0060 .060% $.0060
Trustee's fee and other operating expenses .128%(e) .0128 .118%(e) .0118
______ ______ ______ ______
Total .188% $.0188 .178% $.0178
====== ====== ====== ======
Page 6
THE DOW(sm) THE DOW(sm)
DART 5 PORTFOLIO DART 10 PORTFOLIO
JANUARY 2000 SERIES JANUARY 2000 SERIES
____________________ ____________________
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 1.75%(b) .175 1.75%(b) .175
______ ______ ______ ______
Maximum sales charge 2.75 % $ .275 2.75% $ .275
====== ====== ====== ======
Maximum sales charge imposed on reinvested dividends 1.75%(c) $ .175 1.75%(c) $ .175
====== ====== ====== ======
ORGANIZATION COSTS
(as a percentage of public offering price)
Estimated organization costs .170%(d) $.0170 .170%(d) $.0170
====== ====== ====== ======
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative
and evaluation fees .050% $.0050 .050% $.0050
Trustee's fee and other operating expenses .098%(e) .0098 .098%(e) .0098
______ ______ ______ ______
Total .148% $.0148 .148% $.0148
====== ====== ====== ======
Example
This example is intended to help you compare the cost of investing in a
Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in a Trust for the periods shown
and sell all your Units at the end of those periods. The example also
assumes a 5% return on your investment each year and that a Trust's
operating expenses stay the same. Although your actual costs may vary,
based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
______ _______ _______ ________
The Dow(sm) Target 5 Portfolio, January 2000 Series $302 $721 $1,166 $2,397
The Dow(sm) Target 10 Portfolio, January 2000 Series 303 724 1,171 2,407
Global Target 15 Portfolio, January 2000 Series 313 753 1,220 2,507
The S&P Target 10 Portfolio, January 2000 Series 311 747 1,208 2,483
The Nasdaq Target 15 Portfolio, January 2000 Series 310 744 1,203 2,473
The Dow(sm) DART 5 Portfolio, January 2000 Series 308 738 1,193 2,453
The Dow(sm) DART 10 Portfolio, January 2000 Series 308 738 1,193 2,453
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.
_____________
<FN>
(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 (2.75% of the
Public Offering Price) and the maximum remaining deferred sales charge
(initially $.175 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 $.175
per Unit which will be deducted in ten monthly installments of $.0175
per Unit beginning February 18, 2000 and on the 20th day of each month
thereafter (or the preceding business day if the 20th day is not a
business day) through November 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 1.75% 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
Distributions."
(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 price you pay for your Units and will be deducted from the assets
of a Trust at the end of the initial offering period.
(e)Other operating expenses for certain Trusts include estimated per
Unit costs associated with a license fee as described in "Expenses and
Charges," but do not include brokerage costs and other portfolio
transaction fees for any of the Trusts. In certain circumstances the
Trusts may incur additional expenses not set forth above. See "Expenses
and Charges."
</FN>
Page 7
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
FT 386
We have audited the accompanying statements of net assets, including the
schedules of investments, of FT 386, comprised of The Dow (sm) Target 5
Portfolio, January 1999 Series; The Dow (sm) Target 10 Portfolio,
January 1999 Series; Global Target 15 Portfolio, January 2000 Series;
The S&P Target 10 Portfolio, January 2000 Series; The Nasdaq Target 15
Portfolio, January 2000 Series; The Dow(sm) Dividend And Repurchase
Target 5 Portfolio, January 2000 Series ; and The Dow(sm) Dividend And
Repurchase Target 10 Portfolio, January 2000 Series as of the opening
of business on December __, 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 allocated among the Trusts on December __, 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 386,
comprised of The Dow (sm) Target 5 Portfolio, January 1999 Series; The
Dow (sm) Target 10 Portfolio, January 1999 Series; Global Target 15
Portfolio, January 2000 Series; The S&P Target 10 Portfolio, January
2000 Series; The Nasdaq Target 15 Portfolio, January 2000 Series; The
Dow(sm) Dividend And Repurchase Target 5 Portfolio, January 2000 Series;
and The Dow(sm) Dividend And Repurchase Target 10 Portfolio, January 2000
Series , at the opening of business on December __, 1999 in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December __, 1999
Page 8
Statements of Net Assets
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
The Dow(sm) The Dow(sm) Global
Target 5 Target 10 Target 15
Portfolio Portfolio Portfolio
January January January
2000 Series 2000 Series 2000 Series
_____________ ____________ _____________
NET ASSETS
Investment in Securities represented
by purchase contracts (1) (2) $ $ $
Less liability for reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( )
Less liability for deferred sales charge (4) ( ) ( ) ( )
________ ________ _______
Net assets $ $ $
======== ======== =======
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $ $ $
Less maximum sales charge (5) ( ) ( ) ( )
Less estimated reimbursement to Sponsor
for organization costs (3) ( ) ( ) ( )
________ ________ _______
Net assets $ $ $
======== ========
__________
<FN>
See "Notes to Statements of Net Assets" on page 11.
</FN>
Page 9
Statements of Net Assets
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
The S&P The Nasdaq
Target 10 Portfolio Target 15 Portfolio
January January
2000 Series 2000 Series
____________ ______________
NET ASSETS
Investment in Securities represented
by purchase contracts (1) (2) $ $
Less liability for reimbursement to Sponsor
for organization costs (3) ( ) ( )
Less liability for deferred sales charge (4) ( ) ( )
_______ _______
Net assets $ $
======= =======
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $ $
Less maximum sales charge (5) ( ) ( )
Less estimated reimbursement to Sponsor
for organization costs (3) ( ) ( )
_______ _______
Net assets $ $
======= =======
__________
<FN>
See "Notes to Statements of Net Assets" on page 11.
</FN>
Page 10
Statements of Net Assets
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
The Dow(sm) The Dow(sm)
DART 5 Portfolio DART 10 Portfolio
January January
2000 Series 2000 Series
________________ __________________
NET ASSETS
Investment in Securities represented
by purchase contracts (1) (2) $ $
Less liability for reimbursement to Sponsor
for organization costs (3) ( ) ( )
Less liability for deferred sales charge (4) ( ) ( )
_______ _______
Net assets $ $
======= =======
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $ $
Less maximum sales charge (5) ( ) ( )
Less estimated reimbursement to Sponsor
for organization costs (3) ( ) ( )
_______ _______
Net assets $ $
======= =======
______________
<FN>
NOTES TO STATEMENTS OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" for each Trust is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by The Chase Manhattan Bank,
of which $1,400,000 will be allocated among each of the seven Trusts in
FT 386, 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 $.0130,
$.0140, $.0150, $.0170, $.0170, $.0180 and $.0180 per Unit for the
Target 5 Portfolio, Target 10 Portfolio, Global Target 15 Portfolio, The
S&P Target 10 Portfolio, The Nasdaq Target 15 Portfolio, DART 5
Portfolio and DART 10 Portfolio, respectively. A payment will be made at
the end of the initial offering period to an account maintained by the
Trustee from which the obligation of the investors to the Sponsor will
be satisfied. To the extent that actual organization costs of a Trust
are greater than the estimated amount, only the estimated organization
costs added to the Public Offering Price will be reimbursed to the
Sponsor and deducted from the assets of such Trust.
(4) Represents the amount of mandatory deferred sales charge
distributions from a Trust ($.175 per Unit), payable to us in ten equal
monthly installments beginning on February 18, 2000 and on the twentieth
day of each month thereafter (or if such date is not a business day, on
the preceding business day) through November 20, 2000. If you redeem
Units before November 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 a Trust includes a maximum sales
charge (comprised of an initial and a deferred sales charge) computed at
the rate of 2.75% of the Public Offering Price (equivalent to 2.778% 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 11
Schedule of Investments
The Dow(sm) Target 5 Portfolio, January 2000 Series
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
Percentage Market
Number of Aggregate Value Cost of Current
of Ticker Symbol and Name of Offering per Securities to Dividend
Shares Issuer of Securities (1) Price Share the Trust (2) Yield (3)
______ _______________________________ _________ _________ _____________ _________
20% $ $ %
20% %
20% %
20% %
20% %
_______ _________
Total Investments 100% $
======= =========
_____________
<FN>
See "Notes to Schedules of Investments" on page 18.
</FN>
Page 12
Schedule of Investments
The Dow(sm) Target 10 Portfolio, January 2000 Series
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
Percentage Market
Number of Aggregate Value Cost of Current
of Ticker Symbol and Name of Offering per Securities to Dividend
Shares Issuer of Securities (1) Price Share the Trust (2) Yield (3)
______ _______________________________ ____________ _________ ___________ _________
10% $ $ %
10% %
10% %
10% %
10% %
10% %
10% %
10% %
10% %
10% %
_______ ________
Total Investments 100% $
======= ========
_____________
<FN>
See "Notes to Schedules of Investments" on page 18.
</FN>
Page 13
Schedule of Investments
Global Target 15 Portfolio, January 2000 Series
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
Percentage
Number of Aggregate Market Cost of Current
of Offering Value per Securities to Dividend
Shares Name of Issuer of Securities (1) Price Share the Trust (2) Yield (3)
______ _______________________________________ ___________ ________ _____________ ________
DJIA COMPANIES:
_______________
% $ $ %
% %
% %
% %
% %
FT INDEX COMPANIES:
___________________
% %
% %
% %
% %
% %
HANG SENG INDEX COMPANIES:
_________________________
% %
% %
% %
% %
% %
_____ ________
Total Investments 100% $
===== ========
_____________
<FN>
See "Notes to Schedules of Investments" on page 18.
</FN>
Page 14
Schedule of Investments
The S&P Target 10 Portfolio, January 2000 Series
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
Percentage
Number of Aggregate Market Cost of
of Ticker Symbol and Offering Value per Securities to
Shares Name of Issuer of Securities (1) Price Share the Trust (2)
______ ________________________ ___________ ________ _____________
% $ $
%
%
%
%
%
%
%
%
%
______ _______
Total Investments 100% $
===== =======
___________
<FN>
See "Notes to Schedules of Investments" on page 18.
</FN>
Page 15
Schedule of Investments
The Nasdaq Target 15 Portfolio, January 2000 Series
FT 386
At the Opening of Business on the Initial Date of Deposit-December __,
1999
Percentage
Number of Aggregate Market Cost of Market
of Ticker Symbol and Offering Value per Securities to Capitalization
Shares Name of Issuer of Securities (1) Price Share the Trust (2) (in millions) (4)
______ _______________________________________ ___________ ________ _____________ _____________
% $ $ $
%
%
%
%
%
%
%
%
%
%
%
%
%
%
______ ________
Total Investments 100% $
===== ========
______________
<FN>
See "Notes to Schedules of Investments" on page 18.
</FN>
Page 16
Schedule of Investments
The Dow(sm) Dividend And Repurchase Target 5 Portfolio, January 2000 Series
FT 386
At the Opening of Business on the
Initial Date of Deposit-December __, 1999
Percentage
Number of Aggregate Market Cost of Current
of Ticker Symbol and Offering Value per Securities to Dividend
Shares Name of Issuer of Securities (1) Price Share the Trust (2) Yield (3)
______ _______________________________________ ___________ ________ _____________ __________
% $ $
%
%
%
%
______ ________
Total Investments 100% $
===== ========
___________
<FN>
See "Notes to Schedules of Investments" on page 18.
</FN>
Page 17
Schedule of Investments
The Dow(sm) Dividend And Repurchase Target 10 Portfolio, January 2000 Series
FT 386
At the Opening of Business on the Initial Date of Deposit-December __, 1999
Percentage
Number of Aggregate Market Cost of Current
of Ticker Symbol and Offering Value per Securities to Dividend
Shares Name of Issuer of Securities (1) Price Share the Trust (2) Yield (3)
______ _______________________________________ ___________ ________ _____________ __________
% $ $
%
%
%
%
%
%
%
%
%
______ ________
Total Investments 100% $
===== ========
______________
<FN>
NOTES TO SCHEDULES OF INVESTMENTS
(1) All Securities are represented by regular way contracts to purchase
such Securities which are backed by an irrevocable letter of credit
deposited with the Trustee. We entered into purchase contracts for the
Securities on December __, 1999. Each Trust has a Mandatory Termination
Date of January 31, 2001.
(2) The cost of the Securities to a Trust represents the aggregate
underlying value with respect to the Securities acquired-generally
determined by the closing sale prices of the Securities on the
applicable exchange (where applicable, converted into U.S. dollars at
the offer side of the exchange rate at the Evaluation Time) at the
Evaluation Time on December __, 1999, the business day prior to 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)
___________ ________
The Dow(sm) Target 5 Portfolio, January 2000 Series $ $
The Dow(sm) Target 10 Portfolio, January 2000 Series
Global Target 15 Portfolio, January 2000 Series
The S&P Target 10 Portfolio, January 2000 Series
The Nasdaq Target 15 Portfolio, January 2000 Series
The Dow(sm) DART 5 Portfolio, January 2000 Series
The Dow(sm) DART 10 Portfolio, January 2000 Series
(3) Current Dividend Yield for each Security was calculated by dividing
the most recent annualized ordinary dividend paid on a Security by that
Security's closing sale price at the Evaluation Time on the business day
prior to the Initial Date of Deposit.
(4) Market capitalization is based on the market value as of the close
of business on December __, 1999.
</FN>
Page 18
The FT Series
The FT Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created several similar
yet separate series of a unit investment trust which we have named the
FT Series. We designate each of these series of the FT Series with a
different series number. Each of the following is a separate portfolio,
or series, of FT 386:
- - The Dow(sm) Target 5 Portfolio
- - The Dow(sm) Target 10 Portfolio
- - Global Target 15 Portfolio
- - The S&P Target 10 Portfolio
- - The Nasdaq Target 15 Portfolio
- - The Dow(sm) DART 5 Portfolio
- - The Dow(sm) DART 10 Portfolio
Trusts containing only domestic stocks may be called "Domestic Trusts"
and those which contain foreign stocks may be called "International
Trusts."
YOU MAY GET MORE SPECIFIC DETAILS CONCERNING THE NATURE, STRUCTURE AND
RISKS OF THIS PRODUCT IN AN "INFORMATION SUPPLEMENT" BY CALLING THE
TRUSTEE AT 1-800-682-7520.
Mandatory Termination Date.
The Trusts will terminate on the Mandatory Termination Date set forth 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 among
Nike Securities L.P., as Sponsor, The Chase Manhattan Bank as Trustee
and First Trust Advisors L.P. as Portfolio Supervisor and Evaluator,
governs the operation of the Trusts.
How We Created the Trusts.
On the Initial Date of Deposit, we deposited the Securities with the
Trustee and in turn, the Trustee delivered documents to us representing
our ownership of the Trusts in the form of units ("Units").
With our deposit of 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" for each
Trust. 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, to create new Units for sale. If we
create additional Units, we will attempt, to the extent practicable, to
maintain the percentage relationship established among the Securities on
the Initial Date of Deposit, and not the 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 Trust pays the associated brokerage fees. To reduce this
dilution, the Trusts will try to buy the Securities as close to the
Evaluation Time and as close to the evaluation price as possible.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may retain and pay us (or our affiliate) to act as agent for a
Trust to buy Securities. If we or an affiliate of ours act as agent to a
Trust we will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Securities may periodically be sold
under certain circumstances, and the proceeds from these sales will be
used to meet Trust obligations or distributed to Unit holders, but will
not be reinvested. However, Securities will not be sold to take
advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation, or if they no longer meet the criteria by
which they were selected. You will not be able to dispose of or vote any
of the Securities in a Trust. As the holder of the Securities, the
Trustee will vote all of the Securities and will do so based on our
instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in 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 19
Security a Trust acquires will be identical to those from the failed
contract.
Portfolios
Objectives.
When you invest in a Trust you are purchasing a quality portfolio of
attractive common stocks in one convenient purchase. The objective of
each Trust is to provide an above-average total return. To achieve this
objective, each Trust will invest in the common stocks of companies
which are selected by applying a unique specialized strategy. While the
Trusts seek to provide above-average return, each follows a different
investment strategy. Because the Trusts' lives are short (approximately
13 months), we cannot guarantee that a Trust will achieve its objective
or that a Trust will make money once expenses are deducted.
Dividend Yield Strategies.
The Dow(sm) Target 5 Strategy, the Dow(sm) Target 10 Strategy and the
Global Target 15 Strategy all invest in stocks with high dividend
yields. Investing in stocks with high dividend yield may be effective in
achieving the investment objective of these Trusts, because regular
dividends are common for established companies, and dividends have
historically accounted for a large portion of the total return on
stocks. The Dow(sm) Target 5 Portfolio and the Global Target 15 Portfolio
and the Global Target 15 Portfolio each seek to amplify this dividend
yield strategy by selecting the five lowest priced stocks of the 10
highest dividend-yielding stocks in a particular index.
The Target 5 Portfolio Strategy.
The Dow(sm) Target 5 Portfolio Strategy stocks are determined as follows:
Step 1: We rank all 30 stocks contained in the DJIA by dividend yield as
of the business day prior to the date of this prospectus.
Step 2: We then select the ten highest dividend-yielding stocks from
this group.
Step 3:From the ten stocks selected in Step 2, we select the five stocks
with the lowest per share stock price for The Target 5 Portfolio.
The Target 10 Portfolio Strategy.
The Dow(sm) Target 10 Portfolio Strategy stocks are determined as follows:
Step 1: We rank all 30 stocks contained in the DJIA by dividend yield as
of the business day prior to the date of this prospectus.
Step 2: We then select the ten highest dividend-yielding stocks for The
Target 10 Portfolio.
Global Target 15 Portfolio Strategy.
The Global Target 15 Portfolio Strategy stocks are determined as follows:
Step 1: We rank all stocks contained in the DJIA, the Financial Times
Industrial Ordinary Share Index ("FT Index") and the Hang Seng Index by
dividend yield as of the business day prior to the date of this
prospectus in the case of DJIA stocks or three business days prior to
the date of this prospectus in the case of FT Index or Hang Seng Index
stocks.
Step 2: We select the ten highest dividend-yielding stocks in each
respective index.
Step 3: We select the five stocks with the lowest per share stock price
of the ten highest-dividend yielding stocks in each respective index as
of their respective selection date for the Global Target 15 Portfolio.
Companies which, on or before their respective selection date, are
subject to any of the limited circumstances which warrant removal of a
Security from a Trust as described under "Removing Securities from a
Trust" have been excluded from the Global Target 15 Portfolio Strategy.
The S&P Target 10 Portfolio Strategy.
The S&P Target 10 Portfolio Strategy selects a portfolio of 10 of the
largest Standard & Poor's 500 Composite Price Index ("S&P 500 Index")
stocks with the lowest price-to-sales ratios and greatest one-year price
appreciation as a means to achieving its investment objective through
capital appreciation. The S&P Target 10 Portfolio Strategy stocks are
determined as follows:
Step 1: We select the 250 largest companies based on market
capitalization which are components of the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index") as of two business days
prior to the date of this prospectus.
Step 2: From the above list, the 125 companies with the lowest price to
sales ratios are selected.
Step 3: The 10 companies which had the greatest 1-year stock price
Page 20
appreciation are selected for The S&P Target 10 Portfolio.
During the initial offering period The S&P Target 10 Portfolio will not
invest more than 5% of its portfolio in shares of any one securities-
related issuer.
The Nasdaq Target 15 Portfolio Strategy.
The Nasdaq Target 15 Portfolio Strategy selects a portfolio of the 15
Nasdaq 100 Index stocks with the best overall ranking on both 12- and 6-
month price appreciation, return on assets and price to cash flow as a
means to achieving its investment objective. The Nasdaq Target 15
Portfolio stocks are determined as follows:
Step 1: We select stocks which are components of the Nasdaq 100 Index as
of two business days prior to the date of this prospectus and
numerically rank them by 12-month price appreciation (best (1) to worst
(100)).
Step 2: We then numerically rank the stocks by six-month price
appreciation.
Step 3: The stocks are then numerically ranked by return on assets ratio.
Step 4: We then numerically rank the stocks by the ratio of cash flow
per share to stock price.
Step 5: We add up the numerical ranks achieved by each company in the
above steps and select the 15 stocks with the lowest sums for The Nasdaq
Target 15 Portfolio.
The stocks which comprise The Nasdaq Target 15 Portfolio are weighted by
market capitalization subject to the restriction that no stock will
comprise less than 1% or 25% or more of the portfolio on the date of
this prospectus. The Securities will be adjusted on a proportionate
basis to accommodate this constraint.
Companies which, based on publicly available information as of two
business days prior to the date of this prospectus, are the subject of
an announced business combination which we expect will happen within six
months of date of this prospectus have been excluded from The Nasdaq
Target 15 Portfolio.
The Dow(sm) Dividend and Repurchase Target Portfolio Strategies.
Both the Dow(sm) Dividend and Repurchase Target ("DART") 5 Portfolio
Strategy and the Dow(sm) DART 10 Portfolio Strategy select a portfolio
of Dow Jones Industrial Average ("DJIA") stocks with high dividend yields
and/or high buyback ratios and, for the Dow(sm) DART 5 Portfolio Strategy,
high return on assets, as a means to achieving each Strategy's investment
objective. By selecting stocks with the highest dividend yields, each
Strategy seeks to uncover stocks that may be out of favor or undervalued.
More recently, many companies have turned to stock reduction programs as a
tax efficient way to bolster their stock prices and reward shareholders.
Companies which have reduced their shares through a share buyback program
may provide a strong cash flow position and, in turn, high quality earnings.
Buyback ratio is the ratio of a company's shares of common stock outstanding 12
months prior to the date of this prospectus divided by a company's
shares outstanding as of the business day prior to the date of this
prospectus, minus "1."
The Dow(sm) Dividend and Repurchase Target 5 Portfolio Strategy.
The Dow(sm) DART 5 Portfolio Strategy stocks are determined as follows:
Step 1: We rank all 30 stocks contained in the DJIA by the sum of their
dividend yield and buyback ratio as of the business day prior to the
date of this prospectus.
Step 2: We then select the ten stocks with the highest combined dividend
yields and buyback ratios.
Step 3: From the ten stocks selected in Step 2, we select the five
stocks with the greatest increase in the percentage change in return on
assets in the most recent year as compared to the previous year for
The Dow(sm) DART 5 Portfolio.
The Dow(sm) Dividend and Repurchase Target 10 Portfolio Strategy.
The Dow(sm) DART 10 Portfolio Strategy stocks are determined as follows:
Step 1: We rank all 30 stocks contained in the DJIA by the sum of their
dividend yield and buyback ratio as of the business day prior to the
date of this prospectus.
Step 2: We then select the ten stocks with the highest combined dividend
yields and buyback ratios for The Dow(sm) DART 10 Portfolio.
Please note that we applied each strategy at a particular time. If we
create additional Units of a Trust after the Initial Date of Deposit we
will deposit the Securities originally selected by applying the strategy
Page 21
at such time. This is true even if a later application of a strategy
would have resulted in the selection of different securities.
"Dow Jones Industrial Average(sm) ," "Dow(sm)" and "DJIA(sm)" are
service marks of Dow Jones & Company, Inc. ("Dow Jones") and have been
licensed for use for certain purposes by First Trust Advisors L.P., an
affiliate of ours. Dow Jones does not endorse, sell or promote any of
the Trusts, in particular, The Dow(sm) Target 5 Portfolio, The Dow(sm)
Target 10 Portfolio, The Dow(sm) DART 5 Portfolio and The Dow(sm) DART
10 Portfolio. Dow Jones makes no representation regarding the
advisability of investing in such products.
"S&P," "S&P 500," and "Standard & Poor's" are trademarks of The McGraw-
Hill Companies, Inc. and have been licensed for use by us. The S&P
Target 10 Portfolio is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in such Trust. Please see the
Information Supplement which sets forth certain additional disclaimers
and limitations of liabilities on behalf of Standard & Poor's.
The "Nasdaq 100(registered trademark)," "Nasdaq 100 Index(registered
trademark)," and "Nasdaq(registered trademark)" are trade or service
marks of The Nasdaq Stock Market, Inc. (which with its affiliates are
the "Corporations") and are licensed for use by us. The Nasdaq Target 15
Portfolio has not been passed on by the Corporations as to its legality
or suitability. The Nasdaq Target 15 Portfolio is not issued, endorsed,
sold, or promoted by the Corporations. The Corporations make no
warranties and bear no liability with respect to The Nasdaq Target 15
Portfolio.
Dow Jones, Standard & Poor's and The Nasdaq Stock Market, Inc., as well
as the publishers of the Ibbotson Small-Cap Index, FT Index and Hang
Seng Index, are not affiliated with us and have not participated in
creating the Trusts or selecting the Securities for the Trusts. Except
as noted above, none of the index publishers have given us a license to
use their index nor have they approved of any of the information in this
prospectus.
Risk Factors
Price Volatility. The Trusts invest in common stocks of U.S., and, for
the Global Target 15 Portfolio, foreign companies. The value of a
Trust's Units will fluctuate with changes in the value of these common
stocks. Common stock prices fluctuate for several reasons including
changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, or when
political or economic events affecting the issuers occur.
Because the Trusts are not managed, the Trustee will not sell stocks in
response to or in anticipation of market fluctuations, as is common in
managed investments. As with any investment, we cannot guarantee that
the performance of any Trust will be positive over any period of time 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.
Trusts which use dividend yield as a selection criteria employ a
contrarian strategy in which the Securities selected share qualities
that have caused them to have lower share prices or higher dividend
yields than other common stocks in their peer group. There is no
assurance that negative factors affecting the share price or dividend
yield of these Securities will be overcome over the life of the Trusts
or that these Securities will increase in value.
Dividends. There is no guarantee that the issuers of the Securities will
declare dividends in the future or that if declared they will either
remain at current levels or increase over time.
Retail Industry. The S&P Target 10 Portfolio is concentrated in the
common stocks of companies involved in the retail industry. General
risks of these companies include the general state of the economy,
intense competition and consumer spending trends. A decline in the
economy which results in a reduction of consumers' disposable income can
negatively impact spending habits. Competitiveness in the retail
industry will require large capital outlays for the installation of
automated checkout equipment to control inventory, track the sale of
items and gauge the success of sales campaigns. Retailers who sell their
products over the Internet have the potential to access more consumers,
but will require sophisticated technology to remain competitive.
Technology Industry. The Nasdaq Target 15 Portfolio is concentrated in
technology stocks. Technology companies are generally subject to the
risks of rapidly changing technologies; short product life cycles;
fierce competition; aggressive pricing; frequent introduction of new or
Page 22
enhanced products; the loss of patent, copyright and trademark
protections; and government regulation. Technology companies may be
smaller and less experienced companies, with limited product lines,
markets or financial resources. Technology company stocks have
experienced extreme price and volume fluctuations that are often
unrelated to their operating performance.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed in the United States and abroad which may have
a negative impact on certain of the companies represented in the Trusts.
In addition, litigation regarding any of the issuers of the Securities,
such as that concerning Philip Morris Companies, Inc., or of the
industries represented by these issuers may negatively impact the share
prices of these Securities. We cannot predict what impact any pending or
threatened litigation will have on the share prices of the Securities.
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
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, but you
should note that foreign issuers may have greater difficulties than
other issuers.
Foreign Stocks. Certain of the Securities in the Global Target 15
Portfolio are issued by foreign companies, which makes this Trust
subject to more risks than if it invested solely in domestic common
stocks. Risks of foreign common stocks include higher brokerage costs;
different accounting standards; expropriation, nationalization or other
adverse political or economic developments; currency devaluations,
blockages or transfer restrictions; restrictions on foreign investments
and exchange of securities; inadequate financial information; lack of
liquidity of certain foreign markets; and less government supervision
and regulation of exchanges, brokers, and issuers in foreign countries.
The purchase and sale of the foreign Securities will generally occur
only in foreign securities markets. Although we do not believe that the
Trusts will have problems buying and selling these Securities, certain
of the factors stated above may make it impossible to buy or sell them
in a timely manner.
United Kingdom. The Global Target 15 Portfolio is concentrated in common
stocks of U.K. issuers. The United Kingdom is one of 15 members of the
European Union ("EU") which was formed by the Maastricht Treaty on
European Union. It is expected that the Treaty will have the effect of
eliminating most remaining trade barriers between the member nations and
make Europe one of the largest common markets in the world. However, the
uncertain implementation of the Treaty provisions and recent rapid
political and social change throughout Europe make the extent and nature
of future economic development in the United Kingdom and Europe and
their effect on Securities issued by U.K. issuers impossible to predict.
Unlike a majority of EU members, the United Kingdom did not convert its
currency to the new common European currency, the euro, on January 1,
1999. All companies with significant markets or operations in Europe
face strategic challenges as these entities adapt to a single currency.
The euro conversion may materially impact revenues, expenses or income;
increase competition; affect issuers' currency exchange rate risk and
derivatives exposure; cause issuers to increase spending on information
technology updates; and result in potentially adverse tax consequences.
We cannot predict when or if the United Kingdom will convert to the euro
or what impact the implementation of the euro throughout a majority of
EU countries will have on U.K. or European issuers.
Hong Kong. The Global Target 15 Portfolio is also concentrated in common
stocks of Hong Kong issuers. Hong Kong issuers are subject to risks
related to Hong Kong's political and economic environment, the
volatility of the Hong Kong stock market, and the concentration of real
estate companies in the Hang Seng Index. Hong Kong reverted to Chinese
control on July 1, 1997 and any increase in uncertainty as to the future
economic and political status of Hong Kong, or a deterioration of the
relationship between China and the United States, could have negative
implications on stocks listed on the Hong Kong stock market. Securities
prices on the Hong Kong Stock Exchange, and specifically the Hang Seng
Index, can be highly volatile and are sensitive to developments in Hong
Page 23
Kong and China, as well as other world markets.
Exchange Rates. Because securities of foreign issuers generally pay
dividends and trade in foreign currencies, the U.S. dollar value of
these Securities (and therefore Units of the International Trusts) will
vary with fluctuations in foreign exchange rates. Most foreign
currencies have fluctuated widely in value against the U.S. dollar for
various economic and political reasons. The recent conversion by eleven
of the fifteen EU members of their national currencies to the euro could
negatively impact the market rate of exchange between such currencies
(or the newly created euro) and the U.S. dollar.
To determine the value of foreign Securities or their dividends, the
Evaluator will estimate current exchange rates for the relevant
currencies based on activity in the various currency exchange markets.
However, these markets can be quite volatile, depending on the activity
of the large international commercial banks, various central banks,
large multi-national corporations, speculators and other buyers and
sellers of foreign currencies. Since actual foreign currency
transactions may not be instantly reported, the exchange rates estimated
by the Evaluator may not reflect the amount the International Trusts
would receive, in U.S. dollars, had the Trustee sold any particular
currency in the market.
Hypothetical Performance Information
The following table compares hypothetical performance information for
the strategies employed by each Trust and the actual performance of the
DJIA, S&P 500 Index, Nasdaq 100 Index, FT Index, Hang Seng Index and a
combination of the FT Index, Hang Seng Index and the DJIA (the
"Cumulative Index Returns") in each of the full years listed below (and
as of the most recent quarter).
These hypothetical returns should not be used to predict future
performance of the Trusts. Returns from a Trust will differ from its
strategy for several reasons, including the following:
- - Total Return figures shown do not reflect sales charges, commissions,
Trust expenses or taxes.
- - Strategy returns are for calendar years (and through the most recent
quarter), while the Trusts begin and end on various dates.
- - Trusts have a maturity longer than one year.
- - Trusts may not be fully invested at all times or equally weighted in
all stocks comprising a strategy.
- - Securities are often purchased or sold at prices different from the
closing prices used in buying and selling Units.
- - For Trusts investing in foreign Securities, currency exchange rates
may differ.
You should note that the Trusts are not designed to parallel movements
in any index or combination of indexes, and it is not expected that they
will do so. In fact, each Trust's strategy underperformed its
comparative index, or combination thereof, in certain years and we
cannot guarantee that a Trust will outperform its respective index over
the life of a Trust or over consecutive rollover periods, if available.
Each index differs widely in size and focus, as described below.
DJIA. The DJIA consists of 30 U.S. stocks chosen by the editors of The
Wall Street Journal as being representative of the broad market and of
American industry. Changes in the component stocks of the DJIA are made
entirely by the editors of The Wall Street Journal without consulting
the companies, the stock exchange or any official agency. For the sake
of continuity, changes are made rarely. Effective November 1, 1999, Home
Depot Inc., Microsoft Corporation, Intel Corporation and SBC
Communications Inc. were added to the DJIA, replacing Chevron
Corporation, Goodyear Tire & Rubber Company, Sears, Roebuck & Company
and Union Carbide Corporation.
S&P 500 Index. The S&P 500 Index consists of 500 stocks chosen by
Standard and Poor's to be representative of the leaders of various
industries.
Nasdaq 100 Index. The NASDAQ 100 Index consists of the 100 largest non-
financial companies listed on the NASDAQ National Market System. As of
December 18, 1998, the constituents are constructed using a modified
market capitalization approach.
Financial Times Industrial Ordinary Share Index. The FT Index consists
of 30 common stocks chosen by the editors of The Financial Times as
being representative of British industry and commerce.
Hang Seng Index. The Hang Seng Index consists of 33 of the stocks
currently listed on the Stock Exchange of Hong Kong Ltd. and is intended
Page 24
to represent four major market sectors: commerce and industry, finance,
property and utilities. Effective December 6, 1999, Dao Heng Bank Group
Ltd., Johnson Electric Holdings Ltd. and SmarTone Telecommunications
Holdings Ltd. were added to the Hang Seng Index replacing Guangdong
Investment Ltd., The Hongkong and Shanghai Hotels, Ltd. and Hopewell
Holdings Ltd.
Page 25
COMPARISON OF TOTAL RETURN(2)
Hypothetical Strategy Total Returns(1)
_______________________________________________________
Global S&P Nasdaq The Dow(sm) The Dow(sm)
Target 5 Target 10 Target 15 Target 10 Target 15 DART 5 DART 10
Year Strategy Strategy Strategy Strategy Strategy Strategy Strategy
____ ________ _________ _________ _________ _________ ___________ ___________
1972 22.92% 23.76% 18.16% 23.76%
1973 20.01% 4.01% 10.84% -2.26%
1974 -5.40% -1.02% 2.22% -7.11%
1975 64.77% 56.10% 47.74% 57.78%
1976 40.96% 35.18% 30.10% 35.18%
1977 5.49% -1.95% 3.37% -1.95%
1978 1.23% 0.03% 11.00% -1.95%
1979 9.84% 13.01% 44.70% 43.17% 17.64% 13.01%
1980 41.69% 27.90% 52.51% 54.15% 44.01% 24.80%
1981 3.19% 7.46% 0.03% -10.59% -6.01% 2.02%
1982 43.37% 27.12% -2.77% 38.21% 22.07% 27.46%
1983 36.38% 39.07% 15.61% 20.01% 37.02% 40.44%
1984 11.12% 6.22% 29.88% 16.34% 13.40% 6.22%
1985 38.34% 29.54% 54.06% 43.49% 43.24% 39.31%
1986 30.89% 35.63% 38.11% 21.81% 22.94% 49.49% 41.95%
1987 10.69% 5.59% 17.52% 9.16% 14.10% 6.03% 5.24%
1988 21.47% 24.57% 24.26% 20.35% -0.59% 18.40% 19.02%
1989 10.55% 26.97% 15.98% 39.62% 37.33% 40.15% 28.49%
1990 -15.74% -7.82% 3.19% -5.64% -5.39% 5.78% 1.27%
1991 62.03% 34.20% 40.40% 24.64% 109.27% 42.59% 43.84%
1992 22.90% 7.69% 26.64% 24.66% -0.15% 12.91% 8.53%
1993 34.01% 27.08% 65.65% 42.16% 28.55% 19.89% 21.15%
1994 8.27% 4.21% -7.26% 8.17% 10.50% -5.73% 0.17%
1995 30.50% 36.85% 13.45% 25.26% 53.80% 46.58% 38.14%
1996 26.20% 28.35% 21.00% 26.61% 60.03% 35.45% 34.93%
1997 19.97% 21.68% -6.38% 61.46% 35.15% 21.68% 25.64%
1998 12.36% 10.59% 13.50% 53.85% 123.10% 27.43% 19.96%
1999 1.94% 8.02% 10.23% -1.47% 32.51% 12.04% 13.93%
(thru
9/30)
Index Total Returns
____________________________________________________
Cumulative
Hang Seng S&P 500 Nasdaq Index
Year DJIA FT Index Index Index 100 Index Returns(3)
____ ______ ________ _________ _______ _________ __________
1972 18.38%
1973 -13.20%
1974 -23.64%
1975 44.46%
1976 22.80%
1977 -12.91%
1978 2.66%
1979 10.60% 3.59% 77.99% 18.22% 30.73%
1980 21.90% 31.77% 65.48% 32.11% 39.72%
1981 -3.61% -5.30% -12.34% -4.92% -7.08%
1982 26.85% 0.42% -48.01% 21.14% -6.91%
1983 25.82% 21.94% -2.04% 22.28% 15.24%
1984 1.29% 2.15% 42.61% 6.22% 15.35%
1985 33.28% 54.74% 50.95% 31.77% 46.32%
1986 27.00% 24.36% 51.16% 18.31% 6.89% 34.18%
1987 5.66% 37.13% -6.84% 5.33% 10.49% 11.99%
1988 16.03% 9.00% 21.04% 16.64% 13.54% 15.36%
1989 32.09% 20.07% 10.59% 31.35% 26.17% 20.92%
1990 -0.73% 11.03% 11.71% -3.30% -10.41% 7.34%
1991 24.19% 8.77% 50.68% 30.40% 64.99% 27.88%
1992 7.39% -3.13% 34.73% 7.62% 8.86% 12.99%
1993 16.87% 19.22% 124.95% 9.95% 11.67% 53.68%
1994 5.03% 1.97% -29.34% 1.34% 1.74% -7.45%
1995 36.67% 16.21% 27.52% 37.22% 43.01% 26.80%
1996 28.71% 18.35% 37.86% 22.82% 42.74% 28.31%
1997 24.82% 14.78% -17.69% 33.21% 20.76% 7.30%
1998 18.03% 12.32% -2.60% 28.57% 85.43% 9.25%
1999 13.91% 7.25% 27.98% 5.34% 31.22% 16.38%
(thru
9/30)
____________
<FN>
(1) The Strategy stocks for each Strategy for a given year consist of
the common stocks selected by applying the respective Strategy as of the
beginning of the period.
(2) Total Return represents the sum of the change in market value of
each group of stocks between the first and last trading day of a period
plus the total dividends paid on each group of stocks during such period
divided by the opening market value of each group of stocks as of the
first trading day of a period. Total Return figures assume that all
dividends are reinvested semi-annually (except for the FT Index and Hang
Seng Index from 12/31/78 through 12/31/86, during which time annual
reinvestment was assumed) and all returns are stated in terms of U.S.
dollars. Based on the year-by-year returns contained in the table, over
the full years listed above, the Target 5 Strategy, the Target 10
Strategy, the Global Target 15 Strategy, The S&P Target 10 Strategy, The
Nasdaq Target 15 Strategy, The Dow(sm) DART 5 Strategy and The Dow(sm)
DART 10 Strategy achieved an average annual total return of 21.10%,
18.33%, 21.32%, 26.40%, 32.79%, 21.66% and 18.94%, respectively. In
addition, over each stated period, each individual strategy achieved
a greater average annual total return than that of its corresponding
index, the DJIA; the combination of the FT Index, Hang Seng Index and
DJIA (the "Cumulative Index"); the S&P 500 Index; and the Nasdaq 100
Index which were 13.45%, 17.94%, 17.61% and 22.60%, respectively.
(3) Cumulative Index Returns represent the average of the annual returns
of the stocks contained in the FT Index, Hang Seng Index and DJIA.
Cumulative Index Returns do not represent an actual index.
</FN>
Page 26
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the price per Unit of
which is comprised of the following:
- - The aggregate underlying value of the Securities;
- - The amount of any cash in the Income and Capital Accounts;
- - Dividends receivable on Securities; and
- - The 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, changes in the
relevant currency exchange rates, changes in the applicable commissions,
stamp taxes, custodial fees and other costs associated with foreign
trading, 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 each Trust portfolio, legal fees and the initial fees and expenses of
the Trustee) will be purchased in the same proportionate relationship as
all the Securities contained in a Trust. Securities will be sold to
reimburse the Sponsor for a Trust's organization costs at the end of the
initial offering period (a significantly shorter time period than the
life of the Trusts). During the initial offering period, there may be a
decrease in the value of the Securities. To the extent the proceeds from
the sale of these Securities are insufficient to repay the Sponsor for
Trust organization costs, the Trustee will sell additional Securities to
allow a Trust to fully reimburse the Sponsor. In that event, the net
asset value per Unit of a Trust will be reduced by the amount of
additional Securities sold. Although the dollar amount of the
reimbursement due to the Sponsor will remain fixed and will never exceed
the per Unit amount set forth for a Trust in "Statements of Net Assets,"
this will result in a greater effective cost per Unit to Unit holders
for the reimbursement to the Sponsor. To the extent actual organization
costs are less than the estimated amount, only the actual organization
costs will be deducted from the assets of a Trust. When Securities are
sold to reimburse the Sponsor for organization costs, the Trustee will
sell Securities, to the extent practicable, which will maintain the same
proportionate relationship among the Securities contained in a Trust as
existed prior to such sale.
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 sales charge you will pay has both an initial and a deferred
component. The initial sales charge, which you will pay at the time of
purchase, is initially equal to approximately 1.00% of the Public
Offering Price of a Unit. This initial sales charge is actually equal to
the difference between the maximum sales charge of 2.75% and the maximum
remaining deferred sales charge (initially $.175 per Unit) and will vary
from 1.00% 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, ten monthly deferred sales
charges of $.0175 per Unit will be deducted from a Trust's assets on
approximately the twentieth day of each month from February 18, 2000
through November 20, 2000. The maximum sales charge you will pay during
the initial offering period will be 2.75% of the Public Offering Price
per Unit (equivalent to 2.778% of the net amount invested, exclusive of
the deferred sales charge).
Discounts for Certain Persons.
If you invest at least $50,000 (except if you are purchasing for a "wrap
Page 27
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 2.50%
$100 but less than $150 2.25%
$150 but less than $500 1.90%
$500 but less than $1,000 1.75%
$1,000 or more 1.00%
*Breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be
applied on whichever basis is more favorable to the investor. The
breakpoints will be adjusted to take into consideration purchase orders
stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
The reduced sales charge for quantity purchases will apply only to
purchases made by the same person on any one day from any one dealer. To
help you reach the above levels, you can combine the Units you purchase
of the Trusts in this prospectus with any other same day purchases of
other trusts for which we are Principal Underwriter and are currently in
the initial offering period. In addition, we will also consider Units
you purchase in the name of your spouse or child under 21 years of age
to be purchases by you. The reduced 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 party
making the sale.
If you commit to purchase Units of the Trusts, or subsequent series of
the Trusts, valued at $1,000,000 or more over a 12-month period,
commencing with your first purchase you will receive the reduced sales
charge set forth above on all individual purchases over $83,000.
If you purchase Units with rollover proceeds from a previous series of a
Trust, you will be subject only to the maximum deferred sales charge on
such Units (for rollover purchases of $1,000,000 or more, the charge
will be a deferred sales charge limited to 1.00% of the Public Offering
Price), but you will not be eligible to receive the reduced sales
charges described in the above table. In addition, you can use
termination proceeds from other unit investments trusts with a similar
strategy as a Trust, or redemption or termination proceeds from any unit
investment trust we sponsor, to purchase Units of the Trusts subject
only to any remaining deferred sales charge. Please note that you will
be charged the amount of any remaining deferred sales charge on 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).
The Sponsor and certain dealers may establish a schedule where
employees, officers and directors of such dealers can purchase Units of
a Trust at the Public Offering Price less the established schedule
amount, which is designed to compensate such dealers for activities
relating to the sale of Units (the "Employee Dealer Concession").
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 at the Public Offering Price, subject only to the
Sponsor's retention of the sales charge. See "Distribution of Units-
Dealer Concessions."
You will be charged the deferred sales charge per Unit regardless of any
discounts. However, if you are eligible to receive a discount such that
the maximum sales charge you must pay is less than the applicable
maximum deferred sales charge, 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 Evaluator will appraise the aggregate underlying value of the
Securities in a Trust as of the Evaluation Time on each business day and
will adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Page 28
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and certain national holidays
on which the NYSE is closed.
The aggregate underlying value of the Securities in a Trust will be
determined as follows: if the Securities are listed on a securities
exchange or The Nasdaq Stock Market, their value is generally based on
the closing sale prices on that exchange or system (unless it is
determined that these prices are not appropriate as a basis for
valuation). However, if there is no closing sale price on that exchange
or system, they are valued based on the closing ask prices. If the
Securities are not so listed, or, if so listed and the principal market
for them is other than on that exchange or system, their value will
generally be based on the current ask prices on the over-the-counter
market (unless it is determined that these prices are not appropriate as
a basis for valuation). If current ask prices are unavailable, the
valuation is generally determined:
a) On the basis of current ask prices for comparable securities;
b) By appraising the value of the Securities on the ask side of the
market; or
c) By any combination of the above.
The total value of the Securities in the Global Target 15 Portfolio
during the initial offering period is computed on the basis of the
offering side value of the relevant currency exchange rate expressed in
U.S. dollars as of the Evaluation Time.
After the initial offering period is over, the aggregate underlying
value of the Securities will be determined as set forth above, except
that bid prices are used instead of ask prices when necessary. In
addition, during this period the aggregate underlying value of the
Securities is computed on the basis of the bid side value of the
relevant currency exchange rate expressed in U.S. dollars as of the
Evaluation Time.
Distribution of Units
We intend to qualify Units of the Trusts for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
reflect a concession or agency commission of 2.25% of the Public
Offering Price per Unit. However, this amount will be reduced to $0.13
per Unit on purchases by Rollover Unit holders or on the sale of Units
subject only to any remaining deferred sales charge. In addition,
dealers and other selling agents will receive a maximum concession of up
to $0.10 per Unit on purchases of Units resulting from the automatic
reinvestment of income or capital distributions into additional Units.
Dealers and other selling agents who sell Units of a Trust during the
initial offering period in the dollar amounts shown below will be
entitled to the following additional sales concessions as a percentage
of the Public Offering Price:
Total sales per Trust Additional
(in millions) Concession
_____________________ ___________
$ 15 but less than $25 0.015%
$ 25 but less than $40 0.025%
$ 40 but less than $50 0.050%
$ 50 but less than $75 0.125%
$ 75 but less than $100 0.150%
$100 or more 0.200%
Dealers and other selling agents who, during any consecutive 12-month
period, sell at least $2 billion worth of primary market units of unit
investment trusts sponsored by us will receive a concession of $30,000
in the month following the achievement of this level. We reserve the
right to change the amount of concessions or agency commissions from
time to time. If we reacquire, or the Trustee redeems, Units from
brokers, dealers or other selling agents while a market is being
maintained for such Units, such entities agree to immediately repay to
us any concession or agency commission relating to the reacquired Units.
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.
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
Page 29
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trusts. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable sales charge on Units sold by such persons during such
programs. We make these payments out of our own assets and not out of
Trust assets. These programs will not change the price you pay for your
Units.
Investment Comparisons.
From time to time we may compare the estimated returns of a Trust (which
may show performance net of the expenses and charges a Trust would have
incurred) and returns over specified periods of other similar trusts we
sponsor in our advertising and sales materials, with (1) returns on
other taxable investments such as the common stocks comprising various
market 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, BusinessWeek, Forbes or
Fortune. The investment characteristics of each Trust differ from other
comparative investments. You should not assume that these performance
comparisons will be representative of a Trust's future performance.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum sales
charge per Unit for each Trust less any reduced sales charge as stated
in "Public Offering." Also, any difference between our cost to purchase
the Securities and the price at which we sell them to a Trust is
considered a profit or loss (see Note 2 of "Notes to Schedules of
Investments"). During the initial offering period, dealers and others
may also realize profits or sustain losses as a result of fluctuations
in the Public Offering Price they receive when they sell the Units.
In maintaining a market for Units, any difference between the price at
which we purchase Units and the price at which we sell or redeem them
will be a profit or loss to us.
The Secondary Market
Although not obligated, we intend to maintain a market for the Units
after the initial offering period and continuously offer to purchase
Units at prices based on the Redemption Price per Unit.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees 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 or
redeem your Units before you have paid the total deferred sales charge
on your Units, you will have to pay the remainder at that time.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid is equal to or greater than the Redemption Price per Unit, we may
purchase the Units. You will receive your proceeds from the sale no
later than if they were redeemed by the Trustee. We may tender Units we
hold to the Trustee for redemption as any other Units. If we elect not
to purchase Units, the Trustee may sell tendered Units in the over-the-
counter market, if any. However, the amount you will receive is the same
as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trusts are listed under "Fee
Table." If actual expenses of a Trust exceed the estimate, that Trust
will bear the excess. The Trustee will pay operating expenses of the
Trusts from the Income Account of a Trust if funds are available, and
then from the Capital Account. The Income and Capital Accounts are
noninterest-bearing to Unit holders, so the Trustee may earn interest on
these funds, thus benefiting from their use.
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to the Trusts, and will receive brokerage fees
when a Trust uses us (or an affiliate of ours) as agent in buying or
Page 30
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" for providing portfolio
supervisory and evaluation services to the Trusts. In providing
portfolio supervisory services, the Portfolio Supervisor may purchase
research services from a number of sources, which may include
underwriters or dealers of the Trusts.
The fees payable to us, First Trust Advisors L.P. and the Trustee are
based on the largest aggregate number of Units of a Trust outstanding at
any time during the calendar year, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fee paid to us or our
affiliates for providing a given service to all unit investment trusts
for which we provide such services be more than the actual cost of
providing such service in such year.
In addition to a Trust's operating expenses, and the fees described
above, the Trusts may also incur the following charges:
- - A quarterly license fee (which will fluctuate with a Trust's net asset
value) payable by certain of the Trusts for the use of certain
trademarks and trade names of Dow Jones, Standard & Poor's or The Nasdaq
Stock Market, Inc.;
- - All legal expenses of the Trustee according to its responsibilities
under the Indenture;
- - The expenses and costs incurred by the Trustee to protect a Trust and
your rights and interests;
- - Fees for any extraordinary services the Trustee performed under the
Indenture;
- - Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of a Trust;
- - Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of a
Trust;
- - Foreign custodial and transaction fees, if any; and/or
- - All taxes and other government charges imposed upon the Securities or
any part of a Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
a Trust. Since the Securities are all common stocks and dividend income
is unpredictable, we cannot guarantee that dividends will be sufficient
to meet any or all expenses of a Trust. If there is not enough cash in
the Income or Capital Accounts of a Trust, the Trustee has the power to
sell Securities in a Trust to make cash available to pay these charges
which may result in capital gains or losses to you. See "Tax Status."
Tax Status
United States Taxation.
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trusts. This section is current as
of the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a broker-
dealer, or other investor with special circumstances. In addition, this
section does not describe your state or foreign taxes. As with any
investment, you should consult your own tax professional about your
particular consequences.
Trust Status.
The Trusts will not be taxed as corporations for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of the Securities and other assets held by a Trust, and as
such you will be considered to have received a pro rata share of income
(i.e., dividends and capital gains, if any) from each Security when such
income is considered to be received by a Trust. This is true even if you
elect to have your distributions automatically reinvested into
additional Units. In addition, the income from the Trust which you must
take into account for federal income tax purposes is not reduced for
amounts used to pay the deferred sales charge.
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
Page 31
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 that exceed a corporation's accumulated earnings and
profits).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the lowest
tax bracket). 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.
Rollovers.
If you elect to have your proceeds from a Trust rolled over into the
next series of such Trust, it is considered a sale for federal income
tax purposes, and any gain on the sale will be treated as a capital
gain, and any loss will be treated as a capital loss. However, any loss
you incur in connection with the exchange of your Units of a Trust for
units of the next series will generally be disallowed with respect to
this deemed sale and subsequent deemed repurchase, to the extent the two
trusts have identical Securities under the wash sale provisions of the
Internal Revenue Code.
In-Kind Distributions.
Under certain circumstances, you may request a distribution of shares of
Securities (an "In-Kind Distribution") from a Domestic Trust when you
redeem your Units or at a Trust's termination. If you request an In-Kind
Distribution you will be responsible for any expenses related to this
distribution. By electing to receive an In-Kind Distribution, you will
receive an undivided interest in whole shares of stock plus, possibly,
cash.
You will not recognize gain or loss if you only receive Securities in
exchange for your pro rata portion of the Securities held by a Trust.
However, if you also receive cash in exchange for a fractional share of
a Security held by such Trust, you will generally recognize gain or loss
based on the difference between the amount of cash you receive and your
tax basis in such fractional share of the Security.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes you must take into account
your full pro rata share of a Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by a Trust to the same extent as if you directly
paid the expense. You may, however, be required to treat some or all of
the expenses of a Trust as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Foreign, State and Local Taxes.
Distributions by a Trust that are treated as U.S. source income (e.g.,
dividends received on Securities of domestic corporations) will
generally be subject to U.S. income taxation and withholding in the case
of Units held by non-resident alien individuals, foreign corporations or
other non-U.S. persons, subject to any applicable treaty. However,
distributions by a Trust that are derived from dividends of Securities
of a foreign corporation and that are not effectively connected to your
conduct of a trade or business within the United States will generally
not be subject to U.S. income taxation and withholding in the case of
Units held by non-resident alien individuals, foreign corporations or
other U.S. persons, provided that less than 25 percent of the gross
income of the foreign corporation over the three-year period ending with
the close of the taxable year preceding payment was effectively
connected to the conduct of a trade or business within the United States.
Some distributions by a Trust may be subject to foreign withholding
taxes. Any dividends withheld will nevertheless be treated as income to
you. However, because you are deemed to have paid directly your share of
foreign taxes that have been paid or accrued by a Trust, you may be
entitled to a foreign tax credit or deduction for U.S. tax purposes with
respect to such taxes.
Under the existing income tax laws of the State and City of New York,
the Trusts will not be taxed as corporations, and the income of the
Page 32
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.
United Kingdom Taxation.
The following summary describes certain important U.K. tax consequences
for certain U.S. Unit holders who hold Units in the Global Target 15
Portfolio as capital assets. This summary is intended to be a general
guide only and is subject to any changes in law occurring after the date
of this prospectus. You should consult your own tax advisor about your
particular circumstances.
Taxation of Dividends. A U.K. resident individual who receives a
dividend from a U.K. company is generally entitled to a tax credit,
which is either offset against U.K. tax liabilities or, in certain
circumstances, repaid.
You will not be able to claim any refund of the tax credit for dividends
paid by U.K. companies.
Taxation of Capital Gains. U.S. investors who are neither resident nor
ordinarily resident in the United Kingdom will not generally be liable
for U.K. tax on gains arising on the disposal of Units in the Global
Target 15 Portfolio. However, they may be liable if the Units are used,
held or acquired for the purposes of a trade, profession or vocation
carried on in the United Kingdom. Individual U.S. investors may also be
liable if they have previously been resident or ordinarily resident in
the United Kingdom and become resident or ordinarily resident in the
United Kingdom in the future.
Inheritance Tax. Individual U.S. investors who are domiciled in the
United States and who are not U.K. nationals will generally not be
subject to U.K. inheritance tax on death or on gifts of the Units made
during their lifetimes, provided any applicable U.S. federal gift or
estate tax is paid. They may be subject to U.K. inheritance tax if the
Units are used in a business in the United Kingdom or relate to the
performance of personal services in the United Kingdom.
Where the Units are held on trust, the Units will generally not be
subject to U.K. inheritance tax unless the settlor, at the time of
settlement, was domiciled in the United Kingdom, in which case they may
be subject to tax.
It is very unlikely that the Units will be subject to both U.K.
inheritance tax and U.S. federal gift or estate tax. If they were, one
of the taxes could generally be credited against the other.
Stamp Tax. A sale of Securities listed in the FT Index will generally
result in either U.K. stamp duty or stamp duty reserve tax being payable
by the purchaser. The Global Target 15 Portfolio paid this tax when it
acquired Securities. When the Global Target 15 Portfolio sells
Securities, it is anticipated that the tax will be paid by the purchaser.
Hong Kong Taxation.
The following summary describes certain important Hong Kong tax
consequences to certain U.S. Unit holders who hold Units in the Global
Target 15 Portfolio as capital assets. This summary assumes that you are
not carrying on a trade, profession or business in Hong Kong and that
you have no profits sourced in Hong Kong arising from the carrying on of
such trade, profession or business. This summary is intended to be a
general guide only and is subject to any changes in Hong Kong or U.S.
law occurring after the date of this prospectus and you should consult
your own tax advisor about your particular circumstances.
Taxation of Dividends. Dividends you receive from the Global Target 15
Portfolio relating to Hong Kong issuers are not taxable and therefore
will not be subject to the deduction of any withholding tax.
Profits Tax. Unless you are carrying on a trade, profession or business
in Hong Kong you will not be subject to profits tax imposed by Hong Kong
on any gain or profits made on the realization or other disposal of your
Units.
Estate Duty. Units of the Global Target 15 Portfolio do not give rise to
Hong Kong estate duty liability.
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
Page 33
treatment. Before participating in a plan like this, you should review
the tax laws regarding these plans and consult your attorney or tax
advisor. Brokerage firms and other financial institutions offer these
plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
you become Record Owner, but normally your broker/dealer provides this
notice. You may elect to hold your Units in either certificated or
uncertificated form.
Certificated Units. When you purchase your Units you can request that
they be evidenced by certificates, which will be delivered shortly after
your order. Certificates will be issued in fully registered form,
transferable only on the books of the Trustee in denominations of one
Unit or any multiple thereof. You can transfer or redeem your
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with signature
guaranteed by an eligible institution. In certain cases the Trustee may
require additional documentation before they will transfer or redeem
your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- - A written initial transaction statement containing a description of
your Trust;
- - The number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of income (if any)
distributed. After the end of each calendar year, the Trustee will
provide you:
- - A summary of transactions in your Trust for the year;
- - A list of any Securities sold during the year and the Securities held
at the end of that year by your Trust;
- - The Redemption Price per Unit, computed on the 31st day of December of
such year (or the last business day before); and
- - Amounts of income and capital distributed during the year.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Income and Capital Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit dividends received on a
Trust's Securities to the Income Account of such Trust. All other
receipts, such as return of capital, are credited to the Capital Account
of such Trust. Dividends received on foreign Securities, if any, are
converted into U.S. dollars at the applicable exchange rate.
The Trustee will distribute any net income in the Income Account on or
near the Income Distribution Dates to Unit holders of record on the
preceding Income Distribution Record Date. See "Summary of Essential
Information." No income distribution will be paid if accrued expenses of
a Trust exceed amounts in the Income Account on the Income Distribution
Page 34
Dates. Distribution amounts will vary with changes in a Trust's fees and
expenses, in dividends received and with the sale of Securities. The
Trustee will distribute amounts in the Capital Account, net of amounts
designated to meet redemptions, pay the deferred sales charge or pay
expenses, on the last day of each month to Unit holders of record on the
fifteenth day of each month provided the amount equals at least $1.00
per 100 Units. If the Trustee does not have your TIN, it is required to
withhold a certain percentage of your distribution and deliver such
amount to the Internal Revenue Service ("IRS"). You may recover this
amount by giving your TIN to the Trustee, or when you file a tax return.
However, you should check your statements to make sure the Trustee has
your TIN to avoid this "back-up withholding."
We anticipate that there will be enough money in the Capital Account of
a Trust to pay the deferred sales charge. If not, the Trustee may sell
Securities to meet the shortfall.
Within a reasonable time after a Trust is terminated, unless you are a
Rollover Unit holder, you will receive the pro rata share of the money
from the sale of the Securities. However, if you own Units of a Domestic
Trust, 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 their Trust,
after deducting any unpaid expenses.
The Trustee may establish reserves (the "Reserve Account") within a
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of that Trust.
Distribution Reinvestment Option. You may elect to have each
distribution of income and/or capital reinvested into additional Units
of your Trust by notifying the Trustee at least 10 days before any
Record Date. Each later distribution of income and/or capital on your
Units will be reinvested by the Trustee into additional Units of your
Trust. 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 uncertificated, you
need only deliver a request for redemption to the Trustee. In either
case, the certificates or the redemption request must be properly
endorsed with proper instruments of transfer and signature guarantees as
explained in "Rights of Unit Holders-Unit Ownership" (or by providing
satisfactory indemnity if the certificates were lost, stolen, or
destroyed). No redemption fee will be charged, but you are responsible
for any governmental charges that apply. Three business days after the
day you tender your Units (the "Date of Tender") you will receive cash
in an amount for each Unit equal to the Redemption Price per Unit
calculated at the Evaluation Time on the Date of Tender.
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. The IRS
will require the Trustee to withhold a portion of your redemption
proceeds if the Trustee does not have your TIN as generally discussed
under "Income and Capital Distributions."
If you tender 1,000 Units or more of a Domestic Trust for redemption,
rather than receiving cash, you may elect to receive an In-Kind
Distribution in an amount equal to the Redemption Price per Unit by
making this request in writing to the Trustee at the time of tender.
However, 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
Page 35
or broker/dealer account at the Depository Trust Company. The Trustee
will subtract any customary transfer and registration charges from your
In-Kind Distribution. As a tendering Unit holder, you will receive your
pro rata number of whole shares of the Securities that make up the
portfolio, and cash from the Capital Account equal to the fractional
shares to which you are entitled.
The Trustee may sell Securities to make funds available for redemption.
If Securities are sold, the size and diversification of a Trust will be
reduced. These sales may result in lower prices than if the Securities
were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- - If the NYSE is closed (other than customary weekend and holiday
closings);
- - If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- - For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Income and Capital Accounts of a Trust not designated to
purchase Securities;
2. the aggregate underlying value of the Securities held in that 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 such Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of such Trust, if any;
4. cash held for distribution to Unit holders of record of such Trust as
of the business day before the evaluation being made;
5. liquidation costs for foreign Securities, if any; and
6. other liabilities incurred by such Trust; and
dividing
1. the result by the number of outstanding Units of such Trust.
Any remaining deferred sales charge on the Units when you redeem them
will be deducted from your redemption proceeds. In addition, during the
initial offering period, the Redemption Price per Unit will include
estimated organization costs as set forth under "Fee Table."
Investing in a New Trust
Each Trust's portfolio has been selected on the basis of capital
appreciation potential for a limited time period. When each Trust is
about to terminate, you may have the option to roll your proceeds into
the next series of a Trust (the "New Trusts") if one is available. We
intend to create the New Trusts in conjunction with the termination of
the Trusts and plan to apply the same strategy we used to select the
portfolio for the Trusts to the New Trusts.
If you wish to have the proceeds from your Units rolled into a New Trust
you must notify the Trustee in writing of your election by the Rollover
Notification Date stated in the "Summary of Essential Information." As a
Rollover Unit holder, your Units will be redeemed and the underlying
Securities sold by the Trustee, in its capacity as Distribution Agent,
during the Special Redemption and Liquidation Period. The Distribution
Agent may engage us or other brokers as its agent to sell the Securities.
Once all of the Securities are sold, your proceeds, less any brokerage
fees, governmental charges or other expenses involved in the sales, will
be used to buy units of a New Trust or trust with a similar investment
strategy that you have selected, provided such trusts are registered and
being offered. Accordingly, proceeds may be uninvested for up to several
days. Units purchased with rollover proceeds will generally be purchased
subject only to the maximum remaining deferred sales charge on such
units (currently expected to be $.175 per unit).
We intend to create New Trust units as quickly as possible, depending on
the availability of the Securities contained in a New Trust's portfolio.
Rollover Unit holders will be given first priority to purchase New Trust
units. We cannot, however, assure the exact timing of the creation of
New Trust units or the total number of New Trust units we will create.
Page 36
Any proceeds not invested on behalf of Rollover Unit holders in New
Trust units will be distributed within a reasonable time after such
occurrence. Although we believe that enough New Trust units can be
created, monies in a New Trust may not be fully invested on the next
business day.
Please note that there are certain tax consequences associated with
becoming a Rollover Unit holder. See "Tax Status." If you elect not to
participate as a Rollover Unit holder ("Remaining Unit holders"), you
will not incur capital gains or losses due to the Special Redemption and
Liquidation, nor will you be charged any additional sales charge. We may
modify, amend or terminate this rollover option upon 60 days notice.
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, the issuer's credit standing, or otherwise
damage the sound investment character of the Security;
- - The issuer has defaulted on the payment of any other of its
outstanding obligations; or
- - The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to a Trust.
Except in the limited instance in which a Trust acquires Replacement
Securities, as described in "The FT Series," a Trust may not acquire any
securities or other property other than the Securities. The Trustee, on
behalf of 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 distribution to Unit holders or to
meet redemption requests. The Trustee may retain and pay us or an
affiliate of ours to act as agent for the Trusts to facilitate selling
Securities, exchanged securities or property from the Trusts. If we or
our affiliate act in this capacity, we will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Securities designated by us, or, absent our
direction, at its own discretion, in order to meet redemption requests
or pay expenses. In designating Securities to be sold, we will try to
maintain the proportionate relationship among the Securities. If this is
not possible, the composition and diversification of a Trust may be
changed. To get the best price for a Trust we may specify minimum
amounts (generally 100 shares) in which blocks of Securities are to be
sold. We may consider sales of Units of unit investment trusts which we
sponsor when we make recommendations to the Trustee as to which
broker/dealers they select to execute the Trusts' portfolio
transactions, or when acting as agent for the Trusts in acquiring or
selling Securities on behalf of the Trusts.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- - To cure ambiguities;
- - To correct or supplement any defective or inconsistent provision;
- - To make any amendment required by any governmental agency; or
- - To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, each Trust will terminate on
the Mandatory Termination Date. A Trust may be terminated prior to the
Mandatory Termination Date:
- - Upon the consent of 100% of the Unit holders;
Page 37
- - If the value of the Securities owned by such Trust as shown by any
evaluation is less than the lower of $2,000,000 or 20% of the total
value of Securities deposited in such Trust during the initial offering
period ("Discretionary Liquidation Amount"); or
- - In the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination, the Trustee will send written notice to all Unit
holders which will specify how you should tender your certificates, if
any, to the Trustee. If a Trust is terminated due to this last reason,
we will refund your entire sales charge; however, termination of a Trust
before the Mandatory Termination Date for any other stated reason will
result in all remaining unpaid deferred sales charges on your Units
being deducted from your termination proceeds. For various reasons,
including Unit holders' participation as Rollover Unit holders, a Trust
may be reduced below the Discretionary Liquidation Amount and could
therefore be terminated before the Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of a Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Securities. Because the Trustee must sell the Securities within a
relatively short period of time, the sale of Securities as part of the
termination process may result in a lower sales price than might
otherwise be realized if such sale were not required at this time.
If you own at least 1,000 Units of a Domestic 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. 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
either the Rollover Option or the In-Kind Distribution option, you will
receive a cash distribution from the sale of the remaining Securities,
along with your interest in the Income and Capital Accounts, within a
reasonable time after your Trust is terminated. Regardless of the
distribution involved, the Trustee will deduct from a Trust any accrued
costs, expenses, advances or indemnities provided for by the Indenture,
including estimated compensation of the Trustee and costs of liquidation
and any amounts required as a reserve to pay any taxes or other
governmental charges.
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- - The First Trust Combined Series
- - FT Series (formerly known as The First Trust Special Situations Trust)
- - The First Trust Insured Corporate Trust
- - The First Trust of Insured Municipal Bonds
- - The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $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 us and not to the Trusts or to any
series of the Trusts or to any other dealer. We are including this
information only to inform you of our financial responsibility and our
ability to carry out our contractual obligations. We will provide more
detailed financial information on request.
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
Page 38
York, 10004-2413. If you have questions regarding the Trusts, you may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee has not participated in selecting the Securities; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- - Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC;
- - Terminate the Indenture and liquidate the Trust; or
- - Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel, as well as special New York tax
counsel for the Trusts.
Experts.
Ernst & Young LLP, independent auditors, have audited the Trusts'
statements of net assets, including the schedules of investments, at the
opening of business on the Initial Date of Deposit, as set forth in
their report. We've included the Trusts' statements of net assets,
including the schedules of investments, in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
Page 39
FIRST TRUST (registered trademark)
The Dow(sm) Target 5 Portfolio, January 2000 Series
The Dow(sm) Target 10 Portfolio, January 2000 Series
Global Target 15 Portfolio, January 2000 Series
The S&P Target 10 Portfolio, January 2000 Series
The Nasdaq Target 15 Portfolio, January 2000 Series
The Dow(sm) DART 5 Portfolio, January 2000 Series
The Dow(sm) DART 10 Portfolio, January 2000 Series
FT 386
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
________________________
When Units of the Trusts are no longer available, this prospectus may be
used as a preliminary prospectus for a future series, in which case you
should note the following:
THE INFORMATION IN THE PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL, OR ACCEPT OFFERS TO BUY, SECURITIES OF A FUTURE SERIES
UNTIL THAT SERIES HAS BECOME EFFECTIVE WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO SECURITIES CAN BE SOLD IN ANY STATE WHERE A SALE WOULD BE
ILLEGAL.
________________________
This prospectus contains information relating to the above-mentioned
unit investment trusts, but does not contain all of the information
about this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- - Securities Act of 1933 (file no. 333-90679) 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
December __, 1999
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 40
First Trust (registered trademark)
TARGET PORTFOLIO SERIES
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of unit investment trusts ("Trusts")
contained in Target Portfolio Series not found in the prospectus for the
Trusts. This Information Supplement is not a prospectus and does not
include all of the information that a prospective investor should
consider before investing in a Trust. This Information Supplement should
be read in conjunction with the prospectus for the Trust in which an
investor is considering investing.
This Information Supplement is dated December __, 1999. Capitalized
terms have been defined in the prospectus.
Table of Contents
Dow Jones & Company, Inc. 1
Standard & Poor's 2
The Nasdaq Stock Market, Inc. 2
Risk Factors 3
Securities 3
Dividends 3
Foreign Issuers 4
United Kingdom 4
Hong Kong 5
Exchange Rate 6
Litigation 9
Tobacco Industry 9
Concentrations 9
Banks and Thrifts 9
Real Estate Companies 11
Retail Companies 12
Technology Companies 13
Portfolios 14
Equity Securities Selected for The Dow(sm) Target 5 Portfolio, January 2000 Series 14
Equity Securities Selected for The Dow(sm) Target 10 Portfolio, January 2000 Series 14
Equity Securities Selected for Global Target 15 Portfolio, January 2000 Series 14
Equity Securities Selected for The S&P Target 10 Portfolio, January 2000 Series 14
Equity Securities Selected for The Nasdaq Target 15 Portfolio, January 2000 Series 14
Equity Securities Selected for The Dow(sm) DART 5 Portfolio, January 2000 Series 14
Equity Securities Selected for The Dow(sm) DART 10 Portfolio, January 2000 Series 14
Dow Jones & Company, Inc.
The Trusts are not sponsored, endorsed, sold or promoted by Dow Jones &
Company, Inc. ("Dow Jones"). Dow Jones makes no representation or
warranty, express or implied, to the owners of the Trusts or any member
of the public regarding the advisability of investing in securities
generally or in the Trusts particularly. Dow Jones' only relationship to
the Sponsor is the licensing of certain trademarks, trade names and
service marks of Dow Jones and of the Dow Jones Industrial Average(sm),
which is determined, composed and calculated by Dow Jones without regard
to the Sponsor or the Trusts. Dow Jones has no obligation to take the
needs of the Sponsor or the owners of the Trusts into consideration in
determining, composing or calculating the Dow Jones Industrial
Average(sm). Dow Jones is not responsible for and has not participated
Page 1
in the determination of the timing of, prices at, or quantities of the
Trusts to be issued or in the determination or calculation of the
equation by which the Trusts are to be converted into cash. Dow Jones
has no obligation or liability in connection with the administration,
marketing or trading of the Trusts.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN AND DOW
JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE SPONSOR, OWNERS OF THE TRUSTS, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES INDUSTRIAL
AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT
TO THE DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE
ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
Standard & Poor's
The Trusts are not sponsored, endorsed, sold or promoted by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes
no representation or warranty, express or implied, to the owners of the
Trusts or any member of the public regarding the advisability of
investing in securities generally or in the Trusts particularly or the
ability of the S&P 500 Index to track general stock market performance.
S&P's only relationship to the licensee is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index, which is
determined, composed and calculated by S&P without regard to the
licensee or the Trusts. S&P has no obligation to take the needs of the
licensee or the owners of the Trusts into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for
and has not participated in the determination of the prices and amount
of the Trusts or the timing of the issuance or sale of the Trusts or in
the determination or calculation of the equation by which the Trusts are
to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the Trusts.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
LICENSEE, OWNERS OF THE TRUSTS, OR ANY OTHER PERSON OR ENTITY FROM THE
USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES,
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY
FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING
LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
The Nasdaq Stock Market, Inc.
The Nasdaq Target 15 Portfolio Series is not sponsored, endorsed, sold
or promoted by The Nasdaq Stock Market, Inc. (including its affiliates)
(Nasdaq, with its affiliates, are referred to as the "Corporations").
The Corporations have not passed on the legality or suitability of, or
the accuracy or adequacy of descriptions and disclosures relating to The
Nasdaq Target 15 Portfolio Series. The Corporations make no
representation or warranty, express or implied, to the owners of Units
of The Nasdaq Target 15 Portfolio Series or any member of the public
regarding the advisability of investing in securities generally or in
The Nasdaq Target 15 Portfolio Series particularly, or the ability of
the Nasdaq 100 Index(registered trademark) to track general stock market
performance. The Corporations' only relationship to the Sponsor
("Licensee") is in the licensing of the Nasdaq 100(registered
trademark), Nasdaq 100 Index(registered trademark) and Nasdaq(registered
trademark) trademarks or service marks, and certain trade names of the
Page 2
Corporations and the use of the Nasdaq 100 Index(registered trademark)
which is determined, composed and calculated by Nasdaq without regard to
Licensee or The Nasdaq Target 15 Portfolio Series. Nasdaq has no
obligation to take the needs of the Licensee or the owners of Units of
The Nasdaq Target 15 Portfolio Series into consideration in determining,
composing or calculating the Nasdaq 100 Index(registered trademark). The
Corporations are not responsible for and have not participated in the
determination of the timing of, prices at or quantities of The Nasdaq
Target 15 Portfolio Series to be issued or in the determination or
calculation of the equation by which The Nasdaq Target 15 Portfolio
Series is to be converted into cash. The Corporations have no liability
in connection with the administration, marketing or trading of The
Nasdaq Target 15 Portfolio Series.
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED
CALCULATION OF THE NASDAQ 100 INDEX(registered trademark) OR ANY DATA
INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE LICENSEE, OWNERS OF THE NASDAQ
TARGET 15 PORTFOLIO SERIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE
OF THE NASDAQ 100 INDEX(registered trademark) OR ANY DATA INCLUDED
THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES AND
EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ 100
INDEX(registered trademark) OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE
ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES.
Risk Factors
Securities. An investment in Units should be made with an understanding
of the risks which an investment in common stocks entails, including the
risk that the financial condition of the issuers of the Securities or
the general condition of the relevant stock market may worsen, and the
value of the Securities and therefore the value of the Units may
decline. Common stocks are especially susceptible to general stock
market movements and to volatile increases and decreases of value, as
market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors, including expectations
regarding government, economic, monetary and fiscal policies, inflation
and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Both U.S. and foreign
markets have experienced substantial volatility and significant declines
recently as a result of certain or all of these factors. From September
30, 1997 through October 30, 1997, amid record trading volume, the S&P
500 Index, DJIA, FT Index and Hang Seng Index declined 4.60%, 7.09%,
6.19% and 31.14%, respectively. In addition, against a backdrop of
continued uncertainty regarding the current global currency crisis and
falling commodity prices, during the period between July 31, 1998 and
September 30, 1998, the S&P 500, DJIA and FT Index declined by 8.97%,
11.32% and 17.80%, respectively, while the Hang Seng Index increased .20%.
Dividends. Shareholders of common stocks have rights to receive payments
from the issuers of those common stocks that are generally subordinate
to those of creditors of, or holders of debt obligations or preferred
stocks of, such issuers. Shareholders of common stocks of the type held
by the Trusts have a right to receive dividends only when and if, and in
the amounts, declared by the issuer's board of directors and have a
right to participate in amounts available for distribution by the issuer
only after all other claims on the issuer have been paid or provided
for. Common stocks do not represent an obligation of the issuer and,
therefore, do not offer any assurance of income or provide the same
degree of protection of capital as do debt securities. The issuance of
additional debt securities or preferred stock will create prior claims
for payment of principal, interest and dividends which could adversely
affect the ability and inclination of the issuer to declare or pay
dividends on its common stock or the rights of holders of common stock
with respect to assets of the issuer upon liquidation or bankruptcy.
Cumulative preferred stock dividends must be paid before common stock
dividends, and any cumulative preferred stock dividend omitted is added
to future dividends payable to the holders of cumulative preferred
stock. Preferred stockholders are also generally entitled to rights on
liquidation which are senior to those of common stockholders.
Page 3
Foreign Issuers. Since certain or all of the Securities included in the
International Trusts consist of securities of foreign issuers, an
investment in such Trusts involves certain investment risks that are
different in some respects from an investment in a trust which invests
entirely in the securities of domestic issuers. These investment risks
include future political or governmental restrictions which might
adversely affect the payment or receipt of payment of dividends on the
relevant Securities, the possibility that the financial condition of the
issuers of the Securities may become impaired or that the general
condition of the relevant stock market may worsen (both of which would
contribute directly to a decrease in the value of the Securities and
thus in the value of the Units), the limited liquidity and relatively
small market capitalization of the relevant securities market,
expropriation or confiscatory taxation, economic uncertainties and
foreign currency devaluations and fluctuations. In addition, for foreign
issuers that are not subject to the reporting requirements of the
Securities Exchange Act of 1934, there may be less publicly available
information than is available from a domestic issuer. Also, foreign
issuers are not necessarily subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to
those applicable to domestic issuers. The securities of many foreign
issuers are less liquid and their prices more volatile than securities
of comparable domestic issuers. In addition, fixed brokerage commissions
and other transaction costs on foreign securities exchanges are
generally higher than in the United States and there is generally less
government supervision and regulation of exchanges, brokers and issuers
in foreign countries than there is in the United States. However, due to
the nature of the issuers of the Securities selected for the
International Trusts, the Sponsor believes that adequate information
will be available to allow the Supervisor to provide portfolio
surveillance for such Trusts.
Securities issued by non-U.S. issuers generally pay dividends in foreign
currencies and are principally traded in foreign currencies. Therefore,
there is a risk that the United States dollar value of these securities
will vary with fluctuations in the U.S. dollar foreign exchange rates
for the various Securities. See "Exchange Rate" below.
On the basis of the best information available to the Sponsor at the
present time, none of the Securities in the International Trusts are
subject to exchange control restrictions under existing law which would
materially interfere with payment to such Trusts of dividends due on, or
proceeds from the sale of, the Securities. However, there can be no
assurance that exchange control regulations might not be adopted in the
future which might adversely affect payment to such a Trust. The
adoption of exchange control regulations and other legal restrictions
could have an adverse impact on the marketability of international
securities in the International Trusts and on the ability of such Trusts
to satisfy their obligation to redeem Units tendered to the Trustee for
redemption. In addition, restrictions on the settlement of transactions
on either the purchase or sale side, or both, could cause delays or
increase the costs associated with the purchase and sale of the foreign
Securities and correspondingly could affect the price of the Units.
Investors should be aware that it may not be possible to buy all
Securities at the same time because of the unavailability of any
Security, and restrictions applicable to a Trust relating to the
purchase of a Security by reason of the federal securities laws or
otherwise.
Foreign securities generally have not been registered under the
Securities Act of 1933 and may not be exempt from the registration
requirements of such Act. Sales of non-exempt Securities by a Trust in
the United States securities markets are subject to severe restrictions
and may not be practicable. Accordingly, sales of these Securities by a
Trust will generally be effected only in foreign securities markets.
Although the Sponsor does not believe that the International Trust will
encounter obstacles in disposing of the Securities, investors should
realize that the Securities may be traded in foreign countries where the
securities markets are not as developed or efficient and may not be as
liquid as those in the United States. The value of the Securities will
be adversely affected if trading markets for the Securities are limited
or absent.
United Kingdom. The emphasis of the United Kingdom's economy is in the
private services sector, which includes the wholesale and retail sector,
banking, finance, insurance and tourism. Services as a whole account for
a majority of the United Kingdom's gross national product and makes a
significant contribution to the country's balance of payments. The
portfolios of the International Trusts may contain common stocks of
British companies engaged in such industries as banking, chemicals,
building and construction, transportation, telecommunications and
insurance. Many of these industries may be subject to government
regulation, which may have a materially adverse effect on the
performance of their stock. In the first quarter of 1998, gross domestic
Page 4
product (GDP) of the United Kingdom grew to a level 3.0% higher than in
the first quarter of 1997, however the overall rate of GDP growth has
slowed since the third quarter of 1997. The slow down largely reflects a
deteriorating trade position and higher indirect taxes. The average
quarterly rate of GDP growth in the United Kingdom (as well as in Europe
generally) has been decelerating since 1994. The United Kingdom is a
member of the European Union (the "EU") which was created through the
formation of the Maastricht Treaty on European Union in late 1993. It is
expected that the Treaty will have the effect of eliminating most
remaining trade barriers between the 15 member nations and make Europe
one of the largest common markets in the world. However, the effective
implementation of the Treaty provisions and the rate at which trade
barriers are eliminated is uncertain at this time. Furthermore, the
recent rapid political and social change throughout Europe make the
extent and nature of future economic development in the United Kingdom
and Europe and the impact of such development upon the value of
Securities issued by United Kingdom companies impossible to predict.
A majority of the EU members converted their existing sovereign
currencies to a common currency (the "euro") on January 1, 1999. The
United Kingdom did not participate in this conversion on January 1, 1999
and the Sponsor is unable to predict if or when the United Kingdom will
convert to the euro. Moreover, it is not possible to accurately predict
the effect of the current political and economic situation upon long-
term inflation and balance of trade cycles and how these changes, as
well as the implementation of a common currency throughout a majority of
EU countries, would affect the currency exchange rate between the U.S.
dollar and the British pound sterling. In addition, United Kingdom
companies with significant markets or operations in other European
countries (whether or not such countries are participating) face
strategic challenges as these entities adapt to a single trans-national
currency. The euro conversion may have a material impact on revenues,
expenses or income from operations; increase competition due to the
increased price transparency of EU markets; affect issuers' currency
exchange rate risk and derivatives exposure; disrupt current contracts;
cause issuers to increase spending on information technology updates
required for the conversion; and result in potential adverse tax
consequences. The Sponsor is unable to predict what impact, if any, the
euro conversion will have on any of the Securities issued by United
Kingdom companies in the International Trusts.
Hong Kong. Hong Kong, established as a British colony in the 1840's,
reverted to Chinese sovereignty effective July 1, 1997. On such date,
Hong Kong became a Special Administrative Region ("SAR") of China. Hong
Kong's new constitution is the Basic Law (promulgated by China in 1990).
Prior to July 1, 1997, the Hong Kong government followed a laissez-faire
policy toward industry. There were no major import, export or foreign
exchange restrictions. Regulation of business was generally minimal with
certain exceptions, including regulated entry into certain sectors of
the economy and a fixed exchange rate regime by which the Hong Kong
dollar has been pegged to the U.S. dollar. Over the past two decades
through 1996, the gross domestic product (GDP) has tripled in real
terms, equivalent to an average annual growth rate of 6%. However, Hong
Kong's recent economic data has not been encouraging. The full impact of
the Asian financial crisis, as well as current international economic
instability, is likely to continue to have a negative impact on the Hong
Kong economy in the near future.
Although China has committed by treaty to preserve for 50 years the
economic and social freedoms enjoyed in Hong Kong prior to the
reversion, the continuation of the economic system in Hong Kong after
the reversion will be dependent on the Chinese government, and there can
be no assurances that the commitment made by China regarding Hong Kong
will be maintained. Prior to the reversion, legislation was enacted in
Hong Kong designed to extend democratic voting procedures for Hong
Kong's legislature. China has expressed disagreement with this
legislation, which it states is in contravention of the principles
evidenced in the Basic Law of the Hong Kong SAR. The National Peoples'
Congress of China has passed a resolution to the effect that the
Legislative Council and certain other councils and boards of the Hong
Kong Government were to be terminated on June 30, 1997. Such bodies have
subsequently been reconstituted in accordance with China's
interpretation of the Basic Law. Any increase in uncertainty as to the
future economic and political status of Hong Kong could have a
materially adverse effect on the value of the Global Target 15
Portfolio. The Sponsor is unable to predict the level of market
liquidity or volatility which may occur as a result of the reversion to
sovereignty, both of which may negatively impact such Trust and the
value of the Units.
Page 5
China currently enjoys a most favored nation status ("MFN Status") with
the United States. MFN Status is subject to annual review by the
President of the United States and approval by Congress. As a result of
Hong Kong's reversion to Chinese control, U.S. lawmakers have suggested
that they may review China's MFN status on a more frequent basis.
Revocation of the MFN Status would have a severe effect on China's trade
and thus could have a materially adverse effect on the value of the
Global Target 15 Portfolio. The performance of certain companies listed
on the Hong Kong Stock Exchange is linked to the economic climate of
China. The renewal of China's MFN Status in May of 1996 has helped to
reduce the uncertainty for Hong Kong in conducting Sino-U.S. trade, and
the signing of the agreement on copyright protection between the U.S.
and Chinese governments in June of 1996 averted a trade war that would
have affected Hong Kong's re-export trade. In 1997, China and the United
States reached a four-year bilateral agreement on textiles, again
avoiding a Sino-U.S. trade war. More recently, the currency crisis which
has affected a majority of Asian markets since mid-1997 has forced Hong
Kong leaders to address whether to devalue the Hong Kong dollar or
maintain its peg to the U.S. dollar. During the volatile markets of
1998, the Hong Kong Monetary Authority (the "HKMA") acquired the common
stock of certain Hong Kong issuers listed on the Hong Kong Stock
Exchange in an effort to stabilize the Hong Kong dollar and thwart
currency speculators. Government intervention may hurt Hong Kong's
reputation as a free market and increases concerns that authorities are
not willing to let Hong Kong's currency system function autonomously.
This may undermine confidence in the Hong Kong dollar's peg to the U.S.
dollar. Any downturn in economic growth or increase in the rate of
inflation in China or Hong Kong could have a materially adverse effect
on the value of the Global Target 15 Portfolio.
Securities prices on the Hong Kong Stock Exchange, and specifically the
Hang Seng Index, can be highly volatile and are sensitive to
developments in Hong Kong and China, as well as other world markets. For
example, the Hang Seng Index declined by approximately 31% in October,
1997 as a result of speculation that the Hong Kong dollar would become
the next victim of the Asian currency crisis, and in 1989, the Hang Seng
Index dropped 1,216 points (approximately 58%) in early June following
the events at Tiananmen Square. The Hang Seng Index gradually climbed
subsequent to the events at Tiananmen Square, but fell by 181 points on
October 13, 1989 (approximately 6.5%) following a substantial fall in
the U.S. stock markets. During 1994, the Hang Seng Index lost
approximately 31% of its value. From January through August of 1998,
during a period marked by international economic instability and a
global currency crisis, the Hang Seng Index declined by nearly 27%. The
Hang Seng Index is subject to change and delisting of any issues may
have an adverse impact on the performance of the Global Target 15
Portfolio, although delisting would not necessarily result in the
disposal of the stock of these companies, nor would it prevent such
Trust from purchasing additional Securities. In recent years, a number
of companies, comprising approximately 10% of the total capitalization
of the Hang Seng Index, have delisted. In addition, as a result of Hong
Kong's reversion to Chinese sovereignty, an increased number of Chinese
companies could become listed on the Hong Kong Stock Exchange, thereby
changing the composition of the stock market and, potentially, the
composition of the Hang Seng Index.
Exchange Rate. The International Trusts are comprised either totally or
substantially of Securities that are principally traded in foreign
currencies and as such, involve investment risks that are substantially
different from an investment in a fund which invests in securities that
are principally traded in United States dollars. The United States
dollar value of the portfolio (and hence of the Units) and of the
distributions from the portfolio will vary with fluctuations in the
United States dollar foreign exchange rates for the relevant currencies.
Most foreign currencies have fluctuated widely in value against the
United States dollar for many reasons, including supply and demand of
the respective currency, the rate of inflation in the respective
economies compared to the United States, the impact of interest rate
differentials between different currencies on the movement of foreign
currency rates, the balance of imports and exports goods and services,
the soundness of the world economy and the strength of the respective
economy as compared to the economies of the United States and other
countries.
The post-World War II international monetary system was, until 1973,
dominated by the Bretton Woods Treaty which established a system of
fixed exchange rates and the convertibility of the United States dollar
into gold through foreign central banks. Starting in 1971, growing
volatility in the foreign exchange markets caused the United States to
abandon gold convertibility and to effect a small devaluation of the
Page 6
United States dollar. In 1973, the system of fixed exchange rates
between a number of the most important industrial countries of the
world, among them the United States and most Western European countries,
was completely abandoned. Subsequently, major industrialized countries
have adopted "floating" exchange rates, under which daily currency
valuations depend on supply and demand in a freely fluctuating
international market. Many smaller or developing countries have
continued to "peg" their currencies to the United States dollar although
there has been some interest in recent years in "pegging" currencies to
"baskets" of other currencies or to a Special Drawing Right administered
by the International Monetary Fund. Since 1983, the Hong Kong dollar has
been pegged to the U.S. dollar. In Europe, the euro has been developed.
Currencies are generally traded by leading international commercial
banks and institutional investors (including corporate treasurers, money
managers, pension funds and insurance companies). From time to time,
central banks in a number of countries also are major buyers and sellers
of foreign currencies, mostly for the purpose of preventing or reducing
substantial exchange rate fluctuations.
Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of
actual and proposed government policies on the value of currencies,
interest rate differentials between the currencies and the balance of
imports and exports of goods and services and transfers of income and
capital from one country to another. These economic factors are
influenced primarily by a particular country's monetary and fiscal
policies (although the perceived political situation in a particular
country may have an influence as well-particularly with respect to
transfers of capital). Investor psychology may also be an important
determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative
strength or weakness of a particular currency may sometimes exercise
considerable speculative influence on currency exchange rates by
purchasing or selling large amounts of the same currency or currencies.
However, over the long term, the currency of a country with a low rate
of inflation and a favorable balance of trade should increase in value
relative to the currency of a country with a high rate of inflation and
deficits in the balance of trade.
The following tables set forth, for the periods indicated, the range of
fluctuation concerning the equivalent U.S. dollar rates of exchange and
end of month equivalent U.S. dollar rates of exchange for the United
Kingdom pound sterling, the Hong Kong dollar and the euro:
Foreign Exchange Rates
Range of Fluctuations in Foreign Currencies
United Kingdom
Annual Pound Sterling/ Hong Kong/
Period U.S. Dollar U.S. Dollar
_____ ____________ _________
1983 0.616-0.707 6.480-8.700
1984 0.670-0.864 7.774-8.050
1985 0.672-0.951 7.729-7.990
1986 0.643-0.726 7.768-7.819
1987 0.530-0.680 7.751-7.822
1988 0.525-0.601 7.764-7.912
1989 0.548-0.661 7.775-7.817
1990 0.504-0.627 7.740-7.817
1991 0.499-0.624 7.716-7.803
1992 0.499-0.667 7.697-7.781
1993 0.630-0.705 7.722-7.766
1994 0.610-0.684 7.723-7.750
1995 0.610-0.653 7.726-7.763
1996 0.583-0.670 7.732-7.742
1997 0.584-0.633 7.708-7.751
1998 0.584-0.620 7.735-7.749
Source: Bloomberg L.P.
Page 7
End of Month Exchange Rates End of Month Exchange Rates
for Foreign Currencies for Foreign Currencies (continued)
United Kingdom United Kingdom
Pound Sterling/ Hong Kong/ Euro/U.S. Pound Sterling/ Hong Kong/ Euro/U.S.
Monthly Period U.S. Dollar U.S.Dollar Dollar Monthly Period U.S. Dollar U.S.Dollar Dollar
___________ __________ ________ _____ __________ __________ _______ ______
1992: 1996:
January .559 7.762 N.A. January .661 7.728 N.A.
February .569 7.761 N.A. February .653 7.731 N.A.
March .576 7.740 N.A. March .655 7.734 N.A.
April .563 7.757 N.A. April .664 7.735 N.A.
May .546 7.749 N.A. May .645 7.736 N.A.
June .525 7.731 N.A. June .644 7.741 N.A.
July .519 7.732 N.A. July .642 7.735 N.A.
August .503 7.729 N.A. August .639 7.733 N.A.
September .563 7.724 N.A. September .639 7.733 N.A.
October .641 7.736 N.A. October .615 7.732 N.A.
November .659 7.742 N.A. November .595 7.732 N.A.
December .662 7.744 N.A. December .583 7.735 N.A.
1993: 1997:
January .673 7.734 N.A. January .624 7.750 N.A.
February .701 7.734 N.A. February .614 7.744 N.A.
March .660 7.731 N.A. March .611 7.749 N.A.
April .635 7.730 N.A. April .616 7.746 N.A.
May .640 7.724 N.A. May .610 7.748 N.A.
June .671 7.743 N.A. June .600 7.747 N.A.
July .674 7.761 N.A. July .609 7.742 N.A.
August .670 7.755 N.A. August .622 7.750 N.A.
September .668 7.734 N.A. September .619 7.738 N.A.
October .676 7.733 N.A. October .598 7.731 N.A.
November .673 7.725 N.A. November .592 7.730 N.A.
December .677 7.723 N.A. December .607 7.749 N.A.
1994: 1998:
January .664 7.724 N.A. January .613 7.735 N.A.
February .673 7.727 N.A. February .609 7.743 N.A.
March .674 7.737 N.A. March .598 7.749 N.A.
April .659 7.725 N.A. April .598 7.747 N.A.
May .662 7.726 N.A. May .613 7.749 N.A.
June .648 7.730 N.A. June .600 7.748 N.A.
July .648 7.725 N.A. July .613 7.748 N.A.
August .652 7.728 N.A. August .595 7.749 N.A.
September .634 7.727 N.A. September .589 7.749 N.A.
October .611 7.724 N.A. October .596 7.747 N.A.
November .639 7.731 N.A. November .607 7.743 N.A.
December .639 7.738 N.A. December .602 7.746 N.A.
1995: 1999:
January .633 7.732 N.A. January .608 7.748 1.136
February .631 7.730 N.A. February .624 7.748 1.103
March .617 7.733 N.A. March .621 7.750 1.076
April .620 7.742 N.A. April .621 7.750 1.057
May .630 7.735 N.A. May .624 7.755 1.042
June .627 7.736 N.A. June .634 7.758 1.035
July .626 7.738 N.A. July .617 7.762 1.071
August .645 7.741 N.A. August .623 7.765 1.056
September .631 7.732 N.A. September .607 7.768 1.068
October .633 7.727 N.A. October .608 7.768 1.055
November .652 7.731 N.A. November .626 7.767 1.009
December .645 7.733 N.A. December 29
Source: Bloomberg L.P.
Page 8
The Evaluator will estimate current exchange rates for the relevant
currencies based on activity in the various currency exchange markets.
However, since these markets are volatile and are constantly changing,
depending on the activity at any particular time of the large
international commercial banks, various central banks, large multi-
national corporations, speculators and other buyers and sellers of
foreign currencies, and since actual foreign currency transactions may
not be instantly reported, the exchange rates estimated by the Evaluator
may not be indicative of the amount in United States dollars the
International Trusts would receive had the Trustee sold any particular
currency in the market. The foreign exchange transactions of the
International Trusts will be conducted by the Trustee with foreign
exchange dealers acting as principals on a spot (i.e., cash) buying
basis. Although foreign exchange dealers trade on a net basis, they do
realize a profit based upon the difference between the price at which
they are willing to buy a particular currency (bid price) and the price
at which they are willing to sell the currency (offer price).
Litigation
Tobacco Industry. Certain of the issuers of Securities in certain Trusts
may be involved in the manufacture, distribution and sale of tobacco
products. Pending litigation proceedings against such issuers in the
United States and abroad cover a wide range of matters including product
liability and consumer protection. Damages claimed in such litigation
alleging personal injury (both individual and class actions), and in
health cost recovery cases brought by governments, labor unions and
similar entities seeking reimbursement for health care expenditures,
aggregate many billions of dollars.
In November 1998, certain companies in the U.S. tobacco industry entered
into a negotiated settlement with several states which would result in
the resolution of significant litigation and regulatory issues affecting
the tobacco industry generally. The proposed settlement, while extremely
costly to the tobacco industry, would significantly reduce uncertainties
facing the industry and increase stability in business and capital
markets. Future litigation and/or legislation could adversely affect the
value, operating revenues and financial position of tobacco companies.
The Sponsor is unable to predict the outcome of litigation pending
against tobacco companies or how the current uncertainty concerning
regulatory and legislative measures will ultimately be resolved. These
and other possible developments may have a significant impact upon both
the price of such Securities and the value of Units of Trusts containing
such Securities.
Concentrations
Banks and Thrifts. Certain Trusts may be considered to be concentrated
in common stocks of financial institutions. See "Risk Factors" in the
prospectus which will indicate, if applicable, a Trust's concentration
in this industry. Banks, thrifts and their holding companies are
especially subject to the adverse effects of economic recession,
volatile interest rates, portfolio concentrations in geographic markets
and in commercial and residential real estate loans, and competition
from new entrants in their fields of business. Banks and thrifts are
highly dependent on net interest margin. Recently, bank profits have
come under pressure as net interest margins have contracted, but volume
gains have been strong in both commercial and consumer products. There
is no certainty that such conditions will continue. Bank and thrift
institutions had received significant consumer mortgage fee income as a
result of activity in mortgage and refinance markets. As initial home
purchasing and refinancing activity subsided, this income diminished.
Economic conditions in the real estate markets, which have been weak in
the past, can have a substantial effect upon banks and thrifts because
they generally have a portion of their assets invested in loans secured
by real estate. Banks, thrifts and their holding companies are subject
to extensive federal regulation and, when such institutions are state-
chartered, to state regulation as well. Such regulations impose strict
capital requirements and limitations on the nature and extent of
business activities that banks and thrifts may pursue. Furthermore, bank
regulators have a wide range of discretion in connection with their
supervisory and enforcement authority and may substantially restrict the
permissible activities of a particular institution if deemed to pose
significant risks to the soundness of such institution or the safety of
the federal deposit insurance fund. Regulatory actions, such as
increases in the minimum capital requirements applicable to banks and
thrifts and increases in deposit insurance premiums required to be paid
by banks and thrifts to the Federal Deposit Insurance Corporation
("FDIC"), can negatively impact earnings and the ability of a company to
pay dividends. Neither federal insurance of deposits nor governmental
Page 9
regulations, however, insures the solvency or profitability of banks or
their holding companies, or insures against any risk of investment in
the securities issued by such institutions.
The statutory requirements applicable to and regulatory supervision of
banks, thrifts and their holding companies have increased significantly
and have undergone substantial change in recent years. To a great
extent, these changes are embodied in the Financial Institutions Reform,
Recovery and Enforcement Act; enacted in August 1989, the Federal
Deposit Insurance Corporation Improvement Act of 1991, the Resolution
Trust Corporation Refinancing, Restructuring, and Improvement Act of
1991 and the regulations promulgated under these laws. Many of the
regulations promulgated pursuant to these laws have only recently been
finalized and their impact on the business, financial condition and
prospects of the Securities in the Trust's portfolio cannot be predicted
with certainty. The recently enacted financial-services overhaul
legislation will allow banks, securities firms and insurance companies
to form one-stop financial conglomerates marketing a wide range of
financial service products to investors. This legislation will likely
result in increased merger activity and heightened competition among
existing and new participants in the field. Efforts to expand the
ability of federal thrifts to branch on an interstate basis have been
initially successful through promulgation of regulations, and
legislation to liberalize interstate banking which has recently been
signed into law. Under the legislation, banks will be able to purchase
or establish subsidiary banks in any state, one year after the
legislation's enactment. Starting in mid-1997, banks were allowed to
turn existing banks into branches. Consolidation is likely to continue.
The Securities and Exchange Commission and the Financial Accounting
Standards Board require the expanded use of market value accounting by
banks and have imposed rules requiring market accounting for investment
securities held in trading accounts or available for sale. Adoption of
additional such rules may result in increased volatility in the reported
health of the industry, and mandated regulatory intervention to correct
such problems. In late 1993 the United States Treasury Department
proposed a restructuring of the banks regulatory agencies which, if
implemented, may adversely affect certain of the Securities in the
Trust's portfolio. Additional legislative and regulatory changes may be
forthcoming. For example, the bank regulatory authorities have proposed
substantial changes to the Community Reinvestment Act and fair lending
laws, rules and regulations, and there can be no certainty as to the
effect, if any, that such changes would have on the Securities in a
Trust's portfolio. In addition, from time to time the deposit insurance
system is reviewed by Congress and federal regulators, and proposed
reforms of that system could, among other things, further restrict the
ways in which deposited moneys can be used by banks or reduce the dollar
amount or number of deposits insured for any depositor. Such reforms
could reduce profitability as investment opportunities available to bank
institutions become more limited and as consumers look for savings
vehicles other than bank deposits. Banks and thrifts face significant
competition from other financial institutions such as mutual funds,
credit unions, mortgage banking companies and insurance companies, and
increased competition may result from legislative broadening of regional
and national interstate banking powers as has been recently enacted.
Among other benefits, the legislation allows banks and bank holding
companies to acquire across previously prohibited state lines and to
consolidate their various bank subsidiaries into one unit. The Sponsor
makes no prediction as to what, if any, manner of bank and thrift
regulatory actions might ultimately be adopted or what ultimate effect
such actions might have on a Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5%
of the outstanding shares of any class of voting securities of a bank or
bank holding company, (2) acquiring control of a bank or another bank
holding company, (3) acquiring all or substantially all the assets of a
bank, or (4) merging or consolidating with another bank holding company,
without first obtaining Federal Reserve Board ("FRB") approval. In
considering an application with respect to any such transaction, the FRB
is required to consider a variety of factors, including the potential
anti-competitive effects of the transaction, the financial condition and
future prospects of the combining and resulting institutions, the
managerial resources of the resulting institution, the convenience and
needs of the communities the combined organization would serve, the
record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the
prospective availability to the FRB of information appropriate to
determine ongoing regulatory compliance with applicable banking laws. In
addition, the federal Change In Bank Control Act and various state laws
impose limitations on the ability of one or more individuals or other
Page 10
entities to acquire control of banks or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends
by bank holding companies. In the policy statement, the FRB expressed
its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends which exceed its net income or which could
only be funded in ways that would weaken its financial health, such as
by borrowing. The FRB also may impose limitations on the payment of
dividends as a condition to its approval of certain applications,
including applications for approval of mergers and acquisitions. The
Sponsor makes no prediction as to the effect, if any, such laws will
have on the Securities or whether such approvals, if necessary, will be
obtained.
Real Estate Companies. Certain Portfolios are considered to be
concentrated in common stocks of companies engaged in real estate asset
management, development, leasing, property sales and other related
activities. See "Risk Factors" in the prospectus which will indicate, if
applicable, a Trust's concentration in this industry. Investment in
securities issued by these real estate companies should be made with an
understanding of the many factors which may have an adverse impact on
the credit quality of the particular company or industry. Generally,
these include economic recession, the cyclical nature of real estate
markets, competitive overbuilding, unusually adverse weather conditions,
changing demographics, changes in governmental regulations (including
tax laws and environmental, building, zoning and sales regulations),
increases in real estate taxes or costs of material and labor, the
inability to secure performance guarantees or insurance as required, the
unavailability of investment capital and the inability to obtain
construction financing or mortgage loans at rates acceptable to builders
and purchasers of real estate. Additional risks include an inability to
reduce expenditures associated with a property (such as mortgage
payments and property taxes) when rental revenue declines, and possible
loss upon foreclosure of mortgaged properties if mortgage payments are
not paid when due.
REITs are financial vehicles that have as their objective the pooling of
capital from a number of investors in order to participate directly in
real estate ownership or financing. REITs are generally fully integrated
operating companies that have interests in income-producing real estate.
REITs are differentiated by the types of real estate properties held and
the actual geographic location of properties and fall into two major
categories: equity REITs emphasize direct property investment, holding
their invested assets primarily in the ownership of real estate or other
equity interests, while mortgage REITs concentrate on real estate
financing, holding their assets primarily in mortgages secured by real
estate. REITs obtain capital funds for investment in underlying real
estate assets by selling debt or equity securities in the public or
institutional capital markets or by bank borrowing. Thus, the returns on
common equities of the REITs in which the Trust invests will be
significantly affected by changes in costs of capital and, particularly
in the case of highly "leveraged" REITs (i.e., those with large amounts
of borrowings outstanding), by changes in the level of interest rates.
The objective of an equity REIT is to purchase income-producing real
estate properties in order to generate high levels of cash flow from
rental income and a gradual asset appreciation, and they typically
invest in properties such as office, retail, industrial, hotel and
apartment buildings and healthcare facilities.
REITs are a creation of the tax law. REITs essentially operate as a
corporation or business trust with the advantage of exemption from
corporate income taxes provided the REIT satisfies the requirements of
Sections 856 through 860 of the Internal Revenue Code. The major tests
for tax-qualified status are that the REIT (i) be managed by one or more
trustees or directors, (ii) issue shares of transferable interest to its
owners, (iii) have at least 100 shareholders, (iv) have no more than 50%
of the shares held by five or fewer individuals, (v) invest
substantially all of its capital in real estate related assets and
derive substantially all of its gross income from real estate related
assets and (vi) distributed at least 95% of its taxable income to its
shareholders each year. If any REIT in the Trust's portfolio should fail
to qualify for such tax status, the related shareholders (including the
Trust) could be adversely affected by the resulting tax consequences.
The underlying value of the Securities and a Trust's ability to make
distributions to Unit holders may be adversely affected by changes in
national economic conditions, changes in local market conditions due to
changes in general or local economic conditions and neighborhood
characteristics, increased competition from other properties,
obsolescence of property, changes in the availability, cost and terms of
mortgage funds, the impact of present or future environmental
legislation and compliance with environmental laws, the ongoing need for
capital improvements, particularly in older properties, changes in real
estate tax rates and other operating expenses, regulatory and economic
Page 11
impediments to raising rents, adverse changes in governmental rules and
fiscal policies, dependency on management skill, civil unrest, acts of
God, including earthquakes and other natural disasters (which may result
in uninsured losses), acts of war, adverse changes in zoning laws, and
other factors which are beyond the control of the issuers of the REITs
in a Trust.
The value of the REITs may at times be particularly sensitive to
devaluation in the event of rising interest rates. Equity REITs are less
likely to be affected by interest rate fluctuations than mortgage REITs
and the nature of the underlying assets of an equity REIT may be
considered more tangible than that of a mortgage REIT. Equity REITs are
more likely to be adversely affected by changes in the value of the
underlying property it owns than mortgage REITs.
REITs may concentrate investments in specific geographic areas or in
specific property types, i.e., hotels, shopping malls, residential
complexes and office buildings. The impact of economic conditions on
REITs can also be expected to vary with geographic location and property
type. Investors should be aware the REITs may not be diversified and are
subject to the risks of financing projects. REITs are also subject to
defaults by borrowers, self-liquidation, the market's perception of the
REIT industry generally, and the possibility of failing to qualify for
pass-through of income under the Internal Revenue Code, and to maintain
exemption from the Investment Company Act of 1940. A default by a
borrower or lessee may cause the REIT to experience delays in enforcing
its right as mortgagee or lessor and to incur significant costs related
to protecting its investments. In addition, because real estate
generally is subject to real property taxes, the REITs in a Trust may be
adversely affected by increases or decreases in property tax rates and
assessments or reassessments of the properties underlying the REITs by
taxing authorities. Furthermore, because real estate is relatively
illiquid, the ability of REITs to vary their portfolios in response to
changes in economic and other conditions may be limited and may
adversely affect the value of the Units. There can be no assurance that
any REIT will be able to dispose of its underlying real estate assets
when advantageous or necessary.
The issuer of REITs generally maintains comprehensive insurance on
presently owned and subsequently acquired real property assets,
including liability, fire and extended coverage. However, certain types
of losses may be uninsurable or not be economically insurable as to
which the underlying properties are at risk in their particular locales.
There can be no assurance that insurance coverage will be sufficient to
pay the full current market value or current replacement cost of any
lost investment. Various factors might make it impracticable to use
insurance proceeds to replace a facility after it has been damaged or
destroyed. Under such circumstances, the insurance proceeds received by
a REIT might not be adequate to restore its economic position with
respect to such property.
Under various environmental laws, a current or previous owner or
operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under or in such
property. Such laws often impose liability whether or not the owner or
operator caused or knew of the presence of such hazardous or toxic
substances and whether or not the storage of such substances was in
violation of a tenant's lease. In addition, the presence of hazardous or
toxic substances, or the failure to remediate such property properly,
may adversely affect the owner's ability to borrow using such real
property as collateral. No assurance can be given that one or more of
the REITs in a Trust may not be presently liable or potentially liable
for any such costs in connection with real estate assets they presently
own or subsequently acquire while such REITs are held in a Trust.
Recently, in the wake of Chinese economic development and reform,
certain Hong Kong real estate companies and other investors began
purchasing and developing real estate in southern China, including
Beijing, the Chinese capital. By 1992, however, southern China began to
experience a rise in real estate prices, increases in construction costs
and a tightening of credit markets. Any worsening of these conditions
could affect the profitability and financial condition of Hong Kong real
estate companies and could have a materially adverse effect on the value
of a Global Target 15 Portfolio.
Retail Companies. Certain Portfolios are considered to be concentrated
in common stocks of retail companies. See "Risk Factors" in the
prospectus which will indicate, if applicable, a Trust's concentration
in this industry. The profitability of companies engaged in the retail
industry will be affected by various factors including the general state
of the economy and consumer spending trends. Recently, there have been
Page 12
major changes in the retail environment due to the declaration of
bankruptcy by some of the major corporations involved in the retail
industry, particularly the department store segment. The continued
viability of the retail industry will depend on the industry's ability
to adapt and to compete in changing economic and social conditions, to
attract and retain capable management, and to finance expansion.
Weakness in the banking or real estate industry, a recessionary economic
climate with the consequent slowdown in employment growth, less
favorable trends in unemployment or a marked deceleration in real
disposable personal income growth could result in significant pressure
on both consumer wealth and consumer confidence, adversely affecting
consumer spending habits. In addition, competitiveness of the retail
industry will require large capital outlays for investment in the
installation of automated checkout equipment to control inventory, to
track the sale of individual items and to gauge the success of sales
campaigns. Increasing employee and retiree benefit costs may also have
an adverse effect on the industry. In many sectors of the retail
industry, competition may be fierce due to market saturation, converging
consumer tastes and other factors. Because of these factors and the
recent increase in trade opportunities with other countries, American
retailers are now entering global markets which entail added risks such
as sudden weakening of foreign economies, difficulty in adapting to
local conditions and constraints and added research costs.
Technology Companies. Certain Portfolios are considered to be
concentrated in common stocks of technology companies. See "Risk
Factors" in the prospectus which will indicate, if applicable, a Trust's
concentration in this industry.
Technology companies generally include companies involved in the
development, design, manufacture and sale of computers and peripherals,
software and services, data networking/communications equipment,
internet access/information providers, semiconductors and semiconductor
equipment and other related products, systems and services. The market
for these products, especially those specifically related to the
Internet, is characterized by rapidly changing technology, rapid product
obsolescence, cyclical market patterns, evolving industry standards and
frequent new product introductions. The success of the issuers of the
Securities depends in substantial part on the timely and successful
introduction of new products. An unexpected change in one or more of the
technologies affecting an issuer's products or in the market for
products based on a particular technology could have a material adverse
affect on an issuer's operating results. Furthermore, there can be no
assurance that the issuers of the Securities will be able to respond in
a timely manner to compete in the rapidly developing marketplace.
Based on trading history of common stock, factors such as announcements
of new products or development of new technologies and general
conditions of the industry have caused and are likely to cause the
market price of high-technology common stocks to fluctuate
substantially. In addition, technology company stocks have experienced
extreme price and volume fluctuations that often have been unrelated to
the operating performance of such companies. This market volatility may
adversely affect the market price of the Securities and therefore the
ability of a Unit holder to redeem Units at a price equal to or greater
than the original price paid for such Units.
Some key components of certain products of technology issuers are
currently available only from single sources. There can be no assurance
that in the future suppliers will be able to meet the demand for
components in a timely and cost effective manner. Accordingly, an
issuer's operating results and customer relationships could be adversely
affected by either an increase in price for, or an interruption or
reduction in supply of, any key components. Additionally, many
technology issuers are characterized by a highly concentrated customer
base consisting of a limited number of large customers who may require
product vendors to comply with rigorous industry standards. Any failure
to comply with such standards may result in a significant loss or
reduction of sales. Because many products and technologies of technology
companies are incorporated into other related products, such companies
are often highly dependent on the performance of the personal computer,
electronics and telecommunications industries. There can be no assurance
that these customers will place additional orders, or that an issuer of
Securities will obtain orders of similar magnitude as past orders from
other customers. Similarly, the success of certain technology companies
is tied to a relatively small concentration of products or technologies.
Accordingly, a decline in demand of such products, technologies or from
such customers could have a material adverse impact on issuers of the
Securities.
Page 13
Many technology companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their
proprietary rights in their products and technologies. There can be no
assurance that the steps taken by the issuers of the Securities to
protect their proprietary rights will be adequate to prevent
misappropriation of their technology or that competitors will not
independently develop technologies that are substantially equivalent or
superior to such issuers' technology. In addition, due to the increasing
public use of the Internet, it is possible that other laws and
regulations may be adopted to address issues such as privacy, pricing,
characteristics, and quality of Internet products and services. For
example, recent proposals would prohibit the distribution of obscene,
lascivious or indecent communications on the Internet. The adoption of
any such laws could have a material adverse impact on the Securities in
a Trust.
Like many areas of technology, the semiconductor business environment is
highly competitive, notoriously cyclical and subject to rapid and often
unanticipated change. Recent industry downturns have resulted, in part,
from weak pricing, persistent overcapacity, slowdown in Asian demand and
a shift in retail personal computer sales toward the low end, or "sub-
$1,000" segment. Industry growth is dependent upon several factors,
including: the rate of global economic expansion; demand for products
such as personal computers and networking and communications equipment;
excess productive capacity and the resultant effect on pricing; and the
rate of growth in the market for low-priced personal computers.
Portfolios
Equity Securities Selected for The Dow(sm) Target 5 Portfolio
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Equity Securities Selected for The Dow(sm) Target 10 Portfolio
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Equity Securities Selected for the Global Target 15 Portfolio
Dow Jones Industrial Average(sm) Companies
, headquartered in
, headquartered in
, headquartered in
, headquartered in
, headquartered in
Financial Times Industrial Ordinary Share Index Companies
Page 14
Hang Seng Index Companies
Equity Securities Selected for The S&P Target 10 Portfolio
Equity Securities Selected for The Nasdaq Target 15 Portfolio
Equity Securities Selected for The Dow(sm) DART 5 Portfolio
Equity Securities Selected for The Dow(sm) DART 10 Portfolio
Page 15
We have obtained the foregoing company descriptions from sources we deem
reliable. We have not independently verified the provided information
either in terms of accuracy or completeness.
Page 16
MEMORANDUM
Re: FT 386
The only difference of consequence (except as described
below) between FT 376, which is the current fund, and FT 386, the
filing of which this memorandum accompanies, is the change in the
series number. The list of securities comprising the Fund, the
evaluation, record and distribution dates and other changes
pertaining specifically to the new series, such as size and
number of Units in the Fund and the statement of condition of the
new Fund, will be filed by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of Templeton Growth and Treasury Trust, Series 1
and subsequent series (File No. 811-05903) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the FT
376 Prospectus relate to the series number and size and the date
and various items of information which will be derived from and
apply specifically to the securities deposited in the Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Broker's Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
ITEM B This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, FT 386 has duly caused this Amendment No. 2 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 December 6, 1999.
FT 386
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
David J. Allen Sole Director of
Nike Securities December 6, 1999
Corporation, the
General Partner of
Nike Securities L.P. Robert M. Porcellino
Attorney-in-Fact**
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to form S-6 of The First Trust Combined
Series 258 (File No. 33-63483) and the same is hereby
incorporated by this reference.
S-2
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF ERNST & YOUNG LLP
The consent of Ernst & Young LLP to the use of its name and
to the reference to such firm in the Prospectus included in this
Registration Statement will be filed by amendment.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement is
filed as Exhibit 4.1 to the Registration Statement.
S-3
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and Nike
Financial Advisory Services L.P. as Portfolio Supervisor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-43693] filed on behalf of The First Trust
Special Situations Trust, Series 22).
1.1.1* Form of Trust Agreement for FT 386 among Nike Securities
L.P., as Depositor, The Chase Manhattan Bank, as Trustee
and First Trust Advisors L.P., as Evaluator and Portfolio
Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42683] filed on behalf of The
First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
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.
S-4
3.3* Opinion of counsel as to New York income tax status of
Securities being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
4.1* Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-63483] filed on behalf of The First Trust Combined
Series 258).
___________________________________
* To be filed by amendment.
S-5