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1: 487 Form S-6 to Effective Amendment 57± 225K
2: EX-99 Memorandum of Changes HTML 8K
4: EX-99.2 OPIN COUNSEL Opinion Regarding Legality HTML 8K
3: EX-99.A1 INDNTR ORGN Trust Agreement HTML 14K
5: EX-99.C2 EVAL CONSNT Consent of Evaluator HTML 6K
Registration No. 333-199578
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to Form S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
FT 5136
B. Name of depositor:
FIRST TRUST PORTFOLIOS L.P.
C. Complete address of depositor's principal executive offices:
120 East Liberty Drive
Suite 400
Wheaton, Illinois 60187
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o First Trust Portfolios L.P. c/o Chapman and Cutler LLP
120 East Liberty Drive 111 West Monroe Street
Wheaton, Illinois 60187 Chicago, Illinois 60603
E. Title and Amount of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as
amended
F. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
|XXX|Check box if it is proposed that this filing will become
effective on October 31, 2014 at 2:00 p.m. pursuant to Rule 487.
________________________________
Strategic Sectors Portfolio Series
FT 5136
FT 5136 is a series of a unit investment trust, the FT Series. FT 5136
consists of a single portfolio known as Strategic Sectors Portfolio
Series (the "Trust"). The Trust invests in a diversified portfolio of
common stocks ("Securities"). The Trust seeks capital appreciation.
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.
FIRST TRUST (R)
800-621-1675
The date of this prospectus is October 31, 2014
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Registered Public Accounting Firm 5
Statement of Net Assets 6
Schedule of Investments 7
The FT Series 10
Portfolio 10
Risk Factors 12
Portfolio Securities Descriptions 13
Public Offering 16
Distribution of Units 19
The Sponsor's Profits 21
The Secondary Market 21
How We Purchase Units 21
Expenses and Charges 21
Tax Status 22
Retirement Plans 25
Rights of Unit Holders 25
Income and Capital Distributions 25
Redeeming Your Units 26
Removing Securities from the Trust 27
Amending or Terminating the Indenture 28
Information on the Sponsor, Trustee, FTPS Unit Servicing
Agent and Evaluator 28
Other Information 29
Page 2
Summary of Essential Information (Unaudited)
Strategic Sectors Portfolio Series
FT 5136
At the Opening of Business on the Initial Date of Deposit-October 31, 2014
Sponsor: First Trust Portfolios L.P.
Trustee: The Bank of New York Mellon
FTPS Unit Servicing Agent: FTP Services LLC
Evaluator: First Trust Advisors L.P.
[Download Table]
Initial Number of Units (1) 14,392
Fractional Undivided Interest in the Trust per Unit (1) 1/14,392
Public Offering Price:
Public Offering Price per Unit (2) $ 10.000
Less Initial Sales Charge per Unit (3) (.100)
__________
Aggregate Offering Price Evaluation of Securities per Unit (4) 9.900
Less Deferred Sales Charge per Unit (3) (.245)
__________
Redemption Price per Unit (5) 9.655
Less Creation and Development Fee per Unit (3)(5) (.050)
Less Organization Costs per Unit (5) (.031)
__________
Net Asset Value per Unit $ 9.574
==========
Estimated Net Annual Distribution per Unit for the first year (6) $ .1303
Cash CUSIP Number 30285D 351
Reinvestment CUSIP Number 30285D 369
Fee Account Cash CUSIP Number 30285D 377
Fee Account Reinvestment CUSIP Number 30285D 385
FTPS CUSIP Number 30285D 393
Pricing Line Product Code 094159
Ticker Symbol FGIHWX
[Enlarge/Download Table]
First Settlement Date November 5, 2014
Mandatory Termination Date (7) October 31, 2016
Income Distribution Record Date Tenth day of each June and December, commencing December 10, 2014.
Income Distribution Date (6) Twenty-fifth day of each June and December, commencing December 25, 2014.
_____________
<FN>
(1) As of the Evaluation Time on the Initial Date of Deposit, we may
adjust the number of Units of the Trust so that the Public Offering
Price per Unit will equal approximately $10.00. If we make such an
adjustment, the fractional undivided interest per Unit will vary from
the amount indicated above.
(2) 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.
(3) You will pay a maximum sales charge of 3.95% of the Public Offering
Price per Unit (equivalent to 3.99% of the net amount invested) which
consists of an initial sales charge, a deferred sales charge and a
creation and development fee. The sales charges are described in the
"Fee Table."
(4) Each listed Security is valued at its last closing sale price. If a
Security is not listed, or if no closing sale price exists, it is valued
at its closing ask price. Evaluations for purposes of determining the
purchase, sale or redemption price of Units are made as of the close of
trading on the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern time) on each day on which it is open (the "Evaluation Time").
(5) The creation and development fee will be deducted from the assets of
the Trust at the end of the initial offering period and the estimated
organization costs per Unit will be deducted from the assets of the
Trust at the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period. If Units are redeemed prior to
any such reduction, these fees will not be deducted from the redemption
proceeds. See "Redeeming Your Units."
(6) The estimated net annual distribution per Unit for subsequent years,
$.1286, is expected to be less than that set forth above for the first
year because a portion of the Securities included in the Trust will be
sold during the first year to pay for organization costs, the deferred
sales charge and the creation and development fee. We base our estimate
of the dividends the Trust will receive from the Securities by
annualizing the most recent dividends declared by the issuers of the
Securities (such figure adjusted to reflect any change in dividend
policy announced subsequent to the most recently declared dividend).
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. Due to this, and various other
factors, actual dividends received from the Securities may be less than
their most recent annualized dividends. In this case, the actual net
annual distribution you receive will be less than the estimated amount
set forth above. The actual net annual distribution per Unit you receive
will also vary from that set forth above with changes in the Trust's
fees and expenses and with the sale of Securities. See "Fee Table" and
"Expenses and Charges." The Trustee will distribute money from the
Income and Capital Accounts, as determined at the semi-annual Record
Date, semi-annually on the twenty-fifth day of each June and December to
Unit holders of record on the tenth day of such months. However, the
Trustee will only distribute money in the Capital Account if the amount
available for distribution from that account equals at least $1.00 per
100 Units. In any case, the Trustee will distribute any funds in the
Capital Account in December of each year and as part of the final
liquidation distribution. See "Income and Capital Distributions."
(7) See "Amending or Terminating the Indenture."
</FN>
Page 3
Fee Table (Unaudited)
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of the Trust. See "Public
Offering" and "Expenses and Charges." Although the Trust has a term of
approximately two years and is a unit investment trust rather than a
mutual fund, this information allows you to compare fees.
[Enlarge/Download Table]
Amount
per Unit
_______
Unit Holder Sales Fees (as a percentage of public offering price)
Maximum Sales Charge
Initial sales charge 1.00%(a) $.100
Deferred sales charge 2.45%(b) $.245
Creation and development fee 0.50%(c) $.050
_____ _____
Maximum sales charge (including creation and development fee) 3.95% $.395
===== =====
Organization Costs (as a percentage of public offering price)
Estimated organization costs .310%(d) $.0310
===== ======
Estimated Annual Trust Operating Expenses(e)
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative, evaluation
and FTPS Unit servicing fees .081% $.0080
Trustee's fee and other operating expenses .139%(f) $.0138
_____ ______
Total .220% $.0218
===== ======
Example
This example is intended to help you compare the cost of investing in
the Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trust for the periods
shown. The example also assumes a 5% return on your investment each year
and that the Trust's operating expenses stay the same. The example does
not take into consideration transaction fees which may be charged by
certain broker/dealers for processing redemption requests. Although your
actual costs may vary, based on these assumptions your costs, assuming
you sell or redeem your Units at the end of each period, would be:
1 Year 2 Years
______ _______
$448 $470
The example will not differ if you hold rather than sell your Units at
the end of each period.
_____________
<FN>
(a) The combination of the initial and deferred sales charge comprises
what we refer to as the "transactional sales charge." The initial sales
charge is actually equal to the difference between the maximum sales
charge of 3.95% and the sum of any remaining deferred sales charge and
creation and development fee.
(b) The deferred sales charge is a fixed dollar amount equal to $.245
per Unit which, as a percentage of the Public Offering Price, will vary
over time. The deferred sales charge will be deducted in three monthly
installments commencing February 20, 2015.
(c) The creation and development fee compensates the Sponsor for creating
and developing the Trust. The creation and development fee is a charge
of $.050 per Unit collected at the end of the initial offering period,
which is expected to be approximately three months from the Initial Date
of Deposit. If the price you pay for your Units exceeds $10 per Unit,
the creation and development fee will be less than 0.50%; if the price
you pay for your Units is less than $10 per Unit, the creation and
development fee will exceed 0.50%.
(d) Estimated organization costs will be deducted from the assets of the
Trust at the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period. Estimated organization costs are
assessed on a fixed dollar amount per Unit basis which, as a percentage
of average net assets, will vary over time.
(e) Each of the fees listed herein is assessed on a fixed dollar amount
per Unit basis which, as a percentage of average net assets, will vary
over time.
(f) Other operating expenses for the Trust do not include brokerage costs
and other portfolio transaction fees for the Trust. In certain
circumstances the Trust may incur additional expenses not set forth
above. See "Expenses and Charges."
</FN>
Page 4
Report of Independent
Registered Public Accounting Firm
The Sponsor, First Trust Portfolios L.P., and Unit Holders
FT 5136
We have audited the accompanying statement of net assets, including the
schedule of investments, of FT 5136, comprising Strategic Sectors
Portfolio Series (the "Trust"), as of the opening of business on October
31, 2014 (Initial Date of Deposit). This statement of net assets is the
responsibility of the Trust's Sponsor. Our responsibility is to express
an opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of net assets is free of material
misstatement. The Trust is not required to have, nor were we engaged to
perform, an audit of the Trust's internal control over financial
reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the statement of net assets, assessing the
accounting principles used and significant estimates made by the Trust's
Sponsor, as well as evaluating the overall presentation of the statement
of net assets. Our procedures included confirmation of the irrevocable
letter of credit held by The Bank of New York Mellon, the Trustee, and
deposited in the Trust for the purchase of securities, as shown in the
statement of net assets, as of the opening of business on October 31,
2014, by correspondence with the Trustee. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of FT 5136,
comprising Strategic Sectors Portfolio Series, as of the opening of
business on October 31, 2014 (Initial Date of Deposit), in conformity
with accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
October 31, 2014
Page 5
Statement of Net Assets
Strategic Sectors Portfolio Series
FT 5136
At the Opening of Business on the Initial Date of Deposit-October 31, 2014
[Download Table]
NET ASSETS
Investment in Securities represented by purchase contracts (1) (2) $142,477
Less liability for reimbursement to Sponsor for organization costs (3) (446)
Less liability for deferred sales charge (4) (3,526)
Less liability for creation and development fee (5) (720)
________
Net assets $137,785
========
Units outstanding 14,392
Net asset value per Unit (6) $ 9.574
ANALYSIS OF NET ASSETS
Cost to investors (7) $143,916
Less maximum sales charge (7) (5,685)
Less estimated reimbursement to Sponsor for organization costs (3) (446)
________
Net assets $137,785
========
______________
<FN>
NOTES TO STATEMENT OF NET ASSETS
The Trust is registered as a unit investment trust under the Investment
Company Act of 1940. The Sponsor is responsible for the preparation of
financial statements in accordance with accounting principles generally
accepted in the United States which require the Sponsor to make
estimates and assumptions that affect amounts reported herein. Actual
results could differ from those estimates. The Trust intends to comply
in its initial fiscal year and thereafter with provisions of the
Internal Revenue Code applicable to regulated investment companies and
as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) distributed to
Unit holders.
(1) The Trust invests in a diversified portfolio of common stocks.
Aggregate cost of the Securities listed under "Schedule of Investments"
is based on their aggregate underlying value. The Trust has a Mandatory
Termination Date of October 31, 2016.
(2) An irrevocable letter of credit issued by The Bank of New York
Mellon, of which approximately $200,000 has been allocated to the Trust,
has been deposited with the Trustee as collateral, covering the monies
necessary for the purchase of the Securities according to their purchase
contracts.
(3) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trust. These costs have been estimated at $.0310 per
Unit. A payment will be made at the earlier of six months after the
Initial Date of Deposit or the end of the initial offering period to an
account maintained by the Trustee from which the obligation of the
investors to the Sponsor will be satisfied. To the extent that actual
organization costs of the Trust are greater than the estimated amount,
only the estimated organization costs added to the Public Offering Price
will be reimbursed to the Sponsor and deducted from the assets of the
Trust.
(4) Represents the amount of mandatory deferred sales charge
distributions of $.245 per Unit, payable to the Sponsor in three
approximately equal monthly installments beginning on February 20, 2015
and on the twentieth day of each month thereafter (or if such date is
not a business day, on the preceding business day) through April 20,
2015. If Unit holders redeem Units before April 20, 2015, they will have
to pay the remaining amount of the deferred sales charge applicable to
such Units when they redeem them.
(5) The creation and development fee ($.050 per Unit) is payable by the
Trust on behalf of Unit holders out of assets of the Trust at the end of
the initial offering period. If Units are redeemed prior to the close of
the initial offering period, the fee will not be deducted from the
proceeds.
(6) Net asset value per Unit is calculated by dividing the Trust's net
assets by the number of Units outstanding. This figure includes
organization costs and the creation and development fee, which will only
be assessed to Units outstanding at the earlier of six months after the
Initial Date of Deposit or the end of the initial offering period in the
case of organization costs or the close of the initial offering period
in the case of the creation and development fee.
(7) The aggregate cost to investors in the Trust includes a maximum
sales charge (comprised of an initial and a deferred sales charge and
the creation and development fee) computed at the rate of 3.95% of the
Public Offering Price (equivalent to 3.99% of the net amount invested,
exclusive of the deferred sales charge and the creation and development
fee), assuming no reduction of the maximum sales charge as set forth
under "Public Offering."
</FN>
Page 6
Schedule of Investments
Strategic Sectors Portfolio Series
FT 5136
At the Opening of Business on the Initial Date of Deposit-October 31, 2014
[Enlarge/Download Table]
Percentage
of Aggregate Number Market Cost of
Ticker Symbol and Offering of Value per Securities to
Name of Issuer of Securities (1)(3) Price Shares Share the Trust (2)
_________________________________ ___________ ______ _________ _____________
COMMON STOCKS (100.00%):
Consumer Discretionary (10.00%):
DISCA Discovery Communications, Inc. * 1.99% 79 $ 35.94 $ 2,839
GPC Genuine Parts Company 2.01% 30 95.36 2,861
LVS Las Vegas Sands Corp. 1.99% 46 61.50 2,829
DIS The Walt Disney Company 2.03% 32 90.22 2,887
WYNN Wynn Resorts, Limited 1.98% 15 187.65 2,815
Energy (10.01%):
CLR Continental Resources, Inc. * 2.01% 52 55.12 2,866
EOG EOG Resources, Inc. 2.01% 31 92.22 2,859
KMI Kinder Morgan, Inc. 2.00% 74 38.54 2,852
MRO Marathon Oil Corporation 1.99% 83 34.11 2,831
WLL Whiting Petroleum Corporation * 2.00% 48 59.27 2,845
Financials (9.88%):
AMG Affiliated Managers Group, Inc. * 1.93% 14 196.96 2,757
FITB Fifth Third Bancorp 1.99% 144 19.73 2,841
PNC The PNC Financial Services Group, Inc. 1.98% 33 85.42 2,819
TROW T. Rowe Price Group, Inc. 1.99% 35 80.86 2,830
WFC Wells Fargo & Company 1.99% 54 52.46 2,833
Health Care (10.02%):
ALXN Alexion Pharmaceuticals, Inc. * 2.03% 15 192.93 2,894
BIIB Biogen Idec Inc. * 2.03% 9 321.00 2,889
CELG Celgene Corporation * 2.03% 27 106.94 2,887
GILD Gilead Sciences, Inc. * 2.00% 25 114.22 2,856
REGN Regeneron Pharmaceuticals, Inc. * 1.93% 7 392.80 2,750
Industrials (30.11%):
AAL American Airlines Group Inc. 2.01% 71 40.30 2,861
BEAV B/E Aerospace, Inc. * 2.02% 39 73.82 2,879
BA The Boeing Company 2.00% 23 123.82 2,848
CAT Caterpillar Inc. 1.97% 28 100.16 2,805
CBI Chicago Bridge & Iron Company N.V. + 2.01% 53 53.99 2,862
CMI Cummins Inc. 2.03% 20 144.62 2,892
DOV Dover Corporation 2.01% 36 79.44 2,860
ETN Eaton Corporation Plc + 2.01% 43 66.77 2,871
Page 7
Schedule of Investments (cont'd.)
Strategic Sectors Portfolio Series
FT 5136
At the Opening of Business on the Initial Date of Deposit-October 31, 2014
[Enlarge/Download Table]
Percentage
of Aggregate Number Market Cost of
Ticker Symbol and Offering of Value per Securities to
Name of Issuer of Securities (1)(3) Price Shares Share the Trust (2)
_________________________________ ___________ ______ _________ _____________
Industrials (cont'd.):
FLR Fluor Corporation 2.00% 43 $ 66.42 $ 2,856
GE General Electric Company 2.00% 111 25.67 2,849
HON Honeywell International Inc. 2.01% 30 95.59 2,868
NSC Norfolk Southern Corporation 2.00% 26 109.54 2,848
UNP Union Pacific Corporation 2.02% 25 115.00 2,875
UTX United Technologies Corporation 2.01% 27 106.34 2,871
WAB Wabtec Corporation 2.01% 34 84.24 2,864
Information Technology (20.01%):
AAPL Apple Inc. 2.03% 27 106.98 2,888
AVGO Avago Technologies Limited + 2.02% 35 82.39 2,884
CSCO Cisco Systems, Inc. 1.99% 118 24.08 2,841
GOOG Google Inc. (Class C) * 1.93% 5 550.31 2,752
INTC Intel Corporation 1.99% 87 32.58 2,834
NXPI NXP Semiconductors N.V. +* 2.02% 44 65.41 2,878
QCOM QUALCOMM Incorporated 2.01% 37 77.37 2,863
SWKS Skyworks Solutions, Inc. 2.01% 51 56.04 2,858
SSYS Stratasys Ltd. +* 2.02% 25 115.41 2,885
V Visa Inc. 1.99% 12 236.65 2,840
Materials (9.97%):
CF CF Industries Holdings, Inc. 2.00% 11 259.24 2,852
DOW The Dow Chemical Company 2.00% 59 48.25 2,847
LYB LyondellBasell Industries N.V. + 1.98% 31 91.01 2,821
MON Monsanto Company 1.99% 25 113.69 2,842
PKG Packaging Corporation of America 2.00% 40 71.07 2,843
_______ ________
Total Investments 100.00% $142,477
======= ========
_____________
<FN>
See "Notes to Schedule of Investments" on page 9.
Page 8
NOTES TO SCHEDULE 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. The Sponsor entered into purchase contracts
for the Securities on October 31, 2014. Such purchase contracts are
expected to settle within three business days.
(2) The cost of the Securities to the Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the closing sale prices of the listed Securities and the
ask prices of over-the-counter traded Securities at the Evaluation Time
on the business day prior to the Initial Date of Deposit). The valuation
of the Securities has been determined by the Evaluator, an affiliate of
the Sponsor. In accordance with Financial Accounting Standards Board
Accounting Standards Codification 820, "Fair Value Measurement," the
Trust's investments are classified as Level 1, which refers to
securities traded in an active market. The cost of the Securities to the
Sponsor and the Sponsor's loss (which is the difference between the cost
of the Securities to the Sponsor and the cost of the Securities to the Trust)
are $144,713 and $2,236, respectively.
(3) Common stocks of companies headquartered or incorporated outside the
United States comprise approximately 12.06% of the investments of the
Trust.
+ This Security represents the common stock of a foreign company which
trades directly or through an American Depositary Receipt ("ADR") on the
over-the-counter market or a U.S. national securities exchange.
* This Security represents a non-income producing security.
</FN>
Page 9
The FT Series
The FT Series Defined.
We, First Trust Portfolios L.P. (the "Sponsor"), have created hundreds
of similar yet separate series of a unit investment trust which we have
named the FT Series. The series to which this prospectus relates, FT
5136, consists of a single portfolio known as Strategic Sectors
Portfolio Series.
The Trust was created under the laws of the State of New York by a Trust
Agreement (the "Indenture") dated the Initial Date of Deposit. This
agreement, entered into among First Trust Portfolios L.P., as Sponsor,
The Bank of New York Mellon as Trustee, FTP Services LLC ("FTPS") as
FTPS Unit Servicing Agent and First Trust Advisors L.P. as Portfolio
Supervisor and Evaluator, governs the operation of the Trust.
YOU MAY GET MORE SPECIFIC DETAILS CONCERNING THE NATURE, STRUCTURE AND
RISKS OF THIS PRODUCT IN AN "INFORMATION SUPPLEMENT" BY CALLING THE
SPONSOR AT 800-621-1675, DEPT. CODE 2.
How We Created the Trust.
On the Initial Date of Deposit, we deposited a portfolio of common
stocks with the Trustee and, in turn, the Trustee delivered documents to
us representing our ownership of the Trust in the form of units ("Units").
After the Initial Date of Deposit, we may deposit additional Securities
in the Trust, or cash (including a letter of credit or the equivalent)
with instructions to buy more Securities, to create new Units for sale.
If we create additional Units, we will attempt, to the extent
practicable, to maintain the percentage relationship established among
the Securities on the Initial Date of Deposit (as set forth in "Schedule
of Investments"), adjusted to reflect the sale, redemption or
liquidation of any of the Securities or any stock split or a merger or
other similar event affecting the issuer of the Securities.
Since the prices of the Securities will fluctuate daily, the ratio of
Securities in the Trust, on a market value basis, will also change
daily. The portion of Securities represented by each Unit will not
change as a result of the deposit of additional Securities or cash in
the Trust. If we deposit cash, you and new investors may experience a
dilution of your investment. This is because prices of Securities will
fluctuate between the time of the cash deposit and the purchase of the
Securities, and because the Trust pays the associated brokerage fees. To
reduce this dilution, the Trust will try to buy the Securities as close
to the Evaluation Time and as close to the evaluation price as possible.
In addition, because the Trust pays the brokerage fees associated with
the creation of new Units and with the sale of Securities to meet
redemption and exchange requests, frequent redemption and exchange
activity will likely result in higher brokerage expenses.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may retain and pay us (or our affiliate) to act as agent for the
Trust to buy Securities. If we or an affiliate of ours act as agent to
the Trust, we will be subject to the restrictions under the Investment
Company Act of 1940, as amended (the "1940 Act").
We cannot guarantee that the Trust will keep its present size and
composition for any length of time. Securities may be periodically sold
under certain circumstances to satisfy Trust obligations, to meet
redemption requests and, as described in "Removing Securities from the
Trust," to maintain the sound investment character of the Trust, and the
proceeds received by the Trust will be used to meet Trust obligations or
distributed to Unit holders, but will not be reinvested. However,
Securities will not be sold to take advantage of market fluctuations or
changes in anticipated rates of appreciation or depreciation, or if they
no longer meet the criteria by which they were selected. You will not be
able to dispose of or vote any of the Securities in the Trust. As the
holder of the Securities, the Trustee will vote the Securities and will
endeavor to vote the Securities such that the Securities are voted as
closely as possible in the same manner and the same general proportion
as are the Securities held by owners other than such Trust.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in the Trust fails, unless we can
purchase substitute Securities ("Replacement Securities") we will refund
to you that portion of the purchase price and transactional sales charge
resulting from the failed contract on the next Income Distribution Date.
Any Replacement Security the Trust acquires will be identical to those
from the failed contract.
Portfolio
Objective.
The Trust seeks capital appreciation by combining the stocks of
companies from several sectors of the U.S. economy into one portfolio.
The portfolio will be selected from the sectors classified by the Standard &
Poor's Global Industry Classification Standard (GICS(R)).
S&P 500/Global Industry Classification Standard. Forbes magazine has
described the 10 sectors that make up the Standard & Poor's GICS(R)
Page 10
structure as the "backbone of the U.S. economy." Simply, the S&P 500
GICS(R) structure was created to give a standard industry definition to
the stocks of public companies.
The GICS(R) structure consists of 10 sectors and is further broken down
into 24 industry groups, 67 industries and 157 sub-industries.
The Trust will contain stocks of companies from several different
sectors of the market which we believe have the potential to outperform
the overall market over the life of this investment. For that reason,
companies from all 10 sectors may not be included in this portfolio.
Investment Thesis.
Markets move in cycles and sector returns can vary over time as sectors
move in and out of favor. Diversifying a portfolio over several sectors
that focus on different areas of the market may reduce volatility in a
portfolio while giving an investor the potential for enhanced returns.
It is important to note that diversification does not guarantee a profit
or protect against a loss.
Sector Growth Potential.
Shown below are the 10 sectors and consensus projections for year-over-
year (Y-O-Y) revenue growth rates for 2014, 2015 and 2016. Notice that
as the U.S. economy continues to improve, Wall Street analysts have
revised many of the projections upward. Of course, there can be no
assurance these projections will be achieved and that market conditions
will remain favorable for any sector.
S&P 500 & S&P 500 Sectors
(Estimated Annual Y-O-Y Revenue Growth Rates)
As of 3/14/14As of 9/12/14
2014 2015 2016 2014 2015 2016
S&P 500 Index 3.5% 4.5% 4.9% 3.9% 5.0% 5.3%
Consumer
Discretionary 6.2% 6.3% 6.1% 4.8% 5.8% 6.4%
Consumer
Staples 2.7% 4.1% 6.1% 2.6% 4.5% 6.1%
Energy 0.0% 1.5% 3.2% 2.1% -1.4% 2.4%
Financials 1.5% 4.3% 5.5% 0.4% 4.2% 4.5%
Health Care 6.8% 6.9% 4.5% 8.4% 7.8% 5.4%
Industrials 3.0% 3.9% 4.1% 2.6% 3.9% 4.6%
Information
Technology 5.0% 5.7% 5.4% 4.4% 7.2% 6.0%
Materials 3.7% 4.7% 5.8% 2.3% 5.0% 6.7%
Telecomm.
Services 2.7% 2.2% 1.7% 4.9% 6.6% 6.0%
Utilities 3.4% 2.2% 3.4% 5.6% 1.6% 2.7%
Source: Bloomberg. Consensus estimates using fiscal year revenue from
each company.
Perhaps the most important investment decision is not the specific
investments that are selected, but the manner in which the assets are
allocated. Asset allocation is the process of developing a diversified
investment portfolio by combining different assets in varying
proportions. Spreading capital across a range of investments -in this
case, sectors- makes your portfolio less dependent on the performance of
any one sector. The performance of any given sector can have drastic
changes from year to year.
The Trust is a unit investment trust which provides you with the
convenience of owning a selection of equity securities from several
different sectors in one investment. The securities included will be
selected and weighted in order to position the portfolio for current
market conditions. This portfolio offers several additional important
advantages:
- Potential for capital appreciation.
- Complete transparency of portfolio holdings and individual stock
weightings.
- No embedded capital gains. Capital gains taxes are paid only if
Securities within the portfolio are sold at a gain or if you have a
profit at the time you redeem your Units or the Trust terminates.
- No style drift from manager-driven trading.
- Low cash positions so more of your money is put to work.
- Fixed portfolio and fixed maturity.
Keys To Investing.
We believe there are three elements to helping you attain investment
success. The Trust utilizes these three key elements.
Diversification. We expect some investments to perform better than
others under different market conditions. That's why we believe it is
important to diversify. The Trust has an allocation across several
sectors of the U.S. economy.
Discipline. History has shown that bear and bull markets are a normal
occurrence. Although past performance is no guarantee of future results,
history has also shown that long-term investors have been rewarded for
their patience.
Rebalancing. Periodic rebalancing of a portfolio helps to decrease
volatility and potentially increase returns. Rebalancing is simple with
the Trust. When the portfolio terminates, investors have the option of
reinvesting their proceeds into a new unit investment trust.
Based on the composition of the portfolio on the Initial Date of
Deposit, the Trust is considered to be a Large-Cap Blend Trust.
From time to time in the prospectus or in marketing materials we may
identify a portfolio's style and capitalization characteristics to
describe a trust. These characteristics are designed to help you better
understand how the Trust may fit into your overall investment plan.
Page 11
These characteristics are determined by the Sponsor as of the Initial
Date of Deposit and, due to changes in the value of the Securities, may
vary thereafter. In addition, from time to time, analysts and research
professionals may apply different criteria to determine a Security's
style and capitalization characteristics, which may result in
designations which differ from those arrived at by the Sponsor. In
general, growth stocks are those with high relative price-to-book ratios
while value stocks are those with low relative price-to-book ratios. At
least 65% of the stocks in a trust on the trust's initial date of
deposit must fall into either the growth or value category for a trust
itself to receive the designation. Trusts that do not meet this criteria
are designated as blend trusts. In determining market capitalization
characteristics, we analyze the market capitalizations of the 3,000
largest stocks in the United States (excluding foreign securities, ADRs,
limited partnerships and regulated investment companies). Companies with
market capitalization among the largest 10% are considered Large-Cap
securities, the next 20% are considered Mid-Cap securities and the
remaining securities are considered Small-Cap securities. Both the
weighted average market capitalization of a trust and at least half of
the Securities in a trust must be classified as either Large-Cap, Mid-
Cap or Small-Cap in order for a trust to be designated as such. Trusts,
however, may contain individual stocks that do not fall into its stated
style or market capitalization designation.
Of course, as with any similar investments, there can be no assurance
that the objective of the Trust will be achieved. See "Risk Factors" for
a discussion of the risks of investing in the Trust.
Risk Factors
Price Volatility. The Trust invests in common stocks. The value of the
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, such as
the current market volatility, or when political or economic events
affecting the issuers occur. In addition, common stock prices may be
particularly sensitive to rising interest rates, as the cost of capital
rises and borrowing costs increase.
Because the Trust is 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 the Trust will be positive over any period of time,
or that you will not lose money. Units of the Trust are not deposits of
any bank and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
Current Economic Conditions. The global economy continues to experience
subdued growth. Most developed and developing economies are continuing
to struggle against the lingering effects of the financial crisis which
began in 2007, grappling in particular with the challenges of taking
appropriate fiscal and monetary policy actions. Inflation remains tame
worldwide, partly reflecting output gaps, high unemployment and a
continued financial deleveraging in major developed economies. The
global employment situation remains challenging, as long-lasting effects
from the financial crisis continue to weigh on labor markets in many
countries and regions. Prices of most primary commodities, a driving
force behind many emerging market economies, have declined moderately in
recent years, mainly driven by generally weak global demand as global
economic growth remains anemic.
The financial crisis began with problems in the U.S. housing and credit
markets, many of which were caused by defaults on "subprime" mortgages
and mortgage-backed securities, eventually leading to the failures of
some large financial institutions and has negatively impacted most
sectors of the global economy. Due to the current state of uncertainty
in the economy, the value of the Securities held by the Trust may be
subject to steep declines or increased volatility due to changes in
performance or perception of the issuers. To combat the financial
crisis, central banks in the United States, Europe and Asia have held
interest rates at historically low levels for several years. However,
there is no assurance that this will continue in the future and no way
to predict how quickly interest rates will rise once central banks
change their current position. In addition, other extraordinary steps
have been taken by the governments of several leading economic countries
to combat the financial crisis; however, the impact of these measures
has been mixed and in certain instances has produced unintended
consequences.
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.
Concentration Risk. When at least 25% of a Trust's portfolio is invested
in securities issued by companies within a single sector, the Trust is
considered to be concentrated in that particular sector. A portfolio
concentrated in a single sector may present more risks than a portfolio
broadly diversified over several sectors.
Page 12
The Trust is concentrated in stocks of industrial companies.
Industrials. General risks of industrial companies include the general
state of the economy, intense competition, consolidation, domestic and
international politics, excess capacity and consumer spending trends. In
addition, they may also be significantly affected by overall capital
spending levels, economic cycles, technical obsolescence, delays in
modernization, labor relations, government regulations and e-commerce
initiatives.
Industrial companies may also be affected by factors more specific to
their individual industries. Industrial machinery manufacturers may be
subject to declines in consumer demand and the need for modernization.
Aerospace and defense companies may be influenced by decreased demand
for new equipment, aircraft order cancellations, changes in aircraft-
leasing contracts and cutbacks in profitable business travel.
Agricultural equipment businesses may be influenced by fluctuations in
farm income, farm commodity prices, government subsidies and weather
conditions. The number of housing starts, levels of public and non-
residential construction including weakening demand for new office and
retail space, and overall construction spending may adversely affect
construction equipment manufacturers, while overproduction,
consolidation and weakening global economies may lead to deteriorating
sales for auto and truck makers and their suppliers.
Foreign Securities. Certain of the Securities in the Trust are issued by
foreign entities, which makes the Trust subject to more risks than if it
invested solely in domestic securities. These Securities are either
directly listed on a U.S. securities exchange or are in the form of ADRs
which trade on the over-the-counter market or are listed on a U.S.
securities exchange. Risks of foreign securities 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. Political and/or economic turmoil in certain
regions or countries and certain natural disasters may increase the
volatility of certain foreign markets. Investments in debt securities of
foreign governments present special risks, including the fact that
issuers may be unable or unwilling to repay principal and/or interest
when due in accordance with the terms of such debt, or may be unable to
make such repayments when due in the currency required under the terms
of the debt. Political, economic and social events also may have a
greater impact on the price of debt securities issued by foreign
governments than on the price of U.S. securities.
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 Trust.
In addition, litigation regarding any of the issuers of the Securities,
or of the industries represented by these issuers, may negatively impact
the value of these Securities. We cannot predict what impact any pending
or threatened litigation will have on the value of the Securities.
Portfolio Securities Descriptions
Consumer Discretionary
______________________
Discovery Communications, Inc., headquartered in Silver Spring,
Maryland, provides media management and network services to the media
and entertainment industries.
Genuine Parts Company, headquartered in Atlanta, Georgia, is a wholesale
distributor of automotive replacement parts, industrial replacement
parts, office products and electrical/electronic materials. The company
provides services in the United States, Canada and Mexico.
Las Vegas Sands Corp., headquartered in Las Vegas, Nevada, through its
subsidiaries, is a global developer of destination properties that
feature premium accommodations, gaming, entertainment and retail
operations. Properties also include convention and exhibition facilities.
The Walt Disney Company, headquartered in Burbank, California, operates
as a diversified international entertainment company with operations
consisting of filmed entertainment, theme parks and resorts, and
consumer products. The company also operates broadcast and cable
television networks, radio networks and publishing operations.
Wynn Resorts, Limited, headquartered in Las Vegas, Nevada, through its
subsidiaries, engages in the design, development, financing and
construction of destination casino resorts and operates one casino
resort located in Las Vegas and another located in Macau, China.
Energy
______
Continental Resources, Inc., headquartered in Oklahoma City, Oklahoma,
operates as a crude-oil concentrated, independent oil and natural gas
exploration and production company.
EOG Resources, Inc., headquartered in Houston, Texas, is engaged in the
exploration for, and the development, production and marketing of,
Page 13
natural gas and crude oil primarily in major producing basins in the
United States, as well as in Canada, Trinidad and other international
areas.
Kinder Morgan, Inc., headquartered in Houston, Texas, owns and operates
energy infrastructure in the United States and Canada.
Marathon Oil Corporation, headquartered in Houston, Texas, explores for,
produces, refines, distributes and markets crude oil, natural gas and
petroleum products.
Whiting Petroleum Corporation, headquartered in Denver, Colorado, is
engaged in oil and natural gas exploration, acquisition and production
activities in the Gulf Coast/Permian Basin, Rocky Mountains, Michigan
and Mid-Continent regions of the United States.
Financials
__________
Affiliated Managers Group, Inc., headquartered in Prides Crossing,
Massachusetts, acquires majority interests in investment management
firms. The company's affiliates provide investment management services,
mainly in the United States and Europe, to mutual funds, partnerships
and institutional and individual clients.
Fifth Third Bancorp, headquartered in Cincinnati, Ohio, conducts a
general commercial banking business primarily in the Midwest and
Florida. The company also provides insurance underwriting; real estate
management; discount securities brokerage; and provides electronic funds
transfer and data processing services.
The PNC Financial Services Group, Inc., headquartered in Pittsburgh,
Pennsylvania, is a diversified financial services company. The company
is engaged in retail, corporate and institutional banking, asset
management, and residential mortgage banking. The company's products and
services are available primarily in the United States, with certain
products available internationally.
T. Rowe Price Group, Inc., headquartered in Baltimore, Maryland, is a
financial services holding company. The company, through its
subsidiaries, serves as an investment advisor to both individual and
institutional investors and manages a variety of stock, bond and money
market mutual funds.
Wells Fargo & Company, headquartered in San Francisco, California,
operates a general banking business in a number of states and operates
mortgage banking offices throughout the United States. The company also
provides consumer finance services throughout the United States, Canada,
the Caribbean, Central America and Guam; and offers various other
financial services.
Health Care
___________
Alexion Pharmaceuticals, Inc., headquartered in Cheshire, Connecticut,
is engaged in the research and development of proprietary
immunoregulatory products used in the treatment of autoimmune and
cardiovascular diseases.
Biogen Idec Inc., headquartered in Weston, Massachusetts, is a
biopharmaceutical company engaged primarily in the research,
development, manufacture and commercialization of targeted therapies for
the treatment of cancer and autoimmune and inflammatory diseases.
Celgene Corporation, headquartered in Summit, New Jersey, is a
biopharmaceutical company engaged in the discovery, development and
commercialization of novel therapies designed to treat cancer and
immunological diseases through regulation of cellular, genomic and
proteomic targets.
Gilead Sciences, Inc., headquartered in Foster City, California,
discovers, develops and commercializes treatments for important viral
diseases, including a currently available therapy for cytomegalovirus
retinitis. The company develops treatments for diseases caused by human
immunodeficiency virus, hepatitis B virus and influenza virus.
Regeneron Pharmaceuticals, Inc., headquartered in Tarrytown, New York,
is a biopharmaceutical company that discovers, develops, and
commercializes medicines for the treatment of serious medical conditions
in the United States.
Industrials
___________
American Airlines Group Inc., headquartered in Fort Worth, Texas, was
formed in December 2013 with the closing of the merger between American
Airlines and US Airways Group. The company provides scheduled passenger,
freight and mail airline service throughout North America and
internationally.
B/E Aerospace, Inc., headquartered in Wellington, Florida, and its
wholly owned subsidiaries, engage in the design, manufacture, sale and
service of commercial aircraft and business jet cabin interior products.
The company's products include food and beverage prep/storage equipment,
seating products, and oxygen delivery systems.
The Boeing Company, headquartered in Chicago, Illinois, produces and
markets commercial jet transports and provides related support services
worldwide, principally to commercial airline customers. The company also
develops, produces, modifies and supports military aircraft, helicopters
and their related systems.
Caterpillar Inc., headquartered in Peoria, Illinois, makes earthmoving,
construction and materials handling machinery and equipment and diesel
Page 14
engines. The company also provides various financial products and
services and distributes its equipment through a global network of
dealers.
Chicago Bridge & Iron Company N.V., headquartered in The Hague, the
Netherlands, is an engineering, procurement, and construction company.
The company's projects include hydrocarbon processing plants, liquefied
natural gas terminals and peak shaving plants, offshore structures,
pipelines, bulk liquid terminals, water storage and treatment
facilities, and other steel structures and associated systems.
Cummins Inc., headquartered in Columbus, Indiana, is engaged in the
design, manufacture, distribution and servicing of diesel and natural
gas engines. The company also produces electric power generation systems
and engine-related products, such as filtration and emissions solutions,
fuel systems, controls and air handling systems.
Dover Corporation, headquartered in Downers Grove, Illinois, makes,
installs and services elevators. The company also makes a broad range of
specialized metal fabricated industrial products, electronic components
and sophisticated manufacturing equipment.
Eaton Corporation Plc, headquartered in Dublin, Ireland, is a global
manufacturer of highly engineered products that serve industrial,
vehicle, construction, commercial, aerospace and semiconductor markets.
Fluor Corporation, headquartered in Irving, Texas, provides engineering,
procurement, construction, operations and maintenance, and project
management services worldwide.
General Electric Company, headquartered in Fairfield, Connecticut,
manufactures major appliances, industrial and power systems, aircraft
engines, turbines and generators, and equipment used in medical imaging.
In addition, a variety of financial services are offered through GE
Commercial Finance.
Honeywell International Inc., headquartered in Morris Township, New
Jersey, is a diversified manufacturing and technology company serving
various industries. The company's products include aerospace equipment
and services, turbochargers, security technologies, specialty chemicals
and energy efficiency solutions.
Norfolk Southern Corporation, headquartered in Norfolk, Virginia, is a
holding company engaged principally in the rail transportation business,
operating primarily in the Southeast, East and Midwest regions of the
United States. The company transports coal, automotive and industrial
products.
Union Pacific Corporation, headquartered in Omaha, Nebraska, through its
subsidiary, Union Pacific Railroad Company, provides rail transportation
services throughout North America. The company transports a variety of
products, including automotive parts, finished vehicles, chemicals,
grains, commodities, foods and beverages.
United Technologies Corporation, headquartered in Hartford, Connecticut,
through its subsidiaries, makes Pratt & Whitney aircraft jet engines and
spare parts; Otis elevators and escalators; Carrier heating, ventilating
and air conditioning equipment; Sikorsky helicopters and Hamilton
Sundstrand aerospace systems.
Wabtec Corporation, headquartered in Wilmerding, Pennsylvania, provides
various technology-based equipment for the rail industry worldwide. The
company manufactures and services components for new and existing
freight cars and locomotives; and passenger transit vehicles such as
subway cars and buses.
Information Technology
______________________
Apple Inc., headquartered in Cupertino, California, is engaged in the
design, manufacture and marketing of personal computers, related
personal computing and mobile communication devices. The company also
provides related software and networking solutions. Products are
available worldwide through the company's retail and online stores,
resellers and third-party wholesalers.
Avago Technologies Limited, headquartered in Singapore, engages in the
design, development and supply of analog semiconductor devices worldwide.
Cisco Systems, Inc., headquartered in San Jose, California, provides
networking solutions that connect computing devices and computer
networks. The company offers various products to utilities,
corporations, universities, governments and small- to medium-size
businesses worldwide.
Google Inc. (Class C), headquartered in Mountain View, California,
provides a web-based search engine through its Google.com website. The
company offers a wide range of search options including web, image,
groups and directory and news searches.
Intel Corporation, headquartered in Santa Clara, California, designs,
develops, makes and markets advanced microcomputer components and
related products at various levels of integration. The company's
principal components consist of silicon-based semiconductors etched with
complex patterns of transistors.
NXP Semiconductors N.V., headquartered in Eindhoven, the Netherlands, is
a global semiconductor company that designs semiconductors and software
for consumer electronics, mobile communications, in-car entertainment,
security applications and networking.
QUALCOMM Incorporated, headquartered in San Diego, California, designs,
develops, makes, sells, licenses and operates advanced communications
systems and products based on proprietary digital wireless technology.
Page 15
The company's products include "CDMA" integrated circuits, wireless
phones, infrastructure products, transportation management information
systems and ground stations.
Skyworks Solutions, Inc., headquartered in Woburn, Massachusetts, is a
wireless semiconductor company focused on radio frequency and complete
semiconductor system solutions for mobile communications applications.
Stratasys Ltd., incorporated in Israel and dually headquartered in Eden
Prairie, Minnesota and Rehovat, Israel, manufactures three-dimensional
printers. Based on data from three-dimensional computer aided design
files, their printers build three dimensional models by depositing
multiple layers of resin. Engineers, manufacturers and designers use
these printers to visualize, verify and communicate product designs.
Visa Inc., headquartered in San Francisco, California, through its
subsidiaries, operates a retail electronic payments network worldwide.
The company also offers a range of processing services for participating
issuers of Visa debit, prepaid and ATM payment products.
Materials
_________
CF Industries Holdings, Inc., headquartered in Deerfield, Illinois,
engages in the manufacture and distribution of nitrogen and phosphate
fertilizer products in North America. The company has developed a
process to extract uranium from its production of phosphate fertilizer
products for use in nuclear reactors.
The Dow Chemical Company, headquartered in Midland, Michigan, is a
leading manufacturer and supplier of chemicals, plastic materials and
agricultural products, and other specialized products and services
marketed worldwide.
LyondellBasell Industries N.V., headquartered in Rotterdam, the
Netherlands, together with its subsidiaries, manufactures and markets
chemicals and polymers worldwide. The company's products are used for
packaging, durable textiles, clean fuels, medical applications and
automotive parts.
Monsanto Company, headquartered in St. Louis, Missouri, and its
subsidiaries provide agricultural products and integrated solutions for
farmers. The company produces seed brands and develops biotechnology
traits that assist farmers in controlling insects and weeds.
Packaging Corporation of America, headquartered in Lake Forest,
Illinois, engages in the manufacture and sale of container board and
corrugated packaging products in the United States. The company produces
multi-color boxes as well as wax-coated boxes for agricultural
products.
We have obtained the foregoing descriptions from third-party sources we
deem reliable.
Public Offering
The Public Offering Price.
Units will be purchased 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 maximum sales charge (which combines an initial upfront sales
charge, a deferred sales charge and the creation and development fee).
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the prices of the Securities and changes in
the value of the Income and/or Capital Accounts.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934, as amended.
Organization Costs. Securities purchased with the portion of the Public
Offering Price intended to be used to reimburse the Sponsor for the
Trust's organization costs (including costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission ("SEC")
and states, the initial audit of the Trust's statement of net assets,
legal fees and the initial fees and expenses of the Trustee) will be
purchased in the same proportionate relationship as all the Securities
contained in the Trust. Securities will be sold to reimburse the Sponsor
for the Trust's organization costs at the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period (a
significantly shorter time period than the life of the Trust). During
Page 16
the period ending with the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period, there may be a
decrease in the value of the Securities. To the extent the proceeds from
the sale of these Securities are insufficient to repay the Sponsor for
Trust organization costs, the Trustee will sell additional Securities to
allow the Trust to fully reimburse the Sponsor. In that event, the net
asset value per Unit of the Trust will be reduced by the amount of
additional Securities sold. Although the dollar amount of the
reimbursement due to the Sponsor will remain fixed and will never exceed
the per Unit amount set forth for the Trust in "Notes to Statement of
Net Assets," this will result in a greater effective cost per Unit to
Unit holders for the reimbursement to the Sponsor. To the extent actual
organization costs are less than the estimated amount, only the actual
organization costs will ultimately be charged to the Trust. When
Securities are sold to reimburse the Sponsor for organization costs, the
Trustee will sell Securities, to the extent practicable, which will
maintain the same proportionate relationship among the Securities
contained in the Trust as existed prior to such sale.
Minimum Purchase.
The minimum amount per account you can purchase of the Trust is
generally $1,000 worth of Units ($500 if you are purchasing Units for
your Individual Retirement Account or any other qualified retirement
plan), but such amounts may vary depending on your selling firm.
Maximum Sales Charge.
The maximum sales charge is comprised of a transactional sales charge
and a creation and development fee. After the initial offering period
the maximum sales charge will be reduced by 0.50%, to reflect the amount
of the previously charged creation and development fee.
Transactional Sales Charge.
The transactional sales charge you will pay has both an initial and a
deferred component.
Initial Sales Charge. The initial sales charge, which you will pay at
the time of purchase, is equal to the difference between the maximum
sales charge of 3.95% of the Public Offering Price and the sum of the
maximum remaining deferred sales charge and creation and development fee
(initially $.295 per Unit). On the Initial Date of Deposit, the initial
sales charge is equal to approximately 1.00% of the Public Offering
Price of a Unit. Thereafter, it will vary from 1.00% depending on the
purchase price of your Units and as deferred sales charge and creation
and development fee payments are made. When the Public Offering Price
exceeds $10.00 per Unit, the initial sales charge will exceed 1.00% of
the Public Offering Price.
Monthly Deferred Sales Charge. In addition, three monthly deferred sales
charges of approximately $.0817 per Unit will be deducted from the
Trust's assets on approximately the twentieth day of each month from
February 20, 2015 through April 20, 2015. 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 2.45% of the Public Offering Price.
If you purchase Units after the last deferred sales charge payment has
been assessed, your transactional sales charge will consist of a one-
time initial sales charge of 3.45% of the Public Offering Price
(equivalent to 3.573% of the net amount invested). The transactional
sales charge will be reduced by 1/2 of 1% on each subsequent October 31,
commencing October 31, 2015, to a minimum transactional sales charge of
3.00%.
Creation and Development Fee.
As Sponsor, we will also receive, and the Unit holders will pay, a
creation and development fee. See "Expenses and Charges" for a
description of the services provided for this fee. The creation and
development fee is a charge of $.050 per Unit collected at the end of
the initial offering period. If you buy Units at a price of less than
$10.00 per Unit, the dollar amount of the creation and development fee
will not change, but the creation and development fee on a percentage
basis will be more than 0.50% of the Public Offering Price.
Discounts for Certain Persons.
The maximum sales charge is 3.95% per Unit and the maximum dealer
concession is 3.15% per Unit. However, if you invest at least $50,000
including any proceeds as described below (except if you are purchasing
for "Fee Accounts" as described below), the maximum sales charge for the
amount of the investment eligible to receive the reduced sales charge is
reduced as follows:
Your maximum Dealer
If you invest sales charge concession
(in thousands):* will be: will be:
__________________________________________________________
$50 but less than $100 3.70% 2.90%
$100 but less than $250 3.45% 2.65%
$250 but less than $500 3.10% 2.35%
$500 but less than $1,000 2.95% 2.25%
$1,000 or more 2.45% 1.80%
*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 not eligible for the redemption or termination proceeds
discount set forth below made by the same person on any one day from any
one dealer. To help you reach the above levels, you can combine the
Page 17
Units you purchase of the Trust with any other same day purchases of
other trusts for which we are Principal Underwriter and are currently in
the initial offering period. In addition, we will also consider Units
you purchase in the name of your spouse, or the equivalent if recognized
under local law, or child (including step-children) under the age of 21
living in the same household 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 including pension,
profit sharing or employee benefit plans, as well as multiple-employee
benefit plans of a single employer or affiliated employers (provided
they are not aggregated with personal accounts). You must inform your
dealer of any combined purchases before the sale in order to be eligible
for the reduced sales charge.
You are entitled to use your redemption or termination proceeds from any
unit investment trust (regardless of who was sponsor) to purchase Units
of the Trust during the initial offering period at the Public Offering
Price less 1.00% (for purchases of $1,000,000 or more, the maximum sales
charge will be limited to 2.45% of the Public Offering Price), but you
will not be eligible to receive the reduced sales charges described in
the above table with respect to such proceeds. Please note that if you
purchase Units of the Trust in this manner using redemption proceeds
from trusts which assess the amount of any remaining deferred sales
charge at redemption, you should be aware that any deferred sales charge
remaining on these units will be deducted from those redemption
proceeds. In order to be eligible to receive the reduced sales charge
described in this paragraph, the trade date of the redemption or
termination resulting in the receipt of such proceeds must have occurred
within 30 calendar days prior to your Unit purchase. In addition, this
program will only be available for investors that utilize the same
broker/dealer (or a different broker/dealer with appropriate
notification) for both the Unit purchase and the transaction resulting
in the receipt of the termination or redemption proceeds used for the
Unit purchase and such transaction must be from the same account. You
may be required to provide appropriate documentation or other
information to your broker/dealer to evidence your eligibility for this
reduced sales charge program.
If you are purchasing Units for an investment account, the terms of
which provide that your registered investment advisor or registered
broker/dealer (a) charges periodic fees in lieu of commissions; (b)
charges for financial planning, investment advisory or asset management
services; or (c) charges a comprehensive "wrap fee" or similar fee for
these or comparable services ("Fee Accounts"), you will not be assessed
the transactional sales charge described in this section on such
purchases. These Units will be designated as Fee Account Units and,
depending upon the purchase instructions we receive, assigned either a
Fee Account Cash CUSIP Number, if you elect to have distributions paid
to you, or a Fee Account Reinvestment CUSIP Number, if you elect to have
distributions reinvested into additional Units of the Trust. Certain Fee
Account Unit holders may be assessed transaction or other account fees
on the purchase and/or redemption of such Units by their registered
investment advisor, broker/dealer or other processing organizations for
providing certain transaction or account activities. Fee Account Units
are not available for purchase in the secondary market. We reserve the
right to limit or deny purchases of Units not subject to the
transactional sales charge by investors whose frequent trading activity
we determine to be detrimental to the Trust.
Employees, officers and directors (and immediate family members) of the
Sponsor, our related companies, and dealers and their affiliates will
purchase Units at the Public Offering Price less the applicable dealer
concession, subject to the policies of the related selling firm.
Immediate family members include spouses, or the equivalent if
recognized under local law, children or step-children under the age of
21 living in the same household, parents or step-parents and trustees,
custodians or fiduciaries for the benefit of such persons. Only
employees, officers and directors of companies that allow their
employees to participate in this employee discount program are eligible
for the discounts.
You will be charged the deferred sales charge per Unit regardless of any
discounts. However, if you are eligible to receive a discount such that
the maximum sales charge you must pay is less than the applicable
maximum deferred sales charge, including Fee Account Units, you will be
credited additional Units with a dollar value equal to the difference
between your maximum sales charge and the maximum deferred sales charge
at the time you buy your Units. If you elect to have distributions
Page 18
reinvested into additional Units of the Trust, in addition to the
reinvestment Units you receive you will also be credited additional
Units with a dollar value at the time of reinvestment sufficient to
cover the amount of any remaining deferred sales charge and creation and
development fee to be collected on such reinvestment Units. The dollar
value of these additional credited Units (as with all Units) will
fluctuate over time, and may be less on the dates deferred sales charges
or the creation and development fee are collected than their value at
the time they were issued.
The Value of the Securities.
The Evaluator will determine the aggregate underlying value of the
Securities in the Trust as of the Evaluation Time on each business day
and will adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus shall mean any day on which the NYSE is open.
The aggregate underlying value of the Securities in the Trust will be
determined as follows: if the Securities are listed on a national or
foreign securities exchange or The NASDAQ Stock Market(R), their value
shall generally be based on the closing sale price on the exchange or
system which is the principal market therefore ("Primary Exchange"),
which shall be deemed to be the NYSE if the Securities are listed
thereon (unless the Evaluator deems such price inappropriate as the
basis for evaluation). In the event a closing sale price on the Primary
Exchange is not published, the Securities will be valued based on the
last trade price on the Primary Exchange. If no trades occur on the
Primary Exchange for a specific trade date, the value will be based on
the closing sale price from, in the opinion of the Evaluator, an
appropriate secondary exchange, if any. If no trades occur on the
Primary Exchange or any appropriate secondary exchange on a specific
trade date, the Evaluator will determine the value of the Securities
using the best information available to the Evaluator, which may include
the prior day's evaluated price. If the Security is an American
Depositary Receipt ("ADR"), Global Depositary Receipt ("GDR") or other
similar security in which no trade occurs on the Primary Exchange or any
appropriate secondary exchange on a specific trade date, the value will
be based on the evaluated price of the underlying security, determined
as set forth above, after applying the appropriate ADR/GDR ratio, the
exchange rate and such other information which the Evaluator deems
appropriate. For purposes of valuing Securities traded on The NASDAQ
Stock Market(R), closing sale price shall mean the NASDAQ(R) Official
Closing Price as determined by The NASDAQ Stock Market LLC. If the
Securities are not so listed or, if so listed and the principal market
therefore is other than on the Primary Exchange or any appropriate
secondary exchange, the value shall generally be based on the current
ask price on the over-the-counter market (unless the Evaluator deems
such price inappropriate as a basis for evaluation). If current ask
prices are unavailable, the value 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) any
combination of the above. If such prices are in a currency other than
U.S. dollars, the value of such Security shall be converted to U.S.
dollars based on current exchange rates (unless the Evaluator deems such
prices inappropriate as a basis for evaluation). If the Evaluator deems
a price determined as set forth above to be inappropriate as the basis
for evaluation, the Evaluator shall use such other information available
to the Evaluator which it deems appropriate as the basis for determining
the value of a Security.
After the initial offering period is over, the aggregate underlying
value of the Securities will be determined as set forth above, except
that bid prices are used instead of ask prices when necessary.
Distribution of Units
We intend to qualify Units of the Trust for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
The Sponsor compensates intermediaries, such as broker/dealers and
banks, for their activities that are intended to result in sales of
Units of the Trust. This compensation includes dealer concessions
described in the following section and may include additional
concessions and other compensation and benefits to broker/dealers and
other intermediaries.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
represent a concession or agency commission of 3.15% of the Public
Offering Price per Unit (or 65% of the maximum transactional sales
charge for secondary market sales), subject to the reduced concession
applicable to volume purchases as set forth in "Public Offering-
Discounts for Certain Persons." However, for Units subject to a
transactional sales charge which are purchased using redemption or
termination proceeds, this amount will be reduced to 2.15% of the sales
price of these Units (1.80% for purchases of $1,000,000 or more).
Eligible dealer firms and other selling agents who, during the previous
consecutive 12-month period through the end of the most recent month,
sold primary market units of unit investment trusts sponsored by us in
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the dollar amounts shown below will be entitled to the following
additional sales concession on primary market sales of units during the
current month of unit investment trusts sponsored by us:
Total sales Additional
(in millions) Concession
__________________________________________________________
$25 but less than $100 0.050%
$100 but less than $150 0.075%
$150 but less than $250 0.100%
$250 but less than $500 0.115%
$500 but less than $750 0.125%
$750 but less than $1,000 0.130%
$1,000 but less than $1,500 0.135%
$1,500 but less than $2,000 0.140%
$2,000 but less than $3,000 0.150%
$3,000 but less than $4,000 0.160%
$4,000 but less than $5,000 0.170%
$5,000 or more 0.175%
Dealers and other selling agents will not receive a concession on the
sale of Units which are not subject to a transactional sales charge, but
such Units will be included in determining whether the above volume
sales levels are met. Eligible dealer firms and other selling agents
include clearing firms that place orders with First Trust and provide
First Trust with information with respect to the representatives who
initiated such transactions. Eligible dealer firms and other selling
agents will not include firms that solely provide clearing services to
other broker/dealer firms or firms who place orders through clearing
firms that are eligible dealers. We reserve the right to change the
amount of concessions or agency commissions from time to time. Certain
commercial banks may be making Units of the Trust available to their
customers on an agency basis. A portion of the transactional sales
charge paid by these customers is kept by or given to the banks in the
amounts shown above.
Other Compensation and Benefits to Broker/Dealers.
The Sponsor, at its own expense and out of its own profits, currently
provides additional compensation and benefits to broker/dealers who sell
Units of this Trust and other First Trust products. This compensation is
intended to result in additional sales of First Trust products and/or
compensate broker/dealers and financial advisors for past sales. A
number of factors are considered in determining whether to pay these
additional amounts. Such factors may include, but are not limited to,
the level or type of services provided by the intermediary, the level or
expected level of sales of First Trust products by the intermediary or
its agents, the placing of First Trust products on a preferred or
recommended product list, access to an intermediary's personnel, and
other factors. The Sponsor makes these payments for marketing,
promotional or related expenses, including, but not limited to, expenses
of entertaining retail customers and financial advisors, advertising,
sponsorship of events or seminars, obtaining information about the
breakdown of unit sales among an intermediary's representatives or
offices, obtaining shelf space in broker/dealer firms and similar
activities designed to promote the sale of the Sponsor's products. The
Sponsor makes such payments to a substantial majority of intermediaries
that sell First Trust products. The Sponsor may also make certain
payments to, or on behalf of, intermediaries to defray a portion of
their costs incurred for the purpose of facilitating Unit sales, such as
the costs of developing or purchasing trading systems to process Unit
trades. Payments of such additional compensation described in this and
the preceding paragraph, some of which may be characterized as "revenue
sharing," may create an incentive for financial intermediaries and their
agents to sell or recommend a First Trust product, including the Trust,
over products offered by other sponsors or fund companies. These
arrangements will not change the price you pay for your Units.
Advertising and Investment Comparisons.
Advertising materials regarding the Trust may discuss several topics,
including: developing a long-term financial plan; working with your
financial professional; the nature and risks of various investment
strategies and unit investment trusts that could help you reach your
financial goals; the importance of discipline; how the Trust operates;
how securities are selected; various unit investment trust features such
as convenience and costs; and options available for certain types of
unit investment trusts. These materials may include descriptions of the
principal businesses of the companies represented in the Trust, research
analysis of why they were selected and information relating to the
qualifications of the persons or entities providing the research
analysis. In addition, they may include research opinions on the economy
and industry sectors included and a list of investment products
generally appropriate for pursuing those recommendations.
From time to time we may compare the estimated returns of the Trust
(which may show performance net of the expenses and charges the Trust
would have incurred) and returns over specified periods of other similar
trusts we sponsor in our advertising and sales materials, with (1)
returns on other taxable investments such as the common stocks
Page 20
comprising various market indexes, corporate or U.S. Government bonds,
bank CDs and money market accounts or funds, (2) performance data from
Morningstar Publications, Inc. or (3) information from publications such
as Money, The New York Times, U.S. News and World Report, Bloomberg
Businessweek, Forbes or Fortune. The investment characteristics of the
Trust differ from other comparative investments. You should not assume
that these performance comparisons will be representative of the Trust's
future performance. We may also, from time to time, use advertising
which classifies trusts or portfolio securities according to
capitalization and/or investment style.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum
transactional sales charge per Unit for the Trust less any reduction as
stated in "Public Offering." We will also receive the amount of any
collected creation and development fee. Also, any difference between our
cost to purchase the Securities and the price at which we sell them to
the Trust is considered a profit or loss (see Note 2 of "Notes to
Schedule of Investments"). During the initial offering period, dealers
and others may also realize profits or sustain losses as a result of
fluctuations in the Public Offering Price they receive when they sell
the Units.
In maintaining a market for the Units, any difference between the price
at which we purchase Units and the price at which we sell or redeem them
will be a profit or loss to us.
The Secondary Market
Although not obligated, we may 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 (OR THE FTPS UNIT
SERVICING AGENT IN THE CASE OF FTPS UNITS). 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 (or the FTPS Unit Servicing Agent in the case of FTPS Units)
will notify us of any tender of Units for redemption. If our bid at that
time is equal to or greater than the Redemption Price per Unit, we may
purchase the Units. You will receive your proceeds from the sale no
later than if they were redeemed by the Trustee. We may tender Units
that we hold to the Trustee for redemption as any other Units. If we
elect not to purchase Units, the Trustee (or the FTPS Unit Servicing
Agent in the case of FTPS Units) may sell tendered Units in the over-the-
counter market, if any. However, the amount you will receive is the same
as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trust are listed under "Fee Table."
If actual expenses of the Trust exceed the estimate, the Trust will bear
the excess. The Trustee will pay operating expenses of the Trust from
the Income Account of the Trust if funds are available, and then from
the Capital Account. The Income and Capital Accounts are non-interest-
bearing to Unit holders, so the Trustee may earn interest on these
funds, thus benefiting from their use.
First Trust Advisors L.P., an affiliate of ours, acts as Portfolio
Supervisor and Evaluator and will be compensated for providing portfolio
supervisory services and evaluation services as well as bookkeeping and
other administrative services to the Trust. In providing portfolio
supervisory services, the Portfolio Supervisor may purchase research
services from a number of sources, which may include underwriters or
dealers of the Trust. As Sponsor, we will receive brokerage fees when
the Trust uses us (or an affiliate of ours) as agent in buying or
selling Securities. As authorized by the Indenture, the Trustee may
employ a subsidiary or affiliate of the Trustee to act as broker to
execute certain transactions for the Trust. The Trust will pay for such
services at standard commission rates.
FTP Services LLC, an affiliate of ours, acts as FTPS Unit Servicing
Agent to the Trust with respect to the Trust's FTPS Units. FTPS Units
are Units which are purchased and sold through the Fund/SERV(R) trading
system or on a manual basis through FTP Services LLC. In all other
respects, FTPS Units are identical to other Units. FTP Services LLC will
be compensated for providing shareholder services to the FTPS Units.
Page 21
The fees payable to First Trust Advisors L.P., FTP Services LLC and the
Trustee are based on the largest aggregate number of Units of the Trust
outstanding at any time during the calendar year, except during the
initial offering period, in which case these fees are calculated based
on the largest number of Units outstanding during the period for which
compensation is paid. These fees may be adjusted for inflation without
Unit holders' approval, but in no case will the annual fee paid to us or
our affiliates for providing services to all unit investment trusts be
more than the actual cost of providing such services in such year.
As Sponsor, we will receive a fee from the Trust for creating and
developing the Trust, including determining the Trust's objectives,
policies, composition and size, selecting service providers and
information services and for providing other similar administrative and
ministerial functions. The "creation and development fee" is a charge of
$.050 per Unit outstanding at the end of the initial offering period.
The Trustee will deduct this amount from the Trust's assets as of the
close of the initial offering period. We do not use this fee to pay
distribution expenses or as compensation for sales efforts. This fee
will not be deducted from your proceeds if you sell or redeem your Units
before the end of the initial offering period.
In addition to the Trust's operating expenses and those fees described
above, the Trust may also incur the following charges:
- All legal expenses of the Trustee according to its responsibilities
under the Indenture;
- The expenses and costs incurred by the Trustee to protect the Trust
and your rights and interests;
- Fees for any extraordinary services the Trustee performed under the
Indenture;
- Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of the Trust;
- Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Sponsor of the
Trust;
- Foreign custodial and transaction fees (which may include compensation
paid to the Trustee or its subsidiaries or affiliates), if any; and/or
- All taxes and other government charges imposed upon the Securities or
any part of the Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
the Trust. In addition, if there is not enough cash in the Income or
Capital Account, the Trustee has the power to sell Securities to make
cash available to pay these charges which may result in capital gains or
losses to you. See "Tax Status."
Tax Status
Federal Tax Matters.
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trust. This section is current as of
the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, except as specifically
provided below, these summaries generally do not describe your situation
if you are a corporation, a non-U.S. person, a broker/dealer, or other
investor with special circumstances. In addition, this section may not
describe your state, local or foreign tax consequences.
This federal income tax summary is based in part on the advice of
counsel to the Sponsor. The Internal Revenue Service ("IRS") could
disagree with any conclusions set forth in this section. In addition,
our counsel was not asked to review, and has not reached a conclusion
with respect to the federal income tax treatment of the assets to be
deposited in the Trust. This may not be sufficient for you to use for
the purpose of avoiding penalties under federal tax law.
As with any investment, you should seek advice based on your individual
circumstances from your own tax advisor.
Trust Status.
The Trust intends to qualify as a "regulated investment company,"
commonly known as a "RIC," under the federal tax laws. If the Trust
qualifies as a RIC and distributes its income as required by the tax
law, the Trust generally will not pay federal income taxes.
For federal income tax purposes, you are treated as the owner of Trust
Units and not of the assets held by the Trust. Taxability issues are
taken into account at the trust level. Your federal income tax treatment
of income from the Trust is based on the distributions paid by the Trust.
Income From the Trust.
Trust distributions are generally taxable. After the end of each year,
you will receive a tax statement that separates the Trust's
distributions into ordinary dividends, capital gains dividends and
returns of capital. Income reported is generally net of expenses (but
see Deductibility of Trust Expenses, below). Ordinary income
distributions are generally taxed at your ordinary tax rate, however, as
Page 22
further discussed below, certain ordinary income distributions received
from the Trust may be taxed at the capital gains tax rates. Generally,
you will treat all capital gains dividends as long-term capital gains
regardless of how long you have owned your Units. To determine your
actual tax liability for your capital gains dividends, you must
calculate your total net capital gain or loss for the tax year after
considering all of your other taxable transactions, as described below.
In addition, the Trust may make distributions that represent a return of
capital for tax purposes and thus will generally not be taxable to you.
The tax status of your distributions from the Trust is not affected by
whether you reinvest your distributions in additional Units or receive
them in cash. The income from the Trust that you must take into account
for federal income tax purposes is not reduced by amounts used to pay a
deferred sales charge, if any. The tax laws may require you to treat
distributions made to you in January as if you had received them on
December 31 of the previous year.
Under the "Health Care and Education Reconciliation Act of 2010," income
from the Trust may also be subject to a new 3.8% "Medicare tax" imposed
for taxable years beginning after 2012. This tax will generally apply to
your net investment income if your adjusted gross income exceeds certain
threshold amounts, which are $250,000 in the case of married couples
filing joint returns and $200,000 in the case of single individuals.
Distributions with Respect to Certain Stock Dividends.
Ordinary income dividends received by an individual Unit holder from a
regulated investment company such as the Trust are generally taxed at
the same rates that apply to net capital gain, as discussed below,
provided certain holding period requirements are satisfied and provided
the dividends are attributable to qualifying dividends received by the
Trust itself. Dividends that do not meet these requirements will
generally be taxed at ordinary income rates. The Trust will provide
notice to its Unit holders of the amount of any distribution which may
be taken into account as a dividend which is eligible for the capital
gains tax rates.
Dividends Received Deduction.
A corporation that owns Units generally will not be entitled to the
dividends received deduction with respect to many dividends received
from the Trust because the dividends received deduction is generally not
available for distributions from regulated investment companies.
However, certain ordinary income dividends on Units that are
attributable to qualifying dividends received by the Trust from certain
corporations may be reported by the Trust as being eligible for the
dividends received deduction.
Sale or Redemption of Units.
If you sell or redeem your Units, you will generally recognize a taxable
gain or loss. To determine the amount of this gain or loss, you must
subtract your tax basis in your Units from the amount you receive in the
transaction. Your tax basis in your Units is generally equal to the cost
of your Units, generally including sales charges. In some cases,
however, you may have to adjust your tax basis after you purchase your
Units.
The information statement you receive in regard to the sale or
redemption of your Units may contain information about your basis in the
Units and whether any gain or loss recognized by you should be
considered long-term or short-term capital gain. The information
reported to you is based upon rules that do not take into consideration
all facts that may be known to you or your advisors. You should consult
with your tax advisors about any adjustments that may need to be made to
the information reported to you.
Capital Gains and Losses.
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (0% for certain taxpayers in the 10% or
15% tax brackets). An additional 3.8% "Medicare tax" may also apply to
gain from the sale or redemption of Units of the Trust, subject to the
income thresholds as described above.
Net capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if
the holding period for the asset is more than one year and is short-term
if the holding period for the asset is one year or less. You must
exclude the date you purchase your Units to determine your holding
period. However, if you receive a capital gain dividend from the Trust
and sell your Units at a loss after holding it for six months or less,
the loss will be recharacterized as long-term capital loss to the extent
of the capital gain dividend received. The tax rates for capital gains
realized from assets held for one year or less are generally the same as
for ordinary income. The Internal Revenue Code treats certain capital
gains as ordinary income in special situations.
Capital gain received from assets held for more than one year that is
considered "unrecaptured section 1250 gain" is taxed at a maximum stated
tax rate of 25%. In the case of capital gains dividends, the
determination of which portion of the capital gains dividend, if any, is
subject to the 25% tax rate, will be made based on rules prescribed by
the United States Treasury.
In-Kind Distributions.
Under certain circumstances as described in this prospectus, you may
request an In-Kind Distribution of Trust assets when you redeem your
Units at any time prior to 10 business days before the Trust's Mandatory
Termination Date. By electing to receive an In-Kind Distribution, you
Page 23
will receive Trust assets plus, possibly, cash. THIS DISTRIBUTION IS
SUBJECT TO TAXATION, AND YOU WILL GENERALLY RECOGNIZE GAIN OR LOSS,
GENERALLY BASED ON THE VALUE AT THAT TIME OF THE SECURITIES AND THE
AMOUNT OF CASH RECEIVED. The IRS could, however, assert that a loss
could not be currently deducted.
Deductibility of Trust Expenses.
Expenses incurred and deducted by the Trust will generally not be
treated as income taxable to you. In some cases, however, you may be
required to treat your portion of these Trust expenses as income. In
these cases you may be able to take a deduction for these expenses.
However, certain miscellaneous itemized deductions, such as investment
expenses, may be deducted by individuals only to the extent that all of
these deductions exceed 2% of the individual's adjusted gross income.
Also, certain individuals may also be subject to a phase-out of the
deductibility of itemized deductions based upon their income.
Investments in Certain Foreign Corporations.
If the Trust holds an equity interest in any "passive foreign investment
companies" ("PFICs"), which are generally certain foreign corporations
that receive at least 75% of their annual gross income from passive
sources (such as interest, dividends, certain rents and royalties or
capital gains) or that hold at least 50% of their assets in investments
producing such passive income, the Trust could be subject to U.S.
federal income tax and additional interest charges on gains and certain
distributions with respect to those equity interests, even if all the
income or gain is timely distributed to its Unit holders. Similarly, if
the Trust invests in a fund (a "Portfolio Fund") that invests in PFICs,
the Portfolio Fund may be subject to such taxes. The Trust will not be
able to pass through to its Unit holders any credit or deduction for
such taxes whenever the taxes are imposed at the Trust level or on a
Portfolio Fund. The Trust (or the Portfolio Fund) may be able to make an
election that could ameliorate these adverse tax consequences. In this
case, the Trust (or the Portfolio Fund) would recognize as ordinary
income any increase in the value of such PFIC shares, and as ordinary
loss any decrease in such value to the extent it did not exceed prior
increases included in income. Under this election, the Trust (or the
Portfolio Fund) might be required to recognize in a year income in
excess of its distributions from PFICs and its proceeds from
dispositions of PFIC stock during that year, and such income would
nevertheless be subject to the distribution requirement and would be
taken into account for purposes of the 4% excise tax. Dividends paid by
PFICs will not be treated as qualified dividend income.
Foreign Investors.
If you are a foreign investor (i.e., an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or
trust), you should be aware that, generally, subject to applicable tax
treaties, distributions from the Trust will be characterized as
dividends for federal income tax purposes (other than dividends which
the Trust properly reports as capital gain dividends) and will be
subject to U.S. income taxes, including withholding taxes, subject to
certain exceptions described below. However, except as described below,
distributions received by a foreign investor from the Trust that are
properly reported by such Trust as capital gain dividends may not be
subject to U.S. federal income taxes, including withholding taxes,
provided that the Trust makes certain elections and certain other
conditions are met.
Distributions may be subject to a U.S. withholding tax of 30% in the
case of distributions to or dispositions by (i) certain non-U.S.
financial institutions that have not entered into an agreement with the
U.S. Treasury to collect and disclose certain information and are not
resident in a jurisdiction that has entered into such an agreement with
the U.S. Treasury and (ii) certain other non-U.S. entities that do not
provide certain certifications and information about the entity's U.S.
owners. Dispositions of Units by such persons may be subject to such
withholding after December 31, 2016.
Foreign Tax Credit.
If at least 50% of the value of the total assets of the Trust (at the
close of the taxable year) is represented by foreign securities or at
least 50% of the value of the total assets of the Trust (at the close of
each quarter of the taxable year) is represented by interests in other
RICs, the tax statement that you receive may include an item showing
foreign taxes the Trust paid to other countries. In this case, dividends
taxed to you will include your share of the taxes the Trust paid to
other countries. You may be able to deduct or receive a tax credit for
your share of these taxes.
You should consult your tax advisor regarding potential foreign, state
or local taxation with respect to your Units.
Page 24
Retirement Plans
You may purchase Units of the Trust for:
- Individual Retirement Accounts;
- Keogh Plans;
- Pension funds; and
- Other tax-deferred retirement plans.
Generally, the federal income tax on capital gains and income received
in each of the above plans is deferred until you receive distributions.
These distributions are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred rollover
treatment. Before participating in a plan like this, you should review
the tax laws regarding these plans and consult your attorney or tax
advisor. Brokerage firms and other financial institutions offer these
plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
Ownership of Units will not be evidenced by certificates. If you
purchase or hold Units through a broker/dealer or bank, your ownership
of Units will be recorded in book-entry form at the Depository Trust
Company ("DTC") and credited on its records to your broker/dealer's or
bank's DTC account. If you purchase or hold FTPS Units, your ownership
of FTPS Units will be recorded in book-entry form on the register of
Unit holdings maintained by the FTPS Unit Servicing Agent. Transfer of
Units will be accomplished by book entries made by DTC and its
participants if the Units are registered to DTC or its nominee, Cede &
Co., or otherwise will be accomplished by book entries made by the FTPS
Unit Servicing Agent, with respect to FTPS Units. DTC will forward all
notices and credit all payments received in respect of the Units held by
the DTC participants. You will receive written confirmation of your
purchases and sales of Units from the broker/dealer or bank through
which you made the transaction or from the FTPS Unit Servicing Agent if
you purchased and hold FTPS Units. You may transfer your Units by
contacting the broker/dealer or bank through which you hold your Units,
or the FTPS Unit Servicing Agent, if you hold FTPS Units.
Unit Holder Reports.
The Trustee will prepare a statement detailing the per Unit amounts (if
any) distributed from the Income Account and Capital Account in
connection with each distribution. In addition, at the end of each
calendar year, the Trustee will prepare a statement which contains the
following information:
- A summary of transactions in the Trust for the year;
- A list of any Securities sold during the year and the Securities held
at the end of that year by the Trust;
- The Redemption Price per Unit, computed on the 31st day of December of
such year (or the last business day before); and
- Amounts of income and capital distributed during the year.
It is the responsibility of the entity through which you hold your Units
to distribute these statements to you. In addition, you may also request
from the Trustee copies of the evaluations of the Securities as prepared
by the Evaluator to enable you to comply with applicable federal and
state tax reporting requirements.
Income and Capital Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit dividends received on the
Trust's Securities to the Income Account of the Trust. All other
receipts, such as return of capital or capital gain dividends, are
credited to the Capital Account of the Trust.
The Trustee will distribute money from the Income and Capital Accounts,
as determined at the semi-annual Record Date, semi-annually on the
twenty-fifth day of each June and December to Unit holders of record on
the tenth day of such months. However, the Trustee will only distribute
money in the Capital Account if the amount available for distribution
from that account equals at least $1.00 per 100 Units. In any case, the
Trustee will distribute any funds in the Capital Account in December of
each year and as part of the final liquidation distribution. See
"Summary of Essential Information." No income distribution will be paid
if accrued expenses of the Trust exceed amounts in the Income Account on
the Distribution Dates. Distribution amounts will vary with changes in
the Trust's fees and expenses, in dividends received and with the sale
of Securities. 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 IRS. You may recover this amount by giving your TIN to the
Trustee, or when you file a tax return. However, you should check your
statements to make sure the Trustee has your TIN to avoid this "back-up
withholding."
We anticipate that there will be enough money in the Capital Account of
the Trust to pay the deferred sales charge. If not, the Trustee may sell
Securities to meet the shortfall.
Page 25
Within a reasonable time after the Trust is terminated, you will receive
a pro rata share of the money from the sale of the Securities. All Unit
holders will receive a pro rata share of any other assets remaining in
your Trust, after deducting any unpaid expenses.
The Trustee may establish reserves (the "Reserve Account") within the
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of that Trust.
Distribution Reinvestment Option. You may elect to have each
distribution of income and/or capital reinvested into additional Units
of the Trust by notifying your broker/dealer or bank (or the FTPS Unit
Servicing Agent with respect to FTPS Units) within the time period
required by such entities so that they can notify the Trustee of your
election 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 such Trust. There is no sales
charge on Units acquired through the Distribution Reinvestment Option,
as discussed under "Public Offering." This option may not be available
in all states. Each reinvestment plan is subject to availability or
limitation by the Sponsor and each broker/dealer or selling firm. The
Sponsor or broker/dealers may suspend or terminate the offering of a
reinvestment plan at any time. Because the Trust may begin selling
Securities nine business days prior to the Mandatory Termination Date,
reinvestment is not available during this period. Please contact your
financial professional for additional information. 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 a
request for redemption to your broker/dealer or bank through which you
hold your Units or to the FTPS Unit Servicing Agent, if you hold FTPS
Units. No redemption fee will be charged, but you are responsible for
any governmental charges that apply. Certain broker/dealers may charge a
transaction fee for processing redemption requests. 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 your redemption
request is received by the Trustee from the broker/dealer or bank
through which you hold your Units, or, if you hold FTPS Units, the date
the redemption request is received by the FTPS Unit Servicing Agent (if
such day is a day the NYSE is open for trading). However, if the
redemption request is received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing income will be withdrawn
from the Income Account if funds are available for that purpose, or from
the Capital Account. All other amounts paid on redemption will be taken
from the Capital Account. The IRS will require the Trustee to withhold a
portion of your redemption proceeds if the Trustee does not have your
TIN as generally discussed under "Income and Capital Distributions."
If you tender for redemption at least 2,500 Units, or such larger amount
as required by your broker/dealer or bank, 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 to your
broker/dealer or bank at the time of tender. However, to be eligible to
participate in the In-Kind Distribution option at redemption, Unit
holders must hold their Units through the end of the initial offering
period. The In-Kind Distribution option is generally not available to
FTPS Unit holders. No In-Kind Distribution requests submitted during the
10 business days prior to the Trust's Mandatory Termination Date will be
honored. Where possible, the Trustee will make an In-Kind Distribution
by distributing each of the Securities in book-entry form to your bank's
or broker/dealer's account at DTC. 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 Securities that make up the portfolio, and
cash from the Capital Account equal to the fractional shares to which
you are entitled.
If you elect to receive an In-Kind Distribution of Securities, you
should be aware that it will be considered a taxable event at the time
you receive the Securities. See "Tax Status" for additional information.
The Trustee may sell Securities to make funds available for redemption.
If Securities are sold, the size and diversification of the Trust will
be reduced. These sales may result in lower prices than if the
Securities were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
Page 26
- If the NYSE is closed (other than customary weekend and holiday
closings);
- If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Income and Capital Accounts of the Trust not designated
to purchase Securities;
2. the aggregate underlying value of the Securities held in the Trust; and
3. dividends receivable on the Securities trading ex-dividend as of the
date of computation; and
deducting
1. any applicable taxes or governmental charges that need to be paid out
of the Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of the Trust, if any;
4. cash held for distribution to Unit holders of record of the Trust as
of the business day before the evaluation being made;
5. liquidation costs for foreign Securities, if any; and
6. other liabilities incurred by the Trust; and
dividing
1. the result by the number of outstanding Units of the Trust.
Any remaining deferred sales charge on the Units when you redeem them
will be deducted from your redemption proceeds. In addition, until they
are collected, the Redemption Price per Unit will include estimated
organization costs as set forth under "Fee Table."
Removing Securities from the Trust
The portfolio of the Trust is not managed. However, we may, but are not
required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- The issuer of the Security defaults in the payment of a declared
dividend;
- Any action or proceeding prevents the payment of dividends;
- There is any legal question or impediment affecting the Security;
- The issuer of the Security has breached a covenant which would affect
the payment of dividends, the issuer's credit standing, or otherwise
damage the sound investment character of the Security;
- The issuer has defaulted on the payment of any other of its
outstanding obligations;
- There has been a public tender offer made for a Security or a merger
or acquisition is announced affecting a Security, and that in our
opinion the sale or tender of the Security is in the best interest of
Unit holders;
- The sale of Securities is necessary or advisable (i) in order to
maintain the qualification of the Trust as a "regulated investment
company" or (ii) to provide funds to make any distribution for a taxable
year in order to avoid imposition of any income or excise taxes on
undistributed income in the Trust;
- The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to the Trust;
- As a result of the ownership of the Security, the Trust or its Unit
holders would be a direct or indirect shareholder of a passive foreign
investment company; or
- The sale of the Security is necessary for the Trust to comply with
such federal and/or state securities laws, regulations and/or regulatory
actions and interpretations which may be in effect from time to time.
Except for instances in which the Trust acquires Replacement Securities,
as described in "The FT Series," the Trust will generally not acquire
any securities or other property other than the Securities. The Trustee,
on behalf of the Trust and at the direction of the Sponsor, will vote
for or against 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 acquired by
the Trust, at our instruction, they will either be sold or held in the
Trust. In making the determination as to whether to sell or hold the
exchanged securities or property we may get advice from the Portfolio
Supervisor. Any proceeds received from the sale of Securities, exchanged
securities or property will be credited to the Capital Account of the
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 Trust to facilitate selling Securities, exchanged
securities or property from the Trust. If we or our affiliate act in
this capacity, we will be held subject to the restrictions under the
1940 Act. As authorized by the Indenture, the Trustee may also employ a
subsidiary or affiliate of the Trustee to act as broker in selling such
Securities or property. The Trust will pay for these brokerage services
at standard commission rates.
The Trustee may sell Securities designated by us, or, absent our
direction, at its own discretion, in order to meet redemption requests
Page 27
or pay expenses. In designating Securities to be sold, we will try to
maintain the proportionate relationship among the Securities. If this is
not possible, the composition and diversification of the Trust may be
changed.
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 adverse to your best
interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, the Trust will terminate on
the Mandatory Termination Date as stated in the "Summary of Essential
Information." The Trust may be terminated earlier:
- Upon the consent of 100% of the Unit holders of the Trust;
- If the value of the Securities owned by the Trust as shown by any
evaluation is less than the lower of $2,000,000 or 20% of the total
value of Securities deposited in the Trust during the initial offering
period ("Discretionary Liquidation Amount"); or
- In the event that Units of the Trust not yet sold aggregating more
than 60% of the Units of the Trust are tendered for redemption by
underwriters, including the Sponsor.
If the Trust is terminated due to this last reason, we will refund your
entire sales charge; however, termination of the 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, the Trust may be
reduced below the Discretionary Liquidation Amount and could therefore
be terminated before the Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of the Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Securities. Because the Trustee must sell the Securities within a
relatively short period of time, the sale of Securities as part of the
termination process may result in a lower sales price than might
otherwise be realized if such sale were not required at this time.
You will receive a cash distribution from the sale of the remaining
Securities, along with your interest in the Income and Capital Accounts,
within a reasonable time after the Trust is terminated. The Trustee will
deduct from the Trust any accrued costs, expenses, advances or
indemnities provided for by the Indenture, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to pay any taxes or other governmental charges.
Information on the Sponsor, Trustee,
FTPS Unit Servicing Agent and Evaluator
The Sponsor.
We, First Trust Portfolios 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 took over the First Trust product line and 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
The First Trust product line commenced with the first insured unit
investment trust in 1974. To date we have deposited more than $235
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 FINRA and SIPC. Our principal offices are at 120 East
Liberty Drive, Wheaton, Illinois 60187; telephone number 800-621-1675.
As of December 31, 2013, the total consolidated partners' capital of
First Trust Portfolios L.P. and subsidiaries was $56,474,953 (audited).
This information refers only to us and not to the Trust or to any series
of the Trust or to any other dealer. We are including this information
only to inform you of our financial responsibility and our ability to
carry out our contractual obligations. We will provide more detailed
financial information on request.
Code of Ethics. The Sponsor and the Trust have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to the Trust.
Page 28
The Trustee.
The Trustee is The Bank of New York Mellon, a trust company organized
under the laws of New York. The Bank of New York Mellon has its unit
investment trust division offices at 101 Barclay Street, New York, New
York 10286, telephone 800-813-3074. If you have questions regarding your
account or your Trust, please contact the Trustee at its unit investment
trust division offices or your financial advisor. The Sponsor does not
have access to individual account information. The Bank of New York
Mellon is subject to supervision and examination by the Superintendent
of the New York State Department of Financial Services and the Board of
Governors of the Federal Reserve System, and its deposits are insured by
the Federal Deposit Insurance Corporation to the extent permitted by law.
The Trustee has not participated in selecting the Securities; it only
provides administrative services.
The FTPS Unit Servicing Agent.
The FTPS Unit Servicing Agent is FTP Services LLC, an Illinois limited
liability company formed in 2005 and an affiliate of the Sponsor. FTP
Services LLC acts as record keeper, shareholder servicing agent and
distribution agent for Units which are purchased and sold through the
Fund/SERV(R) trading system or on a manual basis through FTP Services
LLC. FTP Services LLC provides FTPS Units with administrative and
distribution related services as described in this prospectus. The FTPS
Unit Servicing Agent's address is 120 East Liberty Drive, Wheaton,
Illinois 60187. If you have questions regarding the FTPS Units, you may
call the FTPS Unit Servicing Agent at 800-621-1675, dept. code 1. The
FTPS Unit Servicing Agent has not participated in selecting the
Securities; it only provides administrative services to the FTPS Units.
Fund/SERV(R) is a service of National Securities Clearing Corporation, a
subsidiary of The Depository Trust & Clearing Corporation.
Limitations of Liabilities of Sponsor, FTPS Unit Servicing Agent and
Trustee.
Neither we, the FTPS Unit Servicing Agent 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 FTPS Unit Servicing
Agent and 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 120 East Liberty Drive, Wheaton, Illinois 60187.
The Trustee, Sponsor, FTPS Unit Servicing Agent 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,
FTPS Unit Servicing Agent or Unit holders for errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler LLP, 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 LLP acts as the Trustee's counsel.
Experts.
The Trust's statement of net assets, including the schedule of
investments, as of the opening of business on the Initial Date of
Deposit included in this prospectus, has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated
in their report appearing herein, and is included in reliance upon the
report of such firm given upon their authority as experts in accounting
and auditing.
Supplemental Information.
If you write or call the Sponsor, 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 29
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Page 31
First Trust(R)
Strategic Sectors Portfolio Series
FT 5136
Sponsor:
First Trust Portfolios L.P.
Member SIPC o Member FINRA
120 East Liberty Drive
Wheaton, Illinois 60187
800-621-1675
FTPS Unit Servicing Agent: Trustee:
FTP Services LLC The Bank of New York Mellon
120 East Liberty Drive 101 Barclay Street
Wheaton, Illinois 60187 New York, New York 10286
800-621-1675, dept. code 1 800-813-3074
24-Hour Pricing Line:
800-446-0132
Please refer to the "Summary of Essential
Information" for the Product Code.
________________________
When Units of the Trust 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 trust, but does not contain all of the information about
this investment company as filed with the SEC in Washington, D.C. under
the:
- Securities Act of 1933 (file no. 333-199578) and
- Investment Company Act of 1940 (file no. 811-05903)
Information about the Trust, including its Code of Ethics, can be
reviewed and copied at the SEC's Public Reference Room in Washington
D.C. Information regarding the operation of the SEC's Public Reference
Room may be obtained by calling the SEC at 202-942-8090.
Information about the Trust is available on the EDGAR Database on the
SEC's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the SEC
100 F Street, N.E.
Washington, D.C. 20549
e-mail address: publicinfo@sec.gov
October 31, 2014
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 32
First Trust(R)
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in FT 5136 not found in the prospectus for the Trust. This
Information Supplement is not a prospectus and does not include all of
the information you should consider before investing in the Trust. This
Information Supplement should be read in conjunction with the prospectus
for the Trust in which you are considering investing.
This Information Supplement is dated October 31, 2014. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors
Securities 1
Dividends 1
Foreign Issuers 1
Concentration
Industrials 2
Risk Factors
Securities. An investment in Units should be made with an understanding
of the risks which an investment in common stocks entails, including the
risk that the financial condition of the issuers of the Securities or
the general condition of the relevant stock market may worsen, and the
value of the Securities and therefore the value of the Units may
decline. Common stocks are especially susceptible to general stock
market movements and to volatile increases and decreases of value, as
market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors, including expectations
regarding government, economic, monetary and fiscal policies, inflation
and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Both U.S. and foreign
markets have experienced substantial volatility and significant declines
recently as a result of certain or all of these factors.
Dividends. Shareholders of common stocks have rights to receive payments
from the issuers of those common stocks that are generally subordinate
to those of creditors of, or holders of debt obligations or preferred
stocks of, such issuers. Shareholders of common stocks of the type held
by the Trust 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.
Foreign Issuers. The following section applies to individual Trusts
which contain Securities issued by, or invest in securities issued by,
foreign entities. Since certain of the Securities in the Trust consist
of, or invest in, securities issued by foreign entities, an investment
in the Trust involves certain investment risks that are different in
some respects from an investment in a trust which invests solely in the
securities of domestic entities. 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, as amended, there may be less publicly available information
Page 1
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 Trust, the
Sponsor believes that adequate information will be available to allow
the Supervisor to provide portfolio surveillance for the Trust.
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.
On the basis of the best information available to the Sponsor at the
present time, none of the Securities in the Trust are subject to
exchange control restrictions under existing law which would materially
interfere with payment to the Trust of dividends due on, or proceeds
from the sale of, the Securities. However, there can be no assurance
that exchange control regulations might not be adopted in the future
which might adversely affect payment to the Trust. The adoption of
exchange control regulations and other legal restrictions could have an
adverse impact on the marketability of international securities in the
Trust and on the ability of the Trust to satisfy its obligation to
redeem Units tendered to the Trustee for redemption. In addition,
restrictions on the settlement of transactions on either the purchase or
sale side, or both, could cause delays or increase the costs associated
with the purchase and sale of the foreign Securities and correspondingly
could affect the price of the Units.
Investors should be aware that it may not be possible to buy all
Securities at the same time because of the unavailability of any
Security, and restrictions applicable to the 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 the Trust in
the United States securities markets are subject to severe restrictions
and may not be practicable. Accordingly, sales of these Securities by
the Trust will generally be effected only in foreign securities markets.
Although the Sponsor does not believe that the 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.
Concentration
Industrials. The profitability of industrial companies will be affected
by various factors including the general state of the economy, intense
competition, domestic and international politics, excess capacity and
spending trends.
The Internet may also influence the industrial market. Customers' desire
for better pricing and convenience, as well as manufacturers' desire to
boost profitability by finding new avenues of sales growth and
productivity gains, may drive many industrial manufacturers to invest
heavily in Internet hardware and software. Because the Internet allows
manufacturers to take orders directly from customers, thus eliminating
the middlemen from both supply chains and distributors, industrial
makers may no longer need traditional third-party outfits to distribute
their products. In addition, the Internet may also allow industrial
manufacturers to cut inventory levels, by enabling customers to tailor
their orders to their specific needs.
Industrial companies may also be affected by factors more specific to
their individual industries. Industrial machinery manufacturers may be
subject to declines in consumer demand and the need for modernization.
Agricultural equipment businesses may be influenced by fluctuations in
farm income, farm commodity prices, government subsidies and weather
conditions. The number of housing starts, levels of public and non-
residential construction including weakening demand for new office and
retail space, and overall construction spending may adversely affect
construction equipment manufacturers, while overproduction,
consolidation and weakening global economies may lead to deteriorating
sales for truck makers.
Page 2
CONTENTS OF REGISTRATION STATEMENT
A. Bonding Arrangements of Depositor:
First Trust Portfolios L.P. is covered by a Brokers' Fidelity Bond, in the
total amount of $2,000,000, the insurer being National Union Fire
Insurance Company of Pittsburgh.
B. This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
The Registrant, FT 5136, hereby identifies The First Trust Special
Situations Trust, Series 4; The First Trust Special Situations Trust, Series
18; The First Trust Special Situations Trust, Series 69; The First Trust
Special Situations Trust, Series 108; The First Trust Special Situations
Trust, Series 119; The First Trust Special Situations Trust, Series 190; FT
286; The First Trust Combined Series 272; FT 412; FT 438; FT 556; FT 754; FT
1102; FT 1179; FT 2935; FT 3320; FT 3367; FT 3370; FT 3397; FT 3398; FT
3400; FT 3451; FT 3480; FT 3529; FT 3530; FT 3568; FT 3569; FT 3570; FT
3572; FT 3615; FT 3647; FT 3650; FT 3689; FT 3690; FT 3729; FT 3780; FT
3940; FT 4020; FT 4037; FT 4143; FT 4260; FT 4746; FT 4789 and FT 5039 for
purposes of the representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series with respect
to which this Registration Statement is being filed do not differ materially
in type or quality from those deposited in such previous series;
(2) that, except to the extent necessary to identify the specific
portfolio securities deposited in, and to provide essential financial
information for, the series with respect to the securities of which this
Registration Statement is being filed, this Registration Statement does not
contain disclosures that differ in any material respect from those contained
in the registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities Act of
1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, FT 5136, has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wheaton and State of Illinois on October 31,
2014.
FT 5136
By FIRST TRUST PORTFOLIOS L.P.
Depositor
By Elizabeth H. Bull
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
Name Title* Date
---- ----- ----
James A. Bowen Director of The Charger Corporation, ) October 31, 2014
the General Partner of First Trust )
Portfolios L.P. )
)
)
) Elizabeth H. Bull
) Attorney-in-Fact**
* The title of the person named herein represents his capacity in and
relationship to First Trust Portfolios L.P., the Depositor.
** An executed copy of the related power of attorney was filed with the
Securities and Exchange Commission in connection with the Amendment No. 2
to Form S-6 of FT 2669 (File No. 333-169625) and the same is hereby
incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Amendment No. 1 to Registration Statement
No. 333-199578 on Form S-6 of our report dated October 31, 2014, relating to the
financial statement of FT 5136, comprising Strategic Sectors Portfolio Series,
appearing in the Prospectus, which is a part of such Registration Statement, and
to the reference to us under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
October 31, 2014
S-4
CONSENT OF COUNSEL
The consent of counsel to the use of its name in the Prospectus included
in this Registration Statement will be contained in its opinion to be filed as
Exhibit 3.1 of the Registration Statement.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its name in the
Prospectus included in the Registration Statement will be filed as Exhibit 4.1
to the Registration Statement.
S-5
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for FT 4484 and
certain subsequent Series, effective November 6, 2013 among First
Trust Portfolios L.P., as Depositor, The Bank of New York Mellon, as
Trustee, First Trust Advisors L.P., as Evaluator, First Trust
Advisors L.P., as Portfolio Supervisor and FTP Services LLC, as FTPS
Unit Servicing Agent (incorporated by reference to Amendment No. 1 to
Form S-6 [File No. 333-191558] filed on behalf of FT 4484).
1.1.1 Form of Trust Agreement for FT 5136 and certain subsequent Series,
effective October 31, 2014 among First Trust Portfolios L.P., as
Depositor, The Bank of New York Mellon, as Trustee, First Trust
Advisors L.P., as Evaluator, First Trust Advisors L.P., as Portfolio
Supervisor, and FTP Services LLC, as FTPS Unit Servicing Agent.
1.2 Copy of Certificate of Limited Partnership of First Trust Portfolios
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 First
Trust Portfolios 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 The Charger Corporation, the
general partner of First Trust Portfolios 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 The Charger Corporation, the general partner of
First Trust Portfolios L.P., Depositor (incorporated by reference to
Amendment No. 2 to Form S-6 [File No. 333-169625] filed on behalf of
FT 2669).
1.6 Underwriter Agreement (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42755] filed on behalf of The First Trust
Special Situations Trust, Series 19).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1 filed
herewith on page 2 and incorporated herein by reference).
S-6
2.2 Copy of Code of Ethics (incorporated by reference to Amendment No.1
to Form S-6 [File No. 333-156964] filed on behalf of FT 1987).
3.1 Opinion of counsel as to legality of securities being registered.
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. 2
to Form S-6 [File No. 333-169625] filed on behalf of FT 2669).
S-7
Dates Referenced Herein and Documents Incorporated by Reference
This ‘487’ Filing | | Date | | Other Filings |
---|
| | |
| | 12/31/16 |
| | 10/31/16 | | 24F-2NT |
| | 10/31/15 |
| | 4/20/15 |
| | 2/20/15 |
| | 12/25/14 |
| | 12/10/14 |
| | 11/5/14 | | 497J |
Filed on / Effective on: | | 10/31/14 |
| | 12/31/13 |
| | 11/6/13 |
| List all Filings |
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