SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: THE FIRST TRUST GNMA, SERIES 76
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositors 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of NIKE SECURITIES L.P.
Agents for Service: Attention: James A. Bowen
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN AND CUTLER
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
E. Title and Amount of Securities An indefinite number of Units
Being Registered: pursuant to Rule 24f-2
promulgated under the
Investment Company Act of
1940, as amended
F. Approximate Date of Proposed _____ Check if it is proposed
Sale to the Public: that this filing will become
effective on ___ at: ___ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED SEPTEMBER 14, 1999
The John R. Taylor GNMA Trust
The First Trust GNMA, Series 76
The First Trust GNMA, Series 76 consists of a unit investment trust
known as The John R. Taylor GNMA Trust (the "Trust"). The Trust seeks to
provide a high level of current income through an investment in a
portfolio of fixed-rate mortgage-backed securities issued by Government
National Mortgage Association ("GNMA" or "Ginnie Mae") (the "Securities").
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
John R. Taylor Financial Group, Inc.
The date of this prospectus is ____________, 1999
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statement of Net Assets 6
Schedule of Investments 7
The First Trust GNMA Series 8
Portfolio 9
Estimated Returns and Estimated Average Life 9
Risk Factors 10
Public Offering 11
Distribution of Units 13
The Sponsor's and Underwriter's Profits 13
The Secondary Market 14
How We Purchase Units 14
Expenses and Charges 14
Tax Status 15
Retirement Plans 16
Rights of Unit Holders 16
Interest and Principal Distributions 17
Redeeming Your Units 18
Removing Securities from the Trust 18
Amending or Terminating the Indenture 19
Rating of the Units 20
Information on the Underwriter, Sponsor, Trustee and Evaluator 20
Other Information 21
Page 2
Summary of Essential Information
THE JOHN R. TAYLOR GNMA TRUST
THE FIRST TRUST GNMA, SERIES 76
At the Opening of Business on the
Initial Date of Deposit-____________, 1999
Sponsor: Nike Securities L.P.
Underwriter: John R. Taylor Financial Group, Inc.
Trustee: The Chase Manhattan Bank
Evaluator: Securities Evaluation Services, Inc.
<TABLE>
<CAPTION>
<S> <C>
Initial Number of Units
Fractional Undivided Interest in the Trust per Unit 1/
Principal Amount (Par Value) of Securities per Unit (1) $
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit $
Maximum Sales Charge of .325% of the Public Offering Price per Unit
(3.28% of the net amount invested) (2) $
Less Deferred Sales Charge per Unit $ (.225)
Public Offering Price per Unit (3) $
Sponsor's Initial Repurchase Price per Unit (4) $
Redemption Price per Unit (based on aggregate underlying value of Securities) (4) $
CUSIP
Security Code
First Settlement Date ____________, 1999
Mandatory Termination Date (5) ____________, 20__
Estimated Average Life (6)
Estimated Net Annual Interest Income per Unit (7) $
Estimated Current Return (6) %
Estimated Long-Term Return (6) %
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Interest Distribution Record Date Fifteenth day of each month, commencing ____________, 1999.
Interest Distribution Date (7) Last day of each month, commencing ____________, 1999.
____________
<FN>
(1) Because the Securities will pay principal during the life of the
Trust and may, in certain circumstances, be sold, redeemed, prepaid or
mature in accordance with their terms, the Unit value at the Mandatory
Termination Date will not be equal to the Principal Amount (Par Value)
of Securities per Unit stated above.
(2) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" and "Public Offering."
(3) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit.
Evaluations for purposes of sale, purchase or redemption of Units are
made as of the close of trading (generally 4:00 p.m. Eastern time) on
the New York Stock Exchange ("NYSE") on each day on which it is open
(the "Evaluation Time"). No investor will purchase Units at this price.
Additional Units may be created during the day of the Initial Date of
Deposit which, along with the Units described above, will be valued as
of the Evaluation Time on the Initial Date of Deposit and sold to
investors at the Public Offering Price per Unit based on this valuation.
On the Initial Date of Deposit the Public Offering Price per Unit will
not include any accrued interest on the Securities. After the Initial
Date of Deposit, the Public Offering Price per Unit will include a pro
rata share of any accrued interest on the Securities. See "Fee Table"
and "Public Offering."
(4) Until the end of the initial offering period the Sponsor's Initial
Repurchase Price per Unit and the Redemption Price per Unit will include
the estimated organization costs per Unit set forth under "Fee Table."
After such date, the Sponsor's Repurchase Price and Redemption Price per
Unit will not include such estimated organization costs. See "Redeeming
Your Units."
(5) See "Amending or Terminating the Indenture."
(6) There is no assurance that the Estimated Current Return, Estimated
Long-Term Return or Estimated Average Life will remain the same over the
life of the Trust. See "Estimated Current Return, Estimated Long-Term
Return and Estimated Average Life."
(7) The amount of distributions from the Interest Account will vary from
month to month for various reasons, including changes in the Trust's
fees and expenses, the sale of Securities, principal payments and
prepayments. Distributions from the Principal Account will be made
monthly utilizing the same record and distribution date as for Interest
distributions provided the amount available for distribution equals at
least $1.00 per 100 Units. In any case, we will distribute any funds in
the Capital Account as part of the final liquidation distribution.
</FN>
</TABLE>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may pay if you
buy and hold Units of the Trusts. See "Public Offering" and "Expenses
and Charges." Although the Trust has a term of approximately ___ years,
and is a unit investment trust rather than a mutual fund, this
information allows you to compare fees.
<TABLE>
<CAPTION>
Amount
per Unit
________
<S> <C> <C>
Unit Holder Transaction Expenses
(as a percentage of public offering price)
Initial sales charge imposed on purchase 1.00%(a) $.100
Deferred sales charge 2.25%(b) .225
_____ _____
Maximum sales charge 3.25% $.325
===== =====
Organization Costs
(as a percentage of public offering price)
Estimated organization costs %(c) $
==== =====
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Portfolio supervision, bookkeeping,
administrative and evaluation fees % $
Trustee's fee and other operating expenses %(d)
____ _____
Total % $
==== =====
</TABLE>
This example is intended to help you compare the cost of investing in
the Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trust for the periods
shown and sell all your Units at the end of those periods. The example
also assumes a 5% return on your investment each year and that the
Trust's operating expenses stay the same. Although your actual costs may
vary, based on these assumptions your costs under each distribution
option would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $
3 Years $
5 Years $
10 Years $
The example will not differ if you hold rather than sell your Units at
the end of each period.
______________
<FN>
(a) The amount of the initial sales charge will vary depending on the
purchase price of your Units. The amount of the initial sales charge is
actually the difference between the maximum sales charge (.325% of the
Public Offering Price) and the maximum remaining deferred sales charge
(initially $.225 per Unit). When the Public Offering Price exceeds
$10.00 per Unit, the initial sales charge will exceed 1.00% of the
Public Offering Price per Unit.
(b) The deferred sales charge is a fixed dollar amount equal to $.225
per Unit which will be deducted in monthly installments of $.045 per
Unit beginning May 19, 2000 and on the 20th day of each month thereafter
(or if such day is not a business day, on the previous business day)
through September 20, 2000. If you buy Units at a price of less than
$10.00 per Unit, the dollar amount of the deferred sales charge will not
change but the deferred sales charge on a percentage basis will be more
than 2.25% of the Public Offering Price. If you purchase Units after the
first deferred sales charge payment has been deducted, your purchase
price will include both the initial sales charge and any remaining
deferred sales charge payments.
(c) You will bear all or a portion of the costs incurred in organizing
the Trust. These estimated organization costs are included in the price
you pay for your Units and will be deducted from the assets of the Trust
at the end of the initial offering period.
(d) Other operating expenses do not include brokerage costs and other
portfolio transaction fees.
</FN>
</TABLE>
Page 4
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
The First Trust GNMA, Series 76
We have audited the accompanying statement of net assets, including the
schedule of investments, of The First Trust GNMA, Series 76, comprised
of The John R. Taylor GNMA Trust, as of the opening of business on
____________, 1999. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement
of net assets. Our procedures included confirmation of the letter of
credit held by the Trustee and deposited in the Trust on ____________,
1999. An audit also includes assessing the accounting principles used
and significant estimates made by the Sponsor, as well as evaluating the
overall presentation of the statement of net assets. We believe that our
audit of the statement of net assets provides a reasonable basis for our
opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of The First
Trust GNMA, Series 76, comprised of The John R. Taylor GNMA Trust,
at the opening of business on ____________, 1999 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
____________, 1999
Page 5
Statement of Net Assets
THE JOHN R. TAYLOR GNMA TRUST
THE FIRST TRUST GNMA, SERIES 76
At the Opening of Business on the
Initial Date of Deposit-____________, 1999
<TABLE>
<CAPTION>
<S> <C>
NET ASSETS
Investments in Securities represented by purchase contracts (1)(2) $
Accrued interest on underlying Securities (2)(3)
________
Less liability for reimbursement to Sponsor for organization costs (4) ( )
Less distributions payable (3) ( )
Less liability for deferred sales charge (5)
________
Net assets $
=========
Outstanding units
ANALYSIS OF NET ASSETS
Cost to investors (6) $
Less maximum sales charge (6) ( )
Less estimated reimbursement to Sponsor for organization costs (4) ( )
_________
Net assets $
=========
________________
<FN>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by The Chase Manhattan Bank,
of which $ will be allocated to the Trust, has been deposited with
the Trustee as collateral, covering the monies necessary for the
purchase of the Securities according to their purchase contracts ($ ),
accrued interest to the Initial Date of Deposit ($ ) and accrued
interest from the Initial Date of Deposit to the expected dates of
delivery of the Securities ($ ).
(3) The Trustee will advance to the Trust the amount of net interest
accrued to the First Settlement Date which will be distributed to the
Sponsor as Unit holder of record.
(4) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trust. These costs have been estimated at $ per Unit
for the Trust. A payment will be made at the end of the initial offering
period to an account maintained by the Trustee from which the obligation
of the investors to the Sponsor will be satisfied. To the extent that
actual organization costs are greater than the estimated amount, only
the estimated organization costs added to the Public Offering Price will
be reimbursed to the Sponsor and deducted from the assets of the Trust.
(5) Represents the amount of mandatory deferred sales charge
distributions from the Trust ($.225 per Unit), payable to us in five
equal monthly installments beginning on May 19, 2000 and on the
twentieth day of each month thereafter (or if such day is not a business
day, on the preceding business day) through September 20, 2000. If you
redeem Units before September 20, 2000 you will have to pay the
remaining amount of the deferred sales charge applicable to such Units
when you redeem them.
(6) The aggregate cost to investors in the Trust includes a maximum
sales charge (comprised of an initial and a deferred sales charge)
computed at the rate of .325% of the Public Offering Price per Unit
(equivalent to 3.28% of the net amount invested), assuming no reduction
of sales charge as set forth under "Public Offering."
</FN>
</TABLE>
Page 6
Schedule of Investments
THE JOHN R. TAYLOR GNMA TRUST
THE FIRST TRUST GNMA, SERIES 76
At the Opening of Business on the
Initial Date of Deposit-____________, 1999
Government National Mortgage Association, Modified Pass-Through Mortgage-
Backed Securities
<TABLE>
<CAPTION>
Years of Stated Cost of
Aggregate Maturity Securities to
Principal Coupon Rate Trust (2)
_________ ___________ _______________ ____________
<S> <C> <C> <C>
$ % 20__ - 20__ $
========= ===========
_____________
<FN>
(1) All Securities are represented by regular way contracts to purchase
such Securities for the performance of which an irrevocable letter of
credit has been deposited with the Trustee. We entered into purchase
contracts for the Securities on ____________, 1999 and we expect that
they will all settle on or prior to ____________, 1999.
(2) The cost of the Securities to the Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the offering side evaluation of the Securities at the
Evaluation Time on the business day preceding the Initial Date of
Deposit). The valuation of the Securities has been determined by the
Evaluator. The cost of the Securities to us and our profit or loss
(which is the difference between the cost of the Securities to us and
the cost of the Securities to the Trust) are $ and $ , respectively.
</FN>
</TABLE>
Page 7
The First Trust GNMA Series
The First Trust GNMA Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created several similar
yet separate series of an investment company which we have named The
First Trust GNMA Series. We designate each of these investment company
series, The First Trust GNMA Series, with a different series number.
YOU MAY GET MORE SPECIFIC DETAILS ON SOME OF THE INFORMATION IN THIS
PROSPECTUS IN AN "INFORMATION SUPPLEMENT" BY CALLING THE TRUSTEE AT 1-
800-682-7520.
What We Call the Trust.
This First Trust GNMA Series consists of one unit investment trust known
as The John R. Taylor GNMA Trust.
Mandatory Termination Date.
The Trust will terminate upon the redemption, sale or other disposition
of the last Security held in the Trust, but in no case later than its
Mandatory Termination Date set forth in "Summary of Essential
Information." 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 between Nike Securities L.P., as
Sponsor, The Chase Manhattan Bank as Trustee, First Trust Advisors L.P.
as Portfolio Supervisor and Securities Evaluation Services, Inc. as
Evaluator, governs the operation of the Trust.
How We Created the Trust.
On the Initial Date of Deposit, we deposited the Securities with the
Trustee, and in turn, the Trustee delivered documents to us representing
our ownership of the Trust in the form of units ("Units").
With our deposit of the Securities on the Initial Date of Deposit we
established a percentage relationship among the Securities in the
Trust's portfolio, as stated under "Schedule of Investments." After the
Initial Date of Deposit, we may deposit additional Securities in the
Trust, or cash (including a letter of credit) with instructions to buy
more Securities, in order to create new Units for sale. If we create
additional Units, we will attempt, to the extent practicable, to
maintain the original percentage relationship established among the
Securities on the Initial Date of Deposit, and not the actual percentage
relationship existing on the day we are creating the Units, since the
two may differ. This difference may be due to the sale, redemption or
liquidation of any of the Securities.
Since the prices of the underlying 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 will pay brokerage fees to buy the
Securities. 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.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may, from time to time, retain and pay us (or our affiliate) to
act as agent for the Trust to buy Securities. If we or an affiliate of
ours act as agent to the Trust we will be subject to the restrictions
under the Investment Company Act of 1940, as amended.
We cannot guarantee that the Trust will keep its present size and
composition for any length of time. Securities may periodically be
redeemed, prepaid or sold under certain circumstances, and the proceeds
from these sales will be used to meet Trust obligations or distributed
to Unit holders, but will not be reinvested. However, Securities will
not be sold to take advantage of market fluctuations or changes in
anticipated rates of appreciation or depreciation, or if they no longer
meet the criteria by which they were selected. You will not be able to
dispose of any of the Securities in the Trust or vote the Securities. As
the holder of the Securities, the Trustee will vote all of the
Securities and will do so based on our instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in the Trust fails, unless we can
purchase substitute Securities ("Replacement Securities"), we will
refund to you that portion of the purchase price, accrued interest and
sales charge resulting from the failed contract on the next Income
Distribution Date. Any Replacement Security the Trust acquires will be
Page 8
identical to those from the failed contract.
Portfolio
Objectives.
The objective of The John R. Taylor GNMA Trust is to provide a high
level of current income through an investment in a portfolio of fixed-
rate mortgage-backed securities representing pools of mortgages on 1- to
4-family dwellings issued by Ginnie Mae. As a Unit holder, you will
receive a portion of the interest and principal paid by homeowners on
these mortgages every month.
GNMA, an organization created by the U.S. Government, guarantees the
timely payment of principal and interest on the Securities. Of course,
the guarantee applies only to the timely payment of principal and
interest on the Securities and not to the Units themselves. In the
opinion of John Taylor Financial Group, Inc. (the "Underwriter") the
mortgage-backed securities market is one of the largest securities
marketplaces in the world. The yields available on mortgage-backed
securities historically have outperformed the rates available on
treasuries and CDs. The Underwriter believes that one of the primary
benefits of the Trust is allowing the individual investor the
opportunity to participate in the income potential the mortgage-backed
securities market provides.
The Securities have been selected for the Trust by the Underwriter's
fixed income trading staff. The fixed income trading staff is led by
Dane Fulmer, who has 26 years trading experience and is a nationally
recognized expert in fixed income securities.
The Trust has an expected life of approximately ____ years. See "Risk
Factors" for a discussion of the risks of investing in the Trust.
Estimated Returns and
Estimated Average Life
As of the date of this prospectus, Estimated Current Return and
Estimated Long-Term Return are set forth in "Summary of Essential
Information." Estimated Current Return is computed by dividing the
Estimated Net Annual Interest Income per Unit by the Public Offering
Price per Unit. Estimated Net Annual Interest Income per Unit will vary
with changes in fees and expenses and with principal prepayments,
redemption, maturity, exchange or sale of the Securities, while the
Public Offering Price will vary with changes in the aggregate underlying
value of the Securities. Therefore, there is no assurance that the
Estimated Current Return set forth in "Summary of Essential Information"
will be realized in the future.
Unlike Estimated Current Return, Estimated Long-Term Return is a measure
of the estimated return to the investor earned over the estimated life
of the Trust. Estimated Long-Term Return factors in the Estimated
Average Life of the Securities in the Trust and is calculated using a
formula which (1) factors in the relative weightings of the market
values, yields (which take into account the amortization or premiums and
the accretion of discounts) and estimated retirements of the Securities;
and (2) takes into account a compounding factor, the sales charge and
expenses. Like Estimated Current Return, there is no assurance that the
Estimated Long-Term Return set forth in "Summary of Essential
Information" will be realized in the future because the various
components used to calculate this figure will change. In addition,
neither Estimated Current Return or Estimated Long-Term Return reflects
the true return you will receive, which will be lower, because neither
includes the effect of certain delays in distributions. We will provide
you with estimated cash flows for the Trust at no charge if you request
them.
In order to calculate Estimated Average Life, an estimated prepayment
rate for the remaining term of the mortgage pool must be determined.
Each of the primary market makers in Ginnie Mae Securities use
sophisticated computer models to determine the estimated prepayment
rate. These computer models take into account a number of factors and
assumptions including: actual prepayment data reported by GNMA for
recent periods on a particular pool, the impact of aging on the
prepayment of mortgage pools, the current interest rate environment, the
coupon, the housing environment, historical trends on GNMA securities as
a group, geographical factors and general economic trends. In
determining the Estimated Average Life of the Securities in the Trust we
have relied upon the estimated prepayment rate determined by a primary
market maker. We cannot be certain that this estimate will prove
accurate or whether the estimated prepayment rate determined by another
primary market maker would have provided a better estimate. Any
Page 9
difference between the estimate we use and the actual prepayment rate
will affect the Estimated Long-Term Return of the Trust.
Risk Factors
Price Volatility. The Trust invests in mortgage-backed securities. The
value of these Securities will decline with increases in interest rates,
not only because increases in rates generally decrease values, but also
because increased rates may indicate an economic slowdown. The value of
the Securities will also fluctuate with changes in the general condition
of the mortgage-backed securities market, changes in inflation rates or
when political or economic events affecting Ginnie Mae occur.
Because the Trust is not managed, the Trustee will not sell Securities
in response to or in anticipation of market fluctuations, as is common
in managed investments. As with any investment, we cannot guarantee that
the performance of the Trust will be positive over any period of time or
that you won't lose money. Units of the Trust are not deposits of any
bank and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Mortgage-Backed Securities. Mortgage-backed securities represent an
ownership interest in mortgage loans made by banks and other financial
institutions to finance purchases of homes. The individual mortgage
loans are "pooled" together for sale to investors. As the underlying
mortgage loans are paid off, investors receive principal and interest
payments.
Fixed-rate mortgage-backed securities represent a pool of mortgage loans
which pay a fixed rate of interest over the life of the loan. The value
of fixed-rate mortgage-backed securities generally decreases when
interest rates rise.
Guarantees. The Securities, but not the Units, are guaranteed as to the
timely payment of principal and interest by Ginnie Mae. Ginnie Mae
Securities are supported by the full faith and credit of the U.S.
government. You should note that the guaranty does not apply to the
market prices and yields of the Securities, which will vary with changes
in interest rates and other market conditions.
Prepayment Risk. Mortgage-backed securities differ from conventional
debt securities because principal is paid back over the life of the
security rather than at maturity. The Trust may receive unscheduled
prepayments of principal prior to a Security's maturity date due to
voluntary pre-payments, refinancing or foreclosure on the underlying
mortgage loans. The impact on the Trust would be a loss of anticipated
interest, and a portion of its principal investment represented by any
premium the Trust may have paid. Mortgage prepayments generally increase
with falling interest rates and decrease with rising interest rates. If
you receive principal payments earlier than you expect you may not be
able to reinvest these proceeds into an instrument which provides a rate
of return equal to or greater than the Trust.
Interest Income. Since the Trust can only distribute what it receives,
interest distributions will decrease as principal on the Securities is
paid or prepaid.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed in the United States which may have a negative
impact on mortgage-backed securities or their issuers. In addition,
litigation regarding Ginnie Mae or the mortgage-backed securities market
may negatively impact the share prices of these Securities. We cannot
predict what impact any pending or proposed legislation or pending or
threatened litigation will have on the value of the Securities.
Year 2000 Problem. Many computer systems were not designed to properly
process information and data involving dates of January 1, 2000 and
thereafter. This is commonly known as the "Year 2000 Problem." We do not
expect that any of the computer system changes necessary to prepare for
January 1, 2000 will cause any major operational difficulties for the
Trust. However, we are unable to predict what impact the Year 2000
Problem will have on any of the issuers of the Securities.
Underwriter Recommendations. While the Underwriter has carefully
evaluated and approved the Securities in the Trust for this purpose,
they may choose for any reason not to recommend any or all of the
Securities for another purpose or at a later date. This may affect the
value of your Units. In addition, the Underwriter in its general
securities business acts as agent or principal in connection with buying
and selling securities, including the Securities, and may have bought
the Securities for the Trust, thereby benefiting.
Page 10
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the price per Unit of
which is comprised of the following:
- - The aggregate underlying value of the Securities;
- - The amount of any cash in the Interest and Principal Accounts;
- - Accrued interest on the Securities; and
- - The total sales charge (which combines an initial up-front sales
charge and a deferred sales charge).
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the aggregate underlying value of the
Securities and changes in the value of the Interest and Principal
Accounts.
Securities purchased with the portion of the Public Offering Price
intended to be used to reimburse the Sponsor for the Trust's
organization costs (including costs of preparing the registration
statement, the Indenture and other closing documents, registering Units
with the Securities and Exchange Commission ("SEC") and states, the
initial audit of the Trust portfolio, legal fees and the initial fees
and expenses of the Trustee) will be purchased in the same proportionate
relationship as all the Securities contained in the Trust. Securities
will be sold to reimburse the Sponsor for the Trust's organization costs
at the end of the initial offering period (a significantly shorter time
period than the life of the Trust). During the initial offering period,
there may be a decrease in the value of the Securities. To the extent
the proceeds from the sale of these Securities are insufficient to repay
the Sponsor for the Trust's 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 will be reduced by the
amount of additional Securities sold. Although the dollar amount of the
reimbursement due to the Sponsor will remain fixed and will never exceed
the per Unit amount set forth in "Statement of Net Assets," this will
result in a greater effective cost per Unit to Unit holders for the
reimbursement to the Sponsor. To the extent actual organization costs
are less than the estimated amount, only the actual organization costs
will be deducted from the assets of the Trust. When Securities are sold
to reimburse the Sponsor for organization costs, the Trustee will sell
such Securities, to the extent practicable, which will maintain the same
proportionate relationship among the Securities as existed prior to such
sale.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Accrued Interest.
Accrued interest represents unpaid interest on a Security from the last
day it paid interest. Interest on the Securities is paid monthly,
although the Trust accrues such interest daily. Because the Trust always
has an amount of interest earned but not yet collected, the Public
Offering Price of Units will have added to it the proportionate share of
accrued interest to the date of settlement. You will receive the amount,
if any, of accrued interest you paid for on the next distribution date.
In addition, if you sell or redeem your Units you will be entitled to
receive your proportionate share of the accrued interest from the
purchaser of your Units.
Minimum Purchase.
The minimum amount you can purchase of the Trust is $1,000 worth of
Units ($500 if you are purchasing Units for your Individual Retirement
Account or any other qualified retirement plan).
Sales Charges.
The sales charge you will pay has both an initial and a deferred
component. The initial sales charge, which you will pay at the time of
purchase, is initially equal to approximately 1.00% of the Public
Offering Price of a Unit. This initial sales charge is actually equal to
the difference between the maximum sales charge of .325% and the maximum
remaining deferred sales charge (initially $.225 per Unit) and will vary
from 1.00% with changes in the aggregate underlying value of the
Securities, changes in the Interest and Principal Accounts and as
deferred sales charge payments are made. In addition, five monthly
deferred sales charges of $.225 per Unit will be deducted from the
Trust's assets on approximately the twentieth day of each month from May
Page 11
19, 2000 through September 20, 2000. The maximum sales charge you will
pay during the initial offering period will be .325% of the Public
Offering Price per Unit (equivalent to 3.28% of the net amount invested,
exclusive of the deferred sales charge).
After the initial offering period, if you purchase Units after the last
deferred sales charge payment has been assessed, your sales charge will
consist of a one-time initial sales charge of .325% of the Public
Offering Price (equivalent to 3.359% of the net amount invested), which
will be reduced by 1/2 of 1% on each subsequent ____________, commencing
____________, 2000 to a minimum sales charge of ___%.
Discounts for Certain Persons.
If you invest at least $100,000 (except if you are purchasing for a
"wrap fee account" as described below), the maximum sales charge is
reduced, as follows:
Your Maximum
If you invest Sales Charge
(in thousands):* will be:
_________________ ____________
$___ but less than $___ %
$___ but less than $___ %
$___ or more %
* Breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be
applied on whichever basis is more favorable to the investor. The
breakpoints will be adjusted to take into consideration purchase orders
stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
The reduced sales charge for quantity purchases will apply only to
purchases made by the same person on any one day from the Underwriter or
any one dealer. We will consider Units you purchase in the name of your
spouse or child under 21 years of age to be purchases by you for
determining the reduced sales charge. The reduced sales charge will also
apply to a trustee or other fiduciary purchasing Units for a single
trust estate or single fiduciary account. You must inform the
Underwriter or your dealer of any combined purchases before the sale in
order to be eligible for the reduced sales charge. Any reduced sales
charge is the responsibility of the Underwriter, broker/dealer or other
selling agent making the sale.
The following persons may purchase Units at the Public Offering Price
less the applicable dealer concession:
- - Employees, officers and directors of the Sponsor, our related
companies, the Underwriter, dealers and their affiliates, and vendors
providing services to us.
- - Immediate family members of the above (spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law and daughters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons).
If you purchase Units through registered broker/dealers who charge
periodic fees for financial planning, investment advisory or asset
management services or provide these services as part of an investment
account where a comprehensive "wrap fee" charge is imposed, you may
purchase Units at the Public Offering Price, less the concession we
would typically allow such broker/dealer. See "Distribution of Units-
Dealer Concessions."
The Value of the Securities.
The Evaluator will appraise 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
evaluation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and holidays on which the
NYSE is closed.
The aggregate underlying value of the Securities in the Trust will be
determined by the Evaluator as follows:
a) On the basis of current market offering prices for the Securities
obtained from dealers or brokers who customarily deal in securities
comparable to those held by the Trust;
b) If such prices are not available for any of the Securities, on the
basis of current market offering prices of comparable securities;
c) By determining the value of the Securities on the offering side of
the market by appraisal; or
d) By any combination of the above.
After the initial offering period is over, the aggregate underlying
value of the Securities will be determined as set forth above, except
that bid prices are used instead of offering prices. The offering price
of the Securities may be expected to be greater than the bid price by
Page 12
approximately 1-3% of the aggregate principal amount of such Securities.
There is a period of a few days (usually five business days), beginning
on the first day of each month, during which the total amount of
payments (including prepayments, if any) of principal for the preceding
month of the various mortgages underlying each Security will not yet
have been reported by the issuer to Ginnie Mae. During this period, the
precise principal amount of the Securities will not be known. During
this period, for purposes of determining the aggregate underlying value
of the Securities and the accrued interest on the Units, the Evaluator
will base its valuation and calculations upon the average monthly
principal distribution for the preceding twelve month period. We don't
expect the differences in such principal amounts from month to month to
be material. We will, however, adopt procedures to minimize the impact
of such differences 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 their then current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
represent a concession or agency commission of ___% of the Public
Offering Price per Unit (or __% of the maximum sales charge for
secondary market sales). Dealers and other selling agents will receive
an additional volume concession or agency commission of ____% of the
Public Offering Price if they purchase Units on the Initial Date of
Deposit or $_______ worth of Units on any day thereafter or if they were
eligible to receive a similar concession in connection with sales of
similarly structured trusts sponsored by us.
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 sales charge paid by these customers is kept by or given
to the banks in the amounts shown above.
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trust. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable sales charges on the unit sales generated by such
person during such programs. We make these payments out of our own
assets, and not out of Trust assets. These programs will not change the
price you pay for your Units.
Investment Comparisons.
From time to time we may compare the estimated returns of the 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 investments such as the securities 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, Business Week, Forbes or
Fortune. The investment characteristics of the Trust differs from other
comparative investments. You should not assume that these performance
comparisons will be representative of the Trust's future performance.
The Sponsor's and Underwriter's Profits
The Underwriter will receive a gross sales commission equal to the
maximum sales charge per Unit less any reduced sales charge as stated in
"Public Offering." We will receive from the Underwriter the difference
between the gross sales commission and ___% of the Public Offering Price
per Unit (or ___% if the Underwriter sells at least $___ million). 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 "Schedule of Investments"). During the initial offering
period, the Underwriter may also realize profits or sustain losses as a
result of fluctuations in the Public Offering Price it receives when it
sells the Units.
Page 13
In maintaining a market for the Units, any difference between the price
at which we purchase Units and the price at which we sell them will be a
profit or loss to us.
The Secondary Market
Although not obligated, we intend to maintain a market for the Units
after the initial offering period and continuously offer to purchase
Units at prices based on the Redemption Price per Unit.
With the exception of legal and regulatory filing fees and expenses
associated with annually updating the Trust's registration statement,
Evaluator fees and Trustee costs to transfer and record the ownership of
Units, we will pay all expenses to maintain a secondary market. We may
discontinue purchases of Units at any time. IF YOU WISH TO DISPOSE OF
YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET PRICES BEFORE
MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. If you sell or redeem
your Units before you have paid the total deferred sales charge on your
Units, you will have to pay the remainder at that time.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid is equal to or greater than the Redemption Price per Unit, we may
purchase the Units. You will receive your proceeds from the sale no
later than if they were redeemed by the Trustee. We may tender Units we
hold to the Trustee for redemption as any other Units. If we elect not
to purchase Units, the Trustee may sell tendered Units in the over-the-
counter market, if any. However, the amount you will receive is the same
as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trust are listed under "Fee Table."
If actual expenses exceed the estimate, the Trust will bear the excess.
The Trustee will pay operating expenses of the Trust from the Interest
Account of the Trust if funds are available, and then from the Principal
Account. The Interest and Principal Accounts are noninterest-bearing to
Unit holders, so the Trustee may earn interest on these funds, thus
benefiting from their use.
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to the Trust, and will receive brokerage fees
when the Trust uses us (or our affiliates) as agent in selling
Securities. First Trust Advisors L.P., an affiliate of ours, acts as
Portfolio Supervisor and will receive the fee set forth under "Fee
Table" for providing portfolio supervisory services to the Trusts. In
providing portfolio supervisory services, the Portfolio Supervisor may
purchase research services from a number of sources, which may include
the Underwriter or dealers of the Trust.
The fees payable to us, First Trust Advisors L.P., the Evaluator and the
Trustee are based on the largest aggregate number of Units of the Trust
outstanding at any time during the calendar year, except during the
initial offering period, in which case these fees are calculated based
on the largest number of Units outstanding during the period for which
compensation is paid. These fees may be adjusted for inflation without
Unit holders' approval, but in no case will the annual fees paid to us
or our affiliates for providing a given service to all unit investment
trusts for which we provide such services exceed the actual cost of
providing such services in such year.
In addition to the Trust's operating expenses, and the fees described
above, the Trust may also incur the following charges:
- - All legal and annual auditing expenses of the Trustee according to
its responsibilities under the Indenture;
- - All legal and regulatory filing fees and expenses associated with
annually updating the Trust's registration statement (historically, we
paid these costs).
- - The expenses and costs incurred by the Trustee to protect the Trust
and the rights and interests of the Unit holders;
- - Fees for any extraordinary services the Trustee performed under the
Indenture;
- - Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of 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; and/or
Page 14
- - 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. We cannot guarantee that the interest received will be
sufficient to meet any or all expenses of the Trust. If there is not
enough cash in the Interest or Principal Accounts of the Trust, 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."
The Trust will be audited annually. So long as we are making a secondary
market for Units, we will bear the costs of these annual audits to the
extent the cost exceeds $0.0050 per Unit. Otherwise, the Trust will pay
for the audit. You can request a copy of the audited financial
statements from the Trustee.
Tax Status
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trust. This section is current as of
the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe state or foreign taxes. As with
any investment, you should consult your own tax professional about your
particular consequences.
Trust Status.
The Trust intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended. This means the Trust
generally will not be subject to Federal income taxes or excise taxes on
dividends and capital gains earned from the Securities. You, however,
will be subject to Federal income taxes on dividends and capital gains
you receive from the Trust.
Interest Distributions.
Distributions of the Trust's interest income, unless designated as
capital gain dividends, will be considered dividends for Federal tax
purposes, which are taxable to you as ordinary income. To the extent
distributions in any year exceed the Trust's current and accumulated
earnings and profits, they will be treated as a return of capital and
will reduce your basis or be treated as a gain from the sale of Units to
the extent they exceed your basis. Distributions from the Trust are not
eligible for the 70% dividends received deduction for corporations.
Your Tax Basis and Income or Loss upon Disposition.
Distributions of principal from the Trust will be taxable to you as long-
term capital gain, regardless of how long you have owned your Units. You
will generally recognize capital gain or loss when you dispose of your
Units (by sale, redemption or otherwise). To determine the amount of
this gain or loss, you must subtract your tax basis in your Units from
your proceeds received in the transaction. Your tax basis in your Units
is generally equal to the cost of your Units. In some cases, however,
you may have to adjust your tax basis after you purchase your Units.
If you are an individual, the federal tax rate for net capital gain is
generally 20% (10% for certain taxpayers in the lowest tax bracket). Net
capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if
the holder period for the asset is more than one year and is short-term
if the holding period for the asset is one year or less. You must
exclude the date you purchase your Units to determine the holding period
of your Units. The tax rates for capital gains realized from assets held
for or less are generally the same as for ordinary income.
Discount and Accrued Interest.
Some Securities may have been sold with original issue discount. This
generally means that the Securities were originally issued at a price
below their face (or par) value. Original issued discount accrues on a
daily basis and generally is treated as interest income for federal
income tax purposes. The basis of your Units must be increased as
original issue discount accrues.
Some Securities may have been purchased at a market discount. Market
discount is generally the excess of the stated redemption price of the
Security at maturity over the purchase price of the Security (not
including unaccrued original discount). Market discount can arise based
on the price the Trust pays for a Security or on the price you pay for
Page 15
your Units. Market discount is taxed as ordinary income. You will
generally recognize this income when the Trust receives principal
payments on a Security, when a Security is sold or redeemed, or when you
sell or redeem your Units, unless the Trust elects to include market
discount in taxable income as it accrues.
If the price of your Units included accrued interest on a Security, you
must include the accrued interest in your tax basis of your Units. When
the Trust receives this accrued interest, you must treat it as a return
of capital and reduce your tax basis in your Units.
This discussion provides only the general rules with respect to the tax
treatment of original issue discount and market discount. The rules,
however, are complex and special rules apply in certain circumstances.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of the Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata share
of each expense paid by the Trust to the same extent as if you directly
paid the expense. You may be required to treat some or all of the
expenses of the Trust as miscellaneous itemized deductions. However,
individuals may only deduct certain miscellaneous itemized deductions to
the extent they exceed 2% of adjusted gross income.
Foreign, State and Local Taxes.
If you are a foreign investor (i.e., an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or
trust), you will not be subject to U.S. federal income taxes, including
withholding taxes, on interest income or on any gain from the sale or
redemption of your Units, provided that certain conditions are met. You
should consult your tax advisor with respect to the conditions you must
meet in order to be exempt for U.S. tax purposes. Under the existing
income tax laws of the State and City of New York, the Trust will not be
taxed as a corporation, and the income of the Trust will be treated as
the income of the Unit holders in the same manner as for Federal income
tax purposes. You should consult your tax advisor regarding potential
foreign, state or local taxation with respect to your Units.
Retirement Plans
You may purchase Units of the 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 consult
your attorney or tax advisor. Brokerage firms and other financial
institutions offer these plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
you become Record Owner, but normally your broker/dealer provides this
notice. You may elect to hold your Units in either certificated or
uncertificated form.
Certificated Units. When you purchase your Units you can request that
they be evidenced by certificates, which will be delivered shortly after
your order. Certificates will be issued in fully registered form,
transferable only on the books of the Trustee in denominations of one
Unit or any multiple thereof. You can transfer or redeem your
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with your
signature guaranteed by an eligible institution. In certain cases the
Trustee may require additional documentation before they will transfer
or redeem your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
Page 16
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send to you:
- - A written initial transaction statement containing a description of
the Trust;
- - The number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of interest (if any)
distributed. After the end of each calendar year, the Trustee will
provide you with the following information:
- - The amount of interest received by the Trust less deductions for
payment of applicable taxes, fees and Trust expenses, redemption of
Units and the balance remaining on the last business day of the calendar
year;
- - The amount of principal on the Securities and the net proceeds
received therefrom less deduction for payment of applicable taxes, fees
and Trust expenses, redemption of Units and the balance remaining on the
last business day of the calendar year;
- - The Securities held and the number of Units outstanding on the last
business day of the calendar year;
- - The Redemption Price per Unit on the last business day of the
calendar year; and
- - The amounts actually distributed during the calendar year from the
Interest and Principal Accounts, separately stated.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Interest and Principal Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. It is your responsibility to notify the Trustee
when you become Record Owner of the Units, but normally your
broker/dealer provides this notice. The Trustee will credit any interest
received on the Trust's Securities to the Interest Account of such
Trust. All other receipts, such as return of capital, are credited to
the Principal Account of the Trust.
After deducting the amount of accrued interest the Trustee advanced to
us as Unit holder of record as of the First Settlement Date, the Trustee
will distribute any interest in the Interest Account on or near the
Interest Distribution Dates to Unit holders of record on the preceding
Interest Distribution Record Date. See "Summary of Essential
Information." Distribution amounts will vary with changes in the Trust's
fees and expenses, in interest received, with principal payments and
prepayments and with the sale of Securities. The Trustee will distribute
amounts in the Principal Account, net of amounts designated to meet
redemptions, pay the deferred sales charge or pay expenses, on the last
day of each month to Unit holder of record on the fifteenth day of each
month provided the amount equals at least $1.00 per 100 Units. If the
Trustee does not have your TIN, it is required to withhold a certain
percentage of your distribution and deliver such amount to the Internal
Revenue Service ("IRS"). You may recover this amount by giving your TIN
to the Trustee or when you file a tax return. However, you should check
your statements to make sure the Trustee has your TIN to avoid this
"back-up withholding."
We anticipate that there will be enough money in the Principal Account
to pay the deferred sales charge. If not, the Trustee may sell
Securities to meet the shortfall.
Within a reasonable time after the Trust is terminated you will receive
the pro rata share of the money from the disposition of the Securities.
The Trustee may establish reserves (the "Reserve Account") within the
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of the Trust.
Page 17
Universal Distribution Option. You may elect to have your principal and
interest distributions automatically distributed to any other investment
vehicle of which you have an existing account. If you elect this option,
the Trustee will notify you of each distribution made pursuant to this
option. You may elect to terminate your participation at any time by
notifying the Trustee in writing.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by sending the
certificates representing the Units you want to redeem to the Trustee at
its unit investment trust office. If your Units are uncertificated, you
need only to deliver a request for redemption to the Trustee. In either
case, the certificates or the redemption request must be properly
endorsed with proper instruments of transfer and signature guarantees as
explained in "Rights of Unit Holders-Unit Ownership" (or by providing
satisfactory indemnity if the certificates were lost, stolen, or
destroyed). No redemption fee will be charged, but you are responsible
for any governmental charges that apply. Three business days after the
day you tender your Units (the "Date of Tender") you will receive cash
in an amount for each Unit equal to the Redemption Price per Unit
calculated at the Evaluation Time on the Date of Tender.
The Date of Tender is considered to be the date on which the Trustee
receives your certificates or redemption request (if such day is a day
the NYSE is open for trading). However, if your certificates or
redemption request are received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing interest will be withdrawn
from the Interest Account of the Trust if funds are available for that
purpose, or from the Principal Account. All other amounts paid on
redemption will be taken from the Principal Account of the Trust. The
IRS will require the Trustee to withhold a portion of your redemption
proceeds if the Trustee does not have your TIN, as generally discussed
under "Interest and Principal Distributions."
The Trustee may sell Securities to make funds available for redemption.
If Securities are sold, the size and diversification of the Trust will
be reduced. These sales may result in lower prices than if the
Securities were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- - If the NYSE is closed (other than customary weekend and holiday
closings);
- - If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- - For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Interest and Principal Accounts not designated to
purchase Securities;
2. the aggregate underlying value of the Securities held in the Trust; and
3. accrued interest on the Securities.
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; and
5. other liabilities incurred by the Trust; and
dividing
1. the result by the number of outstanding Units of the Trust.
Until the end of the initial offering period, the Redemption Price per
Unit will include estimated organization costs as set forth under "Fee
Table."
Removing Securities from the Trust
The portfolio of the Trust is not managed. However, we may, but are not
required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- - The issuer of the Security has defaulted in the payment of principal
Page 18
or interest on the Securities;
- - Any action or proceeding seeking to restrain or enjoin the payment of
principal or interest on the Securities has been instituted;
- - The issuer of the Security has breached a covenant which would affect
the payment of principal or interest on the Security, 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;
- - Such factors arise which, in our opinion, adversely affect the tax or
exchange control status of the Securities or the Trust; or
- - The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to the Trust.
If a Security defaults in the payment of principal or interest and no
provision for payment is made, the Trustee must notify us of this fact
within 30 days. If we fail to instruct the Trustee whether to sell or
hold the Security within 30 days of our being notified, the Trustee may,
in its discretion, sell any defaulted Securities and will not be liable
for any depreciation or loss incurred thereby.
Except in the limited instance in which the Trust acquires Replacement
Securities to replace failed contracts to purchase Securities, as
described in "The First Trust GNMA Series," the Trust may not acquire
any securities or other property other than the Securities. The Trustee,
on behalf of the Trust, will reject any offer for new or exchanged
securities or property in exchange for a Security, except that we may
instruct the Trustee to accept such an offer or to take any other action
with respect thereto as we may deem proper if the issuer is in default
with respect to such Securities or in our written opinion the issuer
will likely default in respect to such Securities in the foreseeable
future. Any obligations received in exchange or substitution will be
held by the Trustee subject to the terms and conditions in the Indenture
to the same extent as Securities originally deposited in the Trust. We
may get advice from the Portfolio Supervisor before reaching a decision
regarding the receipt of new or exchanged securities or property. The
Trustee may retain and pay us or an affiliate of ours to act as agent
for the Trust to facilitate selling Securities, exchanged securities or
property from the Trust. If we or our affiliate act in this capacity, we
will be held subject to the restrictions under the Investment Company
Act of 1940, as amended.
The Trustee may sell Securities that we designate; or, without our
direction, in its own discretion, in order to meet redemption requests
or pay expenses. We will maintain a list with the Trustee of which
Securities should be sold. We may consider sales of units of unit
investment trusts which we sponsor in making recommendations to the
Trustee on the selection of broker/dealers to execute the Trust's
portfolio transactions, or when acting as agent for the Trust in
acquiring or selling Securities on behalf of the Trust.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- - To cure ambiguities;
- - To correct or supplement any defective or inconsistent provision;
- - To make any amendment required by any governmental agency; or
- - To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, the Trust will terminate upon
the redemption, sale or other disposition of the last Security held in
the Trust, but in no case later than the Mandatory Termination Date. The
Trust may be terminated prior to the Mandatory Termination Date:
- - Upon the consent of 100% of the Unit holders;
- - If the value of the Securities owned by the Trust as shown by any
evaluation is less than 20% of the aggregate principal amount of
Securities deposited in the Trust during the initial offering period
(the "Discretionary Liquidation Amount"); or
- - In the event that Units of the Trust not yet sold aggregating more
than 60% of the Units of the Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination the Trustee will send written notice to you which
will specify how you should tender your certificates, if any, to the
Trustee. If the Trust is terminated due to this last reason, we will
refund your entire sales charge; however, termination of the Trust
Page 19
before the Mandatory Termination Date for any other 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 prior to 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 Interest and Principal
Accounts of the Trust, within a reasonable time after the Trust is
terminated. Regardless of the distribution involved, the Trustee will
deduct from the Trust any accrued costs, expenses, advances or
indemnities provided for by the Indenture, including estimated
compensation of the Trustee and costs of liquidation and any amounts
required as a reserve to pay any taxes or other governmental charges.
Rating of the Units
The Units of the Trust are rated "AAA" by Standard & Poor's Managed Fund
Ratings Group, a division of The McGraw-Hill Companies ("Standard &
Poor's"). Trusts rated "AAA" are composed exclusively of assets that are
rated "AAA" by Standard & Poor's or have, in the opinion of Standard &
Poor's, credit characteristics comparable to assets rated "AAA".
Capacity to pay interest and repay principal is very strong in "AAA"
rated securities. This is the highest rating assigned by Standard &
Poor's. This rating should not be construed as an approval of the
offering of the Units by Standard & Poor's or as a guarantee of the
market value of the Trust or the Units. Standard & Poor's has indicated
that this rating is not a recommendation to buy, hold or sell Units nor
does it take into account the extent to which expenses of the Trust or
sales of Securities from the Trust for less than their purchase price
will reduce payment to Unit holders of the interest and principal
required to be paid on such Securities. There is no guarantee that the
"AAA" investment rating with respect to the Units will be renewed after
it expires in 13 months from the Initial Date of Deposit. Standard &
Poor's has been compensated for its services in rating Units of the Trust.
Information on the Underwriter, Sponsor, Trustee and
Evaluator
The Underwriter.
John R. Taylor Financial Group, Inc. is a full service broker/dealer and
investment advisory firm headquartered at 820 South 21st Street, Fort Smith,
Arkansas. Established in 1995, the firm is currently responsible for more
than $300 million in customer assets. The Underwriter is a member of the
National Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation.
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- - The First Trust Combined Series
- - FT Series (formerly known as The First Trust Special Situations Trust)
- - The First Trust Insured Corporate Trust
- - The First Trust of Insured Municipal Bonds
- - The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $25 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1998, the total partners' capital of
Nike Securities L.P. was $18,506,548 (audited).
This information refers only to us and not to the Trust or to any series
of the Trust or to any other dealer. We are including this information
Page 20
only to inform you of our financial responsibility and our ability to
carry out our contractual obligations. We will provide more detailed
financial information on request.
The Trustee.
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th Floor, New York, New
York, 10004-2413. If you have questions regarding the Trust, you may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee has not participated in selecting the Securities; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- - Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC,
- - Terminate the Indenture and liquidate the Trust, or
- - Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is Securities Evaluation Services, Inc. The Evaluator's
address is 531 East Roosevelt Road, Suite 200, Wheaton, Illinois 60187.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel.
Experts.
Ernst & Young LLP, independent auditors, have audited the Trust's
statement of net assets, including the schedule of investments, at the
opening of business on the Initial Date of Deposit, as set forth in
their report. We've included the Trust's statement of net assets,
including the schedule of investments, in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific risk information about the Trust.
Page 21
This page is intentionally left blank.
Page 22
This page is intentionally left blank.
Page 23
FIRST TRUST (registered trademark)
THE JOHN R. TAYLOR GNMA TRUST
The First Trust GNMA, Series 76
Underwriter:
John R. Taylor Financial Group, Inc.
P.O. Box 167
Fort Smith, AR 72902
Trustee:
THE CHASE MANHATTAN BANK
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to The John R. Taylor
GNMA Trust, but does not contain all of the information about this
investment company as filed with the Securities and Exchange Commission
in Washington, D.C. under the:
- - Securities Act of 1933 (file no. 333- ) and
- - Investment Company Act of 1940 (file no. 811-05903)
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W., Washington, D.C. 20549-6009
Call: 1-800-SEC-0330
Visit: http://www.sec.gov
____________, 1999
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 24
First Trust (registered trademark)
The First Trust GNMA Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in The First Trust GNMA, Series 76 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 ____________, 1999. Capitalized
terms have been defined in the prospectus.
Table of Contents
Risk Factors 1
Risk Factors
An investment in Units of the Trust should be made with an understanding
of the risks which an investment in fixed rate long-term debt
obligations may entail, including the risk that the value of the
underlying Securities and hence of the Units will decline with increases
in interest rates. The value of the underlying Securities will fluctuate
inversely with changes in interest rates. In addition, the potential for
appreciation of the underlying Securities, which might otherwise be
expected to occur as a result of a decline in interest rates, may be
limited or negated by increased principal prepayments in respect of the
underlying mortgages. For example, the high inflation during certain
periods, together with the fiscal measures adopted to attempt to deal
with it, has resulted in wide fluctuations in interest rates and, thus,
in the value of fixed rate long-term debt obligations generally. The
Sponsor cannot predict whether such fluctuations will continue in the
future or whether the reinvestment of principal will mitigate the impact
of these fluctuations.
The portfolio of the Trust consists of Ginnie Maes (or contracts to
purchase Ginnie Maes) fully guaranteed as to payments of principal and
interest by GNMA. Each group of Ginnie Maes described herein as having a
specified range of maturities includes individual mortgage-backed
securities which have varying ranges of maturities within each range set
forth in "Schedule of Investments." Current market conditions accord
little or no difference in price among individual Ginnie Mae securities
with the same coupon within certain ranges of stated maturity dates on
the basis of the difference in the maturity dates of each Ginnie Mae. A
purchase of Ginnie Maes with the same coupon rate and maturity date
within such range will be considered an acquisition of the same security
for both additional deposits and for the reinvestment of principal. In
the future, however, the difference in maturity ranges could affect
market value of the individual Ginnie Maes. At such time, any additional
purchases by the Trust will take into account the maturities of the
individual securities. The mortgages underlying the Ginnie Maes in the
Trust have an original stated maturity of up to 15 years.
The Trust may contain Securities which were acquired at a market
discount. Such Securities trade at less than par value because the
interest coupons thereon are lower than interest coupons on comparable
debt securities being issued at currently prevailing interest rates. If
such interest rates for newly issued and otherwise comparable securities
increase, the market discount of previously issued securities will
become greater, and if such interest rates for newly issued comparable
securities decline, the market discount of previously issued securities
Page 1
will be reduced, other things being equal. Investors should also note
that the value of Ginnie Maes purchased at a market discount will
increase in value faster than Ginnie Maes purchased at a market premium
if interest rates decrease. Conversely, if interest rates increase, the
value of Ginnie Maes purchased at a market discount will decrease faster
than Ginnie Maes purchased at a premium. In addition, if interest rates
rise, the prepayment risk of higher yielding, premium Ginnie Maes and
the prepayment benefit for lower yielding, discount Ginnie Maes will be
reduced. Market discount attributable to interest changes does not
indicate a lack of market confidence in the issue. Neither the Sponsor
nor the Trustee shall be liable in any way for any default, failure or
defect in any of the Securities.
The Trust may contain Securities which were acquired at a market
premium. Such Securities trade at more than par value because the
interest coupons thereon are higher than interest coupons on comparable
debt securities being issued at currently prevailing interest rates. If
such interest rates for newly issued and otherwise comparable securities
decrease, the market premium of previously issued securities will be
increased, and if such interest rates for newly issued comparable
securities increase, the market premium of previously issued securities
will be reduced, other things being equal. The current returns of
securities trading at a market premium are initially higher than the
current returns of comparably rated debt securities of a similar type
issued at currently prevailing interest rates because premium securities
tend to decrease in market value as they approach maturity when the face
amount becomes payable. Because part of the purchase price is thus
returned not at maturity but through current income payments, early
redemption of a premium security at par or early prepayments of
principal will result in a reduction in yield. Prepayments of principal
on securities purchased at a market premium are more likely than
prepayments on securities purchased at par or at a market discount and
the level of prepayments will generally increase if interest rates
decline. Market premium attributable to interest changes does not
indicate market confidence in the issue.
Description of Securities. The Ginnie Maes included in the Trust are
backed by the indebtedness secured by underlying mortgage pools of up to
15 year mortgages on 1- to 4-family dwellings. The pool of mortgages
which is to underlie a particular new issue of Ginnie Maes is assembled
by the proposed issuer of such Ginnie Maes. The issuer is typically a
mortgage banking firm, and in every instance must be a mortgagee
approved by and in good standing with the Federal Housing Administration
("FHA"). In addition, GNMA imposes its own criteria on the eligibility
of issuers, including a net worth requirement.
The mortgages which are to comprise a new Ginnie Mae pool may have been
originated by the issuer itself in its capacity as a mortgage lender or
may be acquired by the issuer from a third party, such as another
mortgage banker, a banking institution, the Veterans Administration
("VA") (which in certain instances acts as a direct lender and thus
originates its own mortgages) or one of several other governmental
agencies. All mortgages in any given pool will be insured under the
National Housing Act, as amended ("FHA-insured"), or Title V of the
Housing Act of 1949 ("FMHA Insured") or guaranteed under the
Servicemen's Readjustment Act of 1944, as amended, or Chapter 37 of
Title 38, U.S.C. ("VA-guaranteed"). Such mortgages will have a date for
the first scheduled monthly payment of principal that is not more than
one year prior to the date on which GNMA issues its guaranty commitment
as described below, will have comparable interest rates and maturity
dates, and will meet additional criteria of GNMA. All mortgages in the
pools backing the Ginnie Maes contained in the Trust are mortgages on 1-
to 4-family dwellings (having a stated maturity of up to 30 years for
Securities in the Trust but an estimated average life of considerably
less as set forth in "Special Information"). In general, the mortgages
in these pools provide for equal monthly payments over the life of the
mortgage (aside from prepayments) designed to repay the principal of the
mortgage over such period, together with interest at the fixed rate on
the unpaid balance.
To obtain GNMA approval of a new pool of mortgages, the issuer will file
with GNMA an application containing information concerning itself,
describing generally the pooled mortgages, and requesting that GNMA
approve the issue and issue its commitment (subject to GNMA's
satisfaction with the mortgage documents and other relevant
documentation) to guarantee the timely payment of principal of and
interest on the Ginnie Maes to be issued by the issuer. If the
application is in order, GNMA will issue its commitment and will assign
a GNMA pool number to the pool. Upon completion of the required
documentation (including detailed information as to the underlying
mortgages, a custodial agreement with a Federal or state regulated
financial institution satisfactory to GNMA pursuant to which the
underlying mortgages will be held in safekeeping, and a detailed
guaranty agreement between GNMA and the issuer), the issuance of the
Ginnie Maes is permitted. When the Ginnie Maes are issued, GNMA will
endorse its guarantee thereon. The aggregate principal amount of Ginnie
Maes issued will be equal to the then aggregate unpaid principal
balances of the pooled mortgages. The interest rate borne by the Ginnie
Maes is currently fixed at 1/2 of 1% below the interest rate of the
pooled 1- to 4-family mortgages, the differential being applied to the
payment of servicing and custodial charges as well as GNMA's guaranty fee.
Ginnie Mae IIs consist of jumbo pools of mortgages from more than one
issuer. By allowing pools to consist of multiple issuers, it allows for
larger and more geographically diverse pools. Unlike Ginnie Mae Is,
which have a minimum pool size of $1 million, Ginnie Mae IIs have a
minimum pool size of $7 million. In addition, the interest rates on the
mortgages within the Ginnie Mae II pools will vary unlike the mortgages
within pools in Ginnie Mae Is which all have the same rate. The rates on
the mortgages will vary from 1/2 of 1% to 1.50% above the coupon rate on
the GNMA bond, which is allowed for servicing and custodial fees as well
as the GNMA's guaranty fee. The major advantage of Ginnie Mae IIs lies
in the fact that a central paying agent sends one check to the holder on
the required payment date. This greatly simplifies the current procedure
of collecting distributions from each issuer of a Ginnie Mae, since such
Page 2
distributions are often received late.
All of the Ginnie Maes in the Trust, including the Ginnie Mae IIs, are
of the "fully modified pass-through" type, i.e., they provide for timely
monthly payments to the registered holders thereof (including the Trust)
of their pro rata share of the scheduled principal payments on the
underlying mortgages, whether or not collected by the issuers,
including, on a pro rata basis, any prepayments of principal of such
mortgages received and interest (net of the servicing and other charges
described above) on the aggregate unpaid principal balance of such
Ginnie Maes, whether or not the interest on the underlying mortgages has
been collected by the issuers.
The Ginnie Maes in the Trust are guaranteed as to timely payment of
principal and interest by GNMA. Funds received by the issuers on account
of the mortgages backing the Ginnie Maes in the Trust are intended to be
sufficient to make the required payments of principal of and interest on
such Ginnie Maes but, if such funds are insufficient for that purpose,
the guaranty agreements between the issuers and GNMA require the issuers
to make advances sufficient for such payments. If the issuers fail to
make such payments, GNMA will do so.
GNMA is authorized by Section 306(g) of Title III of the National
Housing Act to guarantee the timely payment of and interest on
securities which are based on or backed by a trust or pool composed of
mortgages insured by FHA, the Farmers' Home Administration ("FMHA") or
guaranteed by the VA. Section 306(g) provides further that the full
faith and credit of the United States is pledged to the payment of all
amounts which may be required to be paid under any guaranty under such
subsection. An opinion of an Assistant Attorney General of the United
States, dated December 9, 1969, states that such guaranties "constitute
general obligations of the United States backed by its full faith and
credit."* GNMA is empowered to borrow from the United States
Treasury to the extent necessary to make any payments of principal and
interest required under such guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages and,
except to the extent of funds received by the issuers on account of such
mortgages, Ginnie Maes do not constitute a liability of nor evidence any
recourse against such issuers, but recourse thereon is solely against
GNMA. Holders of Ginnie Maes (such as the Trust) have no security
interest in or lien on the underlying mortgages.
The GNMA guaranties referred to herein relate only to payment of
principal of and interest on the Ginnie Maes in the Trust and not to the
Units offered hereby.
Monthly payments of principal will be made, and additional prepayments
of principal may be made, to each Trust in respect of the mortgages
underlying the Ginnie Maes in the Trust. All of the mortgages in the
pools relating to the Ginnie Maes in the Trust are subject to prepayment
without any significant premium or penalty at the option of the
mortgagors. While the mortgages on 1- to 4-family dwellings underlying
the Ginnie Maes have a stated maturity of up to 30 years for the Trust,
it has been the experience of the mortgage industry that the average
life of comparable mortgages, owing to prepayments, refinancings and
payments from foreclosures, is considerably less. See "Special
Information" for each Trust.
In the mid-1970's, published yield tables for Ginnie Maes utilized a 12-
year average life assumption for Ginnie Mae pools of 26-30 year
mortgages on 1- to 4-family dwellings. This assumption was derived from
the FHA experience relating to prepayments on such mortgages during the
period from the mid-1950's to the mid-1970s. This 12-year average life
assumption was calculated in respect of a period during which mortgage
lending rates were fairly stable. THE ASSUMPTION IS NO LONGER AN
ACCURATE MEASURE OF THE AVERAGE LIFE OF GINNIE MAES OR THEIR UNDERLYING
SINGLE FAMILY MORTGAGE POOLS. RECENTLY IT HAS BEEN OBSERVED THAT
MORTGAGES ISSUED AT HIGH INTEREST RATES HAVE EXPERIENCED ACCELERATED
PREPAYMENT RATES WHICH WOULD INDICATE A SIGNIFICANTLY SHORTER AVERAGE
LIFE THAN 12 YEARS. TODAY, RESEARCH ANALYSTS USE COMPLEX FORMULAE TO
SCRUTINIZE THE PREPAYMENTS OF MORTGAGE POOLS IN AN ATTEMPT TO PREDICT
MORE ACCURATELY THE AVERAGE LIFE OF GINNIE MAES.
A number of factors, including homeowner's mobility, change in family
size and mortgage market interest rates will affect the average life of
the Ginnie Maes in each Trust. For example, Ginnie Maes issued during a
period of high interest rates will be backed by a pool of mortgage loans
bearing similarly high rates. In general, during a period of declining
interest rates, new mortgage loans with interest rates lower than those
charged during periods of high rates will become available. To the
extent a homeowner has an outstanding mortgage with a high rate, he may
refinance his mortgage at a lower interest rate or he may rapidly repay
his old mortgage. Should this happen, a Ginnie Mae issued with a high
interest rate may experience a rapid prepayment of principal as the
underlying mortgage loans prepay in whole or in part. Accordingly, there
can be no assurance that the prepayment levels which will be actually
realized will conform to the estimates or experience of the FHA, other
mortgage lenders, dealers or market makers or other Ginnie Mae
investors. It is not possible to meaningfully predict prepayment levels
regarding the Ginnie Maes in the Trust. Even though the reinvestment of
principal may mitigate the effects of prepayments of principal, the
termination of the Trust might be accelerated as a result of prepayments
made as described herein.
* Any statement in this Prospectus that a particular security is
backed by the full faith and credit of the United States is based upon
the opinion of an Assistant Attorney General of the United States and
should be so construed.
Page 3
MEMORANDUM
RE: THE FIRST TRUST GNMA, SERIES 76
The only difference of consequence (except as described
below) between The First Trust GNMA Reinvestment Income Trust,
Series 74 & 75, which is the current fund, and The First Trust
GNMA, Series 76, the filing of which this memorandum accompanies,
is the change in the series number. The list of securities
comprising the Fund, the evaluation, record and distribution
dates and other changes pertaining specifically to the new
series, such as size and number of Units in the Trust and the
statement of condition of the new Trust, will be filed by
amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of The First Trust GNMA Fund, Series 1 (File No.
811-3969) related also to the subsequent series of the Trust.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 74 & 75 prospectus relate to the series number and size
and the date and various items of information which will be
derived from and apply specifically to the securities deposited
in the Trust.
CONTENTS OF REGISTRATION STATEMENT
Item A. Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Brokers Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
Item B. This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust GNMA, Series 76, has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on September 14, 1999.
THE FIRST TRUST GNMA, SERIES 76
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By: Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
Robert D. Van Kampen Director of )
Nike Securities )
Corporation the General)
Partner of Nike )September 14, 1999
Securities L.P. )
)
David J. Allen Director of Nike )Robert M. Porcellino
Securities Corporation,)Attorney-in-fact**
the General Partner of )
Nike Securities L.P.
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to Form S-6 of The First Trust Combined
Series 258 (File No. 33-63483) and the same is hereby
incorporated herein by this reference.
S-2
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1 and 3.4 of the Registration Statement.
CONSENT OF SECURITIES EVALUATION SERVICE, INC.
The consent of Securities Evaluation Service, Inc. to the
use of its name in the Prospectus included in this Registration
Statement will be filed as Exhibit 4.1 to the Registration
Statement.
CONSENT OF STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-
HILL, INC.
The consent of Standard & Poor's Ratings Group, A Division
of McGraw-Hill, Inc. to the use of its name in the Prospectus
included in this Registration Statement will be filed as Exhibit
4.2 to the Registration Statement.
CONSENT OF ERNST & YOUNG LLP
The consent of Ernst & Young LLP to the use of its name and
to the reference to such firm in the Prospectus included in this
Registration Statement will be filed by Amendment.
S-3
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust GNMA, Series 62 and subsequent Series
effective December 19, 1991 among Nike Securities L.P., as
Depositor, The Chase Manhattan Bank as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and Nike Financial
Advisory Services L.P. as Portfolio Supervisor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-44532] filed on behalf of The First Trust
GNMA, Series 62).
1.1.1*Form of Trust Agreement for Series 76 among Nike Securities
L.P., as Depositor, The Chase Manhattan Bank (National
Association), as Trustee, Securities Evaluation Service,
Inc., as Evaluator, and First Trust Advisors L.P., as
Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership Agreement
of Nike Securities L.P. (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust, Series
18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1 to
Form S-6 [File No. 33-42683] filed on behalf of The First
Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-43289] filed on
behalf of The First Trust Combined Series 145).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
S-4
3.1* Opinion of counsel as to legality of securities being
registered.
3.3* Opinion of counsel as to New York income tax status of
securities being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
4.1* Consent of Securities Evaluation Service, Inc.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust, Series
18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
________________________
* To be filed by amendment.
S-5
