Registration No. 333-32300
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to Form S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
THE FIRST TRUST GNMA, REINVESTMENT
INCOME TRUST "GRIT"
Series 77 and Series 78
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agents for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
E. Title of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as
amended
F. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
|XXX|Check box if it is proposed that this filing will become
effective on March 16, 2000 at 2:00 p.m. pursuant to Rule 487.
________________________________
The First Trust GNMA Reinvestment Income Trust
"GRIT"
Series 77 and Series 78
The First Trust GNMA Reinvestment Income Trust is a series of a unit
investment trust, The First Trust GNMA Series. The First Trust GNMA
Reinvestment Income Trust consists of two separate portfolios listed
above (each, a "Trust," and collectively, the "Trusts"). Each Trust
invests in a portfolio of fixed-rate mortgage-backed securities issued
by Government National Mortgage Association ("GNMA") ("Securities").
Each Trust seeks to provide a high level of current income.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First Trust (registered trademark)
1-800-621-9533
The date of this prospectus is March 16, 2000
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statements of Net Assets 6
Schedules of Investments 7
The First Trust GNMA Reinvestment Income Trust 8
Portfolio 9
Estimated Returns and Estimated Average Life 9
Risk Factors 10
Public Offering 10
Distribution of Units 13
The Sponsor'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 17
Removing Securities from a Trust 18
Amending or Terminating the Indenture 19
Rating of the Units 19
Information on the Sponsor, Trustee and Evaluator 20
Other Information 21
Page 2
Summary of Essential Information
At the Opening of Business on the
Initial Date of Deposit-March 16, 2000
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: Securities Evaluation Services, Inc.
<TABLE>
<CAPTION>
"GRIT" "GRIT"
Series 77 Series 78
________ ________
<S> <C> <C>
Initial Number of Units 39,955 43,327
Fractional Undivided Interest in the Trust per Unit 1/39,955 1/43,327
Principal Amount (Par Value) of Securities per Unit (1) $ 10.000 $ 10.000
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ 10.175 $ 10.528
Maximum Sales Charge of 4.25% of the Public Offering Price per Unit
(4.297% and 4.302% of the net amount invested, exclusive of the deferred
sales charge for Series 77 and Series 78, respectively) (3) $ .437 $ .453
Less Deferred Sales Charge per Unit $ (.325) $ (.325
Public Offering Price per Unit (4) $ 10.287 $ 10.656
Sponsor's Initial Repurchase Price per Unit (5) $ 9.850 $ 10.203
Redemption Price per Unit (based on aggregate bid side value of Securities
less the deferred sales charge) (5) $ 9.803 $ 10.156
Cash CUSIP Number 30265L 530 30265L 555
Wrap CUSIP Number 30265L 548 30265L 563
Security Code 58393 58395
Estimated Average Life (6) 7.1 yrs. 5.26 yrs.
Estimated Net Annual Interest Income per Unit (7) $ .7761 $ .8761
Estimated Current Return (6) 7.54% 8.22%
Estimated Long-Term Return (6) 6.78% 6.67%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date March 21, 2000
Mandatory Termination Date (8) December 31, 2049
Interest Distribution Record Date First day of each month, commencing April 1, 2000.
Interest Distribution Date (7) Last day of each month, commencing April 30, 2000.
______________
<FN>
(1) Because the Securities will pay principal during the life of the
Trusts 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) Each Security is valued at its current market offering price.
Evaluations for purposes of determining the purchase, sale or redemption
price of Units are made as of the close of trading on the New York Stock
Exchange ("NYSE") (generally 4:00 p.m. Eastern time) on each day on
which it is open (the "Evaluation Time").
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" and "Public Offering."
(4) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit. No
investor will purchase Units at this price. The price you pay for your
Units will be based on their valuation at the Evaluation Time on the
date you purchase your Units. On the Initial Date of Deposit the Public
Offering Price per Unit will not include any net interest accrued on the
Units. After this date, a pro rata share of any net interest accrued on
the Units will be included.
(5) Until the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period the Sponsor's Initial Repurchase
Price per Unit and the Redemption Price per Unit will include the
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."
(6) Estimated Current Return is determined by dividing a Trust's
estimated net annual interest income by the Public Offering Price per
Unit. Estimated Long-Term Return is a measure of the estimated return
over the estimated life of a Trust. Unlike Estimated Current Return,
Estimated Long-Term Return reflects maturities, estimated principal
prepayments, discounts and premiums of the Securities in a Trust.
Estimated Average Life takes into consideration the reinvestment of
principal during the Reinvestment Period. See "Estimated Returns 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,
prepayments and reinvestment. The estimated initial distribution is
$.0215 per Unit and $.0243 per Unit for the "GRIT" Series 77 and
"GRIT" Series 78, respectively. Commencing May 31, 2000, each Trust's
regular monthly distribution will be paid. Amounts in the Principal
Account will generally be reinvested during the Reinvestment Period.
After the Reinvestment Period, distributions from the Principal Account
will be made in December of each year and also in any month in which the
amount available for distribution equals at least $1.00 per 100 Units.
See "Expenses and Charges" and "Interest and Principal Distributions."
(8) See "Amending or Terminating the Indenture."
</FN>
</TABLE>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of a Trust. See "Public
Offering" and "Expenses and Charges." Although each Trust is a unit
investment trust rather than a mutual fund, this information allows you
to compare fees.
<TABLE>
<CAPTION>
"GRIT" "GRIT"
Series 77 Series 78
________ ________
Amount Amount
per Unit per Unit
________ ________
<S> <C> <C> <C> <C>
Unit Holder Transaction Expenses
(as a percentage of public offering price)
Maximum sales charge 4.25% $.437 4.25% $.453
===== ===== ===== =====
Initial sales charge (paid at time of purchase) 1.09%(a) $.112 1.20%(a) $.128
Deferred sales charge (paid in installments or at redemption) 3.16%(b) .325 3.05%(b) .325
Organization Costs
(as a percentage of public offering price)
Estimated organization costs .122%(c) $.0125 .117%(c) $.0125
====== ====== ====== ======
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
Portfolio supervision, bookkeeping,
administrative and evaluation fees .077% $.0078 .075% $.0078
Trustee's fee and other operating expenses .160%(d) .0161 .154%(d) .0161
______ ______ ______ ______
Total .237% $.0239 .229% $.0239
====== ====== ====== ======
</TABLE>
Example
This example is intended to help you compare the cost of investing in
the Trusts with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trusts for the periods
shown and sell all your Units at the end of those periods. The example
also assumes a 5% return on your investment each year and that each
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>
1 Year 3 Years 5 Years 10 Years
______ _______ _______ ________
<S> <C> <C> <C> <C>
"GRIT" Series 77 $461 $511 $566 $729
"GRIT" Series 78 460 510 565 728
The example will not differ if you hold rather than sell your Units at
the end of each period.
______________
<FN>
(a) The initial sales charge is the difference between the maximum sales
charge (4.25% of the Public Offering Price) and any remaining deferred
sales charge.
(b) The deferred sales charge is a fixed dollar amount equal to $.325 per
Unit which, as a percentage of the Public Offering Price, will vary over
time. The deferred sales charge will be deducted in five monthly
installments commencing March 20, 2001.
(c) Estimated organization costs will be deducted from the assets of each
Trust at the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period.
(d) Other operating expenses include the costs incurred by the Trusts for
annually updating each Trust's registration statement. Historically, we
paid these costs. Other operating expenses do not, however, include
brokerage costs and other portfolio transaction fees. In certain
circumstances the Trusts may incur additional expenses not set forth
above. See "Expenses and Charges."
</FN>
</TABLE>
Page 4
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
The First Trust GNMA Reinvestment Income Trust, Series 77 and Series 78
We have audited the accompanying statements of net assets, including the
schedules of investments, of The First Trust GNMA Reinvestment Income
Trust, Series 77 and Series 78 (the "Trusts"), as of the opening of
business on March 16, 2000. These statements of net assets are the
responsibility of the Trusts' Sponsor. Our responsibility is to express
an opinion on these statements of net assets based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
statements of net assets are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statements of net assets. Our procedures included
confirmation of the letter of credit allocated among the Trusts on March
16, 2000. An audit also includes assessing the accounting principles
used and significant estimates made by the Sponsor, as well as
evaluating the overall presentation of the statements of net assets. We
believe that our audit of the statements of net assets provides a
reasonable basis for our opinion.
In our opinion, the statements of net assets referred to above present
fairly, in all material respects, the financial position of The First
Trust GNMA Reinvestment Income Trust, Series 77 and Series 78, at the
opening of business on March 16, 2000 in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
March 16, 2000
Page 5
Statements of Net Assets
At the Opening of Business on the
Initial Date of Deposit-March 16, 2000
<TABLE>
<CAPTION>
"GRIT" "GRIT"
Series 77 Series 78
_________ _________
<S> <C> <C>
NET ASSETS
Investments in Securities represented by purchase contracts (1)(2) $406,540 $456,153
Accrued interest on underlying Securities (2)(3) 1,332 1,625
________ ________
407,872 457,778
Less liability for reimbursement to Sponsor for organization costs (4) (499) (542)
Less distributions payable (3) (1,332) (1,625)
Less liability for deferred sales charge (5) (12,985) (14,081)
________ ________
Net assets $393,056 $441,530
========= =========
Outstanding units 39,955 43,327
ANALYSIS OF NET ASSETS
Cost to investors (6) $411,023 $461,694
Less maximum sales charge (6) (17,468) (19,622)
Less estimated reimbursement to Sponsor for organization costs (4) (499) (542)
_________ _________
Net assets $393,056 $441,530
========= =========
_________________
<FN>
NOTES TO STATEMENTS 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 $1,000,000 will be allocated to the Trusts, has been deposited
with the Trustee as collateral, covering the monies necessary to satisfy
the amounts set forth below:
Aggregate Accrued Interest Accrued Interest
Offering Price to Initial to Expected
of Securities Date of Deposit Date of Delivery
__________ __________ ________________
"GRIT" Series 77 $406,540 $1,332 $ 533
"GRIT" Series 78 456,153 1,625 1,300
(3) The Trustee will advance to each 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 Trusts. These costs have been estimated at $.0125 per Unit
for each Trust. A payment will be made at the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period to
an account maintained by the Trustee from which the obligation of the
investors to the Sponsor will be satisfied. To the extent that actual
organization costs are greater than the estimated amount, only the estimated
organization costs added to the Public Offering Price will be reimbursed
to the Sponsor and deducted from the assets of a Trust.
(5) Represents the amount of mandatory deferred sales charge
distributions from a Trust ($.325 per Unit), payable to us in five equal
monthly installments beginning on March 20, 2001 and on the twentieth
day of each month thereafter (or if such day is not a business day, on
the preceding business day) through July 20, 2001. If you redeem Units
before July 20, 2001 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 a Trust includes a maximum sales
charge (comprised of an initial and a deferred sales charge) computed at
the rate of 4.25% of the Public Offering Price per Unit (equivalent to
4.297% and 4.302% of the net amount invested for "GRIT" Series 77 and
"GRIT" Series 78, respectively), assuming no reduction of sales charge
as set forth under "Public Offering."
</FN>
</TABLE>
Page 6
Schedules of Investments
At the Opening of Business on the
Initial Date of Deposit-March 16, 2000
THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST, SERIES 77
Government National Mortgage Association, Modified Pass-Through Mortgage-
Backed Securities
<TABLE>
<CAPTION>
Years of Stated Cost of
Aggregate Maturity Securities to
Principal (1) Coupon Rate Trust (2)
_________ ___________ _______________ ____________
<S> <C> <C> <C>
$399,548 8.0% 2021 - 2023 $406,540
========= ===========
</TABLE>
THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST, SERIES 78
Government National Mortgage Association, Modified Pass-Through Mortgage-
Backed Securities
<TABLE>
<CAPTION>
Years of Stated Cost of
Aggregate Maturity Securities to
Principal (1) Coupon Rate Trust (2)
_________ ___________ _______________ ____________
<S> <C> <C> <C>
$433,271 9.0% 2019 - 2021 $456,153
========= ===========
_____________
<FN>
(1) All Securities are represented by regular way contracts to purchase
such Securities which are backed by an irrevocable letter of credit
deposited with the Trustee. We entered into purchase contracts for the
Securities on March 15, 2000 and we expect that they will all settle on
or prior to March 22, 2000 and March 28, 2000 for "GRIT" Series 77 and
"GRIT" Series 78, respectively.
(2) The cost of the Securities to a 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 aggregate bid side value of the Securities at the
Evaluation Time on the business day preceding the Initial Date of
Deposit was $404,667 and $454,122 for "GRIT" Series 77 and "GRIT" Series
78, respectively. The valuation of the Securities has been determined by
the Evaluator, certain shareholders of which are officers of the
Sponsor. The cost of the Securities to us and our profit or loss (which
is the difference between the cost of the Securities to us and the cost
of the Securities to a Trust) are set forth below:
Cost of
Securities Profit
to Sponsor (Loss)
_________ _______
"GRIT" Series 77 $404,792 $1,748
"GRIT" Series 78 452,227 3,926
</FN>
</TABLE>
Page 7
The First Trust GNMA Reinvestment Income Trust
The First Trust GNMA Reinvestment Income Trust 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 Reinvestment Income Trust. The series to which this
prospectus relates consists of two portfolios known as The First Trust
GNMA Reinvestment Income Trust, Series 77 and Series 78.
YOU MAY GET MORE SPECIFIC DETAILS CONCERNING THE NATURE, STRUCTURE AND
RISKS OF THIS PRODUCT IN AN "INFORMATION SUPPLEMENT" BY CALLING THE
TRUSTEE AT 1-800-682-7520.
The Trusts were created under the laws of the State of New York by a
Trust Agreement (the "Indenture") dated the Initial Date of Deposit.
This agreement, entered into among Nike Securities L.P., as Sponsor, The
Chase Manhattan Bank as Trustee, First Trust Advisors L.P. as Portfolio
Supervisor and Securities Evaluation Services, Inc. as Evaluator,
governs the operation of the Trusts. Each Trust will terminate upon the
redemption, sale or other disposition of the last Security held in such
Trust, but in no case later than its Mandatory Termination Date set
forth in "Summary of Essential Information."
How We Created the Trusts.
On the Initial Date of Deposit, we deposited portfolios of GNMA
securities with the Trustee, and in turn, the Trustee delivered
documents to us representing our ownership of the Trusts in the form of
units ("Units").
With our deposit of Securities on the Initial Date of Deposit we
established a percentage relationship among the Securities in each
Trust's portfolio. After the Initial Date of Deposit, we may deposit
additional Securities in a Trust, or cash (including a letter of credit)
with instructions to buy more Securities, in order to create new Units
for sale. If we create additional Units, we will attempt, to the extent
practicable, to maintain the original percentage relationship between
the principal amounts of Ginnie Maes of specified interest rates and
ranges of maturities in the Trust. Precise duplication may not be
possible because fractions of Ginnie Maes may not be purchased and
identical Securities may not be available.
Since the prices of the underlying Securities will fluctuate daily, the
ratio of Securities in a Trust, on a market value basis, will also
change daily. The portion of Securities represented by each Unit will
not change as a result of the deposit of additional Securities or cash
in a Trust. If we deposit cash, you and new investors may experience a
dilution of your investment. This is because prices of Securities will
fluctuate between the time of the cash deposit and the purchase of the
Securities, and because a Trust pays brokerage fees to buy the
Securities. To reduce this dilution, the Trusts will try to buy the
Securities as close to the Evaluation Time and as close to the
evaluation price as possible. In addition, the costs of acquiring
additional Securities pursuant to the reinvestment of principal during
the Reinvestment Period will be borne by the Trusts. It is currently
anticipated that the Trustee will purchase these Securities directly
from market makers.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may retain and pay us (or our affiliate) to act as agent for the
Trusts to buy Securities. If we or an affiliate of ours act as agent to
the Trusts we will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Securities may periodically be
redeemed, prepaid or sold under certain circumstances. These proceeds
will be reinvested to the extent practicable during the Reinvestment
Period or used to meet Trust obligations. However, Securities will not
be sold to take advantage of market fluctuations or changes in
anticipated rates of appreciation or depreciation, or if they no longer
meet the criteria by which they were selected. You will not be able to
dispose of or vote any of the Securities in a Trust. As the holder of
the Securities, the Trustee will vote all of the Securities and will do
so based on our instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in a Trust fails, unless we can purchase
substitute Securities ("Replacement Securities"), we will refund to you
that portion of the purchase price, accrued interest and sales charge
resulting from the failed contract on the next Interest Distribution
Page 8
Date. Any Replacement Security a Trust acquires will be identical to
those from the failed contract.
Portfolio
Objectives.
The objective of each 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. The Securities, but not the Units or the Trusts,
are backed by the full faith and credit of the U.S. government.
Reinvestment. In an effort to minimize the effect of principal payments
and prepayments we will direct the Trustee to reinvest all payments and
prepayments of principal from the underlying Securities into additional
GNMA securities for as long as we think it is practical to do so (the
"Reinvestment Period"). At the present time, we anticipate the
Reinvestment Period for each Trust to last approximately 5-8 years from
the Initial Date of Deposit. The GNMA securities the Trustee will
purchase will have similar maturities and interest rates as the
Securities upon which the principal was received. There may, however, be
times during the Reinvestment Period when reinvestment is not feasible
because we don't have enough cash to purchase additional GNMA securities
without incurring disproportionate expenses, additional GNMA securities
are not available or for various other reasons. In those instances a
Trust will generally hold the cash until additional purchases are
possible or distribute the cash when we think additional purchases are
not practical. There will be no attempt to time or delay the purchase of
additional Securities for reinvestment to take advantage of market
movements.
Of course, as with any similar investment, there can be no guarantee
that the objective of the Trusts will be achieved. See "Risk Factors"
for a discussion of the risks of investing in the Trusts.
Estimated Returns and
Estimated Average Life
The Current and Long-Term Returns set forth in the "Summary of Essential
Information" are estimates and are designed to be comparative rather
than predictive. We cannot predict your actual return, which will vary
with Unit price, the reinvestment of principal, how long you hold your
investment and with changes in the portfolio, interest income and
expenses. In addition, neither rate reflects the true return you will
receive, which will be lower, because neither includes the effect of
certain delays in distributions. Estimated Current Return equals the
estimated annual interest income to be received from the Securities less
estimated annual Trust expenses, divided by the Public Offering Price
per Unit (which includes the initial sales charge). Estimated Long-Term
Return is a measure of the estimated return over the Estimated Average
Life of a Trust and is calculated using a formula which (1) factors in
the market values, yields (which take into account the amortization of
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. Unlike Estimated Current Return, Estimated
Long-Term Return reflects maturities, estimated principal prepayments,
discounts and premiums of the Securities in a Trust. We will provide you
with estimated cash flows for your Trust at no charge upon your request.
In order to calculate Estimated Average Life of a Trust, an estimated
prepayment rate for the remaining term of each Trust's 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 Trusts
we have relied upon the median of the estimated prepayment rates
determined by primary market makers. We cannot be certain that this
estimate will prove accurate or whether the estimated prepayment rates
determined by other primary market makers would have provided a better
estimate. Any difference between the estimate we use and the actual
prepayment rate will affect the Estimated Long-Term Return of the Trusts.
Page 9
Risk Factors
Price Volatility. The Trusts invest 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 Trusts are 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 Trusts will be positive over any period of time
or that you won't lose money. Units of the Trusts are not deposits of
any bank and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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.
Reinvestment Risk. Mortgage-backed securities differ from conventional
debt securities because principal is paid back over the life of the
security rather than at maturity. In addition, we anticipate that the
Trusts will 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. As discussed under
"Portfolio" we intend to instruct the Trustee to reinvest principal
payments and prepayments into additional Securities during the
Reinvestment Period. Reinvestment during periods when interest rates are
lower than those prevailing on the Initial Date of Deposit will have the
effect of decreasing monthly distributions of interest income from a
Trust. In addition, there may be times during the Reinvestment Period
when reinvestment is not feasible because we don't have enough cash to
purchase additional GNMA securities without incurring disproportionate
expenses, additional GNMA securities are not available or for various
other reasons. If the Trustee is unable to reinvest these proceeds, the
impact on the Trusts would be a loss of anticipated interest, and a
portion of its principal investment represented by any premium the Trust
may have paid. The number and dollar amount of 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 Trusts.
Interest Income. Since the Trusts can only distribute what each
receives, interest distributions will decrease if principal payments and
prepayments cannot be reinvested.
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 value 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.
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;
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- - 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, changes in the value of the Interest and Principal Accounts
and with the accrual of net interest on the Units.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Organization Costs. Securities purchased with the portion of the Public
Offering Price intended to be used to reimburse the Sponsor for a
Trust's organization costs (including costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission ("SEC")
and states, the initial audit of the Trust portfolio, legal fees and the
initial fees and expenses of the Trustee) will be purchased in the same
proportionate relationship as all the Securities contained in the
Trusts. Securities will be sold to reimburse the Sponsor for a Trust's
organization costs at the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period (a significantly
shorter time period than the life of the Trusts). During the period
ending with the earlier of six months after the Initial Date of Deposit
or the end of the initial offering period, there may be a decrease in
the value of the Securities. To the extent the proceeds from the sale of
these Securities are insufficient to repay the Sponsor for a Trust's
organization costs, the Trustee will sell additional Securities to allow
a Trust to fully reimburse the Sponsor. In that event, the net asset
value per Unit will be reduced by the amount of additional Securities
sold. Although the dollar amount of the reimbursement due to the Sponsor
will remain fixed and will never exceed the per Unit amount set forth
for a Trust in "Statements of Net Assets," this will result in a greater
effective cost per Unit to Unit holders for the reimbursement to the
Sponsor. To the extent actual organization costs are less than the
estimated amount, only the actual organization costs will be deducted
from the assets of a Trust. When Securities are sold to reimburse the
Sponsor for organization costs, the Trustee will sell such Securities,
to the extent practicable, which will maintain the same proportionate
relationship among the Securities as existed prior to such sale.
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 Trusts accrue such interest daily. Because the Trusts
always have 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 a Trust is $1,000 worth of Units
($500 if you are purchasing Units for your Individual Retirement Account
or any other qualified retirement plan).
Sales Charges.
The sales charge you will pay has both an initial and a deferred
component. The initial sales charge, which you will pay at the time of
purchase, is initially equal to approximately 4.297% and 4.302% of the
Public Offering Price of a Unit for Series 77 and Series 78,
respectively, but will vary with the purchase price of your Unit. When
the Public Offering Price exceeds the per Unit amount specified in
"Summary of Essential Information" for each Trust, the initial sales
charge will exceed the percentage of the Public Offering Price specified
in the "Fee Table" for each Trust. This initial sales charge is actually
equal to the difference between the maximum sales charge of 4.25% and
the maximum remaining deferred sales charge (initially $.325 per Unit)
and will vary from the percentage of the Public Offering Price specified
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in the "Fee Table" for each Trust 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.
Monthly Deferred Sales Charge. In addition, five monthly deferred sales
charge payments of $.065 per Unit will be deducted from a Trust's assets
on approximately the twentieth day of each month from March 20, 2001
through July 20, 2001. If you buy Units at a price of less than the per
Unit amounts specified in "Summary of Essential Information" for each
Trust, the dollar amount of the deferred sales charge will not change,
but the deferred sales charge on a percentage basis will be more than
the percentage of the Public Offering Price specified in the "Fee Table"
for each Trust.
After the initial offering period, if you purchase Units after the last
deferred sales charge payment has been assessed, your sales charge will
consist of a one-time initial sales charge of 4.25% of the Public
Offering Price (equivalent to 4.439% of the net amount invested).
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:
_________________ ____________
$100 but less than $250 4.00%
$250 but less than $500 3.75%
$500 but less than $1,000 3.50%
$1,000 or more 2.75%
* Breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be
applied on whichever basis is more favorable to the investor. The
breakpoints will be adjusted to take into consideration purchase orders
stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
The reduced sales charge for quantity purchases will apply only to
purchases made by the same person on any one day from any one dealer. To
help you reach the above levels, you can combine the Units you purchase
of the Trusts. 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 your dealer of
any combined purchases before the sale in order to be eligible for the
reduced sales charge. Any reduced sales charge is the responsibility of
the party making the sale.
The following persons may purchase Units at the Public Offering Price
less the applicable dealer concession:
- - Employees, officers and directors of the Sponsor, our related
companies, dealers and their affiliates, and vendors providing services
to us.
- - Immediate family members of the above (spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law, daughters-in-law, sisters-in-law and brothers-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 in lieu of commissions or who charge 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, your Units will only be assessed that
portion of the sales charge retained by the Sponsor, 1.25% of the Public
Offering Price. This discount for "wrap fee" purchases is available
whether or not you purchase Units with the Wrap CUSIP. See "Distribution
of Units-Dealer Concessions."
The Value of the Securities.
The Evaluator will appraise the aggregate underlying value of the
Securities in the Trusts 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 certain national holidays
on which the NYSE is closed.
The aggregate underlying value of the Securities in the Trusts 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 Trusts;
Page 12
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
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 Trusts for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units during the primary
or secondary market at prices which represent a concession or agency
commission of 3.0% of the Public Offering Price per Unit.
Dealers and other selling agents who, during any consecutive 12-month
period, sell at least $2 billion worth of primary market units of unit
investment trusts sponsored by us will receive a concession of $30,000
in the month following the achievement of this level. We reserve the
right to change the amount of concessions or agency commissions from
time to time. Certain commercial banks may be making Units of the Trusts
available to their customers on an agency basis. A portion of the sales
charge paid by these customers is kept by or given to the banks in the
amounts shown above.
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
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 charge 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 Trusts
(which may show performance net of the expenses and charges the Trusts
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, BusinessWeek, Forbes or
Fortune. The investment characteristics of the Trusts differ from other
comparative investments. You should not assume that these performance
comparisons will be representative of a Trust's future performance.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum sales
charge per Unit of a Trust less any reduced sales charge as stated in
"Public Offering." Also, any difference between our cost to purchase the
Securities and the price at which we sell them to a Trust is considered
Page 13
a profit or loss (see Note 2 of "Schedules of Investments"). During the
initial offering period, dealers and others may also realize profits or
sustain losses as a result of fluctuations in the Public Offering Price
they receive when they sell the Units.
In maintaining a market for the Units, any difference between the price
at which 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.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees, Trustee costs to transfer and record the ownership of
Units and costs incurred in annually updating each Trust's registration
statement. We may discontinue purchases of Units at any time. IF YOU
WISH TO DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET
PRICES BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. If you sell
or redeem your Units before you have paid the total deferred sales
charge on your Units, you will have to pay the remainder at that time.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid is equal to or greater than the Redemption Price per Unit, we may
purchase the Units. You will receive your proceeds from the sale no
later than if they were redeemed by the Trustee. We may tender Units we
hold to the Trustee for redemption as any other Units. If we elect not
to purchase Units, the Trustee may sell tendered Units in the over-the-
counter market, if any. However, the amount you will receive is the same
as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trusts are listed under "Fee
Table." If actual expenses exceed the estimate, the applicable Trust
will bear the excess. The Trustee will pay operating expenses of a Trust
from the Interest Account of such 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 Trusts, and will receive brokerage fees
when the Trusts use us (or our affiliates) as agent in selling
Securities. Legal and regulatory filing fees and expenses associated
with updating each Trust's registration statement yearly are also now
chargeable to the Trusts. Historically, we paid these fees and expenses.
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 dealers of
the Trusts.
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 a Trust
outstanding at any time during the calendar year, except during the
initial offering period, in which case these fees are calculated based
on the largest number of Units outstanding during the period for which
compensation is paid. These fees may be adjusted for inflation without
Unit holders' approval, but in no case will the annual fees paid to us
or our 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 a Trust's operating expenses, and the fees described
above, the Trusts may also incur the following charges:
- - All legal and annual auditing expenses of the Trustee according to
its responsibilities under the Indenture;
- - The expenses and costs incurred by the Trustee to protect the Trusts
and the rights and interests of the Unit holders;
- - Fees for any extraordinary services the Trustee performed under the
Indenture;
- - Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of a Trust;
- - Payment for any loss, liability or expenses we incurred without
Page 14
negligence, bad faith or willful misconduct in acting as Sponsor of a
Trust; and/or
- - All taxes and other government charges imposed upon the Securities or
any part of a Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
the Trusts. We cannot guarantee that the interest received will be
sufficient to meet any or all expenses of the Trusts. If there is not
enough cash in the Interest or Principal Accounts, 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 Trusts 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
Trusts will pay for the audit. You can request a copy of the audited
financial statements from the Trustee.
Tax Status
This section discusses some of the main U.S. federal income tax
consequences of owning Units of the Trusts. This section is current as
of the date of this prospectus. Tax laws and interpretations change
frequently, and this summary does not describe all of the tax
consequences to all taxpayers. For example, this summary generally does
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe your state, local or foreign
taxes. As with any investment, you should consult your own tax
professional about your particular consequences.
Trust Status.
Each Trust intends to qualify as a "regulated investment company" under
the federal tax laws. If each Trust qualifies as a regulated investment
company and distributes its income as required by the tax law, the
Trusts generally will not pay taxes on income.
Interest Distributions.
Trust distributions are taxable to most investors. At the end of each
year, you will receive a tax statement that separates Trust
distributions into two categories, ordinary income distributions and
capital gains dividends. Ordinary income distributions are generally
taxed at your ordinary tax rate. Generally, you will treat all capital
gains dividends as long-term capital gain regardless of how long you
have owned your Units. To determine your actual tax liability for your
capital gains dividends, you must calculate your total net capital gain
or loss for the tax year after considering all of your other taxable
transactions, as described below. The tax status of dividends from a
Trust is not affected by whether you reinvest your dividends in
additional Units or receive them in cash. The tax laws may require you
to treat distributions made to you in January as if you had received
them on December 31 of the previous year.
Your Tax Basis and Income or Loss upon Disposition.
If you sell or redeem your Units, you will generally recognize a taxable
gain or loss. To determine the amount of this gain or loss, you must
subtract your tax basis in your Units from what you receive 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 holding period for the asset is more than one year and is short-term
if the holding period for the asset is one year or less. You must
exclude the date you purchase your Units to determine the holding period
of your Units. However, if you receive a capital gain dividend and sell
your Unit at a loss after holding it for six months or less, the loss
will be recharacterized as long-term capital loss to the extent of the
capital gain received as a dividend. The tax rates for capital gains
realized from assets held for one year or less are generally the same as
for ordinary income.
Limitations on the Deductibility of Trust Expenses.
Deductible expenses incurred by a Trust will generally not be treated as
income taxable to you. In some cases, however, you may be required to
treat your portion of these Trust expenses as income. In these cases you
may be able to take a deduction for these expenses. However, certain
Page 15
miscellaneous itemized deductions, such as investment expenses, may be
deducted by individuals only to the extent all these deductions exceed
2% of adjusted gross income.
Retirement Plans
You may purchase Units of the Trusts for:
- - Individual Retirement Accounts;
- - Keogh Plans;
- - Pension funds; and
- - Other tax-deferred retirement plans.
Generally, the federal income tax on capital gains and income received
in each of the above plans is deferred until you receive distributions.
These distributions are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred rollover
treatment. 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
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- - A written initial transaction statement containing a description of
your Trust;
- - A list of the number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of interest (if any)
distributed. After the end of each calendar year, the Trustee will
provide you:
- - The amount of interest received by your 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;
Page 16
- - 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. The Trustee will credit any interest received on
the Securities to the Interest Account. All other receipts, such as
return of capital, are credited to the Principal Account of a 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." No interest distribution will be paid if accrued expenses
of a Trust exceed amounts in the Interest Account on the Interest
Distribution Dates. Distribution amounts will vary with changes in a
Trust's fees and expenses, in interest received, with principal payments
and prepayments and with the sale of Securities. During the Reinvestment
Period, the Trustee will generally reinvest principal payments and
prepayments into additional Securities. Amounts the Trustee is currently
unable to reinvest will be held in the Principal Account until such time
as reinvestment is possible or distributed to Unit holders if the
Trustee determines that reinvestment is not possible. After the
Reinvestment Period, 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 first 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 a 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 a
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of such Trust.
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 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. The IRS will require the Trustee to
withhold a portion of your redemption proceeds if the Trustee does not
Page 17
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 a Trust will be
reduced. These sales may result in lower prices than if the Securities
were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- - If the NYSE is closed (other than customary weekend and holiday
closings);
- - If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- - For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Interest and Principal Accounts not designated to
purchase Securities;
2. the aggregate underlying value of the Securities held in a Trust; and
3. accrued interest on the Securities.
deducting
1. any applicable taxes or governmental charges that need to be paid out
of a Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of a Trust, if any;
4. cash held for distribution to Unit holders of record of a Trust as of
the business day before the evaluation being made; and
5. other liabilities incurred by a Trust; and
dividing
1. the result by the number of outstanding Units of a Trust.
Any remaining deferred sales charge on the Units when you redeem them
will be deducted from your redemption proceeds. In addition, until the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period, the Redemption Price per Unit will include
estimated organization costs as set forth under "Fee Table."
Removing Securities from a Trust
The portfolios of the Trusts are not managed. However, we may, but are
not required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- - The issuer of the Security has defaulted in the payment of principal
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;
- - There has been a public tender offer made for a Security or a merger
or acquisition is announced affecting a Security, and that in our
opinion the sale or tender of the Security is in the best interest of
Unit holders;
- - Such factors arise which, in our opinion, adversely affect the tax or
exchange control status of the Securities or a 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 a 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 a Trust acquires Replacement
Securities, as described in "The First Trust GNMA Reinvestment Income
Trust," a Trust may not acquire any securities or other property other
than the Securities. The Trustee, on behalf of a Trust, will reject any
offer for new or exchanged securities or property in exchange for a
Security, 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
Page 18
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 a 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 a Trust to facilitate selling
Securities, exchanged securities or property from a 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 a Trust's
portfolio transactions, or when acting as agent for a Trust in acquiring
or selling Securities on behalf of a 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, each Trust will terminate
upon the redemption, sale or other disposition of the last Security held
in such Trust, but in no case later than the Mandatory Termination Date.
A Trust may be terminated earlier:
- - Upon the consent of 100% of the Unit holders;
- - If the value of the Securities owned by such Trust as shown by any
evaluation is less than the lower of $2,000,000 or 40% of the aggregate
principal amount of Securities deposited in such Trust during the
initial offering period (the "Discretionary Liquidation Amount"); or
- - In the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination the Trustee will send written notice to you which
will specify how you should tender your certificates, if any, to the
Trustee. If a Trust is terminated due to this last reason, we will
refund your entire sales charge; however, termination of a Trust before
the Mandatory Termination Date for any other reason will result in all
remaining unpaid deferred sales charges on your Units being deducted
from your termination proceeds. For various reasons, a Trust may be
reduced below the Discretionary Liquidation Amount and could therefore
be terminated before the Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of a Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Securities. Because the Trustee must sell the Securities within a
relatively short period of time, the sale of Securities as part of the
termination process may result in a lower sales price than might
otherwise be realized if such sale were not required at this time.
You will receive a cash distribution from the sale of the remaining
Securities, along with your interest in the Interest and Principal
Accounts, within a reasonable time after a Trust is terminated.
Regardless of the distribution involved, the Trustee will deduct from
the Trusts 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 Trusts 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"
Page 19
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 Trusts 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 Trusts or
sales of Securities from the Trusts 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
Trusts.
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- - The First Trust Combined Series
- - FT Series (formerly known as The First Trust Special Situations Trust)
- - The First Trust Insured Corporate Trust
- - The First Trust of Insured Municipal Bonds
- - The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $27 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, 1999, the total partners' capital of
Nike Securities L.P. was $19,881,035 (audited).
This information refers only to us and not to the Trust or to any series
of the Trust or to any other dealer. We are including this information
only to inform you of our financial responsibility and our ability to
carry out our contractual obligations. We will provide more detailed
financial information on request.
Code of Ethics. The Sponsor and the Trusts have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to the Trusts.
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 Trusts, you may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee has not participated in selecting the Securities; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
Page 20
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- - Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC,
- - Terminate the Indenture and liquidate the Trusts, or
- - Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is 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 Trusts'
statements of net assets, including the schedules of investments, at the
opening of business on the Initial Date of Deposit, as set forth in
their report. We've included the Trusts' statements of net assets,
including the schedules of investments, in the prospectus and elsewhere
in the registration statement in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
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Page 23
FIRST TRUST (registered trademark)
The First Trust GNMA Reinvestment Income Trust
Series 77 and Series 78
Sponsor:
Nike Securities L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
THE CHASE MANHATTAN BANK
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to the above-mentioned
unit investment trusts, but does not contain all of the information
about this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- - Securities Act of 1933 (file no. 333-32300) and
- - Investment Company Act of 1940 (file no. 811-05903)
Information about the Trusts, including their Codes of Ethics, can be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington D.C. Information regarding the operation of
the Commission's Public Reference Room may be obtained by calling the
Commission at 1-202-942-8090.
Information about the Trust is available on the EDGAR Database on the
Commission's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0102
e-mail address: [email protected]
March 16, 2000
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 Reinvestment Income Trust, Series 77
and Series 78 not found in the prospectus for the Trusts. This
Information Supplement is not a prospectus and does not include all of
the information you should consider before investing in the Trusts. This
Information Supplement should be read in conjunction with the prospectus
for the Trust in which you are considering investing.
This Information Supplement is dated March 16, 2000. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors 1
Risk Factors
An investment in Units of the Trusts 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 portfolios of the Trusts consist 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 "Schedules 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 Trusts will take into account the maturities of the
individual securities. The mortgages underlying the Ginnie Maes in the
Trusts have an original stated maturity of up to 30 years.
The Trusts 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
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 Trusts 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
Page 1
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.
The mortgages underlying a Ginnie Mae may be prepaid at any time without
penalty. A lower or higher current return on Units may occur depending
on (i) whether the price at which the respective Ginnie Maes were
acquired by the Trusts is lower or higher than par, (ii) whether
principal is reinvested or distributed to Unit holders and (iii) if
reinvestment occurs, whether the Ginnie Maes purchased by the Trustee
with reinvested principal are purchased at a premium or discount from
par. During periods of declining interest rates, prepayments of Ginnie
Maes may occur with increasing frequency because, among other reasons,
mortgagors may be able to refinance their outstanding mortgages at lower
interest rates. In such a case, (i) the reinvestment of principal may be
at prices which result in a lower return on Units or (ii) principal will
be distributed to Unit holders who cannot reinvest such principal
distributions in other securities at an attractive yield.
Description of Securities. The Ginnie Maes included in the Trusts are
backed by the indebtedness secured by underlying mortgage pools of up to
30 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 Trusts are mortgages on 1-
to 4-family dwellings (having a stated maturity of up to 30 years for
Securities in the Trusts 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
distributions are often received late.
Page 2
All of the Ginnie Maes in the Trusts, 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
Trusts) 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 Trusts 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 Trusts 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 Trusts) 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 Trusts 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 Trusts. All of the mortgages in the
pools relating to the Ginnie Maes in the Trusts 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 Trusts, 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.
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 Trusts. Even though the reinvestment of
principal may mitigate the effects of prepayments of principal, the
termination of the Trusts 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
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 $500,000, 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
The Registrant, The First Trust GNMA Reinvestment Income
Trust, Series 77 & Series 78 hereby identifies Series 8 of The
First Trust GNMA, The First Trust Combined Series 248, The First
Trust GNMA Reinvestment Income Trust, Series 68 and The First
Trust Special Situations Trust, Series 18; FT 286; The First
Trust Combined Series 272 and FT 412 for purposes of the
representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from
those deposited in such previous series;
(2) that, except to the extent necessary to identify the
specific portfolio securities deposited in and to provide
essential financial information for, the series with respect to
the securities of which this Registration Statement is being
filed, this Registration Statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities
Act of 1933.
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust GNMA Reinvestment Income Trust,
Series 77 & Series 78 has duly caused this Amendment of
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on March 16, 2000.
THE FIRST TRUST GNMA REINVESTMENT
INCOME TRUST, SERIES 77 & SERIES
78
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
David J. Allen Sole Director )
of Nike Securities )
Corporation, the ) March 16, 2000
General Partner of )
Nike Securities L.P.)
)
)
) Robert M. Porcellino
) Attorney-in-Fact**
)
)
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Combined Series 258 (File No. 33-63483) and the same is
hereby incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated March 16, 2000 in
Amendment No. 1 to the Registration Statement (Form S-6) (File
No. 333-32300) and related Prospectus of The First Trust GNMA
Reinvestment Income Trust, Series 77 & Series 78.
ERNST & YOUNG LLP
Chicago, Illinois
March 16, 2000
CONSENT OF COUNSEL
The consent of counsel are contained in their respective
opinions filed by this amendment as Exhibits 3.1 and 3.4 to 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 the Registration
Statement is filed as Exhibit 4.1 to the Registration Statement
CONSENT OF STANDARD & POOR'S RATINGS SERVICES, A DIVISION OF THE
McGRAW-HILL COMPANIES, INC.
The consent of Standard & Poor's Ratings Services, A Division of
the McGraw-Hill Companies, Inc. to the use of its name in the
Prospectus included in the Registration Statement is filed as
Exhibit 4.2 to the Registration Statement.
S-4
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, United States Trust Company of New York as
Trustee, Securities Evaluation Service, Inc., as
Evaluator, and Nike Financial Advisory Services L.P. as
Portfolio Supervisor (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-44532] filed on
behalf of The First Trust GNMA, Series 62).
1.1.1 Form of Trust Agreement for Series 77 & Series 78 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).
S-5
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
2.2 Copy of Code of Ethics (incorporated by reference to
Amendment No. 1 to form S-6 [File No. 333-31176] filed on
behalf of FT 415).
3.1 Opinion of counsel as to legality of securities being
registered.
3.4 Opinion of counsel as to advancement of funds by Trustee.
4.1 Consent of Securities Evaluation Service, Inc.
4.2 Consent of Standard & Poor's Ratings Services, A Division
of the McGraw-Hill Companies, 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. 33-63483] filed on behalf of The First Trust Combined
Series 258).
S-6
MEMORANDUM
The First Trust GNMA Reinvestment Income Trust, Series 77 &
Series 78
File No. 333-32300
The Prospectus and the Indenture filed with Amendment No. 1
of the Registration Statement on Form S-6 have been revised to
reflect information regarding the execution of the Indenture and
the deposit of bonds on March 16, 2000 and to set forth certain
statistical data based thereon. In addition, there are a number
of other changes described below.
THE PROSPECTUS
Cover Page The date of the Trust has been added.
Page 3 The following information for the Trust appears:
The total number of units initially being offered
and the initial size of the Fund.
The Public Offering Price on the business day
prior to the Initial Date of Deposit.
The estimated long term return and estimated
current return (if applicable) to Unit holders as
of the business day prior to the Initial Date of
Deposit.
The first distribution and record dates.
Page 5 The Report of Independent Auditors, has been
completed
Page 6 The Statements of Net Assets for the Fund have been
completed.
Page 7 The Schedules of Investments have been completed.
Back Cover The series number for the Trust and the date of
the Prospectus have been included.
THE TRUST AGREEMENT
The Trust Agreement have been conformed to
reflect the execution thereof.
CHAPMAN AND CUTLER
March 16, 2000
THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST, SERIES 77
AND SERIES 78
TRUST AGREEMENT
Dated: March 16, 2000
This Trust Agreement among Nike Securities L.P., as
Depositor, Chase Manhattan Bank, as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and First Trust Advisors
L.P., as Portfolio Supervisor sets forth certain provisions in
full and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust for The
First Trust GNMA, Series 62 and subsequent Series, effective
December 19, 1991" (herein called the "Standard Terms and
Conditions of Trust"), and such provisions as are set forth in
full and such provisions as are incorporated by reference
constitute a single instrument. All references herein to
Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and the Portfolio Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the Provisions of Part II hereof, all the
provisions contained in the Standard Terms and Conditions of
Trust are herein incorporated by reference in their entirety and
shall be deemed to be a part of this instrument as fully and to
the same extent as though said provisions had been set forth in
full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST SERIES 77
("SERIES 77")
The following special terms and conditions are hereby agreed
to:
(A) The Securities defined in Section 1.01(5) listed in
Schedule A hereto have been deposited in trust under this Trust
Agreement and shall include any securities deposited in the Fund
pursuant to Section 2.01 hereof.
(B) The number of Units in the Trust referred to in
Section 2.03 is set forth under "Summary of Essential
Information - Initial Number of Units" in the Prospectus.
(C) For the Trust the First General Record Date shall be
set forth under "Summary of Essential Information" in the
Prospectus.
(D) For the Trust the First Settlement Date shall be set
forth under "Summary of Essential Information - First Settlement
Date" in the Prospectus.
(E) For the Trust the Record Dates and the Distribution
Dates shall be set forth under "Summary of Essential Information"
in the Prospectus.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
FOR THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST SERIES 78
("SERIES 78")
The following special terms and conditions are hereby agreed
to:
(A) The Securities defined in Section 1.01(5) listed in
Schedule A hereto have been deposited in trust under this Trust
Agreement and shall include any securities deposited in the Fund
pursuant to Section 2.01 hereof.
(B) The number of Units in the Trust referred to in
Section 2.03 is set forth under "Summary of Essential
Information - Initial Number of Units" in the Prospectus.
(C) For the Trust the First General Record Date shall be
set forth under "Summary of Essential Information" in the
Prospectus.
(D) For the Trust the First Settlement Date shall be set
forth under "Summary of Essential Information - First Settlement
Date" in the Prospectus.
(E) For the Trust the Record Dates and the Distribution
Dates shall be set forth under "Summary of Essential Information"
in the Prospectus.
PART III
(A) Any reference in the Standard Terms and Conditions of
Trust to "per 1,000 Units" shall be amended to read "per 100
Units," and any reference to "$1 per Unit" shall be amended to
read "$10 per Unit."
(B) Section 1.01(2) of the Standard Terms and Conditions of
Trust shall be amended to read as follows:
"(2) "Trustee" shall mean the Chase Manhattan Bank, or
any successor trustee as hereinafter provided."
All references to United States Trust Company of New York in
the Standard Terms and Conditions of Trust shall be amended to
refer to The Chase Manhattan Bank.
(C) Section 1.01(4) of the Standard Terms and Conditions of
Trust shall be amended to read as follows:
"(4) "Portfolio Supervisor" shall mean First
Trust Advisors L.P. and its successors in interest, or
any successor portfolio supervisor appointed as
hereinafter provided."
(D) The first and second paragraphs of Section 2.01 are
hereby restated in their entirety as follows:
Section 2.01. Deposit of Securities. (a) The Depositor, on
the date of the Trust Agreement, has deposited with the Trustee
in trust the Securities listed in Schedule A to the Trust
Agreement in bearer form or duly endorsed in blank or accompanied
by all necessary instruments of assignment and transfer in proper
form or Contract Obligations relating to such Securities to be
held, managed and applied by the Trustee as herein provided. The
Depositor shall deliver the Securities listed on said Schedule A
which were not actually delivered concurrently with the execution
and delivery to the Trust Agreement and which were represented by
Contract Obligations to the Trustee within 10 calendar days after
said execution and delivery (the "Delivery Period"). If a
contract to buy such Securities between the Depositor and seller
is terminated by the seller thereof for any reason beyond the
control of the Depositor or if for any other reason the
Securities are not delivered to the Trust by the end of the
Delivery Period, the Trustee shall immediately draw on the letter
of credit, if any, apply the monies in accordance with Section
3.03(b), and the Depositor shall forthwith take the remedial
action specified in Section 3.13. If the Depositor does not take
the action specified in Section 3.13 within 10 calendar days of
the end of the Delivery Period, the Trustee shall forthwith take
the action specified in Section 3.13.
(b)(1)From time to time following the Initial Date of
Deposit, the Depositor is hereby authorized, in its
discretion, to assign, convey to and deposit with the
Trustee (i) additional Securities, duly endorsed in blank or
accompanied by all necessary instruments of assignment and
transfer in proper form, (ii) Contract Obligations relating
to such additional Securities, accompanied by cash and/or
letter(s) of credit as specified in paragraph (c) of this
Section 2.01, or (iii) cash (or a letter of credit in lieu
of cash) with instructions to purchase additional
Securities, in an amount equal to the portion of the Unit
Value of the Units created by such deposit attributable to
the Securities to be purchased pursuant to such
instructions. Except as provided in the following
subparagraphs (2), (3) and (4) the Depositor, in each case,
shall ensure that each deposit of additional Securities
pursuant to this Section shall maintain, as nearly as
practicable, the Percentage Ratio. Each such deposit of
additional Securities shall be made pursuant to a Notice of
Deposit of Additional Securities delivered by the Depositor
to the Trustee. Instructions to purchase additional
Securities shall be in writing, and shall specify the name
of the Security, CUSIP number, if any, aggregate amount,
price or price range and date to be purchased. When
requested by the Trustee, the Depositor shall act as broker
to execute purchases in accordance with such instructions;
the Depositor shall be entitled to compensation therefor in
accordance with applicable law and regulations. The Trustee
shall have no liability for any loss or depreciation
resulting from any purchase made pursuant to the Depositor's
instructions or made by the Depositor as broker.
(2) Additional Securities (or Contract Obligations
therefor) may, at the Depositor's discretion, be deposited
or purchased in round lots. If the amount of the deposit is
insufficient to acquire round lots of each Security to be
acquired, the additional Securities shall be deposited or
purchased in the order of the Security in the Trust most
under-represented immediately before the deposit with
respect to the Percentage Ratio.
(3) If at the time of a deposit of additional
Securities, Securities of an issue deposited on the Initial
Date of Deposit (or of an issue of Replacement Securities
acquired to replace an issue deposited on the Initial Date
of Deposit) are unavailable, cannot be purchased at
reasonable prices or their purchase is prohibited or
restricted by applicable law, regulation or policies, the
Depositor may (i) deposit, or instruct the Trustee to
purchase, in lieu thereof, another issue of Securities or
Replacement Securities or (ii) deposit cash or a letter of
credit in an amount equal to the valuation of the issue of
Securities whose acquisition is not feasible with
instructions to acquire such Securities of such issue when
they become available.
(4) Any contrary authorization in the preceding
subparagraphs (1) through (3) notwithstanding, deposits of
additional Securities made after the 90-day period
immediately following the Initial Date of Deposit (except
for deposits made to replace Failed Contract Obligations if
such deposits occur with 20 days from the date of a failure
occurring within such initial 90-day period) shall maintain
exactly the Percentage Ratio existing immediately prior to
such deposit.
(5) In connection with and at the time of any deposit
of additional Securities pursuant to this Section 2.01(b),
the Depositor shall exactly replicate Cash (as defined
below) received or receivable by the Trust as of the date of
such deposit. For purposes of this paragraph, "Cash" means,
as to the Principal Account, cash or other property (other
than Securities) on hand in the Principal Account or
receivable and to be credited to the Principal Account as of
the date of the deposit (other than amounts to be
distributed solely to persons other than holders of Units
created by the deposit) and, as to the Income Account, cash
or other property (other than Securities) received by the
Trust as of the date of the deposit or receivable by the
Trust in respect of a record date for a payment on a
Security which has occurred or will occur before the Trust
will be the holder of record of a Security, reduced by the
amount of any cash or other property received or receivable
on any Security allocable (in accordance with the Trustee's
calculations of distributions from the Income Account
pursuant to Section 3.05) to a distribution made or to be
made in respect of a Record Date occurring prior to the
deposit. Such replication will be made on the basis of a
fraction, the numerator of which is the number of Units
created by the deposit and the denominator of which is the
number of Units which are outstanding immediately prior to
the deposit."
(E) Section 2.01 is hereby amended to include the following
subsection:
"(c) In connection with the deposits described in
Section 2.01 (a) and (b), the Depositor has, in the case of
Section 2.01(a) deposits, and, prior to the Trustee
accepting a Section 2.01(b) deposit, will, deposit cash
and/or letter(s) of credit (meeting the conditions set forth
in Section 2.07) in an amount sufficient to purchase the
Contract Obligations (the "Purchase Amount") relating to
Securities which are not actually delivered to the Trustee
at the time of such deposit, the terms of which
unconditionally allow the Trustee to draw on the full amount
of the available letter of credit. The Trustee may allow
the Depositor to substitute for any letter(s) of credit
deposited with the Trustee in connection with the deposits
described in Section 2.01(a) and (b) cash in an amount
sufficient to satisfy the obligations to which the letter(s)
of credit relates. Any substituted letter(s) of credit
shall be released by the Trustee. The Trustee may deposit
such cash or cash drawn on the letter of credit in a non-
interest bearing account for the Trust."
(F) The third paragraph of Section 2.01 is hereby amended
as subsection (d).
(G) The following Section 2.07 shall be added immediately
after Section 2.06.
"Section 2.07. Letter of Credit. The Trustee shall not
accept any letter of credit under this Indenture unless the
stated expiration date of the letter of credit is at least thirty
days from the respective date of deposit of Contract Obligations
pursuant to Section 2.01(a) or 2.01(b). The Trustee is
authorized to downpost the amount available under the letter of
credit, if any, deposited by the Depositor by an amount equal to
the purchase price of Contract Obligations representing
Securities delivered to the Trust on the date of delivery of such
Securities."
(H) Section 3.01 of the Standard Terms and Conditions of
Trust shall be replaced in its entirety with the following:
"Section 3.01. Initial Cost. Subject to reimbursement as
hereinafter provided, the cost of organizing the Trust and the
sale of the Trust Units shall be borne by the Depositor,
provided, however, that the liability on the part of the
Depositor under this section shall not include any fees or other
expenses incurred in connection with the administration of the
Trust subsequent to the deposit referred to in Section 2.01. At
the earlier of six months after the Initial Date of Deposit or
the conclusion of the primary offering period (as certified by
the Depositor to the Trustee), the Trustee shall withdraw from
the Account or Accounts specified in the Prospectus or, if no
Account is therein specified, from the Principal Account, and pay
to the Depositor the Depositors reimbursable expenses of
organizing the Trust in an amount certified to the Trustee by the
Depositor. In no event shall the amount paid by the Trustee to
the Depositor for the Depositors reimbursable expenses of
organizing the Trust exceed the estimated per Unit amount of
organization costs set forth in the Prospectus for the Trust
multiplied by the number of Units of the Trust outstanding at the
earlier of six months after the Initial Date of Deposit or the
conclusion of the primary offering period; nor shall the
Depositor be entitled to or request reimbursement for expenses of
organizing the Trust incurred after the earlier of six months
after the Initial Date of Deposit or the conclusion of the
primary offering period. If the cash balance of the Principal
Account is insufficient to make such withdrawal, the Trustee
shall, as directed by the Depositor, sell Securities identified
by the Depositor, or distribute to the Depositor Securities
having a value, as determined under Section 4.01 as of the date
of distribution, sufficient for such reimbursement. Securities
sold or distributed to the Depositor to reimburse the Depositor
pursuant to this Section shall be sold or distributed by the
Trustee, to the extent practicable, in the percentage ratio then
existing. The reimbursement provided for in this section shall
be for the account of Unit holders of record at the earlier of
six months after the Initial Date of Deposit or the conclusion of
the primary offering period. Any assets deposited with the
Trustee in respect of the expenses reimbursable under this
Section 3.01 shall be held and administered as assets of the
Trust for all purposes hereunder. The Depositor shall deliver to
the trustee any cash identified in the Statement of Net Assets of
the Trust included in the Prospectus not late than the expiration
of the Delivery Period and the Depositors obligation to make
such delivery shall be secured by the letter of credit deposited
pursuant to Section 2.01. Any cash which the Depositor has
identified as to be used for reimbursement of expenses pursuant
to this Section 3.01 shall be held by the Trustee, without
interest, and reserved for such purpose and, accordingly, prior
to the earlier of six months after the Initial Date of Deposit or
the conclusion of the primary offering period, shall not be
subject to distribution or, unless the Depositor otherwise
directs, used for payment of redemptions in excess of the per
Unit amount payable pursuant to the next sentence. If a Unit
holder redeems Units prior to the earlier of six months after the
Initial Date of Deposit or the conclusion of the primary offering
period, the Trustee shall pay the Unit holder, in addition to the
Redemption Value of the tendered Units, unless otherwise directed
by the Depositor, an amount equal to the estimated per Unit cost
of organizing the Trust set forth in the Prospectus, or such
lower revision thereof most recently communicated to the Trustee
by the Depositor pursuant to Section 5.01, multiplied by the
number of Units tendered for redemption; to the extent the cash
on hand in the Trust is insufficient for such payments, the
Trustee shall have the power to sell Securities in accordance
with Section 5.02. As used herein, the Depositors reimbursable
expenses of organizing the Trust shall include the cost of the
initial preparation and typesetting of the registration
statement, prospectuses (including preliminary prospectuses), the
indenture, and other documents relating to the Trust, SEC and
state blue sky registration fees, the cost of the initial
valuation of the portfolio and audit of the Trust, the initial
fees and expenses of the Trustee, and legal and other out-of-
pocket expenses related thereto, but not including the expenses
incurred in the printing of preliminary prospectuses and
prospectuses, expenses incurred in the preparation and printing
of brochures and other advertising materials and any other
selling expenses."
(I) Section 3.05 of Article III of the Standard Terms and
Conditions of Trust is hereby amended to include the following
subsection:
"Section 3.05(e) deduct from the Interest
Account or, to the extent funds are not available in
such Account, from the Principal Account and pay to the
Depositor the amount that it is entitled to receive
pursuant to Section 3.15."
(J) Section 3.06(B)(3) is amended in its entirety to read
as follows:
"(3) the amount paid for purchases of New
Securities, Replacement Securities or Reinvestment
Securities pursuant to Section 3.13 and for redemptions
pursuant to Section 5.02."
(K). Section 3.07 of the Standard Terms and Conditions of
Trust is amended to delete the word "or" at the end of Section
3.07(g) and add the following after Section 3.07(h):
";(i) that such sale is required due to Units tendered for
redemption; or
(j) that the sale of Securities is necessary or advisable
in order to maintain the qualification of the Trust as a
"regulated investment company" in the case of a Trust which has
elected to qualify as such."
(L) The title of Section 3.13 of Article III of the
Standard Terms and Conditions of Trust is hereby amended in its
entirety to read as follows:
"Section 3.13. Limited Replacement of Special
Securities; Replacement Securities; Reinvestment of
Principal."
(M) Section 3.13 of Article III of the Standard Terms and
Conditions of Trust is hereby amended by inserting the following
paragraphs immediately preceding the last paragraph of such
Section:
"From the Initial Date of Deposit until such time
as the Depositor notifies the Trustee in writing that
such action is impractical (the "Reinvestment Period"),
the Trustee shall, as directed by the Depositor, enter
into contracts (which the Depositor shall have approved
as satisfactory in form and substance) to purchase
obligations to be held as Securities hereunder as part
of the Trust Fund (the "Reinvestment Securities") and
shall pay for the same with the moneys held in the
Principal Account representing the payment or
prepayment of principal on the underlying Securities to
the extent that such proceeds are not required for the
purpose of redemption of Units or other charges to the
Principal Account then pending. In giving such
direction, the Depositor shall determine that the
Reinvestment Securities to be acquired pursuant to such
contract are taxable, mortgage-backed securities of the
modified pass-through type, fully guaranteed as to
principal and interest by the Government National
Mortgage Association and are substantially similar as
to maturity and interest rates as the Securities upon
which the principal used to purchase such Reinvestment
Securities was received.
The Trustee may purchase the Reinvestment
Securities for deposit in the Trust Fund directly from
market makers in such Securities or may retain the
Depositor or other brokers to purchase the Reinvestment
Securities and pay them usual and customary brokerage
commissions for such transactions. Funds remaining in
the Principal Account subsequent to a purchase of
Reinvestment Securities will remain in such Account
until such time as they can be invested into additional
Reinvestment Securities. During the Reinvestment
Period, amounts in the Principal Account which, the
Depositor determines and so notifies the Trustee in
writing or via facsimile, are (a) unable to be invested
into Reinvestment Securities or (b) are required to be
distributed for "regulated investment company" tax
purposes shall be distributed on the next semi-annual
distribution date, June 30 and December 31 of each
year, to Unit holders of record on June 1 and December
1, respectively.
At such time as the Depositor shall determine that
the reinvestment of cash from the Principal Account
into Reinvestment Securities shall no longer be
practical, the Depositor shall notify the Trustee, in
writing, that the Reinvestment Period is terminated.
Upon termination of the Reinvestment Period,
unreinvested amounts remaining in the Principal Account
and amounts subsequently credited to the Principal
Account shall be distributed in accordance with Section
3.05."
(N) The last paragraph of Section 3.13 of the Standard
Terms and Conditions of Trust is replaced as follows:
"Whenever a New Security is acquired by the
Depositor pursuant to the provisions of this Section
3.13, the Trustee shall, within five days thereafter,
mail to all Holders of Units of the respective Trust
Fund notice of such acquisition, including an
identification of the failed Special Security and the
New Security acquired.
The Trustee shall not be liable or responsible in
any way for depreciation or loss incurred by reason of
any purchase made pursuant to any direction of the
Depositor provided in this Section 3.13, and in the
absence of such direction the Trustee shall have no
duty to make any purchase. The Depositors shall not be
liable for errors of judgment in respect of this
Section 3.13; provided however, that this provision
shall not protect the Depositor against any liability
to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its
reckless disregard of its obligations and duties
hereunder."
(O) The first sentence of Section 3.14 shall be amended to
read as follows:
"As compensation for providing supervisory portfolio
services under this Indenture, the Portfolio Supervisor
shall receive, in arrears, against a statement or statements
therefor submitted to the Trustee monthly or annually an
aggregate annual fee in the amount of $0.15 per 1,000 Units,
calculated based on the largest number of Units outstanding
during the calendar year except during the initial offering
period as determined in Section 4.01 of this Indenture, in
which case the fee is calculated based on the largest number
of Units outstanding during the period for which the
compensation is paid (such annual fee to be pro rated for
any calendar year in which the Portfolio Supervisor provides
services during less than the whole of such year). Such fee
may exceed the actual cost of providing such portfolio
supervision services for the Trust, but at no time will the
total amount received for portfolio supervision services
rendered to unit investment trusts of which Nike Securities
L.P. is the sponsor in any calendar year exceed the
aggregate cost to the Portfolio Supervisor of supplying such
services in such year."
(P) Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraphs
which shall be entitled Section 3.15:
"Section 3.15. Bookkeeping and Administrative Expenses. As
compensation for providing bookkeeping and other administrative
services of a character described in 26(a)(2)(C) of the
Investment Company Act of 1940 to the extent such services are in
addition to, and do not duplicate, the services to be provided
hereunder by the Trustee or the Portfolio Supervisor, the
Depositor shall receive against a statement or statements
therefor submitted to the Trustee monthly or annually an
aggregate annual fee in an amount which shall not exceed the
amount of $0.15 per 1,000 Units, calculated based on the largest
number of Units outstanding during the calendar year except
during the initial offering period as determined in Section 4.01
of this Indenture, in which case the fee is calculated based on
the largest number of Units outstanding during the period for
which the compensation is paid (such annual fee to be pro rated
for any calendar year in which the Depositor provides services
during less than the whole of such year). Such fee may exceed
the actual cost of providing such bookkeeping and administrative
services for the Trust, but at no time will the total amount
received for bookkeeping and administrative services rendered to
unit investment trusts of which Nike Securities L.P. is the
sponsor in any calendar year exceed the aggregate cost to the
Depositor of supplying such services in such year. Such
compensation may, from time to time, be adjusted provided that
the total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase, after
the date hereof, in consumer prices for services as measured by
the United States Department of Labor Consumer Price Index
entitled "All Services Less Rent of Shelter" or similar index, if
such index should no longer be published. The consent or
concurrence of any Unit holder hereunder shall not be required
for any such adjustment or increase. Such compensation shall be
paid by the Trustee, upon receipt of invoice therefor from the
Depositor, upon which, as to the cost incurred by the Depositor
of providing services hereunder the Trustee may rely, and shall
be charged against the Interest and Principal Accounts on or
before the Distribution Date following the Monthly Record Date on
which such period terminates. The Trustee shall have no
liability to any Certificateholder or other person for any
payment made in good faith pursuant to this Section.
If the cash balance in the Interest and Principal Accounts
shall be insufficient to provide for amounts payable pursuant to
this Section 3.15, the Trustee shall have the power to sell (i)
Securities from the current list of Securities designated to be
sold pursuant to Section 5.02 hereof, or (ii) if no such
Securities have been so designated, such Securities as the
Trustee may see fit to sell in its own discretion, and to apply
the proceeds of any such sale in payment of the amounts payable
pursuant to this Section 3.15.
Any moneys payable to the Depositor pursuant to this Section
3.15 shall be secured by a prior lien on the Trust Fund except
that no such lien shall be prior to any lien in favor of the
Trustee under the provisions of Section 6.04 herein."
(Q) All provisions regarding the Distribution Date included
in Section 3.05 of Article III of the Standard Terms and
Conditions of Trust are hereby amended to change the Distribution
Date from the first day of the month following the Record Date to
the last day of the month in which the Record Date occurs.
(R) Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraph
which shall be entitled Section 3.16:
"Section 3.16. Deferred Sales Charge. If the
prospectus related to the Trust specifies a deferred sales
charge, the Trustee shall, on the dates specified in and as
permitted by such Prospectus (the "Deferred Sales Charge
Payment Dates"), withdraw from the Principal Account, an
amount per Unit specified in such Prospectus and credit such
amount to a special non-Trust account designated by the
Depositor out of which the deferred sales charge will be
distributed to or on the order of the Depositor on such
Deferred Sales Charge Payment Dates (the "Deferred Sales
Charge Account"). If the balance in the Principal Account
is insufficient to make such withdrawal, the Trustee shall,
as directed by the Depositor, advance funds in an amount
required to fund the proposed withdrawal and be entitled to
reimbursement of such advance upon the deposit of additional
monies in the Principal Account, and/or sell Securities and
credit the proceeds thereof to the Deferred Sales Charge
Account, provided, however, that the aggregate amount
advanced by the Trustee at any time for payment of the
deferred sales charge shall not exceed $15,000. Such
direction shall, if the Trustee is directed to sell a
Security, identify the Security to be sold and include
instructions as to the execution of such sale. In the
absence of such direction by the Depositor, the Trustee
shall sell Securities sufficient to pay the deferred sales
charge (and any unreimbursed advance then outstanding) in
full, and shall select Securities to be sold in such manner
as will maintain (to the extent practicable) the relative
proportion of number of shares of each Security then held.
The proceeds of such sales, less any amounts paid to the
Trustee in reimbursement of its advances, shall be credited
to the Deferred Sales Charge Account. If a Unit holder
redeems Units prior to full payment of the deferred sales
charge, the Trustee shall, if so provided in the related
Prospectus, on the Redemption Date, withhold from the
Redemption Price payable to such Unit holder an amount equal
to the unpaid portion of the deferred sales charge and
distribute such amount to the Deferred Sales Charge Account.
If the Trust is terminated for reasons other than that set
forth in Section 6.01(g), the Trustee shall, if so provided
in the related Prospectus, on the termination of the Trust,
withhold from the proceeds payable to Unit holders an amount
equal to the unpaid portion of the deferred sales charge and
distribute such amount to the Deferred Sales Charge Account.
If the Trust is terminated pursuant to Section 6.01(g)(ii),
the Trustee shall not withhold from the proceeds payable to
Unit holders any amounts of unpaid deferred sales charges.
If pursuant to Section 5.02 hereof, the Depositor shall
purchase a Unit tendered for redemption prior to the payment
in full of the deferred sales charge due on the tendered
Unit, the Depositor shall pay to the Unit holder the amount
specified under Section 5.02 less the unpaid portion of the
deferred sales charge. All advances made by the Trustee
pursuant to this Section shall be secured by a lien on the
Trust prior to the interest of the Unit holders."
(S) Notwithstanding anything to the contrary in Sections
3.16 and 4.05 of the Standard Terms and Conditions of Trust, so
long as Nike Securities L.P. is acting as Depositor, the Trustee
shall have no power to remove the Portfolio Supervisor.
(T) The first sentence of Section 4.03. shall be amended to
read as follows:
"As compensation for providing evaluation services under
this Indenture, the Evaluator shall receive, in arrears, against
a statement or statements therefor submitted to the Trustee
monthly or annually an aggregate annual fee in the amount of
$0.30 per 1,000 Units, calculated based on the largest number of
Units outstanding during the calendar year except during the
initial offering period as determined in Section 4.01 of this
Indenture, in which case the fee is calculated based on the
largest number of Units outstanding during the period for which
the compensation is paid (such annual fee to be pro rated for any
calendar year in which the Evaluator provides services during
less than the whole of such year), plus for each issue of
underlying Securities in excess of 50 issues (treating separate
maturities as separate issues), the Evaluator shall receive an
additional $0.25 per evaluation per issue. Such compensation
may, from time to time, be adjusted provided that the total
adjustment upward does not, at the time of such adjustment,
exceed the percentage of the total increase, after the date
hereof, in consumer prices for services as measured by the United
States Department of Labor Consumer Price Index entitled "All
Services Less Rent of Shelter" or similar index, if such index
should no longer be published. The consent or concurrence of any
Unit holder hereunder shall not be required for any such
adjustment or increase. Such compensation shall be paid by the
Trustee, upon receipt of invoice therefor from the Evaluator,
upon which, as to the cost incurred by the Evaluator of providing
services hereunder the Trustee may rely, and shall be charged
against the Interest and/or Principal Accounts, in accordance
with Section 3.05."
(U) Section 5.01 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The fourth sentence of the first paragraph of
Section 5.01 shall be amended by deleting the phrase "and
(iii)" and adding the following, "(iii) amounts representing
unpaid accrued organization costs, and (iv)"; and
(ii) The following text shall immediately precede
the last sentence of the first paragraph of Section 5.01:
"The resulting figure is herein called a "Trust
Fund Evaluation." Prior to the payment to the Depositor of
its reimbursable organization costs to be made at the
earlier of six months after the Initial Date of Deposit or
the conclusion of the primary offering period in accordance
with Section 3.01, for purposes of determining the Trust
Fund Evaluation under this Section 5.01, the Trustee shall
rely upon the amounts representing unpaid accrued
organization costs in the estimated amount per Unit set
forth in the Prospectus until such time as the Depositor
notifies the Trust in writing of a revised estimated amount
per Unit representing unpaid accrued organization costs.
Upon receipt of such notice, the Trustee shall use this
revised estimated amount per Unit representing unpaid
accrued organization costs in determining the Trust Fund
Evaluation but such revision of the estimated expenses shall
not effect calculations made prior thereto and no adjustment
shall be made in respect thereof."
(V) The first sentence of the first paragraph of Section
5.02 of the Standard Terms and Conditions of Trust shall be
replaced with the following:
"Any Unit evidenced by a Certificate tendered for redemption
by a Certificateholder or his duly authorized attorney or any
Unit held in uncertificated form tendered by a Holder of Units or
his duly authorized attorney by means of an appropriate request
for redemption in a form approved by the Trustee to the Trustee
at its unit investment trust office in the City of New York,
shall be paid by the Trustee on the third business day following
the day on which tender for redemption is made in proper form
(being herein called the "Redemption Date").
(W) The third paragraph of Section 6.02 of the Standard
Terms and Conditions of Trust shall be deleted in its entirety
and replaced with the following:
"The Trustee shall pay, or reimburse to the Depositor, the
expenses related to the updating of the Trusts registration
statement, to the extent of legal fees, typesetting fees,
electronic filing expenses and regulatory filing fees. Such
expenses shall be paid from the Interest Account, or to the
extent funds are not available in such Account, from the
Principal Account, against an invoice or invoices therefor
presented to the Trustee by the Depositor. By presenting such
invoice or invoices, the Depositor shall be deemed to certify,
upon which certification the Trustee is authorized conclusively
to rely, that the amounts claimed therein are properly payable
pursuant to this paragraph. The Depositor shall provide the
Trustee, from time to time as requested, an estimate of the
amount of such expenses, which the Trustee shall use for the
purpose of estimating the accrual of Trust expenses. The amount
paid by the Trust pursuant to this paragraph in each year shall
be separately identified in the annual statement provided to Unit
holders. The Depositor shall assure that the Prospectus for the
Trust contains such disclosure as shall be necessary to permit
payment by the Trust of the expenses contemplated by this
paragraph under applicable laws and regulations.
The provisions of this paragraph shall not limit the
authority of the Trustee to pay, or reimburse to the Depositor or
others, such other or additional expenses as may be determined to
be payable from the Trust as provided in Section 6.02 of the
Standard Terms and Conditions of Trust."
(X) The first two sentences of Section 6.04 shall be
deleted and the following shall be substituted therefor:
"For services performed under this Indenture the Trustee
shall be an annual fee in the amount of $0.92 per 1,000 Units,
accrued daily, calculated based on the largest number of Units
outstanding during the calendar year except during the initial
offering period as determined in Section 4.01 of this Indenture,
in which case the fee is calculated based on the largest number
of Units outstanding during the period for which the compensation
is paid (such annual fee to be prorated for any calendar year in
which the Trustee provides services during less than the whole of
such year). However, in no event, shall the Trustee receive
compensation in any one year from any Trust of less than $2,000
for such annual compensation."
(Y) The third sentence of paragraph (a) of Section 6.05 of
the Standard Terms and Conditions of Trust shall be replaced in
its entirety by the following:
"The Depositor may remove the Trustee at any time with or
without cause and appoint a successor Trustee by written
instrument or instruments delivered not less than sixty days
prior to the effective date of such removal and appointment to
the Trustee so removed and to the successor Trustee."
(Z) The third sentence of the second paragraph of Section
8.02 shall be replaced with the following:
"Commencing no earlier than nine business days prior to the
termination of the Trust, the Trustee will liquidate the
Securities during such period and in such daily amounts as the
Depositor shall direct, and shall:"
IN WITNESS WHEREOF, Nike Securities L.P., United States
Trust Company of New York, Securities Evaluation Service, Inc.
and First Trust Advisors L.P. have each caused this Trust
Agreement to be executed and the respective corporate seal to be
hereto affixed and attested (if applicable) by authorized
officers; all as of the day, month and year first above written.
NIKE SECURITIES L.P., Depositor
By Robert M. Porcellino
Senior Vice President
THE CHASE MANHATTAN BANK, Trustee
By Rosalia A. Raviele
Vice President
(SEAL)
Attest:
Joan A. Currie
Assistant Secretary
SECURITIES EVALUATION SERVICE,
INC., Evaluator
By James G. Prince
Vice President and Assistant
Secretary
(SEAL)
Attest:
Jerome Klaas
Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Robert M. Porcellino
Senior Vice President
-3-
SCHEDULE A TO TRUST AGREEMENT
SECURITIES DEPOSITED
IN
THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST, SERIES 74
AND SERIES 75
(Note:Incorporated herein and made a part hereof is the
"Portfolio" for Series 74 and Series 75 as set forth
in the Prospectus and any other securities that may
be deposited subsequent to the Initial Date of
Deposit pursuant to this Trust Agreement.)
SCHEDULE B TO TRUST AGREEMENT
THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST, Series 74 and
Series 75
NOTICE OF DEPOSIT OF ADDITIONAL SECURITIES
Dated: March 16, 1999
Pursuant to Section 2.01 of the Trust Agreement dated March
16, 1999 among Nike Securities L.P., as Depositor, United States
Trust Company of New York, as Trustee, Securities Evaluation
Service, Inc., as Evaluator, and First Trust Advisors L.P., as
Portfolio Supervisor (the "Trust Agreement"), the Depositor
hereby certifies to the Trustee as follows:
(a) The additional securities listed in Appendix A
hereto are hereby deposited in trust and have a
substantially equal percentage relationship between the
principal amounts of the Securities of specified interest
rates and years of maturity as specified in the Trust's
prospectus dated March 16, 1999.
(b) In accordance with Section 2.03 of the Trust
Agreement, an additional ______________ Units should be
issued as a result of the deposit referred to in (a) above.
Taking into account the above Units, the total number of
Units in the Trust issued as of the date of this notice
is_____________
(c) Taking into account that Units issued in (b)
above, the fractional undivided interest in and ownership of
the Trust represented by each Unit is _________
NIKE SECURITIES L.P.
By
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 606063
March 16, 2000
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust GNMA Reinvestment Income Trust, Series
77 & Series 78
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of The First Trust GNMA Reinvestment Income
Trust, Series 77 & Series 78 (the "Fund"), in connection with the
preparation, execution and delivery of a Trust Agreement dated
March 16, 2000 among Nike Securities L.P., as Depositor, The
Chase Manhattan Bank, as Trustee, Securities Evaluation Service,
Inc., as Evaluator, and First Trust Advisors L.P., as Portfolio
Supervisor, pursuant to which the Depositor has delivered to and
deposited the Securities listed in Schedule A to the Trust
Agreement with the Trustee and pursuant to which the Trustee has
issued to or on the order of the Depositor a certificate or
certificates representing units of fractional undivided interest
in and ownership of the Fund created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. The Units in the Fund, however evidenced, when duly
executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-32300)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF:erg
Exhibit 3.4
CARTER, LEDYARD & MILBURN
2 Wall Street
New York, New York 10005
March 16, 2000
The Chase Manhattan Bank
as Trustee of
The First Trust GNMA Reinvestment Income
Trust, Series 77 & Series 78
4 New York Plaza, 6th Floor
New York, New York 10004-2413
Attention: Mr. Thomas Porrazzo
Vice President
Re:The First Trust GNMA Reinvestment Income Trust, Series 77 &
Series 78
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank
("Chase") in connection with the execution and delivery of a
Trust Agreement (the "Trust Agreement") dated today's date (which
Trust Agreement incorporates by reference a certain Standard
Terms and Conditions of Trust dated December 19, 1991 and the
same are collectively referred to herein as the "Indenture")
among Nike Securities L.P., as Depositor (the "Depositor"),
Securities Evaluation Services, Inc., as Evaluator (the
"Evaluator), First Trust Advisors L.P., as Portfolio Supervisor
(the "Supervisor"), and Chase, as Trustee (the "Trustee"),
establishing The First Trust GNMA Reinvestment Income Trust,
Series 77 & Series 78 (the "Trust"), and the confirmation by
Chase, as Trustee under the Indenture, that it has registered on
the registration books of the Trust the ownership by the
Depositor of a number of units consituting the entire interest in
the Trust (such aggregate units being herein called "Units"),
each of which represents an undivided interest in the respective
Trust which consists of taxable mortgage-backed securities
guaranteed as to principal and interest by the Government
National Mortgage Association (collectively, the "Securities").
We have examined the Indenture, a specimen of the
certificates to be issued thereunder (the "Certificates"),the
Closing Memorandum dated today's date (the "Closing Memorandum"),
today's date, and such other documents as we have deemed
necessary in order to render this opinion. Based on the
foregoing we are of the opinion that:
1. Chase is a duly organized and existing corporation
having the powers of a trust company under the laws of the State
of New York.
2. The Trust Agreement and Indenture have been duly
executed and delivered by Chase and, assuming due execution and
delivery by the other parties thereto, constitute the valid and
legally binding obligations of Chase.
3. The Certificates are in proper form for execution and
delivery by Chase, as Trustee.
4. Chase, as Trustee, has registered on the registration
books of the Trust the ownership of the Units by the Depositor.
Upon receipt of confirmation of the effectiveness of the
registration statement for the sale of the Units filed with the
Securities and Exchange Commission under the Securities Act of
1933, the Trustee may deliver Certificates for such Units, in
such names and denominations as the Depositor may request, to or
upon the order of the Depositor as provided in the Closing
Memorandum.
5. Chase, as Trustee, may lawfully under the New York
Banking Law advance to the Trust Fund amounts as may be necessary
to provide the distribution to be made to the Depositor on the
First Settlement Date (as defined in the Indenture) and be
reimbursed, without interest, for such advance from funds in the
interest account, as provided in the Indenture.
In rendering the foregoing opinion we have not considered,
among other things, whether the Securities have been duly
authorized and delivered.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 333-32300) filed with the
Securities and Exchange Commission with respect to the
registration of the sale of the Units and to the references to
our name in such Registration Statement and the preliminary
prospectus included therein.
Very truly yours,
CARTER, LEDYARD & MILBURN
EXHIBIT 4.1
SES
Securities Evaluation Service, Inc.
Suite 200
531 E. Roosevelt Road
Wheaton, Illinois 60187
March 16, 2000
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST, SERIES 77 &
SERIES 78
Gentlemen:
We have examined the Registration Statement File No.
333-32300 for the above captioned fund. We hereby consent to the
use in the Registration Statement of the references to Securities
Evaluation Service, Inc. as evaluator.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
Securities Evaluation Service, Inc.
James R. Couture
President
Exhibit 4.2
STANDARD & POOR'S CORPORATION
Fund Services
55 Water Street
New York, New York 10041-0003
March 16, 2000
Nike Securities, L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re:The First Trust GNMA Reinvestment Income Trust, Series 77 &
Series 78
Gentlemen:
Pursuant to your request for a Standard & Poor's rating on
the units of the Trust, SEC# 333-32300 we have reviewed the
information presented to us and have assigned an 'AAA' rating to
the units in the Trust. The rating is a direct reflection of the
portfolio of the Trust, which will be composed solely of
mortgage-backed securities fully guaranteed as to principal and
interest by the Government National Mortgage Association (GNMA)
and the full faith and credit of the United States is pledged to
the payment of the securities in the trust.
STANDARD & POOR'S WILL MAINTAIN SURVEILLANCE ON THE 'AAA'
RATING UNTIL April 16, 2001. ON THIS DATE, THE RATING WILL BE
AUTOMATICALLY WITHDRAWN BY STANDARD & POOR'S UNLESS A POST
EFFECTIVE LETTER IS REQUESTED BY THE TRUST.
You have permission to use the name of Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc.
and the above-assigned rating in connection with your
dissemination of information relating of these units, provided
that it is understood that the rating is not a "market" rating
nor a recommendation to buy, hold, or sell the units of the trust
or the securities contained in the Trust. Further, it should be
understood the rating does not take into account the extend to
which fund expenses or portfolio asset sales for less than the
fund's purchase price will reduce payment to the unit holders of
the interest and principal required to be paid on the portfolio
assets. Standard & Poor's reserves the right to advise its own
clients, subscribers, and the public of the rating. Standard &
Poor's relies on the sponsor and its counsel, accountants, and
other experts for the accuracy and completeness of the
information submitted in connection with the rating. Standard &
Poor's does not independently verify the truth or accuracy of any
such information.
This letter evidences our consent to the use of the name of
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. and the above-assigned rating in the registration
statement or prospectus relating to the units or the trust.
However, this letter should not be construed as a consent by us,
within the meaning of Section 7 of the Securities Act of 1933, to
the use of the name of Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. in connection with
the ratings assigned to the securities contained in the trust.
You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Please be certain to send us three copies of your final
prospectus as soon as it becomes available. Should we not
receive them within a reasonable time after the closing or should
they not conform to the representations made to us, we reserve
the right to withdraw the rating.
We are pleased to have had the opportunity to be of service
to you. If we can be of further help, please do not hesitate to
call upon us.
Sincerely,
Joel Friedman
Managing Director
