File No. 33-49388
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
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
THE FIRST TRUST GNMA SERIES 65
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : April 29, 1994
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the issuer has registered an indefinite amount of
securities. A 24f-2 Notice for the offering was last filed on
February 15, 1994.
<PAGE>
THE FIRST TRUST GNMA FUND, SERIES 65
20,318,895 UNITS
PROSPECTUS
Part One
Dated April 15, 1994
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.
The Trust
The First Trust GNMA Fund, Series 65 (the "Trust") is a fixed portfolio of
taxable mortgage-backed securities of the modified pass-through type (the
"Securities") which involve large pools of mortgages and are fully guaranteed
as to principal and interest by the Government National Mortgage Association
("GNMA"). All of the Securities in the Trust consist of pools of mortgages on
1- to 4-family dwellings with terms of up to 30 years. At March 16, 1994,
each Unit represented a 1/20,318,895 undivided interest in the principal and
net income of the Trust (see "The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price per 1,000 Units
The Public Offering Price per 1,000 Units is equal to the aggregate value of
the Securities in the Portfolio of the Trust divided by the number of Units
outstanding, multiplied by 1,000, plus a sales charge of 3.8% of the Public
Offering Price (3.950% of the amount invested). At March 16, 1994, the Public
Offering Price per 1,000 Units was $993.41 plus net interest accrued to date
of settlement (five business days after such date) of $4.42 (see "Market for
Units" in Part Two).
Please retain both parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders was 7.29% per annum on March 16,
1994. Estimated Long-Term Return to Unit holders was 7.08% per annum on
March 16, 1994. Estimated Current Return is calculated by dividing the
Estimated Net Annual Interest Income per 1,000 Units by the Public Offering
Price per 1,000 Units. Estimated Long-Term Return is calculated using a
formula which (1) takes into consideration and determines and factors in the
relative weightings of the market values, yields (which take into account the
amortization of premiums and the accretion of discounts) and estimated average
life of all of the Securities in the Trust and (2) takes into account the
expenses and sales charge associated with each Unit of the Trust. Since the
market values and estimated average lives of the Securities and the expenses
of the Trust will change, there is no assurance that the present Estimated
Current Return and Estimated Long-Term Return indicated above will be realized
in the future. Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of the Estimated Long-Term Return
reflects the estimated date and amount of principal returned while the
Estimated Current Return calculations include only Net Annual Interest Income
and Public Offering Price. The above figures are based on estimated per 1,000
Unit cash flows. Estimated cash flows will vary with changes in fees and
expenses, with changes in current interest rates, and with the principal
prepayment, redemption, maturity, exchange or sale of the underlying
Securities and with changes in the average life assumptions of the GNMA pools.
See "What are Estimated Current Return and Estimated Long-Term Return?" in
Part Two.
<PAGE>
THE FIRST TRUST GNMA FUND, SERIES 65
SUMMARY OF ESSENTIAL INFORMATION AS OF MARCH 16, 1994
Sponsor: Nike Securities L. P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: United States Trust Company of New York
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Securities in the Trust $18,898,153
Number of Units 20,318,895
Fractional Undivided Interest in the Trust per Unit 1/20,318,895
Public Offering Price:
Aggregate Value of Securities in the Portfolio $19,417,852
Aggregate Value of Securities per 1,000 Units $955.66
Sales Charge 3.950% (3.8% of Public Offering Price,
per 1,000 Units) $37.75
Public Offering Price per 1,000 Units $993.41*
Redemption Price and Sponsor's Repurchase Price per
1,000 Units ($37.75 less than the Public Offering
Price per 1,000 Units) $955.66*
Liquidation Amount of the Trust $2,000,000
</TABLE>
Date Trust Established February 19, 1993
Mandatory Termination Date December 31, 2042
[FN]
*Plus net interest accrued to date of settlement (five business days after
purchase) (see "Public Offering Price per 1,000 Units" herein and "Redemption
of Units" and "Purchase of Units by the Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST GNMA FUND, SERIES 65
SUMMARY OF ESSENTIAL INFORMATION AS OF MARCH 16, 1994
Sponsor: Nike Securities L. P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: United States Trust Company of New York
<TABLE>
<CAPTION>
SPECIAL INFORMATION
<S> <C>
Calculation of Estimated Net Annual Interest
Income per 1,000 Units:
Estimated Annual Interest Income $74.41
Less: Estimated Annual Expense 2.02
______
Estimated Net Annual Interest Income $72.39
======
Estimated Daily Rate of Net Interest
Accrual per 1,000 Units $.2011
======
Estimated Current Return Based on Public Offering Price 7.29%
=====
Estimated Long-Term Return Based on Public Offering Price 7.08%
=====
</TABLE>
Trustee's Annual Fee: $.90 per 1,000 Units outstanding, exclusive of expenses
of the Trust.
Evaluator's Annual Fee: $.30 per 1,000 Units outstanding, plus $.25 per
evaluation for each issue of underlying securities in excess of 50 issues.
Evaluations are made at 4:00 p.m. Eastern time.
Supervisory Fee: Maximum of $.15 per 1,000 outstanding units annually.
Distributions will generally be made on or shortly after the first day of each
month (except for the distribution which would be made on January 1 which
instead will be made on or before December 31) to Unit holders of record on
the first day of the preceding month.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust
GNMA Fund, Series 65
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust GNMA Fund, Series 65 as of
December 31, 1993, and the related statements of operations and changes in net
assets for the period from the Date of Deposit, February 19, 1993, to December
31, 1993. These financial statements are the responsibility of the Trust's
Trustee. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1993,
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust GNMA Fund,
Series 65 at December 31, 1993, and the results of its operations and changes
in its net assets for the period from the Date of Deposit, February 19, 1993,
to December 31, 1993, in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Chicago, Illinois
March 18, 1994
<PAGE>
THE FIRST TRUST GNMA FUND, SERIES 65
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1993
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Securities, at value (cost $16,109,384) (Note 1) $16,039,024
Accrued interest 222,209
Cash 5,104
___________
16,266,337
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Payable to sponsor 52,871
___________
Net assets, applicable to 16,022,513 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $16,109,384
Unrealized depreciation (70,360)
Distributable funds 174,442
___________
$16,213,466
===========
Net asset value per 1,000 units $1,011.92
===========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST GNMA FUND, SERIES 65
PORTFOLIO
December 31, 1993
The portfolio consists of the following Government National Mortgage
Association mortgage-backed securities of the modified pass-through type:
<TABLE>
<CAPTION>
Principal Coupon Range of stated
amount rate maturities (a) Value
<C> <C> <C> <C>
$15,279,809 8% 8-20-22 to 11-20-23 $16,039,024
=========== ===========
</TABLE>
Note to portfolio:
(a) The principal amount of securities listed by coupon rate and range of
stated maturities represents an aggregate of individual securities
having varying stated maturities within such range. Securities are
grouped by coupon rate with a range of stated maturities because current
market conditions accord no difference in price among the securities
grouped together. The market value of the securities could be affected
by a change in their assumed average maturity or by the actual
maturities of the individual securities.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST GNMA FUND, SERIES 65
STATEMENT OF OPERATIONS
Period from the Date of Deposit,
February 19, 1993, to December 31, 1993
<TABLE>
<S> <C>
Interest income $571,294
Expenses:
Trustee's fees and related expenses (6,422)
Evaluator's fees (2,339)
Supervisory fees (1,170)
________
Investment income - net 561,363
Net gain (loss) on investments:
Net realized gain (loss) -
Change in unrealized appreciation/
depreciation (70,360)
________
(70,360)
________
Net increase in net assets resulting
from operations $491,003
========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST GNMA FUND, SERIES 65
STATEMENT OF CHANGES IN NET ASSETS
Period from the Date of Deposit,
February 19, 1993, to December 31, 1993
<TABLE>
<S> <C>
Net increase in net assets resulting
from operations:
Investment income - net $561,363
Net realized gain (loss) on investments -
Change in unrealized appreciation/
depreciation on investments (70,360)
___________
491,003
Units issued (14,866,651 in 1993):
Securities purchased 15,528,472
Distributions to unit holders:
Investment income - net (539,161)
Principal (480,141)
___________
(1,019,302)
___________
Total increase (decrease) in net assets 15,000,173
Net assets:
At the beginning of the period 1,213,293
___________
At the end of the period (including
distributable funds applicable
to Trust units of $174,442 at
December 31, 1993) $16,213,466
===========
Trust units outstanding at the end of
the period 16,022,513
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST GNMA FUND, SERIES 65
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
Securities are stated at values as determined by Securities Evaluation
Service, Inc. (the Evaluator), certain shareholders of which are officers of
the Sponsor. The values of the securities are based on (1) current bid prices
for the securities obtained from dealers or brokers who customarily deal in
securities comparable to those held by the Trust, (2) current bid prices for
comparable securities, (3) appraisal or (4) any combination of the above.
Security cost -
The Trust's cost of its portfolio is based on the offering prices of the
securities on the Date of Deposit, February 19, 1993, and each subsequent Date
of Deposit for additions to the Trust. The premium or discount is recognized
as interest income on a pro rata basis as principal pay downs are received.
Realized gain (loss) from security transactions is reported on an identified
cost basis.
Federal income taxes -
The Trust, which is an association taxable as a corporation under the Internal
Revenue Code, intends to qualify for and elect tax treatment as a "regulated
investment company" under the Internal Revenue Code of 1986. By qualifying
for and electing such treatment, the Fund will not be subject to Federal
income tax on net investment income or net capital gains distributed to its
unit holders. As the Trust distributes its entire net capital gains, if any,
and net investment income each year, no Federal income tax provision is
required.
Expenses of the Trust -
The Trustee is United States Trust Company of New York. The Trustee's fees
are $.90 per 1,000 units outstanding, exclusive of expenses of the Trust. An
annual fee of $.30 per 1,000 units outstanding, plus $.25 per evaluation for
each issue of underlying securities in excess of 50 issues, is payable to the
Evaluator. Additionally, the Trust pays all related expenses of the Trustee,
recurring financial reporting costs and an annual supervisory fee payable to
an affiliate of the Sponsor.
Distributions to unit holders -
Distributions of investment income - net and principal to unit holders are
presented on a cash basis as reported by the Trustee. Accordingly, no
adjustments are made to reflect the amortization of premium or discount as
discussed above under "Security cost." Principal distributions represent a
tax return of capital to unit holders.
2. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
offering price of the securities on the date of an investor's purchase, plus a
sales charge of 3.8% of the public offering price which is equivalent to
approximately 3.950% of the net amount invested.
<PAGE>
Selected data per 1,000 units of the Trust
outstanding throughout the period -
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
February 19, 1993, to
December 31, 1993
<S> <C>
Interest income $63.09
Expenses (1.09)
_________
Investment income - net 62.00
Distributions to unit holders:
Investment income - net (59.00)
Principal (38.83)
Net gain (loss) on investments (1.94)
_________
Total increase (decrease) in net assets (37.77)
Net assets:
Beginning of the period 1,049.69
_________
End of the period $1,011.92
=========
</TABLE>
Accrued interest to the initial Date of Deposit and each subsequent Date of
Deposit, totaling $67,661, plus net interest accruing to the first settlement
date, February 26, 1993, and each settlement date for subsequent additions to
the Trust, totaling $22,263, were or will be distributed to the Sponsor as the
unit holder of record.
<PAGE>
THE FIRST TRUST GNMA FUND, SERIES 65
PART ONE
Must be Accompanied by Part Two
_____________________
P R O S P E C T U S
_____________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: United States Trust Company of New York
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
The First Trust(registered trademark) GNMA
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated April 28, 1994
The First Trust GNMA (the "Fund"), including the various series
of The First Trust GNMA, consists of series of trusts (the "Trusts"
or "Series" of the Fund), each of which consists of a fixed portfolio
of taxable mortgage-backed securities of the fully modified pass-through
type, which involve large pools of mortgages and are fully guaranteed
as to principal and interest by the Government National Mortgage
Association ("GNMA"), (the "Securities" or "Ginnie Maes") including
so-called "Ginnie Mae IIs." Each Series of the Fund consists of
pools of mortgages on 1- to 4- family dwellings of up to 30 years
(the "Long Term Trusts") or in the case of Series 44, 48, 51,
54, 56, 58, 59 and 64 of up to 15 years (the "Medium Term Trusts").
The Portfolio, essential information based thereon and financial
statements, including a report of independent auditors relating
to the series of the Fund offered hereby, are contained in Part
One to which reference should be made for such information. UNITS
OF THE FIRST TRUST GNMA, SERIES 36, 37, 40, 45 AND 49
(COLLECTIVELY, THE "FOREIGN INVESTOR SERIES") ARE AVAILABLE ONLY
TO NON-RESIDENT ALIENS AND FOREIGN CORPORATIONS FOR WHICH INTEREST
PAID BY THE FOREIGN INVESTOR SERIES WOULD NOT BE EFFECTIVELY CONNECTED
WITH THE CONDUCT OF A TRADE OR BUSINESS IN THE UNITED STATES.
The income on the Foreign Investor Series Units is designed to
be exempt from United States Federal income taxes, including withholding
taxes, for foreign Unit holders who meet various conditions and
provide required certifications. For the convenience of foreign
investors, a Form W-8 is attached to this prospectus.The Form
W-8 must be filed with the Trustee to exempt Unit holders of the
Foreign Investor Series from Federal withholding taxes and a newly
completed Form W-8 must be refiled every three calendar years
thereafter.
The Objectives of the Fund are monthly distributions of interest
and principal and conservation of capital through an investment
in a portfolio of Ginnie Maes.
The guaranteed payment of principal and interest afforded by Ginnie
Maes may make investment in each Series of the Fund other than
the Foreign Investor Series particularly well suited for purchase
by Individual Retirement Accounts, Keogh Plans, pension funds
and other tax-deferred retirement plans. In addition, the ability
to buy single Units (minimum purchase $1,000 and $250 for tax-deferred
retirement plans such as IRA accounts) enables such investors
to tailor the dollar amount of their purchases of Units to take
the maximum possible advantage of the annual deductions available
for contributions to such plans. Investors should consult with
their tax advisers before investing. See "Why are Investments
in Trusts other than the Foreign Investor Series Suitable for
Retirement Plans?"
Offering. The Units offered hereby are issued and outstanding
Units which have been reacquired either by purchase from the Trustee
of Units tendered for redemption or by purchase in the open market.
The price paid in each instance was not less than the value of
the Securities per Unit, plus net interest accrued to the date
of settlement, determined as provided herein under "How is the
Public Offering Price Determined?" Any profit or loss resulting
from the sale of Units will accrue to the Sponsor or other dealers
selling the Units and no proceeds from any such sale will be received
by the Fund.
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
The Public Offering Price per 1,000 Units is equal to the aggregate
bid price of the Securities in the Portfolio of the Fund divided
by the number of Units outstanding multiplied by 1,000, plus a
sales charge of 4.0% of the Public Offering Price (4.167% of the
amount invested) for the Long Term Trusts and 3.50% of the Public
Offering Price (3.627% of the amount invested) for the Medium
Term Trusts. The sales charge is reduced on a graduated scale
for sales involving at least $100,000 of principal invested. See
"How is the Public Offering Price Determined?", particularly for
the method of evaluation.
Monthly Distributions of principal, prepayments of principal,
if any, and interest received by the Fund will be paid in cash
unless the Unit holder elects to have them automatically reinvested
as described herein. See "How Can Distributions to Unit Holders
be Reinvested?" Any such reinvestment is made at net asset value,
that is, without a sales charge. Investors, at the time of purchase,
will have the ability to designate that only principal payments
(including prepayments) or only interest payments or both are
to be reinvested. Monthly distributions will be made as indicated
in Part One for each Trust. Information with respect to the estimated
current return and estimated long-term return to Unit holders
is also contained in Part One.
Market. The Sponsor, although not obligated to do so, intends
to maintain a market for the Units at prices based upon the aggregate
bid price of the Securities in the Portfolio of the Series of
the Fund. In the absence of such a market, a Unit holder will
nonetheless be able to dispose of the Units through redemption
at prices based upon the bid prices of the underlying Securities.
(See "How May Units be Redeemed?")
Page 2
The First Trust GNMA
What is the First Trust GNMA?
The First Trust GNMA (the "Fund"), including the various series
of The First Trust GNMA, is a series of trusts, all similar but
separate with different series numbers. Each was created under
the laws of the State of New York pursuant to a Trust Agreement
(the "Indenture"), dated the Date of Deposit with Nike Securities
L.P., as Sponsor, United States Trust Company of New York, as
Trustee, Securities Evaluation Service, Inc. as Evaluator, and
First Trust Advisors L.P., as Portfolio Supervisor. On the Date
of Deposit, the Sponsor deposited with the Trustee interest-bearing
obligations, including delivery statements relating to contracts
for the purchase of certain such obligations and irrevocable letters
of credit issued by a financial institution in the amounts required
for such purchases (the "Securities" or "Ginnie Maes"). The Trustee
thereafter credited the account of the Sponsor for Units of each
Trust representing the entire ownership of the Fund which Units
are being offered hereby.
The objectives of the Fund and each Series thereof are monthly
distributions of interest and principal and conservation of capital
through an investment in a fixed portfolio of Securities (the
"Portfolio") consisting of Ginnie Maes guaranteed by the Government
National Mortgage Association ("GNMA"). Although the Ginnie Maes
are backed by the full faith and credit of the United States,
the Units of the Fund, as such, are not backed by such full faith
and credit. The Fund may be an appropriate investment medium for
investors who desire to participate in a portfolio of taxable
fixed income securities offering the safety of capital provided
by securities backed by the full faith and credit of the United
States but who do not wish to invest the minimum $25,000 which
is required for a direct investment in GNMA guaranteed securities.
Because regular payments of principal are to be received and certain
of the Securities from time to time may be redeemed or will mature
in accordance with their terms or may be sold under circumstances
described herein, the Fund is not expected to retain its present
size and composition. Units will remain outstanding until redeemed
upon tender to the Trustee by any Unit holder (which may include
the Sponsor) or until the termination of a series of the Fund
pursuant to the Indenture.
Units of the Foreign Investor Series of the Fund are available
only to non-resident aliens and foreign corporations for which
interest paid by the Foreign Investor Series would not be effectively
connected with the conduct of a trade or business in the United
States. Such non-resident aliens who meet various conditions and
provide required certifications will not be subject to United
States Federal income taxes on income from such Trust. (See "What
is the Tax Status of Unit Holders?")
In selecting Ginnie Maes for deposit in the Fund, the following
factors, among others, were considered by the Sponsor: (i) the
types of such securities available; (ii) the prices and yields
of such securities relative to other comparable securities, including
the extent to which such securities are trading at a premium or
at a discount from par; and (iii) the maturities of such securities.
See "Portfolio" in Part One for information with respect to the
Securities selected for deposit in the Fund. The Ginnie Maes included
in the Fund are backed by the indebtedness secured by the mortgages
contained in the underlying mortgage pools. In addition, in order
for the Ginnie Maes to be eligible for inclusion in the Foreign
Investor Series of the Fund, evidence was received by the Sponsor
that the underlying mortgages were originated after July 18, 1984.
Although the Sponsor believes that all the underlying mortgages
were originated after July 18, 1984, to the extent that it is
not the case, a foreign Unit holder will be subject to United
States Federal income taxes on income derived from mortgages that
were originated prior to July 18, 1984. (See "What is the Tax
Status of Unit Holders?")
Except with respect to the Foreign Investor Series of the Fund,
the Sponsor has the limited right to direct the Trustee to purchase
additional securities, which must satisfy the criteria previously
described for Securities originally included in such Series of
the Fund, with moneys held in the Principal Account of such Series
of the Fund representing the proceeds of Securities sold as described
under the caption "How May Securities be Removed from the Fund?"
or the proceeds of Securities sold which proceeds are not required
for
Page 3
the purpose of redemption of Units. The Trustee shall notify all
Unit holders of the affected Series of the acquisition of such
additional securities within five days of such acquisition.
An investment in Units of the Fund 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
Portfolio 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. The high inflation rates
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.
The Portfolio of each Series of the Fund consists of Ginnie Maes
fully guaranteed as to payments of principal and interest by GNMA.
The percentage relationships of the Securities in each Series
of the Fund are as indicated in Part One.
The Fund 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. The Fund 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 become greater, and if such
interest rates for newly issued comparable securities increase,
the market premium of previously issued securities will be reduced,
or such securities may trade at a market discount, other things
being equal. 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 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 WHETHER THE PRICE AT WHICH THE RESPECTIVE GINNIE
MAES WERE ACQUIRED BY THE FUND IS LOWER OR HIGHER THAN PAR (WHICH
REPRESENTS THE PRICE AT WHICH SUCH GINNIE MAES WILL BE REDEEMED
UPON PREPAYMENT). REDEMPTION OF PREMIUM GINNIE MAES AT PAR PURSUANT
TO PREPAYMENTS OF MORTGAGES WILL OPERATE TO LOWER THE CURRENT
RETURN ON UNITS OUTSTANDING AT THE TIME BECAUSE PREMIUM GINNIE
MAES NORMALLY CARRY HIGHER INTEREST COUPONS THAN PAR OR DISCOUNT
GINNIE MAES. DURING PERIODS OF DECLINING INTEREST RATES, SUCH
PREPAYMENTS MAY OCCUR WITH INCREASING FREQUENCY BECAUSE, AMONG
OTHER REASONS, MORTGAGORS MAY BE ABLE TO REFINANCE THEIR OUTSTANDING
MORTGAGES AT LOWER INTEREST RATES.
To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest in the Fund represented by each
unredeemed Unit will increase, although the actual interest in
the Fund represented by such fraction will remain substantially
unchanged. Units will remain outstanding until redeemed upon tender
to the Trustee by any Unit holder, which may include the Sponsor,
or until the termination of a series of the Fund pursuant to the
Indenture.
Description of Securities. The Ginnie Maes included in the Fund
are backed by the indebtedness secured by underlying mortgage
pools containing either up to 30 year mortgages or up to 15 year
mortgages on 1- to 4-family dwellings. The pool of mortgages which
is to underlie a particular new issue of Ginnie Maes is assembled
by the proposed issuer of such Ginnie Maes. The issuer is typically
a mortgage banking firm, and in every instance must be a mortgagee
approved by and in good standing with the Federal
Page 4
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 Fund are mortgages
on 1- to 4-family dwellings (having either a stated maturity of
up to 30 years or a stated maturity of up to 15 years). In general,
the mortgages in these pools provided 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 the 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 consisting
of pools of mortgages from more than one issuer. 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.
All of the Ginnie Maes in the Fund, including the Ginnie Mae IIs,
are of the "fully modified pass-through" type, i.e., they provided
for timely monthly payments to the registered holders thereof
(including the Fund) 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 Fund 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 Fund
are intended to be sufficient to make the required payments of
principal of and interest in 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.
Page 5
GNMA is authorized by Section 306(g) of Title III of the National
Housing Act to guarantee the timely payment of principal 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."*
* 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.
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 Fund) 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 Fund and
not to the Units offered hereby.
Monthly payments of principal will be made, and additional prepayments
of principal may be made, to the Fund in respect of the mortgages
underlying the Ginnie Maes in the Fund. All of the mortgages in
the pools relating to the Ginnie Maes in the Portfolio 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
either up to 30 years or up to 15 years, 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 1970s, 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 1950s 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. The bases for the
calculation of the estimated average life of the Securities in
a Series of the Trust and other related matters is set forth in
"What are Estimated Current Return and Estimated Long-Term Return?"
SOME OF THE MORTGAGES ON 1- TO 4-FAMILY DWELLINGS UNDERLYING THE
GINNIE MAES IN THE FUND HAVE A STATED MATURITY OF UP TO 15 YEARS.
ALTHOUGH GINNIE MAES COMPOSED OF 15 YEAR MORTGAGES ARE A RELATIVELY
RECENT DEVELOPMENT, THEY MAY BE CURRENTLY TRADING ON A BASIS OF
A 7 YEAR AVERAGE LIFE ASSUMPTION. TODAY, RESEARCH ANALYSTS USE
COMPLEX FORMULAE TO SCRUTINIZE THIS PREPAYMENT OF MORTGAGE POOLS
IN AN ATTEMPT TO PREDICT MORE ACCURATELY THE AVERAGE LIFE OF GINNIE
MAES. BECAUSE THE MORTGAGES HAVE A SHORTER AVERAGE LIFE, THE PERCENTAGE
OF EACH PAYMENT WHICH IS ACTUALLY A RETURN OF PRINCIPAL WILL INCREASE
MUCH MORE QUICKLY THAN IS TRUE FOR LONGER TERM MORTGAGES.
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 the Portfolio. 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
Page 6
mortgage with a high rate, he may refinance his mortgage at a
lower interest rate or he may rapidly prepay 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 experience of the FHA, other mortgage
lenders or other Ginnie Mae investors. It is not possible to meaningfully
predict prepayment levels regarding the Ginnie Maes in the Fund.
Therefore, the termination of the Fund might be accelerated as
a result of prepayments made as described herein.
In addition to prepayments as described above, sales of Securities
in the Fund under certain permitted circumstances may result in
an accelerated termination of the Fund. Also, it is possible that,
in the absence of a secondary market for the Units or otherwise,
redemptions of Units may occur in sufficient numbers to reduce
a series of the Fund to a size resulting in such termination.
Early termination of a series of the Fund may have important consequences
to the Unit holder, e.g., to the extent that Units were purchased
with a view to an investment of longer duration, the overall investment
program of the investor may require readjustment; or the overall
return on investment may be less or greater than anticipated,
depending in part on whether the purchase price paid for Units
represented the payment of an overall premium or a discount, respectively,
above or below the stated principal amounts of the underlying
mortgages. In addition, a capital gain or loss for tax purposes
may result from termination of a series of the Fund.
What is the Rating of the Units?
Standard and Poor's Corporation has rated Units of the Fund "AAA."
This is the highest rating assigned by Standard & Poor's Corporation.
See "Description of Standard & Poor's Corporation Rating." The
obtaining of this rating by the Fund should NOT be construed as
an approval of the offering of the Units by Standard & Poor's
Corporation or as a guarantee of the market value of the Fund
or the Units. Standard & Poor's Corporation 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 Fund or sales by the Fund of Securities for less than the
purchase price paid by the Fund 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 maintained. Standard & Poor's Corporation
was compensated by the Sponsor for its services in rating Units
of the Fund.
What are Estimated Current Return and Estimated Long-Term Return?
Debt securities are customarily offered to investors on a "yield
price" basis (as contrasted to a "dollar price" basis) at the
lesser of the price as computed to maturity of such debt security
or to an earlier redemption date. Since Units of the Fund are
offered on a dollar price basis, the estimated rate of return
on an investment in Units of the Fund is stated in terms of "Estimated
Current Return and Estimated Long-Term Return." Estimated Current
Return is computed by multiplying the Estimated Net Annual Interest
Income per 1,000 Units by $1,000 and dividing the result by the
Public Offering Price per 1,000 Units (as described in Part One).
If the price of such 1,000 Units is less than $1,000, the yield
to maturity will be greater than the Estimated Current Return;
if the price of such 1,000 Units is greater than $1,000, the yield
to maturity will be less than the Estimated Current Return. A
change in either the Estimated Net Annual Interest Income or the
Public Offering Price will result in a change in the Estimated
Current Return. The Public Offering Price will vary in accordance
with fluctuations in the value of the underlying Securities. The
Net Annual Interest income will change as Securities mature or
are paid, sold, or as scheduled payments of principal or prepayments
of principal are made, or as the expenses of the Fund change.
Unlike Estimated Current Return, Estimated Long-Term Return is
a measure of the estimated return to the investor earned over
the estimated life of the Fund. The Estimated Long-Term Return
represents an average of the yields to estimated average life
of the Securities in the Fund and adjusted to reflect expenses
and sales charges. The estimated long-term return figure is calculated
using an estimated average life for the Securities. Estimated
average life is an essential factor in the calculation of Estimated
Long-Term Return. When the Fund has a shorter average life than
is estimated, Estimated Long-Term Return will be higher if a Series
of the Trust contains Securities priced at a discount and lower
if the Securities are priced at
Page 7
a premium. Conversely, when the Fund has a longer average life
than is estimated, Estimated Long-Term Return will be lower if
the Securities are priced at a discount and higher if the Securities
are priced at a premium. In order to calculate estimated average
life, an estimated prepayment rate for the remaining term of the
mortgage pool must be determined. Each of the primary market makers
in GNMA securities has sophisticated computer models which are
used to determine the estimated prepayment rate for GNMA securities.
Each computer model takes 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. Because of differences in the weighting of such factors
and assumptions, such computer models maintained by the market
makers in GNMA securities produce estimated prepayment rates which
vary. In connection with the deposit of Securities in the Fund,
the Sponsor, in determining an estimated prepayment rate, has
utilized information provided by a market maker in GNMA securities
which it believes to be reliable. However, it is possible that
another computer model might provide an estimated prepayment rate
which would prove over the life of the Securities to be more accurate.
Once an appropriate estimated prepayment rate is ascertained,
an estimated average life is calculated. The estimated average
life for the Fund is subject to change with alterations in the
data used in any of the underlying assumptions. The actual average
lives of the Securities and the actual long-term returns will
be different from the estimated average lives and the estimated
long-term returns. In calculating Estimated Long-Term Return,
the average yield for the Portfolio is derived by weighting each
Security's yield by the market value of the Security and by the
amount of time remaining to the estimated average life. Once the
average yield on the Securities in the Fund is computed, this
figure is then adjusted for estimated expenses and the effect
of the maximum sales charge paid by investors. The Estimated Long-Term
Return calculation does not take into account certain delays in
distributions of income and the timing of other receipts and distributions
on Units and may, depending on maturities, overstate or understate
the impact of sales charges. Both of these factors may result
in a lower return.
Both Estimated Current Return and Estimated Long-Term Return are
subject to fluctuation with changes in the compositions of the
Portfolio of the Fund, principal payments and prepayments and
changes in market value of the underlying Securities and changes
in fees and expenses, including sales charges. In addition, return
figures may not be directly comparable to yield figures used to
measure other investments, and since return figures are based
on certain assumptions and variables, the actual returns received
by a Unit holder may be higher or lower.
Payments received in respect of the mortgages underlying the Ginnie
Maes in the Fund will consist of a portion representing interest
and a portion representing principal. Although the aggregate monthly
payment made by the obligor on each mortgage remains constant
(aside from optional prepayments of principal), in the early years
most of each such payment will represent interest, while in later
years, the proportion representing interest will decline and the
proportion representing principal will increase. However, by reason
of optional prepayments, principal payments in the earlier years
on the mortgages underlying the Ginnie Maes may be substantially
in excess of those required by the amortization schedules of such
mortgages. Therefore, principal payments in later years may be
substantially less since the aggregate unpaid principal balances
of such underlying mortgages may have been greatly reduced. To
the extent that the underlying mortgages bearing higher interest
rates in the Fund are prepaid faster than the other underlying
mortgages, the Net Annual Interest Income and the Estimated Returns
on the Units can be expected to decline. Monthly payments to the
Unit holders will reflect all of the foregoing factors.
Record Dates and Distribution Dates for monthly distributions
of principal and interest are as indicated in Part One for each
Trust.
How is Accrued Interest Treated?
Accrued interest is the accumulation of unpaid interest on a security
from the last day on which interest thereon was paid. Interest
on the Securities in the Fund is paid monthly to the Fund. However,
interest on the
Page 8
Securities in the Fund is accounted for daily on an accrual basis.
Because of this, the Fund always has an amount of interest earned
but not yet collected by the Trustee. For this reason, the Public
Offering Price of Units will have added to it the proportionate
share of accrued and undistributed interest to the date of settlement.
Unit holders will receive on the next distribution date of a Trust
the amount, if any, of accrued interest paid on their Units.
Except through an advancement of its own funds, the Trustee has
no cash for distribution to Unit holders until it receives interest
payments on the Securities in the Fund. The Trustee will recover
its advancements without interest or other costs to the Fund from
interest received on the Securities in the Fund. (See "How are
Interest and Principal Distributed?")
Because of the varying interest payment dates of the Securities,
accrued interest at any point in time will be greater than the
amount of interest actually received by the Fund and distributed
to Unit holders. Therefore, there will always remain an item of
accrued interest that is added to the value of the Units. If a
Unit holder sells or redeems all or a portion of his Units, he
will be entitled to receive his proportionate share of the accrued
interest from the purchaser of his Units. Since the Trustee has
the use of the interest held in the Interest Account for distributions
to Unit holders and since such Account is non-interest bearing
to Unit holders, the Trustee benefits thereby. See "Public Offering:
How is the Public Offering Price Determined?" for information
with respect to the uncertainty during certain periods of each
month of the precise amount of accrued interest of the Ginnie
Maes.
What are the Expenses and Charges?
At no cost to the Fund, the Sponsor has borne all the expenses
of creating and establishing the Fund, including the cost of the
initial preparation, printing and execution of the Indenture and
the certificates for the Units, legal, accounting and other out-of-pocket
expenses. The Sponsor will not receive any fees in connection
with its activities relating to the Fund. However, for Series
42 and all subsequent Series, First Trust Advisors L.P., an affiliate
of the Sponsor, will receive an annual supervisory fee, which
is not to exceed the amount set forth in Part One, for providing
portfolio supervisory services for the Fund. Such fee is based
on the number of Units outstanding in the Fund on January 1 of
each year except for Trusts which were established subsequent
to January 1, in which case the fee will be based on the number
of Units outstanding in such Trusts as of the respective Dates
of Deposit. The fee may exceed the actual costs of providing such
supervisory services for each Fund, but at no time will the total
amount received for portfolio supervisory services rendered to
unit investment trusts of which Nike Securities L.P. is the Sponsor
in any calendar year exceed the aggregate cost to First Trust
Advisors L.P. of supplying such services in such year.
The Trustee pays certain expenses of the Fund for which it is
reimbursed by the Fund. For each aggregate valuation of the Securities
in a series of the Fund, the Evaluator will receive the fee indicated
under "Summary of Essential Information" in Part One of this Prospectus.
The Trustee will receive for its ordinary recurring services to
the Fund an annual fee computed at $.90 per annum per $1,000 principal
amount of underlying Securities. For a discussion of the services
performed by the Trustee pursuant to its obligations under the
Indenture, reference is made to the material set forth under "Rights
of Unit Holders." The Trustee's and Evaluator's fees are payable
monthly on or before each Distribution Date from the Interest
Account to the extent funds are available and then from the Principal
Account. Since the Trustee has the use of the funds being held
in the Principal and Interest Accounts for future distributions,
payment of expenses and redemptions and since such Accounts are
non-interest bearing to Unit holders, the Trustee benefits thereby.
Part of the Trustee's compensation for its services to the Fund
is expected to result from the use of these funds. Both fees may
be increased without approval of the Unit holders by amounts not
exceeding proportionate increases under the category "All Services
Less Rent of Shelter" in the Consumer Price Index published by
the United States Department of Labor.
The following additional charges are or may be incurred by the
Fund: all expenses (including legal and annual auditing expenses)
of the Trustee incurred in connection with its responsibilities
under the Indenture, except in the event of negligence, bad faith
or willful misconduct on its part; the expenses and costs of any
action undertaken by the Trustee to protect the Fund and the rights
and interests of the Unit holders
Page 9
fees of the Trustee for any extraordinary services performed
under the Indenture; indemnification of the Trustee for any loss,
liability or expense incurred by it without negligence, bad faith
or willful misconduct on its part, arising out of or in connection
with its acceptance or administration of the Fund; indemnification
of the Sponsor for any loss, liability or expense incurred without
gross negligence, bad faith or willful misconduct in acting as
Depositor of the Fund; all taxes and other government charges
imposed upon the Securities or any part of the fund (no such taxes
or charges are being levied or made or, to the knowledge of the
Sponsor, contemplated); and expenditures incurred in contacting
Unit holders upon termination of the Fund. The above expenses
and the Trustee's annual fee, when paid or owing to the Trustee,
are secured by a lien on the Fund. In addition, the Trustee is
empowered to sell Securities in order to make funds available
to pay all these amounts if funds are not otherwise available
in the Interest and Principal Accounts. Due to the minimum principal
amount in which Securities may be required to be sold, the proceeds
of such sales may exceed the amount necessary for the payment
of such fees and expenses.
So long as the Sponsor is maintaining a secondary market for a
Series of the Fund, the Indenture requires that such Series will
be audited on an annual basis at the expense of the Fund by independent
auditors selected by the Sponsor. The Trustee shall not be required,
however, to cause such an audit to be performed if its cost to
a Series of the Fund shall exceed $.50 per 1,000 Units on an annual
basis. Unit holders of a Series of the Fund covered by an audit
may obtain a copy of the audited financial statements of such
Series from the Trustee upon request.
What is the Tax Status of Unit Holders?
A. THE INFORMATION IN THIS SECTION A APPLIES TO EACH SERIES OF
THE FUND OTHER THAN THE FOREIGN INVESTOR SERIES. FOR THE TAX STATUS
OF UNIT HOLDERS OF THE FOREIGN INVESTOR SERIES, SEE SECTION B
BELOW.
Each Trust, which is an association taxable as a corporation under
the Internal Revenue Code, qualified for and has elected tax treatment
as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"). By qualifying for and electing
such treatment, a Trust will not be subject to Federal income
tax on taxable income or net capital gains distributed to Unit
holders of such Trust. Under the Code, an excise tax is imposed
on a Series of the Trust to the extent such Series fails to timely
distribute specified percentages of the Trust's net investment
income and capital gain net income. Each Trust intends to timely
distribute taxable income and capital gains to avoid the imposition
of such tax.
Each Trust files its Federal income tax returns on a calendar
year basis. In any taxable year of a Trust, the distributions
of a Trust's income, other than distributions which are designated
as capital gain dividends, will constitute dividends taxable as
ordinary income to the Unit holders to the extent that the amount
of such distributions does not exceed the current and accumulated
earnings and profits of a Trust. Distributions will not be eligible
for the dividends received deduction for corporations. Under the
Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses,
will be deductible by individuals only to the extent they exceed
2% of adjusted gross income. Miscellaneous itemized deductions
subject to this limitation under present law do not include expenses
incurred by a Trust as long as the Units of the Trust are held
by or for 500 or more persons at all times during the taxable
year. In the event the Units of the Trust are held by fewer than
500 persons, additional taxable income will be realized by the
individual (and other noncorporate) Unit holders in excess of
the distributions received from the Trust.
Distributions by a Trust that are designated by it as capital
gain dividends will be taxable to Unit holders as long-term capital
gains, regardless of the length of time the Units have been held
by a Unit holder. However, if a Unit holder receives a long-term
capital gain dividend (or is allocated a portion of a Trust's
undistributed long-term capital gain) and sells his Units at a
loss prior to holding them for 6 months, such loss will be recharacterized
as long-term capital loss to the extent of such long-term capital
gain received as a dividend or allocated to a Unit holder. Distributions
in partial liquidation reflecting the proceeds of prepayments,
redemptions, maturities (including monthly mortgage payments of
principal) or sales of Securities (exclusive of net capital gain)
will not be taxable to Unit holders to the extent that they represent
a return of capital for tax purposes. The portion of distributions
which represents a return of capital will, however
Page 10
reduce a Unit holder's basis in his Units, and to the extent
they exceed the basis of his Units will be taxable as a capital
gain. A Unit holder will realize a taxable gain or loss when his
Units are sold or redeemed for an amount different from his original
cost after reduction for previous distributions to the extent
that they represented a return of capital. Provided that Units
constitute capital assets in the hands of a Unit holder, such
gain or loss will constitute either a long-term or short-term
capital gain or loss depending upon the length of time the Unit
holder has held his Units.
For taxpayers other than corporations, net capital gains are presently
subject to a maximum stated marginal tax rate of 28 percent. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed. A capital
loss is long-term if the asset is held for more than one year
and short-term if held for one year or less.
The Revenue Reconciliation Act of 1993 (the "Tax Act") raised
tax rates on ordinary income while capital gains remain subject
to a 28% maximum stated rate. Because some or all capital gains
are taxed at a comparatively lower rate under the Tax Act, the
Tax Act includes a provision that would recharacterize capital
gains as ordinary income in the case of certain financial transactions
that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Unit holders and prospective
investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
If a Ginnie Mae has been purchased by a Trust at a market discount
(i.e., for a purchase price less than its outstanding principal
amount) unless the amount of market discount is "de minimis" as
specified in the Code, each payment of principal on the Ginnie
Mae will constitute ordinary income to the Trust to the extent
of any accrued market discount. In the case of a Ginnie Mae, the
amount of market discount that is deemed to accrue each month
shall generally be the amount of discount that bears the same
ratio to the total amount of remaining market discount that the
amount of interest paid during the accrual period (each month)
bears to the total amount of interest remaining to be paid on
the Ginnie Mae as of the beginning of the accrual period.
It should be noted that the Tax Act includes a provision which
eliminates the exemption from United States taxation, including
withholding taxes, for certain "contingent interest." The provision
applies to interest received after December 31, 1993. No opinion
is expressed herein regarding the potential applicability of this
provision and whether United States taxation or withholding taxes
could be imposed with respect to income derived from the Units
as a result thereof. Unit holders and prospective investors should
consult with their tax advisers regarding the potential effect
of this provision on their investment in Units.
Each Unit holder of the Trust shall receive an annual statement
describing the tax status of the distributions paid by the Trust.
Investment in the Trust may be particularly well suited for purchase
by funds and accounts of individual investors that are exempt
from Federal income taxes such as Individual Retirement Accounts,
Keogh Plans, pension funds and other tax-deferred retirement plans
(see "Why are Investments in Trusts Other than the Foreign Investor
Series Suitable for Retirement Plans?").
B. THE INFORMATION IN THIS SECTION B APPLIES ONLY TO THE FOREIGN
INVESTOR SERIES OF THE FUND.
At the time of the closing for each Trust, Chapman and Cutler,
special counsel for the Sponsor, rendered an opinion under then
existing law, substantially to the effect that:
(1) Each Trust is not an association taxable as a corporation
but will be governed by the provisions of Subchapter J of Chapter
1 of the Code.
(2) Each Unit holder will be considered the owner of a pro rata
portion of each Ginnie Mae in each Trust. The total cost to a
Unit holder of his Units, including sales charges, is allocated
among his pro rata portion of each Ginnie Mae (in proportion to
the fair market values thereof on the date the Unit holder purchases
his Units) in order to determine his tax cost for his pro rata
portion of each Ginnie Mae.
Page 11
(3) Each Unit holder will be considered to receive the interest
on his pro rata portion of each Ginnie Mae when interest on such
Ginnie Mae is deemed to be received by each Trust. The Code provides
that in the case of individuals, "miscellaneous itemized deductions"
are only deductible to the extent that they exceed 2 percent of
an individual taxpayer's adjusted gross income. Miscellaneous
itemized deductions subject to the limitation under present law
include a Unit holder's pro rata share of expenses paid by the
Trust, including fees of the Trustee and the Evaluator, but would
not include amortizable premium on a Ginnie Mae.
(4) A Unit holder will have a taxable event which may result
in taxable gains (or losses) (i) upon redemption or sale of his
Units, (ii) if the Trustee disposes of a Ginnie Mae, or (iii)
upon receipt by the Trustee of principal payments of the Ginnie
Mae. The amount of such gain (or loss) is measured by comparing
the Unit holder's aliquot share of the total proceeds from the
transaction with his tax basis in his Units or his pro rata interest
in the Ginnie Mae as the case may be. Thus, a portion of each
principal payment received by the Trust on a Unit holder's pro
rata portion of a Ginnie Mae will constitute taxable gain to the
Unit holder if his tax cost for his pro rata portion of such Ginnie
Mae is less than the unpaid principal amount thereof at the time
he acquired his Unit. Gains (or losses) recognized as a result
of principal payments received on underlying mortgages issued
by natural persons will be ordinary gains (or losses).
(5) The Unit holder's aliquot share of the total proceeds received
on the disposition of, or receipt of or principal payment with
respect to, a Ginnie Mae by the Trust will constitute ordinary
income (which will be treated as interest income for most purposes)
to the extent it does not exceed the accrued market discount on
the Ginnie Mae attributable to underlying mortgages. A Unit holder
may generally elect to include market discount in income as such
discount accrues. In general market discount is the excess, if
any, of the Unit holder's pro rata portion of the outstanding
principal balance of a Ginnie Mae over the Unit holder's initial
tax cost for such pro rata portion, determined at the time such
Unit holder acquires his Units. However, market discount with
respect to any Ginnie Mae will generally be considered zero if
it does not exceed the statutorily defined "de minimis" amount.
If a Unit holder sells his Units, gain, if any, will constitute
ordinary income to the extent of the aggregate of the accrued
market discount on the Unit holder's pro rata portion of each
Ginnie Mae attributable to underlying mortgages that are held
by the Trust that has not previously been included in taxable
income by such Unit holder. In the case of a Ginnie Mae, the amount
of market discount that is deemed to accrue each month shall generally
be the amount of discount that bears the same ratio to the total
amount of remaining market discount that the amount of interest
paid during the accrual period (each month) bears to the total
amount of interest remaining to be paid on the Ginnie Mae as of
the beginning of the accrual period. However, a Unit holder should
consult his own tax adviser regarding the accrual of market discount.
The deduction by a Unit holder for any interest expense incurred
to purchase or carry Units will be reduced by the amount of any
accrued market discount that has not yet been included in taxable
income by such Unit holder. In general, the portion of any interest
expense which is not currently deductible would be ultimately
deductible when the accrued market discount is included in income.
Any other gains (or losses) will be capital gains (or losses),
except in the case of a dealer or financial institution, and will
be long-term if the Unit holder has held his Units for more than
one year.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raises
tax rates on ordinary income while capital gains remain subject
to a 28% maximum stated rate. Because some or all capital gains
are taxed at a comparatively lower rate under the Tax Act, the
Tax Act includes a provision that recharacterizes capital gains
as ordinary income in the case of certain financial transactions
that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Unit holders and prospective
investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
Page 12
A Unit holder of a Trust who is not a citizen or resident of the
United States or a United States domestic corporation (a "Foreign
Investor") will generally not be subject to U.S. Federal income
taxes, including withholding taxes on amounts distributed from
the Trust (including any original issue discount) on, or any gain
from the sale or other disposition of, his Units or the sale or
disposition of any Ginnie Maes by the trustee, provided that (i)
the interest income or gain is not effectively connected with
the conduct by the Foreign Investor of a trade or business within
the United States, (ii) with respect to any gain, the Foreign
Investor (if an individual) is not present in the United States
for 183 days or more during the taxable year, and (iii) the Foreign
Investor provides the required certification of his status of
the matters contained in clauses (i) and (ii) above.
Unless an applicable treaty exemption applies and proper certification
is made, amounts otherwise distributable by a Trust to a Foreign
Investor will generally be subject to withholding taxes under
Section 1441 of the Code unless the Unit holder timely provides
his financial representative or the Trustee with a statement that
(i) is signed by the Unit holder under penalties of perjury, (ii)
certifies that such Unit holder is not a United States person,
or in the case of an individual, that he is neither a citizen
nor a resident of the United States, and (iii) provides the name
and address of the Unit holder. The statement may be made, at
the option of the person otherwise required to withhold, on Form
W-8 or on a substitute form that is substantially similar to Form
W-8. If the information provided on the statement changes, the
beneficial owner must so inform the person otherwise required
to withhold within 30 days of such change.
The foregoing discussions relate only to Federal income taxes
on distributions by each Trust; such distributions may also be
subject to state and local taxation. Unit holders should consult
their own tax advisers regarding questions of state and local
taxation applicable to the Units.
Foreign Unit holders should consult their own tax advisers with
respect to the foreign and United States tax consequences or ownership
of Units.
It should be remembered that even if distributions are reinvested,
they are still treated as distributions for income tax purposes.
It should also be remembered that Unit holders may be required
for Federal income tax purposes to include amounts in ordinary
gross income in advance of the receipt of the cash attributable
to such income.
Each Unit holder (other than a foreign investor who has properly
provided the certifications described above) will be requested
to provide the Unit holder's taxpayer identification number to
the Trustee and to certify that the Unit holder has not been notified
that payments to the Unit holder are subject to back-up withholding.
If the proper taxpayer identification number and appropriate certification
are not provided when requested, distributions by the Trust to
such Unit holder will be subject to back-up withholding.
Winston & Strawn (previously named Cole & Deitz) served as Special
Counsel at the Date of Deposit to Series 36 through 56, inclusive.
In the opinion of such Special Counsel each Foreign Investor Series
of the Trust is not an association taxable as a corporation and
income received by such Series will be treated as the income of
the Unit holders of such Series in the same manner as for Federal
income tax purposes (subject to differences in accounting for
discount and premium to the extent the State and/or City of New
York do not conform to current Federal law).
C. THE INFORMATION IN THIS SECTION C APPLIES TO ALL SERIES OF
THE FUND.
The foregoing discussions relate only to Federal income taxes
on distributions by each Series of the Trust; such distributions
may also be subject to state and local taxation. Unit holders
should consult their own tax advisers regarding questions of state
and local taxation applicable to the Units. Foreign Unit Holders
should consult their own tax advisers with respect to the United
States Federal income and foreign tax consequences of ownership
of Units.
It should be remembered that even if distributions are directed
through the Universal Distribution Option or are reinvested through
the Distribution Reinvestment Option, they are still treated as
distributions for income tax purposes (see "How Can Distributions
to Unit Holders be Reinvested?").
Why are Investments in Trusts Other than the Foreign Investor
Series Suitable for Retirement Plans?
Page 13
THE INFORMATION PRESENTED IN THIS SECTION IS APPLICABLE TO ALL
TRUSTS IN THE FUND OTHER THAN THE FOREIGN INVESTOR SERIES.
A Trust may be well suited for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other tax-deferred retirement
plans. Generally, the Federal income tax relating to capital gains
and income received in each of the foregoing plans is deferred
until distributions are received. Distributions from such plans
are generally treated as ordinary income but may, in some cases,
be eligible for special averaging or tax-deferred rollover treatment.
Investors considering participation in any such plan should review
specific tax laws related thereto and should consult their attorneys
or tax advisers with respect to the establishment and maintenance
of any such plan. Such plans are offered by brokerage firms and
other financial institutions. The Trust will waive the $1,000
minimum investment requirement for tax-deferred retirement plan
accounts. The minimum investment is $250 for tax-deferred retirement
plans such as IRA accounts. Fees and charges with respect to such
plans may vary.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect to participate
in a Universal Distribution Option which permits a Unit holder
to direct the Trustee to distribute principal or interest payments,
or both, to any investment vehicle for which the Unit holder has
an EXISTING account. For example, at a Unit holder's direction,
the Trustee would distribute automatically on the applicable distribution
date interest income or principal, including capital gains, or
both on the participant's Units to, among other investment vehicles,
a Unit holder's checking, bank savings, money market, insurance,
reinvestment or any other account. All such distributions, of
course, are subject to the minimum investment and sales charges,
if any, of the particular investment vehicle to which distributions
are directed. The Trustee will notify the participant of each
distribution pursuant to the Universal Distribution Option. The
Trustee will distribute directly to the Unit holder any distributions
which are not accepted by the specified investment vehicle. A
participant may at any time, by so notifying the Trustee in writing,
elect to terminate his participation in the Universal Distribution
Option and receive future distributions on his Units in cash.
THE FOLLOWING DISTRIBUTION REINVESTMENT OPTION MAY NOT BE AN APPROPRIATE
VEHICLE FOR INVESTORS IN THE FOREIGN INVESTOR SERIES SINCE DISTRIBUTIONS
FROM OPPENHEIMER GOVERNMENT SECURITIES FUND, AS DEFINED BELOW,
WILL BE SUBJECT TO UNITED STATES FEDERAL INCOME WITHHOLDING TAXES.
Distribution Reinvestment Option For Other Than Foreign Investor
Series. The Sponsor has entered into an arrangement with Oppenheimer
Management Corporation which permits any Unit holder of a Series
other than a Foreign Investor Series to elect to have each distribution
of interest income or principal, including capital gains, or both,
on his Units automatically reinvested in shares of Oppenheimer
Government Securities Fund. Oppenheimer Management Corporation
is the investment adviser of Oppenheimer Government Securities
Fund which is an open-end, diversified management investment company.
Oppenheimer Government Securities Fund seeks a high current return
and safety of principal by investing principally in obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, including GNMA mortgage-backed securities,
as is considered consistent with the preservation of capital and
maintenance of liquidity. The objectives and policies of Oppenheimer
Government Securities Fund are presented in more detail in the
prospectus pertaining to such Fund.
Each person who purchases Units of a Series other than a Foreign
Investor Series may use the card attached to Part One of the prospectus
to request a prospectus describing Oppenheimer Government Securities
Fund and a form by which such a person may elect to become a participant
in the Distribution Reinvestment Option with respect to Oppenheimer
Government Securities Fund. After electing participation, each
distribution of interest income, or principal, including capital
gains, or both, on the participant's Units will automatically
be applied by the Trustee to purchase shares (or fractions thereof)
of Oppenheimer Government Securities Fund without a sales charge
and with no minimum initial and subsequent investment requirements.
Distribution Reinvestment Option For The Foreign Investor Series.
The Sponsor has entered into an arrangement with Centennial America
Fund, L.P. ("Centennial America Fund") which permits Unit holders
of
Page 14
a Foreign Investors Series to elect to have each distribution
of interest income or principal, including capital gains, or both,
on their Units automatically reinvested in shares of Centennial
America Fund. Centennial Asset Management Corporation is the investment
adviser of Centennial America Fund. Centennial America Fund is
an open-end, diversified management investment company. Centennial
America Fund is a portfolio specifically designed for non-resident
foreign investors seeking high current return and safety of principal,
maintenance of liquidity and exemption from U.S. Federal income
and withholding taxes. The objectives and policies of Centennial
America Fund are presented in more detail in the prospectus pertaining
to such Fund.
Each person who purchases Units of a Foreign Investors Series
may use the accompanying form to elect to become a participant
in the Distribution Reinvestment Option with respect to Centennial
America Fund. After electing participation, each distribution
of interest income, or principal, including capital gains, or
both, on the participant's Units will automatically be applied
by the Trustee to purchase shares (or fractions thereof) of Centennial
America Fund without a sales charge and with no minimum initial
and subsequent investment requirements.
The transfer agent for Oppenheimer Government Securities Fund
and Centennial America Fund will mail to each participant in the
Distribution Reinvestment Option, confirmations of all transactions
undertaken for such participant in connection with the receipt
of distributions from The First Trust GNMA and the purchase of
shares (or fractions thereof) of First Trust Government Fund and
Centennial America Fund.
A participant may at any time, by so notifying the Trustee in
writing, elect to terminate his participation in the Distribution
Reinvestment Option and receive future distributions on his Units
in cash. There will be no charge or other penalty for such termination.
The Sponsor, Oppenheimer Government Securities Fund and Centennial
America Fund all have the right to terminate the Distribution
Reinvestment Option, in whole or in part.
It should be remembered that even if distributions are directed
through the Universal Distribution Option or are reinvested through
the Distribution Reinvestment Option, they are still treated as
distributions for income tax purposes.
Unit holders of Trusts of the Fund other than the Foreign Investor
Series participating in IRAs, Keogh Plans, pension funds and other
tax-deferred retirement plans may find it highly advantageous
to participate in the Universal Distribution Option or the Distribution
Reinvestment Option in order to keep the monies in the account
fully invested at all times. Should either of such options be
selected, an account with an identical registration to that established
at the time the Units of a Trust are purchased will be set up
in the option selected by the investor. Investors should consult
with their plan custodian as to the appropriate disposition of
distributions. Unless participants in IRAs, Keogh Plans and other
tax-deferred retirement plans elect either the Universal Distribution
Option or the Distribution Reinvestment Option, cash distributions
will be sent to the custodian of the retirement plan and will
not be sent to the investor. See "Why are Investments in Trusts
other than the Foreign Investor Series Suitable for Retirement
Plans?"
PUBLIC OFFERING
How is the Public Offering Price Determined?
Although it is not obligated to do so, the Sponsor intends to
maintain a market for the Units and continuously to offer to purchase
Units at prices, subject to change at any time, based upon the
aggregate bid price of the Securities in the Portfolios of each
Series of the Fund plus interest accrued to the date of settlement.
All expenses incurred in maintaining a secondary market, other
than the fees of the Evaluator and the costs of the Trustee in
transferring and recording the ownership of Units, will be borne
by the Sponsor. If the supply of Units exceeds demand, or for
some other business reason, the Sponsor may discontinue purchases
of Units at such prices. IF A UNIT HOLDER WISHES TO DISPOSE OF
HIS UNITS, HE SHOULD INQUIRE OF THE SPONSOR AS TO CURRENT MARKET
PRICES PRIOR TO MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE.
Prospectuses relating to certain other funds indicate an intention,
subject to change, on the part of the respective
Page 15
sponsors of such funds to repurchase units of those funds on the
basis of a price higher than the bid prices of the securities
in the funds. Consequently, depending upon the prices actually
paid, the repurchase price of other sponsors for units of their
funds may be computed on a somewhat more favorable basis than
the repurchase price offered by the Sponsor for Units of each
Series of the Fund in secondary market transactions. As in each
Series of this Fund, the purchase price per unit of such funds
will depend primarily on the value of the securities in the portfolios
of such funds.
Units are offered to the public at the Public Offering Price.
The Public Offering Price is based on the Evaluator's determination
of the aggregate bid price of the Securities in the Fund, including
any money in the Principal Account other than money required to
redeem tendered Units, and also includes a sales charge of 4.0%
of the Public Offering Price (which is equivalent to 4.167% of
the net amount invested) for Long Term Trusts or a sales charge
of 3.5% of the Public Offering Price (which is equivalent to 3.627%
of the net amount invested) for Medium Term Trusts. Also added
to the Public Offering Price is a proportionate share of interest
accrued but unpaid on the Securities to the date of settlement
of Units. (See "How is Accrued Interest Treated?")
The sales charge is reduced by a discount as indicated below for
volume purchases:
<TABLE>
<CAPTION>
Long Term Trusts Medium Term Trusts
________________________________________ ________________________________________
Discount Dealer Concession Discount Dealer Concession
Dollar Amount of Expressed as a Expressed as a Expressed as a Expressed as a
Transaction at Percentage of Percentage of Percentage of Percentage of
Public Offering Price Public Offering Price Public Offering Price Public Offering Price Public Offering Price
_____________________ _____________________ _____________________ _____________________ _____________________
<S> <C> <C> <C> <C>
$100,000-$249,999 .25% 2.50% .25% 2.05%
$250,000-$499,999 .50% 2.50% .50% 2.05%
$500,000-$999,999 .75% 2.70% .75% 2.05%
$1,000,000 or more 1.50% 2.70% 1.20% 2.25%
</TABLE>
An investor may aggregate purchases of Units of two consecutive
similar series of a particular GNMA Trust for purposes of calculating
the discount for volume purchases listed above. Additionally,
with respect to the employees, officers and directors (including
their immediate families and trustees, custodian or a fiduciary
for the benefit of such person) of Nike Securities L.P. and its
subsidiaries the sales charge is reduced by 2% of the Public Offering
Price for purchases of Units during the secondary offering period.
Any such reduced sales charge, including pursuant to a Letter
of Intent described below, shall be the responsibility of the
selling dealer. For the Long Term Trusts, the Sponsor will pay
Underwriters an additional concession of .10% for purchases between
$100,000 and $499,999 and .20% for purchases over $500,000. This
reduced sales charge structure will apply on all purchases of
Units in the Fund by the same person on any one day from any one
dealer. For purposes of calculating the applicable sales charge,
purchases of Units in the Fund will not be aggregated with any
other purchases by the same person of units in any series of tax-exempt
unit investment trusts sponsored by Nike Securities L.P. Additionally,
Units purchased in the name of the spouse of a purchaser or in
the name of a child of such purchaser under 21 years of age will
be deemed for the purposes of calculating the applicable sales
charge to be additional purchases by the purchaser. The reduced
sales charges will also be applicable to a trustee or other fiduciary
purchasing securities for a single trust or single fiduciary account.
In addition, a purchaser desiring to purchase during a 12-month
period $1,000,000 or more of a series of The First Trust GNMA
may qualify for a reduced sales charge by signing a nonbinding
Letter of Intent. After signing a Letter of Intent, at the date
total purchases, less redemptions, of units of series of the First
Trust GNMA by a purchaser (including units purchased in the name
of the spouse of a purchaser or in the name of a child of such
purchaser under 21 years of age) exceed $1,000,000, the selling
dealer will make a retroactive reduction of the sales charge on
such units in the amount of 1.5% (reduced by any previous discount
received on the units) of the Public Offering Price of the units.
If a purchaser does not complete the required purchases under
the Letter of Intent within the 12-month period, no such retroactive
sales charge
Page 16
reduction shall be made. To qualify as a purchase under a Letter
of Intent, each purchase of units of The First Trust GNMA must
equal or exceed $100,000.
The aggregate bid price of the Securities in the Fund is determined
by the Evaluator on the basis of bid prices or offering prices
as is appropriate, (1) on the basis of current market prices for
the Securities obtained from dealers or brokers who customarily
deal in Securities comparable to those held by the Fund; (2) if
such prices are not available for any of the Securities, on the
basis of current market prices for comparable securities; (3)
by determining the value of the Securities by appraisal; or (4)
by any combination of the above.
There is a period of a few days (usually about 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 on the various mortgages underlying each
of the Ginnie Maes in the Fund will not yet have been reported
by the issuer to GNMA and made generally available to the public.
During this period, the precise principal amount of the underlying
mortgages remaining outstanding for each Ginnie Mae in the Fund,
and therefore the precise principal amount of such Security, will
not be known, although the precise principal amount outstanding
for the preceding month will be known. Therefore, the precise
amount of principal to be acquired by the Trustee as a holder
of such Securities which may be distributed to Unit holders with
the next monthly distribution will not be known. The Sponsor does
not expect that the amounts of such prepayments and the differences
in such principal amounts from month to month will be material
in relation to the Fund due to the number of mortgages underlying
each Ginnie Mae and the number of such Securities in each series
of the Fund. However, there can be no assurance that they will
not be material. For purposes of the determination by the Evaluator
of bid prices of the Ginnie Maes in the Fund and for purposes
of calculations of accrued interest on the Units, during the period
in each month prior to the time when the precise amounts of principal
of the Ginnie Maes for the month become publicly available, the
Evaluator will base its evaluations and calculations, which are
the basis for calculations of the Public Offering Price, the Sponsor's
Repurchase Price in the secondary market and the Redemption Price,
upon the average monthly principal distribution for the preceding
twelve month period. The Sponsor expects that the differences
in such principal amounts from month to month will not be material
to the applicable series of the Fund. Nevertheless, the Sponsor
will adopt procedures as to pricing and evaluation for the Units
of the Fund, with such modifications, if any, deemed necessary
by the Sponsor for the protection of Unit holders designed to
minimize the impact of such differences upon the calculation of
the accrued interest on the Units, the Public Offering Price,
the Sponsor's Repurchase Price in the secondary market and the
Redemption Price. However, under circumstances involving significant
prepayments of mortgages, Unit holders may receive principal distributions
on the next ensuing distribution date in excess of the average
monthly principal distribution for the preceding twelve month
period.
The Evaluator will be requested to make a determination of the
aggregate price of the Securities in the Fund, on a bid price
basis, as of the close of trading on the New York Stock Exchange
(4:00 p.m. Eastern time) on each day on which it is open, effective
for all sales, purchases or redemptions made subsequent to the
last preceding determination. No evaluation will be made, however,
on any day on which the Ginnie Mae securities markets are not
generally open for business.
Although payment is normally made five business days following
the order for purchase, payment may be made prior thereto. Cash,
if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. Delivery of
Certificates representing Units so ordered will be made five business
days following such order or shortly thereafter. Initial transaction
statements for Units held in uncertificated form representing
Units so ordered will be issued to the registered owner of such
Units within two business days of the issuance of such Units.
See "How May Units be Redeemed?" for information regarding the
ability to redeem Units ordered for purchase.
How are Units Distributed?
Page 17
The Sponsor intends to continue qualification of the Units for
sale in a number of states. Sales may be made to dealers and others
at prices which represent a concession or agency commission of
$25.00 per 1,000 Units, but the Sponsor reserves the right to
change the amount of the concession to dealers and others from
time to time. Certain commercial banks are making Units of the
Fund available to their customers on an agency basis. A portion
of the sales charge paid by these customers is retained by or
remitted to the banks in the amounts indicated in the second preceding
sentence. Under the Glass-Steagall Act, banks are prohibited from
underwriting Fund Units; however, the Glass-Steagall Act does
permit certain agency transactions and the banking regulators
have not indicated that these particular agency transactions are
not permitted under such Act.
What are the Profits of the Sponsor?
The Sponsor will receive a gross sales commission equal to 4.0%
of the Public Offering Price of the Units (equivalent to 4.167%
of the net amount invested) for the Long Term Trusts and 3.5%
of the Public Offering Price (equivalent to 3.627% of the net
amount invested) for the Medium Term Trusts. The Sponsor will
receive from dealers and others the excess of such gross sales
commission over the dealer concession or agency commission. (See
"How is the Public Offering Price Determined?") Although any reduced
sales charge shall be the responsibility of the selling dealer,
the Sponsor will reimburse dealers for discounts made available
to purchasers as described in "How is the Public Offering Price
Determined?"
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between
the price at which Units are purchased (based on the bid prices
of the Securities in the Fund) and the price at which Units are
resold (which price is also based on the bid prices of the Securities
in the Fund and includes a sales charge of 4.0% for the Long Term
Trusts and 3.5% for the Medium Term Trusts) or redeemed (based
on the bid prices of the Securities in the Fund). The secondary
market Public Offering Price of Units may be greater or less than
the cost of such Units to the Sponsor.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the
Trustee. Ownership of Units may be evidenced by registered certificates
executed by the Trustee and the Sponsor. Delivery of certificates
representing Units ordered for purchase is normally made five
business days following such order or shortly thereafter. Certificates
are transferable by presentation and surrender to the Trustee
properly endorsed or accompanied by a written instrument or instruments
of transfer. Certificates to be redeemed must be properly endorsed
or accompanied by a written instrument or instruments of transfer.
A Unit holder must sign exactly as his name appears on the face
of the certificate with the signature guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guaranty program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. In
certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates
of corporate authority. Record ownership may occur before settlement.
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, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form.
The Trustee will maintain an account for each such Unit holder
and will credit each such account with the number of Units purchased
by that Unit holder. Within two business days of the issuance
or transfer of Units held in uncertificated form, the Trustee
will send to the registered owner of Units a written initial transaction
statement containing a description of the Fund; the number of
Units issued or transferred; the name, address and taxpayer identification
number, if any, of the new registered owner; a notation of any
liens and restrictions of the issuer and any adverse claims to
which such Units are or may be subject or a statement that there
are no such liens, restrictions or adverse claims; and the date
the transfer was registered. Uncertificated Units are transferable
through the same procedures applicable to Units evidenced by certificates
(described above), except
Page 18
that no certificate need be presented to the Trustee and no certificate
will be issued upon transfer unless requested by the Unit holder.
A Unit holder may at any time request the Trustee to issue certificates
for Units.
Although no such charge is now made or contemplated, a Unit holder
may be required to pay $2.00 to the Trustee per certificate reissued
or transferred, and to pay any governmental charge that may be
imposed in connection with each such transfer or exchange. For
new certificates issued to replace destroyed, stolen, or lost
certificates, the Unit holder may be required to furnish indemnity
satisfactory to the Trustee and pay such expenses as the Trustee
may incur. Mutilated certificates must be surrendered to the Trustee
for replacement.
How are Interest and Principal Distributed?
The terms of the Ginnie Maes provide for payment to the holders
thereof (including the Fund) on the fifteenth day of each month
of amounts collected by or due to the issuers thereof with respect
to the underlying mortgages during the preceding month, except
for the first payment, which is not due until 45 days after the
initial issue date of each Ginnie Mae. Interest from the Fund,
including moneys representing penalties for the failure to make
timely payments on Securities or liquidated damages for default
or breach of any condition or term of the Securities will be distributed
as specified in Part One for each Trust on a pro rata basis to
Unit holders of record as of the preceding Record Date. All distributions
will be net of applicable expenses.
The pro rata share of cash in the Principal Account will also
be computed as of the first day of each month and distributions
to the Unit holders as of such Record Date will be made as specified
in Part One for each Trust. Proceeds from the disposition of any
of the Securities or amounts representing principal on the Securities
received after such Record Date and prior to the following Distribution
Date will be held in the Principal Account and not distributed
until the next Distribution Date. The Trustee is not required
to pay interest on funds held in the Principal or Interest Account
(but may itself earn interest thereon and therefore benefits from
the use of such funds) nor to make a distribution from the Principal
Account unless the amount available for distribution shall equal
at least $1.00 per 1,000 Units.
The Trustee will credit to the Interest Account all interest received
by the Fund, including moneys representing penalties for the failure
to make timely payments on Securities or liquidated damages for
default or breach of any condition or term of the Securities and
that part of the proceeds of any disposition of Securities which
represents accrued interest. Other receipts will be credited to
the Principal Account. Persons who purchase Units between a Record
Date and a Distribution Date will receive their first distribution
on the second Distribution Date after the purchase.
As of the first day of each month, the Trustee will deduct from
the Interest Account and, to the extent funds are not sufficient
therein, from the Principal Account, amounts necessary to pay
the expenses of the Fund. The Trustee also may withdraw from said
accounts such amounts, if any, as it deems necessary to establish
a reserve for any governmental charges payable out of the Fund.
Amounts so withdrawn shall not be considered a part of the Fund's
assets until such time as the Trustee shall return all or any
part of such amounts to the appropriate account. In addition,
the Trustee may withdraw from the Interest Account and the Principal
Account such amounts as may be necessary to cover redemption of
Units by the Trustee.
Record Dates and Distribution Dates for monthly distributions
will be as indicated in Part One for each Trust. Distributions
for an IRA, Keogh, pension funds or other tax-deferred retirement
plan will not be sent to the individual Unit holder; these distributions
will go directly to the custodian of the plan to avoid the penalties
associated with premature withdrawals from such accounts.
What Reports Will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of interest, if any, and
the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per 1,000 Units. Within
a reasonable time after the end of each calendar year, the Trustee
will furnish to each person who at any time during the calendar
year was a Unit holder of record, a statement as to (1) the Interest
Account: interest received (including amounts representing interest
received
Page 19
upon any disposition of Securities, penalties for the failure
to make timely payments on Securities or liquidated damages for
default or breach of any condition or term of the Securities),
deductions for payment of applicable taxes and for fees and expenses
of the Fund, redemption of Units and the balance remaining after
such distributions and deductions, expressed both as a total dollar
amount and as a dollar amount representing the pro rata share
per 1,000 Units outstanding on the last business day of such calendar
year; (2) the Principal Account: payments of principal on Securities,
the dates of disposition of any Securities and the net proceeds
received therefrom (excluding any portion representing interest),
deduction for payment of applicable taxes and for fees and expenses
of the Fund, redemptions of Units, and the balance remaining after
such distributions and deductions expressed both as a total dollar
amount and as a dollar amount per 1,000 Units; (3) the Securities
held and the number of Units outstanding on the last business
day of such calendar year; (4) the Redemption Price per 1,000
Units based upon the last computation thereof made during such
calendar year; (5) the dollar amounts actually distributed during
such calendar year from the Interest Account and from the Principal
Account, separately stated; and (6) such other information as
the Trustee may deem appropriate. Unit holders of Units in uncertificated
form shall receive no less frequently than once each year a dated
written statement containing the name, address and taxpayer identification
number, if any, of the registered owner, the number of Units registered
in the name of the registered owner on the date of the statement
and certain other information that will be provided as required
under applicable law.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its corporate trust office in the City of New
York of the certificates representing the Units to be redeemed,
or, in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed as explained above (or by
providing satisfactory indemnity, as in connection with lost,
stolen or destroyed certificates), and payment of applicable governmental
charges, if any. No redemption fee will be charged. On the seventh
calendar day following such tender, or if the seventh calendar
day is not a business day, on the first business day prior thereto,
the Unit holder will be entitled to receive in cash an amount
for each Unit equal to the Redemption Price per Unit next computed
after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received
by the Trustee, except that as regards Units received after the
close of trading on the New York Stock Exchange (4:00 p.m. Eastern
time), the date of tender is the next day on which such Exchange
is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units so redeemed shall be cancelled.
Accrued interest to the settlement date paid on redemption shall
be withdrawn from the Interest Account or, if the balance therein
is insufficient, from the Principal Account. All other amounts
paid on redemption shall be withdrawn from the Principal Account.
The Redemption Price (as well as the secondary market Public Offering
Price) will be determined on the basis of the bid price of the
Securities in the Fund as of the close of trading on the New York
Stock Exchange (4:00 p.m. Eastern time) on the date any such determination
is made. The Redemption Price per Unit is the pro rata share of
each Unit determined by the Trustee on the basis of (1) the cash
on hand in the Fund or moneys in the process of being collected,
(2) the value of the Securities in the Fund based on the bid prices
of the Securities and (3) interest accrued thereon, less (a) amounts
representing taxes or other governmental charges payable out of
the Fund and (b) the accrued expenses of the Fund. The Evaluator
may determine the value of the Securities in the Fund (1) on the
basis of current bid prices of the Securities obtained from dealers
or brokers who customarily deal in securities comparable to those
held by the Fund, (2) on the basis of bid prices for securities
comparable to any securities for which bid prices are not available,
(3) by determining the value of the Securities by appraisal, or
(4) by any combination of the
Page 20
above. See "How is the Public Offering Price Determined?" for
information with respect to the uncertainty during certain periods
of each month of the precise amount of principal and accrued interest
of the Ginnie Maes.
The difference between the bid and offering price of such Securities
may be expected to average 1/4 to 1/2 of 1% of the principal amount
of such Securities. Therefore, the price at which Units may be
redeemed could be less than the price paid by the Unit holder.
The Trustee is empowered to sell underlying Securities in order
to make funds available for redemption. To the extent that Securities
are sold, the size and diversity of the Fund will be reduced.
Such sales may be required at a time when Securities would not
otherwise be sold and might result in lower prices than might
otherwise be realized. Ginnie Maes are sold in minimum face amounts
which range from $25,000 to $100,000. Due to the minimum principal
amount in which Ginnie Maes may be required to be sold, the proceeds
of such sales may exceed the amount necessary for payment of Units
redeemed. Such excess proceeds will be placed in the Principal
Account and eligible for distribution pro rata to all remaining
Unit holders of record.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on that Exchange is restricted or an emergency exists, as a result
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid price in the secondary market
at that time equals or exceeds the Redemption Price per Unit,
it may purchase such Units by notifying the Trustee before the
close of business on the second succeeding business day and by
making payment therefor to the Unit holder not later than the
day on which the Units would otherwise have been redeemed by the
Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units.
The offering price of any Units acquired by the Sponsor will be
in accord with the Public Offering Price described in the then
currently effective prospectus describing such Units. Any profit
or loss resulting from the resale or redemption of such Units
will belong to the Sponsor.
How May Securities be Removed from the Fund?
The Sponsor is empowered, but not obligated, to direct the Trustee
to dispose of Securities in the event certain events occur that
adversely affect the value of Securities including default in
payment of interest or principal, default in payment of interest
or principal of other obligations guaranteed or backed by the
full faith and credit of the United States of America, institution
of legal proceedings, default under other documents adversely
affecting debt service, decline in price or the occurrence of
other market or credit factors.
If any default in the payment of principal or interest on any
Security occurs and if the Sponsor fails to instruct the Trustee
to sell or to hold such Security within thirty days after notification
by the Trustee to the Sponsor of such default, the Trustee may,
in its discretion, sell the defaulted Security and not be liable
for any depreciation or loss thereby incurred.
The Trustee is also empowered to sell, for the purpose of redeeming
Units tendered by any Unit holder and for the payment of expenses
for which funds may not be available, such of the Securities in
a list furnished by the Sponsor as the Trustee in its sole discretion
may deem necessary. Except as stated under "What is the First
Trust GNMA?", the acquisition by a Trust of any securities other
than the Securities initially deposited is prohibited.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Page 21
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds, The First Trust GNMA, Templeton Growth and Treasury
Trust, Templeton Foreign Fund & U.S. Treasury Securities Trust
and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974
and to date more than $8 billion in First Trust unit investment
trusts have been deposited. The Sponsor's employees include a
team of professionals with many years of experience in the unit
investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141.
As of December 31, 1993, the total partners' capital of Nike Securities
L.P. was $12,743,032 (audited). (This paragraph relates only to
the Sponsor and not to the Trust or to any series thereof or to
any other Underwriter. The information is included herein only
for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations.
More detailed financial information will be made available by
the Sponsor upon request.)
Who is the Trustee?
The Trustee is United States Trust Company of New York with its
principal place of business at 45 Wall Street, New York, New York
10005 and its unit investment office at 770 Broadway, New York,
New York 10003. Unit Holders who have questions regarding the
Fund may call the Customer Service Help Line at 1-800-682-7520.
The Trustee is a member of the New York Clearing House Association
and is subject to supervision and examination by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Securities. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action
in good faith pursuant to the Indenture, or for errors in judgment,
but shall be liable only for their own willful misfeasance, bad
faith, gross negligence (ordinary negligence in the case of the
Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities.
In the event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
Page 22
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or
upon or in respect of the Fund which the Trustee may be required
to pay under any present or future law of the United States of
America or of any other taxing authority having jurisdiction.
In addition, the Indenture contains other customary provisions
limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding amounts prescribed
by the Securities and Exchange Commission, or (b) terminate the
Indenture and liquidate the Fund as provided herein, or (c) continue
to act as Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187. The Evaluator
may resign or may be removed by the Sponsor and the Trustee, in
which event the Sponsor and the Trustee are to use their best
efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment
by the successor Evaluator. If upon resignation of the Evaluator
no successor has accepted appointment within 30 days after notice
of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator
shall be under no liability to the Trustee, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee),
provided that the Indenture is not amended to increase the number
of Units issuable thereunder or to permit the deposit or acquisition
of securities either in addition to or in substitution for any
of the Securities initially deposited in the Fund, except for
the purchase of additional Securities for Series of the Fund (other
than the Foreign Investor Series) pursuant to the Indenture. In
the event of any amendment, the Trustee is obligated to notify
promptly all Unit holders of the substance of such amendment.
The Trust may be liquidated at any time by consent of 100% of
the Unit holders or by the Trustee when the value of the Fund,
as shown by any evaluation, is less than 40% of the aggregate
principal amount of the Securities initially deposited in the
Fund or in the event that Units not yet sold aggregating more
than 60% of the Units initially deposited are tendered for redemption
by the Underwriters, including the Sponsor. The Indenture will
terminate upon the redemption, sale or other disposition of the
last Security held thereunder, but in no event shall it continue
beyond the end of the calendar year preceding the fiftieth anniversary
of the execution of the Indenture. In the event of termination,
written notice thereof will be sent by the Trustee to all Unit
holders. Within a reasonable period after termination, the Trustee
will sell any Securities remaining in the Fund, and, after paying
all expenses and charges incurred by the Fund, will distribute
to each Unit holder (including the Sponsor if it then holds any
Units), upon surrender for cancellation of his Units, his pro
rata share of the balances remaining in the Interest and Principal
Accounts, all as provided in the Indenture.
Page 23
Legal Opinions
The legality of the Units offered hereby was passed upon on the
Date of Deposit for each series by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Winston & Strawn (previously named Cole & Deitz), 175 Water Street,
New York, New York 10038, served as counsel for the Trustee on
the Date of Deposit for Series 36 through 56 of the Fund. Carter,
Ledyard & Milburn, 2 Wall Street, New York, New York 10005, acted
as counsel for the Trustee for Series 57 through 66, inclusive,
and will act as Counsel for the Trustee for subsequent Series
of the Fund.
Experts
The financial statements, including the Portfolio, of each Trust
contained in Part One of the Prospectus and Registration Statement
have been audited by Ernst & Young, independent auditors, as set
forth in their reports thereon appearing elsewhere therein and
in the Registration Statement, and are included in reliance upon
such reports given upon the authority of such firm as experts
in accounting and auditing.
DESCRIPTION OF STANDARD & POOR'S CORPORATION RATING*
* As described by Standard & Poor's Corporation.
A Standard & Poor's Corporation's rating on the units of an investment
trust (hereinafter referred to collectively as "units" and "trust")
is a current assessment of creditworthiness with respect to the
investments held by such trust. This assessment takes into consideration
the financial capacity of the issuers and of any guarantors, insurers,
lessees, or mortgagors with respect to such investments. The assessment,
however, does not take into account the extent to which trust
expenses or portfolio asset sales for less than the trust's purchase
price will reduce payment to the Unit holder of the interest and
principal required to be paid on the portfolio assets. In addition,
the rating is not a recommendation to purchase, sell, or hold
units, inasmuch as the rating does not comment as to market price
of the units or suitability for a particular investor.
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,"
or certain short-term investments. Standard & Poor's defines its
"AAA" rating for such assets as the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is very strong.
Page 24
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Page 27
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
The First Trust (registered trademark) GNMA:
What is the First Trust GNMA? 3
What is the Rating of the Units? 7
What are Estimated Current Return
and Estimated Long-Term Return? 7
How is Accrued Interest Treated? 8
What are the Expenses and Charges? 9
What is the Tax Status of Unit Holders? 10
Why are Investments in Trusts Other than the
Foreign Investor Series Suitable
for Retirement Plans? 13
How Can Distributions to Unit Holders be
Reinvested? 14
Public Offering:
How is the Public Offering Price Determined? 15
How are Units Distributed? 17
What are the Profits of the Sponsor? 18
Rights Of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 18
How are Interest and Principal Distributed? 19
What Reports Will Unit Holders Receive? 19
How May Units be Redeemed? 20
How May Units be Purchased by the Sponsor? 21
How May Securities be Removed from the Fund? 21
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 21
Who is the Trustee? 22
Limitations on Liabilities of Sponsor and Trustee 22
Who is the Evaluator? 23
Other Information:
How May the Indenture be Amended or
Terminated? 23
Legal Opinions 23
Experts 24
Description of Standard & Poor's Corporation Rating 24
</TABLE>
__________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE TRUST HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
THE FIRST TRUST GNMA
Prospectus
Part Two
April 28, 1994
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
United States Trust Company
of New York
770 Broadway
New York, New York 10003
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 28
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust GNMA Series 65, certifies that it
meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment of its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the
Village of Lisle and State of Illinois on April 29, 1994.
THE FIRST TRUST GNMA SERIES 65
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title Date
Robert D. Van Kampen Sole Director of )
Nike Securities )
Corporation, )
the General Partner ) April 29, 1994
of Nike Securities L.P. )
)
) Carlos E. Nardo
) 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
Special Situations Trust, Series 18 (File No. 33-42683) and
the same is hereby incorporated herein by this reference.
S-2
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 18, 1994 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust GNMA dated April 15, 1994.
ERNST & YOUNG
Chicago, Illinois
April 14, 1994
