SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: THE FIRST TRUST GNMA
REINVESTMENT INCOME TRUST,
SERIES 80 and SERIES 81
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN & CUTLER
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
E. Title of Securities
Being Registered: An indefinite number of
Units pursuant to Rule
24f-2 promulgated under
the Investment Company Act
of 1940, as amended.
F. Approximate Date of Proposed
Sale to the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED NOVEMBER 14, 2001
AS AMENDED NOVEMBER 16, 2001
The First Trust GNMA Reinvestment Income Trust
"GRIT"
Series 80 and Series 81
The First Trust GNMA Reinvestment Income Trust is a series of a unit
investment trust, The First Trust GNMA Series. The First Trust GNMA
Reinvestment Income Trust consists of two separate portfolios listed
above (each, a "Trust," and collectively, the "Trusts."). Each Trust
invests in a portfolio of fixed-rate mortgage-backed securities issued
by Government National Mortgage Association ("GNMA") ("Securities").
Each Trust seeks to provide the potential for a high level of current
income.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
FIRST TRUST (R)
1-800-621-9533
The date of this prospectus is November __, 2001
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statements of Net Assets 6
Schedules of Investments 7
The First Trust GNMA Reinvestment Income Trust 8
Portfolio 8
Estimated Returns and Estimated Average Life 9
Risk Factors 9
Public Offering 10
Distribution of Units 13
The Sponsor's Profits 14
The Secondary Market 14
How We Purchase Units 14
Expenses and Charges 14
Tax Status 15
Retirement Plans 16
Rights of Unit Holders 16
Interest and Principal Distributions 17
Redeeming Your Units 17
Removing Securities from the Trust 18
Amending or Terminating the Indenture 19
Rating of the Units 19
Information on the Sponsor, Trustee and Evaluator 20
Other Information 20
Page 2
Summary of Essential Information
At the Opening of Business on the
Initial Date of Deposit-November __, 2001
Sponsor: Nike Securities L.P.
Trustee: JPMorgan Chase Bank
Evaluator: Securities Evaluation Services, Inc.
"GRIT" "GRIT"
Series 80 Series 81
________ ________
Initial Number of Units
Fractional Undivided Interest in the Trust per Unit 1/ 1/
Principal Amount (Par Value) of Securities per Unit (1) $10.000 $10.000
Public Offering Price:
Aggregate Offering Price Evaluation of Securities per Unit (2) $ $
Maximum Sales Charge of % of the Public Offering Price per Unit
( % and % of the net amount invested, exclusive of the deferred
sales charge for Series 80 and Series 81, respectively) (3) $ $
Less Deferred Sales Charge per Unit $ ( ) $ ( )
Public Offering Price per Unit (4) $ $
Sponsor's Initial Repurchase Price per Unit (5) $ $
Redemption Price per Unit (based on aggregate bid side value of Securities
less the deferred sales charge) (5) $ $
Cash CUSIP Number
Wrap CUSIP Number
Security Code
Estimated Average Life (6) yrs. yrs.
Estimated Net Annual Interest Income per Unit (7) $ $
Estimated Current Return (6) % %
Estimated Long-Term Return (6) % %
First Settlement Date November 26, 2001
Mandatory Termination Date (8) ________, 20__
Interest Distribution Record Date First day of each month, commencing December 1, 2001.
Interest Distribution Date (7) Last day of each month, commencing December 31, 2001.
______________
<FN>
(1) Because the Securities will pay principal during the life of the
Trusts and may, in certain circumstances, be sold, redeemed, prepaid or
mature in accordance with their terms, the Unit value at the Mandatory
Termination Date will not be equal to the Principal Amount (Par Value)
of Securities per Unit stated above.
(2) Each Security is valued at its current market offering price.
Evaluations for purposes of determining the purchase, sale or redemption
price of Units are made as of the close of trading on the New York Stock
Exchange ("NYSE") (generally 4:00 p.m. Eastern time) on each day on
which it is open (the "Evaluation Time").
(3) The maximum transactional sales charge consists of an initial sales
charge and a deferred sales charge, but does not include the creation
and development fee. See "Fee Table" and "Public Offering."
(4) The Public Offering Price shown above reflects the value of the
Securities on the business day prior to the Initial Date of Deposit. No
investor will purchase Units at this price. The price you pay for your
Units will be based on their valuation at the Evaluation Time on the
date you purchase your Units. On the Initial Date of Deposit, the Public
Offering Price per Unit will not include any net interest accrued on the
Units. After this date, a pro rata share of any net interest accrued on
the Units will be included.
(5) Until the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period the Sponsor's Initial Repurchase
Price per Unit and the Redemption Price per Unit will include the
estimated organization costs per Unit set forth under "Fee Table." After
such date, the Sponsor's Repurchase Price and Redemption Price per Unit
will not include such estimated organization costs. See "Redeeming Your
Units."
(6) Estimated Current Return is determined by dividing a Trust's
estimated net annual interest income by the Public Offering Price per
Unit. Estimated Long-Term Return is a measure of the estimated return
over the estimated life of a Trust. Unlike Estimated Current Return,
Estimated Long-Term Return reflects maturities, estimated principal
prepayments, discounts and premiums of the Securities in a Trust.
Estimated Average Life takes into consideration the reinvestment of
principal during the Reinvestment Period. See "Estimated Returns and
Estimated Average Life."
(7) The amount of distributions from the Interest Account will vary from
month to month for various reasons, including changes in a Trust's fees
and expenses, the sale of Securities, principal payments, prepayments
and reinvestment. The estimated initial distribution is $_____ per Unit.
Commencing ________, a Trust's regular monthly distribution will be
paid. Amounts in the Principal Account will generally be reinvested
during the Reinvestment Period. After the Reinvestment Period,
distributions from the Principal Account will be made in December of
each year and also in any month in which the amount available for
distribution equals at least $1.00 per 100 Units. See "Expenses and
Charges" and "Interest and Principal Distributions."
(8) See "Amending or Terminating the Indenture."
</FN>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may, directly or
indirectly, pay if you buy and hold Units of a Trust. See "Public
Offering" and "Expenses and Charges." Although the Trusts are a unit
investment trusts rather than mutual funds, this information allows you
to compare fees.
"GRIT" Series 80 "GRIT" Series 81
_______________ ______________
Amount Amount
per Unit per Unit
_____ _____
Unit Holder Sales Fees (as a percentage of public offering price)
Maximum Sales Charge
Initial sales charge %(a) $ %(a) $
Deferred sales charge %(b) $ %(b) $
Creation and development fee cap 0.55%(c) $ 0.55%(c) $
_______ _______ _______ _______
Maximum Sales Charges (including creation and development fee cap) (c) % $ % $
======= ======= ======= =======
Organization Costs (as a percentage of public offering price)
Estimated organization costs %(d) $ %(d) $
======= ======= ======= =======
Estimated Annual Trust Operating Expenses(e)
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative and evaluation fees % $ % $
Trustee's fee and other operating expenses %(f) $ %(f) $
_______ _______ _______ _______
Total % $ % $
======= ======= ======= =======
Example
This example is intended to help you compare the cost of investing in
the Trusts with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trusts for the periods
shown and sell all your Units at the end of those periods. The example
also assumes a 5% return on your investment each year and that each
Trust's operating expenses stay the same. The example does not take into
consideration transaction fees which may be charged by certain
broker/dealers for processing redemption requests. Although your actual
costs may vary, based on these assumptions your costs under each
distribution option would be:
1 Year 3 Years 5 Years 10 Years
__________ __________ __________ __________
"GRIT" Series 80 $ $ $ $
"GRIT" Series 81
The example will not differ if you hold rather than sell your Units at
the end of each period.
______________
<FN>
(a) The combination of the initial and deferred sales charge comprises
what we refer to as the "transactional sales charge." The initial sales
charge is actually equal to the difference between the maximum
transactional sales charge of % and any remaining deferred sales
charge.
(b) The deferred sales charge is a fixed dollar amount equal to $ per
Unit which, as a percentage of the Public Offering Price, will vary over
time. The deferred sales charge will be deducted in five monthly
installments commencing ________, 2002.
(c) The creation and development fee compensates the Sponsor for creating
and developing the Trusts. The creation and development fee is a charge
of .55% collected at the end of the initial offering period which is
generally 365 days. The creation and development fee is computed based
on each Trust's average daily net asset value through the date of
collection. If the value of your Units decreases over the initial
offering period, the creation and development fee as a percentage of
your initial investment will be less than .55%. However, in no event
will we collect more than .55% of your initial investment if the value
of your Units increases over the initial offering period.
(d) Estimated organization costs will be deducted from the assets of
each Trust at the earlier of six months after the Initial Date of
Deposit or the end of the initial offering period.
(e) Each of the fees listed herein is assessed on a fixed dollar amount
per Unit basis which, as a percentage of average net assets, will vary
over time.
(f) Other operating expenses include the costs incurred by the Trusts for
annually updating each Trust's registration statement. Historically, we
paid these costs. Other operating expenses do not, however, include
brokerage costs and other portfolio transaction fees. In certain
circumstances the Trusts may incur additional expenses not set forth
above. See "Expenses and Charges."
</FN>
Page 4
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
The First Trust GNMA Reinvestment Income Trust, Series 80 and Series 81
We have audited the accompanying statements of net assets, including the
schedules of investments, of The First Trust GNMA Reinvestment Income
Trust, Series 80 and Series 81 (the "Trusts"), as of the opening of
business on November __, 2001 (Initial Date of Deposit). These
statements of net assets are the responsibility of the Trusts' Sponsor.
Our responsibility is to express an opinion on these statements of net
assets based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the statements of net assets are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the statements of net assets. Our procedures
included confirmation of the irrevocable letter of credit held by
JPMorgan Chase Bank, the Trustee, and allocated between the Trusts for
the purchase of Securities, as shown in the statements of net assets as
of the opening of business on November __, 2001, by correspondence with
the Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trusts' Sponsor, as well as
evaluating the overall presentation of the statements of net assets. We
believe that our audit of the statements of net assets provides a
reasonable basis for our opinion.
In our opinion, the statements of net assets referred to above presents
fairly, in all material respects, the financial position of The First
Trust GNMA Reinvestment Income Trust, Series 80 and Series 81, at the
opening of business on November __, 2001 (Initial Date of Deposit) in
conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
November __, 2001
Page 5
Statement of Net Assets
At the Opening of Business on the
Initial Date of Deposit-November __, 2001
"GRIT" "GRIT"
Series 80 Series 81
________ ________
NET ASSETS
Investments in Securities represented by purchase contracts (1)(2) $ $
Accrued interest on underlying Securities (2)(3)
________ ________
Less liability for reimbursement to Sponsor for organization costs (4) ( ) ( )
Less distributions payable (3) ( ) ( )
Less liability for deferred sales charge (5) ( ) ( )
________ ________
Net assets $ $
========= =========
Outstanding units
ANALYSIS OF NET ASSETS
Cost to investors (6) $ $
Less maximum transactional sales charge (6) ( ) ( )
Less estimated reimbursement to Sponsor for organization costs (4) ( ) ( )
_________ _________
Net assets $ $
========= =========
_________________
<FN>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" for each Trust is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by JP Morgan Chase Bank, of
which $ will be allocated to the Trusts, has been deposited with the
Trustee as collateral, covering the monies necessary to satisfy the
amounts set forth below:
Aggregate Accrued Interest Accrued Interest
Offering Price to Initial to Expected
of Securities Date of Deposit Date of Delivery
__________ __________ __________
"GRIT" Series 80 $ $ $
"GRIT" Series 81
(3) The Trustee will advance to each Trust the amount of net interest
accrued to the First Settlement Date which will be distributed to the
Sponsor as Unit holder of record.
(4) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trusts. These costs have been estimated at $ per
Unit. A payment will be made at the earlier of six months after the
Initial Date of Deposit or the end of the initial offering period to an
account maintained by the Trustee from which the obligation of the
investors to the Sponsor will be satisfied. To the extent that actual
organization costs are greater than the estimated amount, only the
estimated organization costs added to the Public Offering Price will be
reimbursed to the Sponsor and deducted from the assets of a Trust.
(5) Represents the amount of mandatory deferred sales charge
distributions from a Trust ($ per Unit), payable to the Sponsor in
five equal monthly installments beginning on ________, 2002 and on the
twentieth day of each month thereafter (or if such day is not a business
day, on the preceding business day) through ________, 2003. If Unit
holders redeem Units before ________, 2003, they will have to pay the
remaining amount of the deferred sales charge applicable to such Units
when they redeem them.
(6) The aggregate cost to investors in a Trust includes a maximum
transactional sales charge (comprised of an initial and a deferred sales
charge) computed at the rate of % of the Public Offering Price per
Unit (equivalent to % of the net amount invested), assuming no
reduction of the transactional sales charge as set forth under "Public
Offering."
</FN>
Page 6
Schedules of Investments
At the Opening of Business on the
Initial Date of Deposit-November __, 2001
THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST, SERIES 80
Government National Mortgage Association, Modified Pass-Through Mortgage-
Backed Securities
Years of Stated Cost of
Aggregate Maturity Securities to
Principal (1) Coupon Rate Trust (2)
_________ ___________ _______________ ____________
$ % 20__ - 20__ $
========= ===========
THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST, SERIES 81
Government National Mortgage Association, Modified Pass-Through Mortgage-
Backed Securities
Years of Stated Cost of
Aggregate Maturity Securities to
Principal (1) Coupon Rate Trust (2)
_________ ___________ _______________ ____________
$ % 20__ - 20__ $
========= ===========
_____________
<FN>
(1) All Securities are represented by regular way contracts to purchase
such Securities which are backed by an irrevocable letter of credit
deposited with the Trustee. We entered into purchase contracts for the
Securities on November __, 2001 and we expect that they will all settle
on or prior to November __, 2001 and November __, 2001 for "GRIT"
Series 80 and "GRIT" Series 81, respectively.
(2) The cost of the Securities to a Trust represents the aggregate
underlying value with respect to the Securities acquired (generally
determined by the offering side evaluation of the Securities at the
Evaluation Time on the business day preceding the Initial Date of
Deposit). The aggregate bid side value of the Securities at the
Evaluation Time on the business day preceding the Initial Date of
Deposit was $______ and $______ for "GRIT" Series 80 and "GRIT" Series
81, respectively. The valuation of the Securities has been determined by
the Evaluator, certain shareholders of which are officers of the
Sponsor. The cost of the Securities to us and our profit or loss (which
is the difference between the cost of the Securities to us and the cost
of the Securities to a Trust) are set forth below:
Cost of Profit
Securities (Loss)
to Sponsor
_________ _______
"GRIT" Series 80 $ $
"GRIT" Series 81
</FN>
Page 7
The First Trust GNMA Reinvestment Income Trust
The First Trust GNMA Reinvestment Income Trust Defined.
We, Nike Securities L.P. (the "Sponsor"), have created several similar
yet separate series of an investment company which we have named The
First Trust GNMA Reinvestment Income Trust. The series to which this
prospectus relates consists of a two portfolios known as The First Trust
GNMA Reinvestment Income Trust, Series 80 and Series 81.
The Trusts were created under the laws of the State of New York by a
Trust Agreement (the "Indenture") dated the Initial Date of Deposit.
This agreement, entered into among Nike Securities L.P., as Sponsor,
JPMorgan Chase Bank as Trustee, First Trust Advisors L.P. as Portfolio
Supervisor and Securities Evaluation Services, Inc. as Evaluator,
governs the operation of the Trust.
YOU MAY GET MORE SPECIFIC DETAILS CONCERNING THE NATURE, STRUCTURE AND
RISKS OF THIS PRODUCT IN AN "INFORMATION SUPPLEMENT" BY CALLING THE
TRUSTEE AT 1-800-682-7520.
How We Created the Trust.
On the Initial Date of Deposit, we deposited portfolios of GNMA
securities with the Trustee, and in turn, the Trustee delivered
documents to us representing our ownership of the Trusts in the form of
units ("Units").
After the Initial Date of Deposit, we may deposit additional Securities
in a Trust, or cash (including a letter of credit) with instructions to
buy more Securities, to create new Units for sale. If we create
additional Units, we will attempt, to the extent practicable, to
maintain the original percentage relationship between the principal
amounts of Ginnie Maes of specified interest rates and ranges of
maturities in the Trust. Precise duplication may not be possible because
fractions of Ginnie Maes may not be purchased and identical Securities
may not be available.
Since the prices of the Securities will fluctuate daily, the ratio of
Securities in a Trust, on a market value basis, will also change daily.
The portion of Securities represented by each Unit will not change as a
result of the deposit of additional Securities or cash in a Trust. If we
deposit cash, you and new investors may experience a dilution of your
investment. This is because prices of the Securities will fluctuate
between the time of the cash deposit and the purchase of the Securities,
and because a Trust pays the associated brokerage fees. To reduce this
dilution, the Trusts will try to buy the Securities as close to the
Evaluation Time and as close to the evaluation price as possible.
Because a Trust pays the brokerage fees associated with the creation of
new Units and with the sale of Securities to meet redemption and
exchange requests, frequent redemption and exchange activity will likely
result in higher brokerage expenses. In addition, the costs of acquiring
additional Securities pursuant to the reinvestment of principal during
the Reinvestment Period will be borne by the Trusts. It is currently
anticipated that the Trustee will purchase these Securities directly
from market makers.
An affiliate of the Trustee may receive these brokerage fees or the
Trustee may retain and pay us (or our affiliate) to act as agent for the
Trusts to buy Securities. If we or an affiliate of ours act as agent to
the Trusts we will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
We cannot guarantee that a Trust will keep its present size and
composition for any length of time. Securities may periodically be
prepaid or sold under certain circumstances, and the proceeds will be
reinvested to the extent practicable during the Reinvestment Period or
used to meet Trust obligations. However, Securities will not be sold to
take advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation, or if they no longer meet the criteria by
which they were selected. You will not be able to dispose of or vote any
of the Securities in a Trust. As the holder of the Securities, the
Trustee will vote all of the Securities and will do so based on our
instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Securities. However, if a contract for the purchase of any of the
Securities initially deposited in a Trust fails, unless we can purchase
substitute Securities ("Replacement Securities"), we will refund to you
that portion of the purchase price, accrued interest and transactional
sales charge resulting from the failed contract on the next Interest
Distribution Date. Any Replacement Security a Trust acquires will be
identical to those from the failed contract.
Portfolio
Objectives.
The objective of each Trust is to provide the potential for a high level
of current income through an investment in a portfolio of fixed-rate
mortgage-backed securities representing pools of mortgages on 1- to 4-
family dwellings issued by Ginnie Mae. The Securities, but not the Units
or the Trusts, are backed by the full faith and credit of the U.S.
government.
Page 8
Reinvestment. In an effort to minimize the effect of principal payments
and prepayments we will direct the Trustee to reinvest all payments and
prepayments of principal from the underlying Securities into additional
GNMA securities for as long as we think it is practical to do so (the
"Reinvestment Period"). At the present time, we anticipate the
Reinvestment Period to last approximately 5 years from the Initial Date
of Deposit. The GNMA securities the Trustee will purchase will have
similar maturities and interest rates as the Securities upon which the
principal was received. There may, however, be times during the
Reinvestment Period when reinvestment is not feasible because we don't
have enough cash to purchase additional GNMA securities without
incurring disproportionate expenses, additional GNMA securities are not
available or for various other reasons. In those instances a Trust will
generally hold the cash until additional purchases are possible or
distribute the cash when we think additional purchases are not
practical. There will be no attempt to time or delay the purchase of
additional Securities for reinvestment to take advantage of market
movements.
Of course, as with any similar investment, there can be no guarantee
that the objective of the Trusts will be achieved. See "Risk Factors"
for a discussion of the risks of investing in the Trusts.
Estimated Returns and
Estimated Average Life
The Current and Long-Term Returns set forth in the "Summary of Essential
Information" are estimates and are designed to be comparative rather
than predictive. We cannot predict your actual return, which will vary
with Unit price, the reinvestment of principal, how long you hold your
investment and with changes in the portfolio, interest income and
expenses. In addition, neither rate reflects the true return you will
receive, which will be lower, because neither includes the effect of
certain delays in distributions. Estimated Current Return equals the
estimated annual interest income to be received from the Securities less
estimated annual Trust expenses, divided by the Public Offering Price
per Unit (which includes the initial sales charge). Estimated Long-Term
Return is a measure of the estimated return over the Estimated Average
Life of a Trust and is calculated using a formula which (1) factors in
the market values, yields (which take into account the amortization of
premiums and the accretion of discounts) and estimated retirements of
the Securities, and (2) takes into account a compounding factor, the
sales charge and expenses. Unlike Estimated Current Return, Estimated
Long-Term Return reflects maturities, estimated principal prepayments,
discounts and premiums of the Securities in a Trust. We will provide you
with estimated cash flows for your Trust at no charge upon your request.
In order to calculate Estimated Average Life of a Trust, an estimated
prepayment rate for the remaining term of each Trust's mortgage pool
must be determined. Each of the primary market makers in Ginnie Mae
Securities use sophisticated computer models to determine the estimated
prepayment rate. These computer models take into account a number of
factors and assumptions including: actual prepayment data reported by
GNMA for recent periods on a particular pool, the impact of aging on the
prepayment of mortgage pools, the current interest rate environment, the
coupon, the housing environment, historical trends on GNMA securities as
a group, geographical factors and general economic trends. In
determining the Estimated Average Life of the Securities in a Trust we
have relied upon the median of the estimated prepayment rates determined
by primary market makers. We cannot be certain that this estimate will
prove accurate or whether the estimated prepayment rates determined by
other primary market makers would have provided a better estimate. Any
difference between the estimate we use and the actual prepayment rate
will affect the Estimated Long-Term Return of the Trusts.
Risk Factors
Price Volatility. The Trusts invest in mortgage-backed securities. The
value of these Securities will decline with increases in interest rates,
not only because increases in rates generally decrease values, but also
because increased rates may indicate an economic slowdown. The value of
the Securities will also fluctuate with changes in the general condition
of the mortgage-backed securities market, changes in inflation rates or
when political or economic events affecting Ginnie Mae occur.
Because the Trusts are not managed, the Trustee will not sell Securities
in response to or in anticipation of market fluctuations, as is common
in managed investments. As with any investment, we cannot guarantee that
the performance of the Trusts will be positive over any period of time
or that you won't lose money. Units of the Trusts are not deposits of
any bank and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
Mortgage-Backed Securities. Mortgage-backed securities represent an
ownership interest in mortgage loans made by banks and other financial
Page 9
institutions to finance purchases of homes. The individual mortgage
loans are "pooled" together for sale to investors. As the underlying
mortgage loans are paid off, investors receive principal and interest
payments.
Fixed-rate mortgage-backed securities represent a pool of mortgage loans
which pay a fixed rate of interest over the life of the loan. The value
of fixed-rate mortgage-backed securities generally decreases when
interest rates rise.
Guarantees. The Securities, but not the Units or the Trusts, are
guaranteed as to the timely payment of principal and interest by Ginnie
Mae. Ginnie Mae Securities are supported by the full faith and credit of
the U.S. government. You should note that the guaranty does not apply to
the market prices and yields of the Securities, which will vary with
changes in interest rates and other market conditions.
Reinvestment Risk. Mortgage-backed securities differ from conventional
debt securities because principal is paid back over the life of the
security rather than at maturity. In addition, we anticipate that the
Trusts will receive unscheduled prepayments of principal prior to a
Security's maturity date due to voluntary pre-payments, refinancing or
foreclosure on the underlying mortgage loans. As discussed under
"Portfolio" we intend to instruct the Trustee to reinvest principal
payments and prepayments into additional Securities during the
Reinvestment Period. Reinvestment during periods when interest rates are
lower than those prevailing on the Initial Date of Deposit will have the
effect of decreasing monthly distributions of interest income from a
Trust. In addition, there may be times during the Reinvestment Period
when reinvestment is not feasible because we don't have enough cash to
purchase additional GNMA securities without incurring disproportionate
expenses, additional GNMA securities are not available or for various
other reasons. If the Trustee is unable to reinvest these proceeds, the
impact on the Trusts would be a loss of anticipated interest, and a
portion of its principal investment represented by any premium a Trust
may have paid. The number and dollar amount of mortgage prepayments
generally increase with falling interest rates and decrease with rising
interest rates. If you receive principal payments earlier than you
expect you may not be able to reinvest these proceeds into an instrument
which provides a rate of return equal to or greater than the Trusts.
Interest Income. Since the Trusts can only distribute what each
receives, interest distributions will decrease if principal payments and
prepayments cannot be reinvested.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed in the United States which may have a negative
impact on mortgage-backed securities or their issuers. In addition,
litigation regarding Ginnie Mae or the mortgage-backed securities market
may negatively impact the value of these Securities. We cannot predict
what impact any pending or proposed legislation or pending or threatened
litigation will have on the value of the Securities.
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the price per Unit of
which is comprised of the following:
- - The aggregate underlying value of the Securities;
- - The amount of any cash in the Interest and Principal Accounts;
- - Accrued interest on the Securities; and
- - The maximum transactional sales charge (which combines an initial
upfront sales charge and a deferred sales charge).
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the prices of the Securities, changes in the
value of the Interest and/or Principal Accounts and with the accrual of
net interest on the Units.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Organization Costs. Securities purchased with the portion of the Public
Offering Price intended to be used to reimburse the Sponsor for a
Trust's organization costs (including costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission ("SEC")
and states, the initial audit of the Trust portfolio, legal fees and the
initial fees and expenses of the Trustee) will be purchased in the same
proportionate relationship as all the Securities contained in the
Trusts. Securities will be sold to reimburse the Sponsor for a Trust's
organization costs at the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period (a significantly
shorter time period than the life of the Trusts). During the period
ending with the earlier of six months after the Initial Date of Deposit
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or the end of the initial offering period, there may be a decrease in
the value of the Securities. To the extent the proceeds from the sale of
these Securities are insufficient to repay the Sponsor for a Trust's
organization costs, the Trustee will sell additional Securities to allow
a Trust to fully reimburse the Sponsor. In that event, the net asset
value per Unit will be reduced by the amount of additional Securities
sold. Although the dollar amount of the reimbursement due to the Sponsor
will remain fixed and will never exceed the per Unit amount set forth
for a Trust in "Statements of Net Assets," this will result in a greater
effective cost per Unit to Unit holders for the reimbursement to the
Sponsor. To the extent actual organization costs are less than the
estimated amount, only the actual organization costs will be deducted
from the assets of a Trust. When Securities are sold to reimburse the
Sponsor for organization costs, the Trustee will sell such Securities,
to the extent practicable, which will maintain the same proportionate
relationship among the Securities as existed prior to such sale.
Accrued Interest.
Accrued interest represents unpaid interest on a Security from the last
day it paid interest. Interest on the Securities is paid monthly,
although the Trusts accrue such interest daily. Because the Trusts
always have an amount of interest earned but not yet collected, the
Public Offering Price of Units will have added to it the proportionate
share of accrued interest to the date of settlement. You will receive
the amount, if any, of accrued interest you paid for on the next
distribution date. In addition, if you sell or redeem your Units you
will be entitled to receive your proportionate share of the accrued
interest from the purchaser of your Units.
Minimum Purchase.
The minimum amount you can purchase of a Trust is $1,000 worth of Units
($500 if you are purchasing Units for your Individual Retirement Account
or any other qualified retirement plan).
Transactional Sales Charge.
The transactional sales charge you will pay has both an initial and a
deferred component. The initial sales charge, which you will pay at the
time of purchase, is equal to the difference between the maximum
transactional sales charge of % of the Public Offering Price and the
maximum remaining deferred sales charge (initially $ per Unit). This
initial sales charge is initially equal to approximately ____% of the
Public Offering Price of a Unit, but will vary from ____% depending on
the purchase price of your Units and as deferred sales charge payments
are made. When the Public Offering Price per Unit exceeds $______, the
initial sales charge will exceed ____% of the Public Offering Price.
Monthly Deferred Sales Charge. In addition, five monthly deferred sales
charge payments of $ per Unit will be deducted from a Trust's assets
on approximately the twentieth day of each month from ________, 2002
through ________, 2003. If you buy Units at a price of less than $______
per Unit, the dollar amount of the deferred sales charge will not
change, but the deferred sales charge on a percentage basis will be more
than ____% of the Public Offering Price.
If you purchase Units after the last deferred sales charge payment has
been assessed, your transactional sales charge will consist of a one-
time initial sales charge of % of the Public Offering Price
(equivalent to _____% of the net amount invested).
Discounts for Certain Persons.
If you invest at least $50,000 (except if you are purchasing for "Fee
Accounts" as described below), the maximum transactional sales charge is
reduced, as follows:
Your maximum
transactional
If you invest sales charge
(in thousands):* will be:
_________________ _____________
$50 but less than $100 4.15%
$100 but less than $250 3.90%
$250 but less than $500 3.40%
$500 but less than $1,000 2.40%
$1,000 or more 1.50%
* Breakpoint transactional sales charges are also applied on a Unit
basis utilizing a breakpoint equivalent in the above table of $10 per
Unit and will be applied on whichever basis is more favorable to the
investor. The breakpoints will be adjusted to take into consideration
purchase orders stated in dollars which cannot be completely fulfilled
due to the requirement that only whole Units be issued.
The reduced transactional sales charge for quantity purchases will apply
only to purchases made by the same person on any one day from any one
dealer. To help you reach the above levels, you can combine the Units
you purchase of the Trusts with any other same day purchases of other
trusts for which we are Principal Underwriter and are currently in the
initial offering period. We will also consider Units you purchase in the
name of your spouse or child under 21 years of age to be purchases by
you. The reduced transactional sales charge will also apply to a trustee
or other fiduciary purchasing Units for a single trust estate or single
fiduciary account. You must inform your dealer of any combined purchases
before the sale in order to be eligible for the reduced transactional
sales charge. Broker/dealers will receive a concession of 1.00% of the
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Public Offering Price on Units sold subject to the transactional sales
charge reduction for purchases of $1 million or more. In all other
instances, any reduced transactional sales charge is the responsibility
of the party making the sale.
You may use termination proceeds from other unit investment trusts with
a similar strategy as the Trusts or your redemption or termination
proceeds from any unit investment trust we sponsor to purchase Units of
the Trusts during the initial offering period at the Public Offering
Price less 1.00%. Please note that if you purchase Units of the Trusts
in this manner using redemption proceeds from trusts which assess the
amount of any remaining deferred sales charge at redemption, you should
be aware that any deferred sales charge remaining on these units will be
deducted from those redemption proceeds.
Investors purchasing Units through registered broker/dealers who charge
periodic fees in lieu of commissions or who charge for financial
planning, investment advisory or asset management services or provide
these or comparable services as part of an investment account where a
comprehensive "wrap fee" or similar charge is imposed ("Fee Accounts")
will not be assessed the transactional sales charge described in this
section on the purchase of Units. We reserve the right to limit or deny
purchases of Units not subject to the transactional sales charge by
investors whose frequent trading activity we determine to be detrimental
to a Trust.
Employees, officers and directors (and immediate family members) of the
Sponsor, our related companies, dealers and their affiliates, and
vendors providing services to us may purchase Units at the Public
Offering Price less the applicable dealer concession. Immediate family
members include spouses, children, grandchildren, parents, grandparents,
siblings, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law,
brothers-in-law and sisters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons.
The Sponsor and certain dealers may establish a schedule where
employees, officers and directors of such dealers can purchase Units of
a Trust at the Public Offering Price less the established schedule
amount, which is designed to compensate such dealers for activities
relating to the sale of Units (the "Employee Dealer Concession").
You will be charged the deferred sales charge per Unit regardless of any
discounts. However, if you are eligible to receive a discount such that
the maximum transactional sales charge you must pay is less than the
applicable maximum deferred sales charge, including Fee Accounts, you
will be credited the difference between your maximum transactional sales
charge and the maximum deferred sales charge at the time you buy your
Units.
As Sponsor, we will also receive, and the Unit holders will pay, a
creation and development fee. See "Expenses and Charges" for a
description of the services provided for this fee.
The Value of the Securities.
The Evaluator will determine the aggregate underlying value of the
Securities in the Trusts as of the Evaluation Time on each business day
and will adjust the Public Offering Price of the Units according to this
evaluation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and certain national holidays
on which the NYSE is closed.
The aggregate underlying value of the Securities in the Trusts will be
determined by the Evaluator as follows:
a) On the basis of current market offering prices for the Securities
obtained from dealers or brokers who customarily deal in securities
comparable to those held by the Trusts;
b) If such prices are not available for any of the Securities, on the
basis of current market offering prices of comparable securities;
c) By appraising the value of the Securities on the offering side of the
market; or
d) By any combination of the above.
After the initial offering period is over, the aggregate underlying
value of the Securities will be determined as set forth above, except
that bid prices are used instead of offering prices. The offering price
of the Securities may be expected to be greater than the bid price by
approximately 1-3% of the aggregate principal amount of such Securities.
There is a period of a few days (usually five business days), beginning
on the first day of each month, during which the total amount of
payments (including prepayments, if any) of principal for the preceding
month of the various mortgages underlying each Security will not yet
have been reported by the issuer to Ginnie Mae. During this period, the
precise principal amount of the Securities will not be known. During
this period, for purposes of determining the aggregate underlying value
of the Securities and the accrued interest on the Units, the Evaluator
Page 12
will base its valuation and calculations upon the average monthly
principal distribution for the preceding twelve month period. We don't
expect the differences in such principal amounts from month to month to
be material. We will, however, adopt procedures to minimize the impact
of such differences when necessary.
Distribution of Units
We intend to qualify Units of the Trusts for sale in a number of states.
All Units will be sold at the then current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
represent a concession or agency commission of 3.3% of the Public
Offering Price per Unit. Dealers and other selling agents will receive
an additional volume concession or agency commission on all Trust Units
they sell equal to .30% of the Public Offering Price if they purchase at
least $100,000 worth of Units of a Trust on the Initial Date of Deposit
or $250,000 on any day thereafter or if they were eligible to receive a
similar concession in connection with sales of similarly structured
trusts sponsored by us which are currently in the initial offering period.
Dealers and other selling agents who sell Units of a Trust during the
initial offering period in the dollar amounts shown below will be
entitled to the following additional sales concessions as a percentage
of the Public Offering Price:
Total Sales Additional
(in millions): Concession:
_________________ ___________
$1 but less than $10 .10%
$10 or more .20%
Dealers and other selling agents will not receive a concession on the
sale of Units which are not subject to a transactional sales charge, but
such Units will be included in determining whether volume sales levels
are met. In addition, dealers and other selling agents who, during any
consecutive 12-month period, sell at least $1.75 billion worth of
primary market units of unit investment trusts sponsored by us will
receive a concession of $30,000 in the month following the achievement
of this level. We reserve the right to change the amount of concessions
or agency commissions from time to time. Certain commercial banks may be
making Units of the Trusts available to their customers on an agency
basis. A portion of the transactional sales charge paid by these
customers is kept by or given to the banks in the amounts shown above.
Award Programs.
From time to time we may sponsor programs which provide awards to a
dealer's registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trusts. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria, or
participate in our sales programs, amounts equal to no more than the
total applicable transactional sales charge on the unit sales generated
by such person during such programs. We make these payments out of our
own assets, and not out of Trust assets. These programs will not change
the price you pay for your Units.
Advertising and Investment Comparisons.
Advertising materials regarding the Trusts may discuss several topics,
including: developing a long-term financial plan; working with your
financial professional; the nature and risks of various investment
strategies and unit investment trusts that could help you reach your
financial goals; the importance of discipline; how the Trusts operate;
how securities are selected; various unit investment trust features such
as convenience and costs; and options available for certain types of
unit investment trusts. These materials may include descriptions of the
principal businesses of the companies represented in each Trust,
research analysis of why they were selected and information relating to
the qualifications of the persons or entities providing the research
analysis. In addition, they may include research opinions on the economy
and industry sectors included and a list of investment products
generally appropriate for pursuing those recommendations.
From time to time we may compare the estimated returns of the Trusts
(which may show performance net of the expenses and charges the Trusts
would have incurred) and returns over specified periods of other similar
trusts we sponsor in our advertising and sales materials, with (1)
returns on other investments such as the securities comprising various
market indexes, corporate or U.S. Government bonds, bank CDs and money
market accounts or funds, (2) performance data from Morningstar
Publications, Inc. or (3) information from publications such as Money,
The New York Times, U.S. News and World Report, BusinessWeek, Forbes or
Fortune. The investment characteristics of the Trusts differ from other
comparative investments. You should not assume that these performance
Page 13
comparisons will be representative of a Trust's future performance. We
may also, from time to time, use advertising which classifies trusts
according to capitalization and/or investment style.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum
transactional sales charge per Unit less any reduced sales charge as
stated in "Public Offering." We will also receive the amount of any
accrued and collected creation and development fee. Also, any difference
between our cost to purchase the Securities and the price at which we
sell them to a Trust is considered a profit or loss (see Note 2 of
"Schedules of Investments"). During the initial offering period, dealers
and others may also realize profits or sustain losses as a result of
fluctuations in the Public Offering Price they receive when they sell
the Units.
In maintaining a market for the Units, any difference between the price
at which we purchase Units and the price at which we sell them will be a
profit or loss to us.
The Secondary Market
Although not obligated, we intend to maintain a market for the Units
after the initial offering period and continuously offer to purchase
Units at prices based on the Redemption Price per Unit.
We will pay all expenses to maintain a secondary market, except the
Evaluator fees, Trustee costs to transfer and record the ownership of
Units and costs incurred in annually updating each Trust's registration
statement. We may discontinue purchases of Units at any time. IF YOU
WISH TO DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET
PRICES BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. If you sell
or redeem your Units before you have paid the total deferred sales
charge on your Units, you will have to pay the remainder at that time.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid is equal to or greater than the Redemption Price per Unit, we may
purchase the Units. You will receive your proceeds from the sale no
later than if they were redeemed by the Trustee. We may tender Units we
hold to the Trustee for redemption as any other Units. If we elect not
to purchase Units, the Trustee may sell tendered Units in the over-the-
counter market, if any. However, the amount you will receive is the same
as you would have received on redemption of the Units.
Expenses and Charges
The estimated annual expenses of the Trusts are listed under "Fee
Table." If actual expenses exceed the estimate, the applicable Trust
will bear the excess. The Trustee will pay operating expenses of a Trust
from the Interest Account if funds are available, and then from the
Principal Account. The Interest and Principal Accounts are noninterest-
bearing to Unit holders, so the Trustee may earn interest on these
funds, thus benefiting from their use.
As Sponsor, we will be compensated for providing bookkeeping and other
administrative services to the Trusts, and will receive brokerage fees
when the Trusts use us (or our affiliates) as agent in selling
Securities. Legal and regulatory filing fees and expenses associated
with updating each Trust's registration statement yearly are also now
chargeable to the Trusts. Historically, we paid these fees and expenses.
First Trust Advisors L.P., an affiliate of ours, acts as Portfolio
Supervisor and will receive the fee set forth under "Fee Table" for
providing portfolio supervisory services to the Trusts. In providing
portfolio supervisory services, the Portfolio Supervisor may purchase
research services from a number of sources, which may include dealers of
the Trusts.
The fees payable to us, First Trust Advisors L.P., the Evaluator and the
Trustee are based on the largest aggregate number of Units of a Trust
outstanding at any time during the calendar year, except during the
initial offering period, in which case these fees are calculated based
on the largest number of Units outstanding during the period for which
compensation is paid. These fees may be adjusted for inflation without
Unit holders' approval, but in no case will the annual fees paid to us
or our affiliates for providing a given service to all unit investment
trusts for which we provide such services exceed the actual cost of
providing such services in such year.
As Sponsor, we will receive a fee from the Trusts for creating and
developing the Trusts, including determining each Trust's objectives,
policies, composition and size, selecting service providers and
information services and for providing other similar administrative and
ministerial functions. The "creation and development fee" is a charge of
.55% of a Trust's average daily net asset value through the date of
collection. In connection with the creation and development fee, in no
event will the Sponsor collect more than .55% of a Unit holder's initial
Page 14
investment. We do not use this fee to pay distribution expenses or as
compensation for sales efforts.
In addition to a Trust's operating expenses, and the fees described
above, the Trusts may also incur the following charges:
- - All legal and annual auditing expenses of the Trustee according to
its responsibilities under the Indenture;
- - The expenses and costs incurred by the Trustee to protect the Trusts
and the rights and interests of the Unit holders;
- - Fees for any extraordinary services the Trustee performed under the
Indenture;
- - Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of a Trust;
- - Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Sponsor of a
Trust; and/or
- - All taxes and other government charges imposed upon the Securities or
any part of a Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
the Trusts. We cannot guarantee that the interest received will be
sufficient to meet any or all expenses of the Trusts. If there is not
enough cash in the Interest or Principal Accounts, the Trustee has the
power to sell Securities to make cash available to pay these charges
which may result in capital gains or losses to you. See "Tax Status."
The Trusts will be audited annually. So long as we are making a
secondary market for Units, we will bear the costs of these annual
audits to the extent the cost exceeds $0.0050 per Unit. Otherwise, the
Trusts will pay for the audit. You can request a copy of the audited
financial statement from the Trustee.
Tax Status
This section discusses some of the main U.S. federal income tax
consequences of owning Units of the Trusts. This section is current as
of the date of this prospectus. Tax laws and interpretations change
frequently, and this summary does not describe all of the tax
consequences to all taxpayers. For example, this summary generally does
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe your state, local or foreign
taxes. As with any investment, you should consult your own tax
professional about your particular consequences. In addition, the
Internal Revenue Service issued new withholding and reporting
regulations effective January 1, 2001. Foreign investors should consult
their own tax advisors regarding the tax consequences of these
regulations.
Trust Status.
Each Trust intends to qualify as a "regulated investment company" under
the federal tax laws. If each Trust qualifies as a regulated investment
company and distributes its income as required by the tax law, the
Trusts generally will not pay taxes on income.
Interest Distributions.
Trust distributions are taxable to most investors. At the end of each
year, you will receive a tax statement that separates Trust
distributions into two categories, ordinary income distributions and
capital gains dividends. Ordinary income distributions are generally
taxed at your ordinary tax rate. Generally, you will treat all capital
gains dividends as long-term capital gain regardless of how long you
have owned your Units. To determine your actual tax liability for your
capital gains dividends, you must calculate your total net capital gain
or loss for the tax year after considering all of your other taxable
transactions, as described below. The tax status of dividends from a
Trust is not affected by whether you reinvest your dividends in
additional Units or receive them in cash. The tax laws may require you
to treat distributions made to you in January as if you had received
them on December 31 of the previous year.
Your Tax Basis and Income or Loss upon Disposition.
If you sell or redeem your Units, you will generally recognize a taxable
gain or loss. To determine the amount of this gain or loss, you must
subtract your tax basis in your Units from what you receive in the
transaction. Your tax basis in your Units is generally equal to the cost
of your Units. In some cases, however, you may have to adjust your tax
basis after you purchase your Units.
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the 10% and
15% tax brackets). The 20% rate is reduced to 18% and the 10% rate is
reduced to 8% for long-term gains from most property acquired after
December 31, 2000, with a holding period of more than five years.
Net capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if
the holding period for the asset is more than one year and is short-term
if the holding period for the asset is one year or less. You must
exclude the date you purchase your Units to determine your holding
Page 15
period. However, if you receive a capital gain dividend and sell your
Unit at a loss after holding it for six months or less, the loss will be
recharacterized as long-term capital loss to the extent of the capital
gain received as a dividend. The tax rates for capital gains realized
from assets held for one year or less are generally the same as for
ordinary income. The Internal Revenue Code may, however, treat certain
capital gains as ordinary income in special situations.
Limitations on the Deductibility of Trust Expenses.
Deductible expenses incurred by a Trust will generally not be treated as
income taxable to you. In some cases, however, you may be required to
treat your portion of these Trust expenses as income. In these cases you
may be able to take a deduction for these expenses. However, certain
miscellaneous itemized deductions, such as investment expenses, may be
deducted by individuals only to the extent all these deductions exceed
2% of adjusted gross income.
Retirement Plans
You may purchase Units of the Trusts for:
- - Individual Retirement Accounts;
- - Keogh Plans;
- - Pension funds; and
- - Other tax-deferred retirement plans.
Generally, the federal income tax on capital gains and income received
in each of the above plans is deferred until you receive distributions.
These distributions are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred rollover
treatment. Before participating in a plan like this, you should consult
your attorney or tax advisor. Brokerage firms and other financial
institutions offer these plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
you become Record Owner, but normally your broker/dealer provides this
notice. You may elect to hold your Units in either certificated or
uncertificated form. All Fee Accounts Units, however, will be held in
uncertificated form.
Certificated Units. When you purchase your Units you can request that
they be evidenced by certificates, which will be delivered shortly after
your order. Certificates will be issued in fully registered form,
transferable only on the books of the Trustee in denominations of one
Unit or any multiple thereof. You can transfer or redeem your
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with your
signature guaranteed by an eligible institution. In certain cases the
Trustee may require additional documentation before they will transfer
or redeem your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- - A written initial transaction statement containing a description of
your Trust;
- - A list of the number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of interest (if any)
distributed. After the end of each calendar year, the Trustee will
provide you:
- - The amount of interest received by your Trust less deductions for
payment of applicable taxes, fees and Trust expenses, redemption of
Units and the balance remaining on the last business day of the calendar
year;
- - The amount of principal on the Securities and the net proceeds
received therefrom less deduction for payment of applicable taxes, fees
Page 16
and Trust expenses, redemption of Units and the balance remaining on the
last business day of the calendar year;
- - The Securities held and the number of Units outstanding on the last
business day of the calendar year;
- - The Redemption Price per Unit on the last business day of the
calendar year; and
- - The amounts actually distributed during the calendar year from the
Interest and Principal Accounts, separately stated.
You may request from the Trustee copies of the evaluations of the
Securities as prepared by the Evaluator to enable you to comply with
federal and state tax reporting requirements.
Interest and Principal Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit any interest received on
the Securities to the Interest Account. All other receipts, such as
return of capital, are credited to the Principal Account of a Trust.
After deducting the amount of accrued interest the Trustee advanced to
us as Unit holder of record as of the First Settlement Date, the Trustee
will distribute any interest in the Interest Account on or near the
Interest Distribution Dates to Unit holders of record on the preceding
Interest Distribution Record Date. See "Summary of Essential
Information." No interest distribution will be paid if accrued expenses
of a Trust exceed amounts in the Interest Account on the Interest
Distribution Dates. Distribution amounts will vary with changes in a
Trust's fees and expenses, in interest received, with principal payments
and prepayments and with the sale of Securities. During the Reinvestment
Period, the Trustee will generally reinvest principal payments and
prepayments into additional Securities. Amounts the Trustee is currently
unable to reinvest will be held in the Principal Account until such time
as reinvestment is possible or distributed to Unit holders if the
Trustee determines that reinvestment is not possible. After the
Reinvestment Period, the Trustee will distribute amounts in the
Principal Account, net of amounts designated to meet redemptions, pay
the deferred sales charge or pay expenses, on the last day of each month
to Unit holder of record on the first day of each month provided the
amount equals at least $1.00 per 100 Units. If the Trustee does not have
your TIN, it is required to withhold a certain percentage of your
distribution and deliver such amount to the Internal Revenue Service
("IRS"). You may recover this amount by giving your TIN to the Trustee
or when you file a tax return. However, you should check your statements
to make sure the Trustee has your TIN to avoid this "back-up withholding."
We anticipate that there will be enough money in the Principal Account
to pay the deferred sales charge. If not, the Trustee may sell
Securities to meet the shortfall. Within a reasonable time after a Trust
is terminated you will receive the pro rata share of the money from the
sale of the Securities.
The Trustee may establish reserves (the "Reserve Account") within a
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of such Trust.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by sending the
certificates representing the Units you want to redeem to the Trustee at
its unit investment trust office. If your Units are uncertificated, you
need only to deliver a request for redemption to the Trustee. In either
case, the certificates or the redemption request must be properly
endorsed with proper instruments of transfer and signature guarantees as
explained in "Rights of Unit Holders-Unit Ownership" (or by providing
satisfactory indemnity if the certificates were lost, stolen, or
destroyed). No redemption fee will be charged, but you are responsible
for any governmental charges that apply. Certain broker/dealers may
charge a transaction fee for processing redemption requests. Units
redeemed directly through the Trustee are not subject to such
transaction fees. Three business days after the day you tender your
Units (the "Date of Tender") you will receive cash in an amount for each
Unit equal to the Redemption Price per Unit calculated at the Evaluation
Time on the Date of Tender.
The Date of Tender is considered to be the date on which the Trustee
receives your certificates or redemption request (if such day is a day
the NYSE is open for trading). However, if your certificates or
redemption request are received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing interest will be withdrawn
from the Interest Account if funds are available for that purpose, or
from the Principal Account. All other amounts paid on redemption will be
taken from the Principal Account. The IRS will require the Trustee to
Page 17
withhold a portion of your redemption proceeds if the Trustee does not
have your TIN, as generally discussed under "Interest and Principal
Distributions."
The Trustee may sell Securities to make funds available for redemption.
If Securities are sold, the size and diversification of a Trust will be
reduced. These sales may result in lower prices than if the Securities
were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- - If the NYSE is closed (other than customary weekend and holiday
closings);
- - If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Securities not
reasonably practical; or
- - For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Interest and Principal Accounts not designated to
purchase Securities;
2. the aggregate value of the Securities held in a Trust; and
3. accrued interest on the Securities.
deducting
1. any applicable taxes or governmental charges that need to be paid out
of a Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of a Trust, if any;
4. cash held for distribution to Unit holders of record of a Trust as of
the business day before the evaluation being made; and
5. other liabilities incurred by a Trust; and
dividing
1. the result by the number of outstanding Units of a Trust.
Any remaining deferred sales charge on the Units when you redeem them
will be deducted from your redemption proceeds. In addition, until the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period, the Redemption Price per Unit will include
estimated organization costs as set forth under "Fee Table."
Removing Securities from the Trust
The portfolios of the Trusts are not managed. However, we may, but are
not required to, direct the Trustee to dispose of a Security in certain
limited circumstances, including situations in which:
- - The issuer of the Security has defaulted in the payment of principal
or interest on the Securities;
- - Any action or proceeding seeking to restrain or enjoin the payment of
principal or interest on the Securities has been instituted;
- - The issuer of the Security has breached a covenant which would affect
the payment of principal or interest on the Security, the issuer's
credit standing, or otherwise damage the sound investment character of
the Security;
- - The issuer has defaulted on the payment of any other of its
outstanding obligations;
- - There has been a public tender offer made for a Security or a merger
or acquisition is announced affecting a Security, and that in our
opinion the sale or tender of the Security is in the best interest of
Unit holders;
- - Such factors arise which, in our opinion, adversely affect the tax or
exchange control status of the Securities or a Trust; or
- - The price of the Security has declined to such an extent, or such
other credit factors exist, that in our opinion keeping the Security
would be harmful to a Trust.
If a Security defaults in the payment of principal or interest and no
provision for payment is made, the Trustee must notify us of this fact
within 30 days. If we fail to instruct the Trustee whether to sell or
hold the Security within 30 days of our being notified, the Trustee may,
in its discretion, sell any defaulted Securities and will not be liable
for any depreciation or loss incurred thereby.
Except in the limited instance in which a Trust acquires Replacement
Securities, as described in "The First Trust GNMA Reinvestment Income
Trust," a Trust may not acquire any securities or other property other
than the Securities. The Trustee, on behalf of a Trust, will reject any
offer for new or exchanged securities or property in exchange for a
Security, except that we may instruct the Trustee to accept such an
offer or to take any other action with respect thereto as we may deem
proper if the issuer is in default with respect to such Securities or in
our written opinion the issuer will likely default in respect to such
Securities in the foreseeable future. Any obligations received in
exchange or substitution will be held by the Trustee subject to the
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terms and conditions in the Indenture to the same extent as Securities
originally deposited in the Trust. We may get advice from the Portfolio
Supervisor before reaching a decision regarding the receipt of new or
exchanged securities or property. The Trustee may retain and pay us or
an affiliate of ours to act as agent for a Trust to facilitate selling
Securities, exchanged securities or property from a Trust. If we or our
affiliate act in this capacity, we will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Securities designated by us, or, absent our
direction, at its own discretion in order to meet redemption requests or
pay expenses. We will maintain a list with the Trustee of which
Securities should be sold. We may consider sales of units of unit
investment trusts which we sponsor in making recommendations to the
Trustee on the selection of broker/dealers to execute a Trust's
portfolio transactions, or when acting as agent for a Trust in acquiring
or selling Securities on behalf of a Trust.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- - To cure ambiguities;
- - To correct or supplement any defective or inconsistent provision;
- - To make any amendment required by any governmental agency; or
- - To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, each Trust will terminate
upon the redemption, sale or other disposition of the last Security
held, but in no case later than the Mandatory Termination Date. A Trust
may be terminated earlier:
- - Upon the consent of 100% of the Unit holders;
- - If the value of the Securities owned by such Trust as shown by any
evaluation is less than the lower of $2,000,000 or 40% of the aggregate
principal amount of Securities deposited in the Trust during the initial
offering period (the "Discretionary Liquidation Amount"); or
- - In the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination the Trustee will send written notice to you which
will specify how you should tender your certificates, if any, to the
Trustee. If a Trust is terminated due to this last reason, we will
refund your entire sales charge; however, termination of a Trust before
the Mandatory Termination Date for any other reason will result in all
remaining unpaid deferred sales charges on your Units being deducted
from your termination proceeds. For various reasons, a Trust may be
reduced below the Discretionary Liquidation Amount and could therefore
be terminated before the Mandatory Termination Date.
Unless terminated earlier, the Trustee will begin to sell Securities in
connection with the termination of a Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Securities. Because the Trustee must sell the Securities within a
relatively short period of time, the sale of Securities as part of the
termination process may result in a lower sales price than might
otherwise be realized if such sale were not required at this time.
You will receive a cash distribution from the sale of the remaining
Securities, along with your interest in the Interest and Principal
Accounts, within a reasonable time after a Trust is terminated.
Regardless of the distribution involved, the Trustee will deduct from
the Trusts any accrued costs, expenses, advances or indemnities provided
for by the Indenture, including estimated compensation of the Trustee
and costs of liquidation and any amounts required as a reserve to pay
any taxes or other governmental charges.
Rating of the Units
The Units of the Trusts are rated "AAA" by Standard & Poor's Managed
Fund Ratings Group, a division of The McGraw-Hill Companies ("Standard &
Poor's"). Trusts rated "AAA" are composed exclusively of assets that are
rated "AAA" by Standard & Poor's or have, in the opinion of Standard &
Poor's, credit characteristics comparable to assets rated "AAA".
Capacity to pay interest and repay principal is very strong in "AAA"
rated securities. This is the highest rating assigned by Standard &
Poor's. This rating should not be construed as an approval of the
offering of the Units by Standard & Poor's or as a guarantee of the
market value of the Trusts or the Units. Standard & Poor's has indicated
that this rating is not a recommendation to buy, hold or sell Units nor
does it take into account the extent to which expenses of the Trusts or
sales of Securities from the Trusts for less than their purchase price
will reduce payment to Unit holders of the interest and principal
required to be paid on such Securities. There is no guarantee that the
Page 19
"AAA" investment rating with respect to the Units will be renewed after
it expires in 13 months from the Initial Date of Deposit. Standard &
Poor's has been compensated for its services in rating Units of the
Trusts.
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- - The First Trust Combined Series
- - FT Series (formerly known as The First Trust Special Situations Trust)
- - The First Trust Insured Corporate Trust
- - The First Trust of Insured Municipal Bonds
- - The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $35 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 2000, the total partners' capital of
Nike Securities L.P. was $21,676,108 (audited).
This information refers only to us and not to the Trusts or to any
series of the Trusts or to any other dealer. We are including this
information only to inform you of our financial responsibility and our
ability to carry out our contractual obligations. We will provide more
detailed financial information on request.
Code of Ethics. The Sponsor and the Trusts have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to the Trusts
The Trustee.
The Trustee is JPMorgan Chase Bank, with its principal executive office
located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th Floor, New York, New
York, 10004-2413. If you have questions regarding the Trusts, you may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee has not participated in selecting the Securities; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Securities are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Securities which the Trustee may be required
to pay under any present or future law of the United States or of any
other taxing authority with jurisdiction. Also, the Indenture states
other provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- - Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC,
- - Terminate the Indenture and liquidate the Trusts, or
- - Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is Securities Evaluation Services, Inc. The Evaluator's
address is 531 East Roosevelt Road, Suite 200, Wheaton, Illinois 60187.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Page 20
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal tax law. Carter, Ledyard &
Milburn acts as the Trustee's counsel.
Experts.
The Trusts' statements of net assets, including the schedules of
investments, as of the opening of business on the Initial Date of
Deposit included in this prospectus and elsewhere in the registration
statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and elsewhere in
the registration statement, and is included in reliance upon the report
of such firm given upon their authority as experts in accounting and
auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific details concerning the nature, structure and risks
of this product.
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Page 23
First Trust(R)
The First Trust GNMA Reinvestment Income Trust
Series 80 and Series 81
Sponsor:
Nike Securities L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
JPMORGAN CHASE BANK
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to the above-mentioned
unit investment trusts, but does not contain all of the information
about this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- - Securities Act of 1933 (file no. 333-73296) and
- - Investment Company Act of 1940 (file no. 811-05903)
Information about the Trusts, including their Codes of Ethics, can be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington D.C. Information regarding the operation of
the Commission's Public Reference Room may be obtained by calling the
Commission at 1-202-942-8090.
Information about the Trusts is available on the EDGAR Database on the
Commission's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0102
e-mail address: publicinfo@sec.gov
November __, 2001
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
Page 24
First Trust(R)
The First Trust GNMA Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in The First Trust GNMA Reinvestment Income Trust, Series 80
and Series 81 not found in the prospectus for the Trusts. This
Information Supplement is not a prospectus and does not include all of
the information you should consider before investing in the Trusts. This
Information Supplement should be read in conjunction with the prospectus
for the Trust in which you are considering investing.
This Information Supplement is dated November __, 2001. Capitalized
terms have been defined in the prospectus.
Table of Contents
Risk Factors 1
Risk Factors
An investment in Units of the Trusts should be made with an
understanding of the risks which an investment in fixed rate long-term
debt obligations may entail, including the risk that the value of the
underlying Securities and hence of the Units will decline with increases
in interest rates. The value of the underlying Securities will fluctuate
inversely with changes in interest rates. In addition, the potential for
appreciation of the underlying Securities, which might otherwise be
expected to occur as a result of a decline in interest rates, may be
limited or negated by increased principal prepayments in respect of the
underlying mortgages. For example, the high inflation during certain
periods, together with the fiscal measures adopted to attempt to deal
with it, has resulted in wide fluctuations in interest rates and, thus,
in the value of fixed rate long-term debt obligations generally. The
Sponsor cannot predict whether such fluctuations will continue in the
future or whether the reinvestment of principal will mitigate the impact
of these fluctuations.
The portfolios of the Trusts consist of Ginnie Maes (or contracts to
purchase Ginnie Maes) fully guaranteed as to payments of principal and
interest by GNMA. Each group of Ginnie Maes described herein as having a
specified range of maturities includes individual mortgage-backed
securities which have varying ranges of maturities within each range set
forth in "Schedules of Investments." Current market conditions accord
little or no difference in price among individual Ginnie Mae securities
with the same coupon within certain ranges of stated maturity dates on
the basis of the difference in the maturity dates of each Ginnie Mae. A
purchase of Ginnie Maes with the same coupon rate and maturity date
within such range will be considered an acquisition of the same security
for both additional deposits and for the reinvestment of principal. In
the future, however, the difference in maturity ranges could affect
market value of the individual Ginnie Maes. At such time, any additional
purchases by the Trusts will take into account the maturities of the
individual securities. The mortgages underlying the Ginnie Maes in the
Trusts have an original stated maturity of up to 30 years.
The Trusts may contain Securities which were acquired at a market
discount. Such Securities trade at less than par value because the
interest coupons thereon are lower than interest coupons on comparable
debt securities being issued at currently prevailing interest rates. If
such interest rates for newly issued and otherwise comparable securities
increase, the market discount of previously issued securities will
become greater, and if such interest rates for newly issued comparable
securities decline, the market discount of previously issued securities
will be reduced, other things being equal. Investors should also note
that the value of Ginnie Maes purchased at a market discount will
increase in value faster than Ginnie Maes purchased at a market premium
if interest rates decrease. Conversely, if interest rates increase, the
value of Ginnie Maes purchased at a market discount will decrease faster
than Ginnie Maes purchased at a premium. In addition, if interest rates
rise, the prepayment risk of higher yielding, premium Ginnie Maes and
the prepayment benefit for lower yielding, discount Ginnie Maes will be
reduced. Market discount attributable to interest changes does not
indicate a lack of market confidence in the issue. Neither the Sponsor
nor the Trustee shall be liable in any way for any default, failure or
defect in any of the Securities.
The Trusts may contain Securities which were acquired at a market
premium. Such Securities trade at more than par value because the
interest coupons thereon are higher than interest coupons on comparable
debt securities being issued at currently prevailing interest rates. If
such interest rates for newly issued and otherwise comparable securities
decrease, the market premium of previously issued securities will be
increased, and if such interest rates for newly issued comparable
securities increase, the market premium of previously issued securities
will be reduced, other things being equal. The current returns of
Page 1
securities trading at a market premium are initially higher than the
current returns of comparably rated debt securities of a similar type
issued at currently prevailing interest rates because premium securities
tend to decrease in market value as they approach maturity when the face
amount becomes payable. Because part of the purchase price is thus
returned not at maturity but through current income payments, early
redemption of a premium security at par or early prepayments of
principal will result in a reduction in yield. Prepayments of principal
on securities purchased at a market premium are more likely than
prepayments on securities purchased at par or at a market discount and
the level of prepayments will generally increase if interest rates
decline. Market premium attributable to interest changes does not
indicate market confidence in the issue.
The mortgages underlying a Ginnie Mae may be prepaid at any time without
penalty. A lower or higher current return on Units may occur depending
on (i) whether the price at which the respective Ginnie Maes were
acquired by the Trusts is lower or higher than par, (ii) whether
principal is reinvested or distributed to Unit holders and (iii) if
reinvestment occurs, whether the Ginnie Maes purchased by the Trustee
with reinvested principal are purchased at a premium or discount from
par. During periods of declining interest rates, prepayments of Ginnie
Maes may occur with increasing frequency because, among other reasons,
mortgagors may be able to refinance their outstanding mortgages at lower
interest rates. In such a case, (i) the reinvestment of principal may be
at prices which result in a lower return on Units or (ii) principal will
be distributed to Unit holders who cannot reinvest such principal
distributions in other securities at an attractive yield.
Description of Securities. The Ginnie Maes included in the Trusts are
backed by the indebtedness secured by underlying mortgage pools of up to
30 year mortgages on 1- to 4-family dwellings. The pool of mortgages
which is to underlie a particular new issue of Ginnie Maes is assembled
by the proposed issuer of such Ginnie Maes. The issuer is typically a
mortgage banking firm, and in every instance must be a mortgagee
approved by and in good standing with the Federal Housing Administration
("FHA"). In addition, GNMA imposes its own criteria on the eligibility
of issuers, including a net worth requirement.
The mortgages which are to comprise a new Ginnie Mae pool may have been
originated by the issuer itself in its capacity as a mortgage lender or
may be acquired by the issuer from a third party, such as another
mortgage banker, a banking institution, the Veterans Administration
("VA") (which in certain instances acts as a direct lender and thus
originates its own mortgages) or one of several other governmental
agencies. All mortgages in any given pool will be insured under the
National Housing Act, as amended ("FHA-insured"), or Title V of the
Housing Act of 1949 ("FMHA Insured") or guaranteed under the
Servicemen's Readjustment Act of 1944, as amended, or Chapter 37 of
Title 38, U.S.C. ("VA-guaranteed"). Such mortgages will have a date for
the first scheduled monthly payment of principal that is not more than
one year prior to the date on which GNMA issues its guaranty commitment
as described below, will have comparable interest rates and maturity
dates, and will meet additional criteria of GNMA. All mortgages in the
pools backing the Ginnie Maes contained in the Trusts are mortgages on 1-
to 4-family dwellings (having a stated maturity of up to 30 years for
Securities in the Trusts but an estimated average life of considerably
less as set forth in "Special Information"). In general, the mortgages
in these pools provide for equal monthly payments over the life of the
mortgage (aside from prepayments) designed to repay the principal of the
mortgage over such period, together with interest at the fixed rate on
the unpaid balance.
To obtain GNMA approval of a new pool of mortgages, the issuer will file
with GNMA an application containing information concerning itself,
describing generally the pooled mortgages, and requesting that GNMA
approve the issue and issue its commitment (subject to GNMA's
satisfaction with the mortgage documents and other relevant
documentation) to guarantee the timely payment of principal of and
interest on the Ginnie Maes to be issued by the issuer. If the
application is in order, GNMA will issue its commitment and will assign
a GNMA pool number to the pool. Upon completion of the required
documentation (including detailed information as to the underlying
mortgages, a custodial agreement with a Federal or state regulated
financial institution satisfactory to GNMA pursuant to which the
underlying mortgages will be held in safekeeping, and a detailed
guaranty agreement between GNMA and the issuer), the issuance of the
Ginnie Maes is permitted. When the Ginnie Maes are issued, GNMA will
endorse its guarantee thereon. The aggregate principal amount of Ginnie
Maes issued will be equal to the then aggregate unpaid principal
balances of the pooled mortgages. The interest rate borne by the Ginnie
Maes is currently fixed at 1/2 of 1% below the interest rate of the
pooled 1- to 4-family mortgages, the differential being applied to the
payment of servicing and custodial charges as well as GNMA's guaranty fee.
Ginnie Mae IIs consist of jumbo pools of mortgages from more than one
issuer. By allowing pools to consist of multiple issuers, it allows for
larger and more geographically diverse pools. Unlike Ginnie Mae Is,
which have a minimum pool size of $1 million, Ginnie Mae IIs have a
minimum pool size of $7 million. In addition, the interest rates on the
mortgages within the Ginnie Mae II pools will vary unlike the mortgages
within pools in Ginnie Mae Is which all have the same rate. The rates on
the mortgages will vary from 1/2 of 1% to 1.50% above the coupon rate on
the GNMA bond, which is allowed for servicing and custodial fees as well
as the GNMA's guaranty fee. The major advantage of Ginnie Mae IIs lies
in the fact that a central paying agent sends one check to the holder on
the required payment date. This greatly simplifies the current procedure
Page 2
of collecting distributions from each issuer of a Ginnie Mae, since such
distributions are often received late.
All of the Ginnie Maes in the Trusts, including the Ginnie Mae IIs, are
of the "fully modified pass-through" type, i.e., they provide for timely
monthly payments to the registered holders thereof (including the
Trusts) of their pro rata share of the scheduled principal payments on
the underlying mortgages, whether or not collected by the issuers,
including, on a pro rata basis, any prepayments of principal of such
mortgages received and interest (net of the servicing and other charges
described above) on the aggregate unpaid principal balance of such
Ginnie Maes, whether or not the interest on the underlying mortgages has
been collected by the issuers.
The Ginnie Maes in the Trusts are guaranteed as to timely payment of
principal and interest by GNMA. Funds received by the issuers on account
of the mortgages backing the Ginnie Maes in the Trusts are intended to
be sufficient to make the required payments of principal of and interest
on such Ginnie Maes but, if such funds are insufficient for that
purpose, the guaranty agreements between the issuers and GNMA require
the issuers to make advances sufficient for such payments. If the
issuers fail to make such payments, GNMA will do so.
GNMA is authorized by Section 306(g) of Title III of the National
Housing Act to guarantee the timely payment of and interest on
securities which are based on or backed by a trust or pool composed of
mortgages insured by FHA, the Farmers' Home Administration ("FMHA") or
guaranteed by the VA. Section 306(g) provides further that the full
faith and credit of the United States is pledged to the payment of all
amounts which may be required to be paid under any guaranty under such
subsection. An opinion of an Assistant Attorney General of the United
States, dated December 9, 1969, states that such guaranties "constitute
general obligations of the United States backed by its full faith and
credit."* GNMA is empowered to borrow from the United States Treasury to
the extent necessary to make any payments of principal and interest
required under such guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages and,
except to the extent of funds received by the issuers on account of such
mortgages, Ginnie Maes do not constitute a liability of nor evidence any
recourse against such issuers, but recourse thereon is solely against
GNMA. Holders of Ginnie Maes (such as the Trusts) have no security
interest in or lien on the underlying mortgages.
The GNMA guaranties referred to herein relate only to payment of
principal of and interest on the Ginnie Maes in the Trusts and not to
the Units offered hereby.
Monthly payments of principal will be made, and additional prepayments
of principal may be made, to each Trust in respect of the mortgages
underlying the Ginnie Maes in the Trusts. All of the mortgages in the
pools relating to the Ginnie Maes in the Trusts are subject to
prepayment without any significant premium or penalty at the option of
the mortgagors. While the mortgages on 1- to 4-family dwellings
underlying the Ginnie Maes have a stated maturity of up to 30 years for
the Trusts, it has been the experience of the mortgage industry that the
average life of comparable mortgages, owing to prepayments, refinancings
and payments from foreclosures, is considerably less.
In the mid-1970's, published yield tables for Ginnie Maes utilized a 12-
year average life assumption for Ginnie Mae pools of 26-30 year
mortgages on 1- to 4-family dwellings. This assumption was derived from
the FHA experience relating to prepayments on such mortgages during the
period from the mid-1950's to the mid-1970s. This 12-year average life
assumption was calculated in respect of a period during which mortgage
lending rates were fairly stable. THE ASSUMPTION IS NO LONGER AN
ACCURATE MEASURE OF THE AVERAGE LIFE OF GINNIE MAES OR THEIR UNDERLYING
SINGLE FAMILY MORTGAGE POOLS. RECENTLY IT HAS BEEN OBSERVED THAT
MORTGAGES ISSUED AT HIGH INTEREST RATES HAVE EXPERIENCED ACCELERATED
PREPAYMENT RATES WHICH WOULD INDICATE A SIGNIFICANTLY SHORTER AVERAGE
LIFE THAN 12 YEARS. TODAY, RESEARCH ANALYSTS USE COMPLEX FORMULAE TO
SCRUTINIZE THE PREPAYMENTS OF MORTGAGE POOLS IN AN ATTEMPT TO PREDICT
MORE ACCURATELY THE AVERAGE LIFE OF GINNIE MAES.
A number of factors, including homeowner's mobility, change in family
size and mortgage market interest rates will affect the average life of
the Ginnie Maes in each Trust. For example, Ginnie Maes issued during a
period of high interest rates will be backed by a pool of mortgage loans
bearing similarly high rates. In general, during a period of declining
interest rates, new mortgage loans with interest rates lower than those
charged during periods of high rates will become available. To the
extent a homeowner has an outstanding mortgage with a high rate, he may
refinance his mortgage at a lower interest rate or he may rapidly repay
his old mortgage. Should this happen, a Ginnie Mae issued with a high
interest rate may experience a rapid prepayment of principal as the
underlying mortgage loans prepay in whole or in part. Accordingly, there
can be no assurance that the prepayment levels which will be actually
realized will conform to the estimates or experience of the FHA, other
mortgage lenders, dealers or market makers or other Ginnie Mae
investors. It is not possible to meaningfully predict prepayment levels
regarding the Ginnie Maes in the Trusts. Even though the reinvestment of
principal may mitigate the effects of prepayments of principal, the
termination of the Trusts might be accelerated as a result of
prepayments made as described herein.
______________
* Any statement in this prospectus that a particular security is backed
by the full faith and credit of the United States is based upon the
opinion of an Assistant Attorney General of the United States and should
be so construed.
Page 3
MEMORANDUM
RE: THE FIRST TRUST GNMA REINVESTMENT INCOME TRUST, SERIES 80
AND SERIES 81
The only difference of consequence (except as described
below) between The First Trust GNMA Reinvestment Income Trust,
Series 79, which is the current fund, and The First Trust GNMA
Reinvestment Income Trust, Series 80 and Series 81, the filing of
which this memorandum accompanies, is the change in the series
number. The list of securities comprising the Fund, the
evaluation, record and distribution dates and other changes
pertaining specifically to the new series, such as size and
number of Units in the Trust and the statement of condition of
the new Trust, will be filed by amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of The First Trust GNMA Fund, Series 1 (File No.
811-3969) related also to the subsequent series of the Trust.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 79 prospectus relate to the series number and size and the
date and various items of information which will be derived from
and apply specifically to the securities deposited in the Trust.
CONTENTS OF REGISTRATION STATEMENT
Item A. Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Brokers' Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
Item B. This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Prospectus
The signatures
Exhibits
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust GNMA Reinvestment Income Trust,
Series 80 and Series 81, has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on November 16, 2001.
THE FIRST TRUST GNMA REINVESTMENT
INCOME TRUST, SERIES 80 AND SERIES 81
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By: Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
David J. Allen Sole Director of )
Nike Securities )
Corporation the General)
Partner of Nike )November 16, 2001
Securities L.P. )
)
)Robert M. Porcellino
)Attorney-in-fact**
)
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to Form S-6 of The First Trust Combined
Series 258 (File No. 33-63483) and the same is hereby
incorporated herein by this reference.
S-2
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1 and 3.4 of the Registration Statement.
CONSENT OF SECURITIES EVALUATION SERVICE, INC.
The consent of Securities Evaluation Service, Inc. to the
use of its name in the Prospectus included in this Registration
Statement will be filed as Exhibit 4.1 to the Registration
Statement.
CONSENT OF STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-
HILL, INC.
The consent of Standard & Poor's Ratings Group, A Division
of McGraw-Hill, Inc. to the use of its name in the Prospectus
included in this Registration Statement will be filed as Exhibit
4.2 to the Registration Statement.
CONSENT OF DELOITTE & TOUCHE LLP
The consent of Deloitte & Touche LLP to the use of its name
and to the reference to such firm in the Prospectus included in
this Registration Statement will be filed by Amendment.
S-3
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust GNMA, Series 62 and subsequent Series
effective December 19, 1991 among Nike Securities L.P., as
Depositor, United States Trust Company of New York as
Trustee, Securities Evaluation Service, Inc., as
Evaluator, and Nike Financial Advisory Services L.P. as
Portfolio Supervisor (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-44532] filed on
behalf of The First Trust GNMA, Series 62).
1.1.1*Form of Trust Agreement for Series 80 and Series 81 among
Nike Securities L.P., as Depositor, JPMorgan Bank, as
Trustee, Securities Evaluation Service, Inc., as
Evaluator, and First Trust Advisors L.P., as Portfolio
Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership Agreement
of Nike Securities L.P. (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust, Series
18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1 to
Form S-6 [File No. 33-42683] filed on behalf of The First
Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-43289] filed on
behalf of The First Trust Combined Series 145).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by reference).
S-4
2.2 Copy of Code of Ethics (incorporated by reference to
Amendment No. 1 to form S-6 [File No. 333-31176] filed on
behalf of FT 415).
3.1* Opinion of counsel as to legality of securities being
registered.
3.3* Opinion of counsel as to New York income tax status of
securities being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
4.1* Consent of Securities Evaluation Service, Inc.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust, Series
18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
________________________
* To be filed by amendment.
S-5