<PAGE>
FILE NO. 333-02243
40 ACT FILE NO. 811-2271
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
<TABLE>
<S> <C> <C>
A. Exact name of Trust: NUVEEN TAX-FREE UNIT TRUST, SERIES 860
B. Name of Depositor: JOHN NUVEEN & CO. INCORPORATED
C. Complete address of Depositor's principal executive offices:
333 West Wacker Drive
Chicago, Illinois 60606
D. Name and complete address of agents for service:
JOHN NUVEEN & CO. INCORPORATED
Attn: James J. Wesolowski
333 West Wacker Drive
Chicago, Illinois 60606
CHAPMAN AND CUTLER
Attn: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on April 26, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on April 26, 1996 pursuant to paragraph (a) of rule 485 or 486
E. Title and amount of securities being registered: An indefinite number of Units as
permitted by Rule 24f-2.
F. Proposed maximum offering price to the public of the securities being registered:
Not presently determinable.
G. Amount of filing fee: $500 in accordance with Rule 24f-2.*
H. Approximate date of proposed sale to the public: As soon as practicable after the
effective date of the Registration Statement.
* Previously Paid
/X/ Check box if it is proposed that this filing will become effective on April 26, 1996
at 1:30 P.M. pursuant to Rule 487.
</TABLE>
<PAGE>
NUVEEN TAX-FREE UNIT TRUST, SERIES 860
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(C) OF REGULATION C
UNDER THE SECURITIES ACT OF 1933
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTION 1 AS
TO PROSPECTUS ON FORM S-6)
<TABLE>
<C> <S> <C> <C> <C>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust ) Prospectus Part A -- Cover Page
(b) Title of securities issued )
2. Name and address of Depositor ) Information About the Sponsor
3. Name and address of Trustee ) Information About the Trustee
4. Name and address of principal Underwriter ) Information About the Sponsor
5. Organization of trust ) What Is The Nuveen Tax-Free Unit Trust?
6. Execution and termination of Trust Agreement ) What Is The Nuveen Tax-Free Unit Trust?
) Information About The Trustee
) Other Information
7. Changes of Name ) *
8. Fiscal Year )
9. Litigation )
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. General Information regarding trust's securities ) Summary of Portfolios
) Why and How are the Bonds Insured?
) When Are Distributions Made to Unitholders?
) Ownership and Transfer of Units
) How Units May Be Redeemed Without Charge?
) How Bonds May Be Removed From The Trusts?
) Information About the Trustee
) Information About the Sponsor
) Other Information
) What Is The Tax Status of Unitholders?
11. Type of securities comprising units ) What Is The Nuveen Tax-Free Unit Trust?
) Summary of Portfolios
) Composition of Trusts
) What Are The Objectives Of The Trusts?
) Why and How are the Bonds Insured?
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, expenses, etc. ) Part A -- Essential Information
) How Is The Public Offering Price Determined?
) Market For Units
) What Is Accrued Interest?
) What Are Estimated Long Term Return
) And Estimated Current Return?
) How Was The Price Of The Bonds
) Determined At The Date of Deposit?
) What Are Normal Trust Operating Expenses?
) When Are Distributions Made To Unitholders?
) Summary Of Portfolios
) How Detailed Are Reports To Unitholders?
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
(b) Certain information regarding ) *
periodic payment certificates )
(c) Certain percentages ) How Is The Public Offering Price Determined?
) Market For Units
) What Are Estimated Long Term Return
) And Estimated Current Return?
) How Was The Price Of The Bonds
) Determined At The Date Of Deposit?
) What Is Accrued Interest?
(d) Certain other fees, etc. payable by holders ) How Was The Price Of The Bonds Determined
) At The Date Of Deposit?
) What Are Normal Trust Operating Expenses?
) Ownership And Transfer Of Units
(e) Certain profits receivable by depositor, ) Composition Of Trusts
principal underwriter, trustee or )
affiliated persons )
) How Units May Be Purchased By The Sponsor
(f) Ratio of annual charges to income ) *
14. Issuance of trust's securities ) Summary of Portfolios
) When Are Distributions Made To Unitholders?
) Ownership and Transfer of Units
) How Units May Be Redeemed Without Charge
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and Disposition of ) What Is The Nuveen Tax-Free Unit Trust?
Underlying Securities )
) Summary of Portfolios
) Composition of Trusts
) Why and How are the Bonds Insured?
) How Units May Be Redeemed Without Charge
) How Bonds May Be Removed From The Trusts
) Other Information
17. Withdrawal or redemption ) Market For Units
) How Units May Be Redeemed Without Charge
) How Units May Be Purchased By The Sponsor
18. (a) Receipt and disposition of income ) Summary of Portfolios
) When Are Distributions Made To Unitholders?
) How Detailed Are Reports To Unitholders?
(b) Reinvestment of distributions ) Accumulation Plan
(c) Reserves or special funds ) Summary of Portfolios
) When Are Distributions Made To Unitholders?
(d) Schedule of distributions ) *
19. Records, accounts and reports ) When Are Distributions Made To Unitholders?
) How Detailed Are Reports To Unitholders?
20. Certain miscellaneous provisions of ) Information About the Trustee
Trust Agreement )
) Information About the Sponsor
) Other Information
21. Loans to security holders ) *
22. Limitations on liability ) Summary of Portfolios
) Composition of Trusts
) Information About The Trustee
23. Bond arrangements ) *
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
24. Other material provisions of Trust Agreement. ) *
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of Depositor ) Information About the Sponsor
26. Fees received by Depositor ) *
27. Business of Depositor ) Information About the Sponsor
28. Certain information as to officials ) *
and affiliated persons of Depositor )
29. Voting Securities of Depositor ) Information About the Sponsor
30. Persons controlling Depositor )
31. Payments by Depositor for certain )
services rendered to trust )
32. Payments by Depositor for certain ) *
other services rendered to trust )
33. Remuneration of employees of Depositor )
for certain services rendered to trust )
34. Remuneration of other persons for )
certain services rendered to trust )
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35. Distribution of trust's securities by states ) *
36. Suspension of sales of trust's securities )
37. Revocation of authority to distribute )
38. (a) Method of distribution )
(b) Underwriting agreements ) How Units of The Trusts Are
) Distributed To The Public
(c) Selling agreement )
39. (a) Organization of principal underwriter ) Information About The Sponsor
(b) NASD membership of principal underwriter )
40. Certain fees received by principal underwriter ) *
41. (a) Business of principal underwriter )
(b) Branch offices of principal underwriter ) *
(c) Salesmen of principal underwriter )
42. Ownership of trust's securities by ) *
certain persons )
43. Certain brokerage commissions received ) *
by principal underwriter )
44. (a) Method of valuation ) Part A -- Essential Information
) How Is The Public Offering Price Determined?
) How Was The Price Of The Bonds
) Determined At The Date of Deposit?
) What Are Normal Trust Operating Expenses?
(b) Schedule as to offering price ) *
(c) Variation in offering price to ) How Is the Public Offering Price
certain persons ) Determined?
) What Is Accrued Interest?
) How Was The Price Of The Bonds
) Determined At The Date of Deposit?
45. Suspension of redemption rights ) *
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
46. (a) Redemption valuation ) Unit Value and Evaluation
) How Units May Be Redeemed Without Charge
) How Units May Be Purchased By The Sponsor
(b) Schedule as to redemption price ) *
47. Maintenance of position in underlying ) How Is the Public Offering Price
securities ) Determined?
) How Units May Be Purchased By The Sponsor
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of Trustee ) Information About The Trustee
49. Fees and expenses of Trustee ) Part A -- Essential Information
) What Are Normal Trust Operating Expenses?
50. Trustee's lien ) What Are Normal Trust Operating Expenses?
) When Are Distributions Made To Unitholders?
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's securities ) *
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust agreement with ) What Are Normal Trust Operating
respect to selection or elimination ) Expenses?
of underlying securities )
) How Units May Be Redeemed Without Charge
) How Bonds May Be Removed From The Trusts
(b) Transactions involving elimination ) *
of underlying securities )
(c) Policy regarding substitution or ) Summary of Portfolios
elimination of underlying securities )
) Composition of Trusts
) How Bonds May Be Removed From The Trusts
(d) Fundamental policy not otherwise covered ) *
53. Tax status of trust ) What Is The Tax Status Of Unitholders?
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during last ten years ) *
55. )
56. Certain information regarding ) *
periodic payment certificate )
57. )
58. )
</TABLE>
- ---------
* Inapplicable, omitted, answer negative or not required.
<PAGE>
APRIL 26, 1996
SUBJECT TO COMPLETION
A
NUVEEN NUVEEN GEORGIA INSURED TRUST 51
(NUVEEN TAX-FREE UNIT TRUSTS SERIES 860)
CUSIP NUMBERS:
Monthly: 67101M 827
Quarterly: 67101M 835
Semi-Annually: 67101M 843
PROSPECTUS--PART A (SPECIFIC TERMS) -- APRIL 26, 1996
THIS PART A OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY THE
PART B OF
THE NUVEEN TAX-EXEMPT UNIT TRUSTS PROSPECTUS, TO WHICH SUCH REFERENCE HEREIN
APPLIES. ANY REFERENCE TO
"NUVEEN TAX-EXEMPT UNIT TRUSTS" IN PART B SHALL BE AMENDED TO READ "NUVEEN
TAX-FREE UNIT TRUSTS."
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
Georgia Insured Trust 51 (the "Trust") consists of a portfolio of
interest-bearing obligations issued by or on behalf of the State of Georgia,
certain United States Territories or authorities and political subdivisions
thereof which, in the opinion of recognized bond counsel to the issuing
authorities, provide income which is exempt from Federal income tax and Georgia
income tax, to the extent indicated below.
The objectives of the Trust are income exempt from Federal and state income
taxes, and conservation of capital. The objectives are, of course, dependent
upon the continuing ability of the issuers, obligors and/or insurers to meet
their respective obligations.
The Portfolio of the Trust consists of 6 obligations issued by entities
located in Georgia and one obligation issued by an entity located in the
Territory of Puerto Rico. The Bonds in the Trust are either general obligations
of the governmental entity issuing them and are backed by the taxing power
thereof or are payable as to principal and interest from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. The sources of payment for the Bonds are divided as follows:
<TABLE>
<CAPTION>
NUMBER OF PORTFOLIO
ISSUES PURPOSE OF ISSUE PERCENTAGE
--------------- ----------------------------------------------------
<C> <S> <C>
2 General Obligations 29 %
2 Water and/or Sewer Revenue 29
1 Electrical System Revenue 14
1 Health Care Facility Revenue 14
1 College and University Revenue 14
</TABLE>
Approximately 14.3% of the aggregate principal amount of the Bonds in the
Trust (accounting for approximately 12.7% of the aggregate offering price of the
Bonds) are original issue discount bonds. See "RISK FACTORS" in Part B of this
Prospectus for a discussion of the characteristics of such obligations and of
the risks associated therewith.
All of the Bonds in the Trust are covered by policies of insurance obtained
from the MBIA Insurance Corporation guaranteeing payment of principal and
interest when due. As a result of such insurance, the Bonds in the Trust have
received a rating of "Aaa" by Moody's and both the Bonds in the Trust and the
Units of the Trust have received a rating of "AAA" by Standard & Poor's.
The Trust is considered to be concentrated in Bonds of Water and/or Sewer
Revenue Issuers whose revenues are subject to certain risks including problems
obtaining timely and adequate rate increases and population decline resulting in
decreased user fees. For a discussion of the risks associated with investments
in the bonds of various issuers, see "RISK FACTORS" in Part B of this
Prospectus.
ESSENTIAL INFORMATION
REGARDING THE NUVEEN GEORGIA INSURED TRUST 51
ON THE BUSINESS DAY PRIOR TO THE DATE OF DEPOSIT, APRIL 25, 1996
Sponsor and Evaluator.......... John Nuveen & Co. Incorporated
Trustee........................ The Chase Manhattan Bank, N.A.
------------------------------------------------
The income, expense and distribution data set forth below have been calculated
for Unitholders receiving monthly, quarterly or semi-annual distribution
options.
<TABLE>
<S> <C>
Principal Amount of Bonds in Trust.................. $ 3,500,000
Number of Units..................................... 35,000
Fractional Undivided Interest in Trust Per Unit..... 1/35,000
Public Offering Price--Less than 500 Units
Aggregate Offering Price of Bonds in Trust...... $ 3,326,141
Divided by Number of Units...................... $ 95.03
Plus Sales Charge 4.9% (5.152% of the Aggregate
Offering Price of the Bonds per Unit).......... $ 4.90
Public Offering Price Per Unit(1)............... $ 99.93
Redemption Price Per Unit (exclusive of accrued
interest)......................................... $ 94.58
Sponsor's Initial Repurchase Price Per Unit
(exclusive of accrued interest)................... $ 95.03
Excess of Public Offering Price Per Unit over
Redemption Price Per Unit......................... $ 5.35
Excess of Public Offering Price Per Unit over
Sponsor's Repurchase Price Per Unit............... $ 4.90
Average Maturity of Bonds in the Trust(2)........... 22.3 years
</TABLE>
- ----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
1 of 7
<PAGE>
ESSENTIAL INFORMATION (CONT.)
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMI-ANNUAL
----------- ----------- -----------
<S> <C> <C> <C>
Calculation of Estimated Net Annual
Interest Income Per Unit
Annual Interest Income(3)............ $5.3679 $5.3679 $5.3679
Less Estimated Annual Expense........ $.2427 $.2107 $.1917
----------- ----------- -----------
Estimated Net Annual Interest
Income(4).......................... $5.1252 $5.1572 $5.1762
Daily Rate of Accrual Per Unit........... $.01423 $.01432 $.01437
ESTIMATED CURRENT RETURN(5).............. 5.13% 5.16% 5.18 %
ESTIMATED LONG TERM RETURN(5)............ 5.19% 5.22% 5.24 %
Trustee's Annual Fees(6)................. $1.5652 $1.2452 $1.0552
Date of Deposit.....................................................................................April 26, 1996
Settlement Date........................................................................................May 1, 1996
Mandatory Termination Date....................................See "OTHER INFORMATION" in Part B of this Prospectus
Minimum Value of Each Trust...................................See "OTHER INFORMATION" in Part B of this Prospectus
Sponsor's Annual Evaluation Fee.........................................$0.17 per $1,000 principal amount of Bonds
Estimated Annual Organizational Expenses(7).......................................................$.02914 per Unit
- ----------
</TABLE>
The evaluation time for purpose of sale, purchase or redemption of Units is 4
p.m. Eastern time or as of any earlier closing time on a day on which the New
York Stock Exchange is scheduled in advance to close at such earlier time. (See
"HOW IS THE PUBLIC OFFERING PRICE DETERMINED?" in Part B of this Prospectus.)
(1) Units are offered at the Public Offering Price plus accrued interest from
the preceding Record Date to, but not including, the date of settlement
(normally three business days after purchase). The Date of Deposit of the
Fund has been designated as the First Record Date for all plans of
distribution of the Trust and, accordingly, for Units purchased on the Date
of Deposit, $.07 of accrued interest to the Settlement Date will be added to
the Public Offering Price. (See "WHAT IS ACCRUED INTEREST?" in Part B of
this Prospectus.)
(2) The Average Maturity of Bonds in the Trust is calculated based upon the
stated maturities of the Bonds in the Trust (or, with respect to Bonds for
which funds or securities have been placed in escrow to redeem such Bonds on
a stated call date, based upon such call date). The Average Maturity of
Bonds in the Trust may increase or decrease from time to time as Bonds
mature or are called or sold.
(3) Assumes delivery of all Bonds. (See "COMPOSITION OF TRUSTS" appearing in
Part B of this Prospectus.) Interest income does not include accretion of
original issue discount on "zero coupon" Bonds, Stripped Obligations or
other original issue discount Bonds. (See "RISK FACTORS" in Part B of this
Prospectus.)
(4) The amount and timing of interest distributions from the Trust under the
various plans of distribution are set forth below. It is anticipated that
the amount of interest to be distributed per Unit in each year under each
plan of distribution will initially be substantially equal to the Estimated
Net Annual Interest Income per Unit for that plan. The amount of interest to
be distributed annually per Unit, will generally change as Bonds are
redeemed, mature or are sold or as fees and expenses increase or decrease.
(5) Estimated Long Term Return for the Trust represents the average of the
yields to maturity (or call) of the Bonds in the Trust's portfolio
calculated in accordance with accepted bond practices and adjusted to
reflect a compounding factor, expenses and sales charges. Estimated Current
Return is computed by dividing the Net Annual Interest Income per Unit by
the Public Offering Price, and in contrast to Estimated Long Term Return
does not reflect the amortization of premium or accretion of discount, if
any. For more information see "WHAT ARE ESTIMATED LONG TERM RETURN AND
ESTIMATED CURRENT RETURN?" in Part B of this Prospectus.
(6) Each Trustee annual fee is per $1,000 principal amount of the underlying
Bonds in the Trust for that portion of the Trust that represents a
particular plan of distribution.
(7) The Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs (including costs of preparing the registration
statements, the trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the initial
audit of the Trust portfolio, legal fees and the initial fees and expenses
of the Trustee but not including the expenses incurred in the printing of
preliminary and final prospectuses, and expenses incurred in the preparation
and printing of brochures and other advertising materials and any other
selling expenses) as is common for mutual funds. Total organizational
expenses will be amortized over a five year period. See "WHAT ARE NORMAL
TRUST OPERATING EXPENSES?" in Part B of this Prospectus and "Statement of
Condition." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts.
2 of 7
<PAGE>
INTEREST DISTRIBUTION
Details of interest distributions per Unit of the Trust under the various
plans appear in the following table based upon estimated Net Annual Interest
Income at the Date of Deposit:
<TABLE>
<CAPTION>
NORMAL
DISTRIBUTIONS
1996 1997 PER YEAR
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------- --------------
Record Date*.......................... 6/1 8/1 11/1 2/1 5/1
Distribution Date..................... 6/15 8/15 11/15 2/15 5/15
- ---------------------------------------------------------------------------------------------------------------------------------
Monthly Distribution Plan............. $ .4980(1) $ 5.1252
-------- $.4269 every month --------
Quarterly Distribution Plan........... $ .4980(1) $ .8592(2) $ 1.2888 $ 1.2888 $ 1.2888 $ 5.1572
Semi-Annual Distribution Plan......... $ .4980(1) $ 2.1555(3) $ 2.5866 $ 5.1762
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Record Dates for semi-annual distributions are May 1 and November 1; for
quarterly distributions, they are February 1, May 1, August 1 and November 1.
Record Dates for monthly distributions are the first day of each month.
Distribution Dates under each distribution plan are the fifteenth day of the
month in which the respective Record Date occurred. For additional
information see "WHEN ARE DISTRIBUTIONS MADE TO UNITHOLDERS?" in Part B of
this Prospectus.
(1) The first distribution will be paid to all Unitholders, regardless of the
distribution plan selected. Such distribution may be more or less than a
regular monthly distribution.
(2) The second distribution under the quarterly distribution plan represents a
2-month distribution; subsequent quarterly distributions will be regular
3-month distributions.
(3) The second distribution under the semi-annual distribution plan represents a
5-month distribution; subsequent semi-annual distributions will be regular
6-month distributions.
GEORGIA RISK FACTORS
The financial condition of the State of Georgia is affected by various
national, economic, social and environmental policies and conditions.
Additionally, Constitutional and statutory limitations imposed on the State and
its local governments concerning taxes, bond indebtedness and other matters may
constrain the revenue-generating capacity of the State and its local governments
and, therefore, the ability of the issuers of the Bonds to satisfy their
obligations. Historically, the State has experienced significant revenue
shortfalls.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. Recent widespread flooding in central and southern
Georgia has caused extensive damage and destruction of farmland, private
residences, businesses and local and state government facilities.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations.
All outstanding general obligation bonds of the State are rated "AA+" by
Standard and Poor's and "Aaa" by Moody's.
Further information concerning Georgia risk factors may be obtained upon
written or telephonic request to the Trustee as described in "OTHER INFORMATION
- -- Supplemental Information" appearing in Part B of this Prospectus.
TAX STATUS
For a discussion of the Federal tax status of income earned on Trust Units,
see "WHAT IS THE TAX STATUS OF UNITHOLDERS?" appearing in Part B of this
Prospectus.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under existing
law:
For Georgia income tax purposes, the Trust is not an association taxable
as a corporation, and the income of the Trust will be treated as the income
of the Unitholders. Interest on the Bonds which is exempt from Georgia
income tax when received by the Trust, and which would be exempt from
Georgia income tax if received directly by a Unitholder, will retain its
status as tax-exempt interest when distributed by the Trust and received by
the Unitholders.
If the Trustee disposes of a Bond (whether by sale, exchange, payment on
maturity, retirement or otherwise) or if a Unitholder redeems or sells his
Unit, the Unitholder will recognize gain or loss for Georgia income tax
purposes to the same extent that gain or loss would be recognized for
federal income tax purposes (except in the case of Bonds issued before March
11, 1987 issued with original issue discount owned by the Trust in which
case gain or loss for Georgia income tax purposes may differ from the amount
recognized for federal income tax purposes because original issue discount
on such Bonds may be determined by accruing said original issue
3 of 7
<PAGE>
discount on a ratable basis). Due to the amortization of bond premium and
other basis adjustments required by the Internal Revenue Code, a Unitholder,
under some circumstances, may realize taxable gain when his or her Units are
sold or redeemed for an amount less than or equal to their original cost.
Because obligations or evidences of debt of Georgia, its political
subdivisions and public institutions and bonds issued by the Commonwealth of
Puerto Rico are exempt from the Georgia intangible personal property tax,
the Trust will not be subject to such tax as the result of holding such
obligations, evidences of debt or bonds. But see below regarding intangible
personal property tax legislation.
Amounts paid by the Insurer under an insurance policy or policies issued
to the Trust, if any, with respect to the Bonds in the Trust which represent
maturing interest on defaulted obligations held by the Trustee will be
exempt from State income taxes if, and to the extent as, such interest would
have been so exempt if paid by the issuer of the defaulted obligations
provided that, at the time such policies are purchased, the amounts paid for
such policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the obligations, rather than the insurer,
will pay debt service on the obligations.
We express no opinion regarding whether a Unitholder's ownership of an
interest in the Trust is subject to the Georgia intangible personal property
tax. Although the application of the Georgia intangible personal property
tax to the ownership of the Units by the Unitholders is not clear,
representatives of the Georgia Department of Revenue have in the past
advised us orally that, for purposes of the intangible property tax, the
Department considers a Unitholder's ownership of an interest in the Trust as
a whole to be taxable intangible property separate from any ownership
interest in the underlying tax-exempt Bonds. But see below regarding
intangible personal property tax legislation.
Neither the Bonds nor the Units will be subject to Georgia sales or use
tax.
The Georgia state legislature has recently enacted legislation that
repeals the intangible personal property tax in Georgia. Although such
legislation is effective immediately, lawmakers in Georgia are uncertain as
to whether the tax could be abolished by the General Assembly or whether a
constitutional amendment is necessary. Thus, additional legislation was
approved which enables the Georgia legislature to repeal the intangible tax
if voters approve the measure in the fall. As the effectiveness of the
legislation repealing the tax is uncertain at this time, Unitholders are
advised to consult their tax advisers in this regard.
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Georgia law. Ownership of the Units may result
in collateral Georgia tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of any
such collateral consequences.
4 of 7
<PAGE>
NUVEEN GEORGIA INSURED TRUST 51
(NUVEEN TAX-FREE UNIT TRUST SERIES 860)
SCHEDULE OF INVESTMENTS AT THE DATE OF DEPOSIT, APRIL 26, 1996
<TABLE>
<CAPTION>
Ratings(3) Trustee's
Optional --------------------- Determination
Aggregate Name of Issuer and Title of Issue Represented Redemption Standard of Offering
Principal by Sponsor's Contracts to Purchase Bonds(1) Provisions(2) & Poor's Moody's Price
<C> <C> <S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
$ 500,000 Municipal Electric Authority of Georgia, No Optional Call AAA Aaa $ 495,000
General Power Revenue Bonds, 1993B Series,
5.70% Due 1/1/19.
500,000 City of Atlanta, Georgia, Water and Sewerage 2004 at 102 AAA Aaa 423,155
Revenue Bonds, Series 1993, 4.75% Due 1/1/23.
(Original issue discount bonds delivered on
or about October 21, 1993 at a price of
92.426% of principal amount.)
500,000 The Hospital Authority of Crisp County, No Optional Call AAA Aaa
Georgia, Revenue Certificates (Crisp Regional
Hospital Project), Series 1996,
250M-5.40% Due 7/1/12, 244,703
250M-5.45% Due 7/1/15. 242,743
(General Obligation Bonds.)
500,000 Douglasville-Douglas County Water and Sewer No Optional Call AAA Aaa 495,635
Authority (Georgia), Water and Sewerage
Revenue Bonds, Series 1993, 5.625% Due
6/1/15.
500,000 Development Authority of Fulton County 2006 at 102 AAA Aaa 472,775
(Georgia), Revenue Bonds (Clark Atlanta
University Project), Series 1995, 5.375% Due
1/1/20.
500,000 Macon-Bibb County Hospital Authority, Revenue No Optional Call AAA Aaa 483,490
Anticipation Certificates, Series 1993C (The
Medical Center of Central Georgia), 5.30% Due
8/1/13.
500,000 Commonwealth of Puerto Rico, Public Improvement 2006 at 101 1/2 AAA Aaa 468,640
Bonds of 1996 (General Obligation Bonds.),
5.40% Due 7/1/25.
- ----------- ---------------
$ 3,500,000 $ 3,326,141
- ----------- ---------------
- ----------- ---------------
</TABLE>
- ------------
(1) The Sponsor's contracts to purchase Bonds were entered into during the
period from April 24, 1996 to April 25, 1996. Other information regarding the
Bonds in the Trust on the Date of Deposit is as follows:
<TABLE>
<CAPTION>
ANNUAL
PROFIT INTEREST
COST TO (OR LOSS) INCOME TO BID PRICE
TRUST SPONSOR TO SPONSOR TRUST OF BONDS
---------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
GEORGIA INSURED TRUST 51................ $ 3,317,756 $ 8,385 $ 187,875 $ 3,310,516
</TABLE>
In addition, the difference between the Trustee's determination of Offering
Price and Bid Price (as a percentage of principal amount) is .45%. Neither cost
to Sponsor nor profit (or loss) to Sponsor reflects underwriting profits or
losses received or incurred by the Sponsor through its participation in
underwriting syndicates. The Sponsor did not participate as either the sole
underwriter or as a manager or member of a syndicate that acted as the original
underwriter of any of the Bonds.
(2) The Bonds are first subject to optional redemption in the years, and at
the prices, shown. Unless otherwise indicated, the Bonds, except for Bonds
issued at a substantial original issue discount, are redeemable at declining
prices (but not below par value) in subsequent years. Original issue discount
bonds, including zero coupon bonds, are generally redeemable at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus, if applicable, some premium, the amount of which will decline
in subsequent years. The Bonds may also be subject to sinking fund redemption
without premium prior to the dates shown. Certain Bonds may be subject to
redemption without premium prior to the date shown pursuant to special or
mandatory call provisions specified in the instruments setting forth the terms
and provisions of such Bonds. See "COMPOSITION OF TRUSTS", "WHAT IS THE TAX
STATUS OF UNITHOLDERS?" and "RISK FACTORS" in Part B of this Prospectus.
(3) All the Bonds in the Insured Trusts, as insured by the Insurer, are
rated AAA by Standard & Poor's and Aaa by Moody's. In addition, Units of the
Trust are rated "AAA" by Standard & Poor's as a result of such insurance. The
"AAA" rating on the Units will be in effect for a period of thirteen months from
the Date of Deposit and will, unless renewed, terminate at the end of the
period. The insurance obtained by the Trust guarantees the payment of interest
and principal on the Bonds when due but does not cover certain market risks
associated with fixed income securities such as accelerated payments, premiums
payable on mandatory redemptions or interest rate risks. (See "WHY AND HOW ARE
THE BONDS INSURED?" in Part B of this Prospectus and "Description of Ratings" in
the Information Supplement.)
5 of 7
<PAGE>
Statement of Condition
NUVEEN GEORGIA INSURED TRUST 51
(Nuveen Tax-Free Unit Trust, Series 860)
AS OF APRIL 26, 1996
<TABLE>
<S> <C>
TRUST PROPERTY
Sponsor's contracts to purchase Tax-Free Bonds,
backed by an irrevocable letter of
credit(1)(2).................................... $ 3,326,141
Accrued interest to April 26, 1996 on underlying
Bonds(1)........................................ 62,391
Organizational costs(3)........................... 5,100
--------------
Total................................. $ 3,393,632
--------------
--------------
LIABILITIES AND INTEREST OF UNITHOLDERS
LIABILITIES:
Accrued interest to April 26, 1996 on
underlying Bonds(4).......................... $ 62,391
Accrued organizational costs(3)............... 5,100
--------------
Total................................. $ 67,491
--------------
--------------
INTEREST OF UNITHOLDERS:
Units of fractional undivided interest
outstanding (35,000)
Cost to investors(5)........................ $ 3,497,504
Less: Gross underwriting commission(6).... (171,363)
--------------
Net amount applicable to investors............ $ 3,326,141
--------------
Total................................. $ 3,393,632
--------------
--------------
</TABLE>
- ------------
(1) Represented by contracts to purchase Tax-Exempt Bonds which include "when
issued" or "regular way" or "delayed delivery" contracts for which an
irrevocable letter of credit issued by a major commercial bank has been
deposited with the Trustee on the Date of Deposit. The amount of such letter
of credit and any cash deposited exceeds the amount necessary for the
purchase of the Bonds plus accrued interest to the Date of Deposit. At the
Date of Deposit, Bonds may have been delivered to the Sponsor pursuant to
certain of these contracts; the Sponsor has assigned to the Trustee all of
its rights, title and interest in and to such Bonds.
(2) Aggregate value (at offering prices) as of the Date of Deposit of the Bonds
listed under "Schedule of Investments" herein, and their aggregate cost to
the Trust are the same. Such offering prices were determined by Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc., as of the close of
business on the business day prior to the Date of Deposit. (See "HOW WAS THE
PRICE OF THE BONDS DETERMINED AT THE DATE OF DEPOSIT?" in Part B of this
Prospectus.) Insurance coverage providing for the timely payment, when due,
of all principal of and interest on the Bonds in an Insured Trust has been
obtained by the Sponsor or by the issuers of such Bonds. Such insurance does
not guarantee the market value of the Bonds or the value of the Units. Both
the bid and the offering prices of the underlying Bonds and of the Units may
include value attributable to such policies of insurance.
(3) The Trust (and therefore Unitholders) will bear all or a portion of its
estimated organizational costs which will be deferred and amortized over
five years from the Date of Deposit.
(4) Representing, as set forth in "WHAT IS ACCRUED INTEREST?" in Part B of this
Prospectus, advancement by the Trustee of an amount equal to the accrued
Bond interest as of the Date of Deposit.
(5) Aggregate Public Offering Price (exclusive of accrued interest) computed as
set forth under "HOW IS THE PUBLIC OFFERING PRICE DETERMINED?" in Part B of
this Prospectus.
(6) The gross underwriting commission of 4.90% of the Public Offering Price has
been calculated on the assumption that the Units sold are not subject to a
reduction of sales charge for quantity purchases. In single transactions
involving 500 Units or more, the sales charge is reduced. (See "HOW IS THE
PUBLIC OFFERING PRICE DETERMINED?" in Part B of this Prospectus.)
6 of 7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF JOHN NUVEEN & CO. INCORPORATED AND UNITHOLDERS OF
GEORGIA INSURED TRUST 51:
We have audited the accompanying statement of condition and the schedule of
investments at date of deposit (included in Part A of this Prospectus) of
Georgia Insured Trust 51 (contained in Nuveen Tax-Free Unit Trust, Series 860),
as of April 26, 1996. These financial statements are the responsibility of the
Sponsor. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of the irrevocable letter of credit arrangement for the purchase of
securities, described in Note (1) to the statement of condition, by
correspondence with the Trustee. An audit also includes assessing the accounting
principles used and significant estimates made by the Sponsor, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the statement of condition and the schedule of investments
at date of deposit referred to above present fairly, in all material respects,
the financial position of Georgia Insured Trust 51 as of April 26, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
April 26, 1996.
7 of 7
<PAGE>
APRIL 26, 1996
SUBJECT TO COMPLETION
A
NUVEEN NUVEEN MASSACHUSETTS INSURED TRUST 135
(NUVEEN TAX-FREE UNIT TRUSTS SERIES 860)
CUSIP NUMBERS:
Monthly: 670947 647
Quarterly: 670947 654
Semi-Annually: 670947 662
PROSPECTUS--PART A (SPECIFIC TERMS) -- APRIL 26, 1996
THIS PART A OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY THE
PART B OF
THE NUVEEN TAX-EXEMPT UNIT TRUSTS PROSPECTUS, TO WHICH SUCH REFERENCE HEREIN
APPLIES. ANY REFERENCE TO
"NUVEEN TAX-EXEMPT UNIT TRUSTS" IN PART B SHALL BE AMENDED TO READ "NUVEEN
TAX-FREE UNIT TRUSTS."
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
Massachusetts Insured Trust 135 (the "Trust") consists of a portfolio of
interest-bearing obligations issued by or on behalf of the State of
Massachusetts, certain United States Territories or authorities and political
subdivisions thereof which, in the opinion of recognized bond counsel to the
issuing authorities, provide income which is exempt from Federal income tax and
Massachusetts income tax, to the extent indicated below.
The objectives of the Trust are income exempt from Federal and state income
taxes, and conservation of capital. The objectives are, of course, dependent
upon the continuing ability of the issuers, obligors and/or insurers to meet
their respective obligations.
The Portfolio of the Trust consists of 6 obligations issued by entities
located in Massachusetts and one obligation issued by an entity located in the
Territory of Puerto Rico. The Bonds in the Trust are either general obligations
of the governmental entity issuing them and are backed by the taxing power
thereof or are payable as to principal and interest from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. The sources of payment for the Bonds are divided as follows:
<TABLE>
<CAPTION>
NUMBER OF PORTFOLIO
ISSUES PURPOSE OF ISSUE PERCENTAGE
--------------- ----------------------------------------------------
<C> <S> <C>
3 General Obligations 43 %
2 College and University Revenue 29
1 Health Care Facility Revenue 14
1 Water and/or Sewer Revenue 14
</TABLE>
Approximately 14.3% of the aggregate principal amount of the Bonds in the
Trust (accounting for approximately 12.8% of the aggregate offering price of the
Bonds) are original issue discount bonds. See "RISK FACTORS" in Part B of this
Prospectus for a discussion of the characteristics of such obligations and of
the risks associated therewith.
All of the Bonds in the Trust are covered by policies of insurance obtained
from the MBIA Insurance Corporation guaranteeing payment of principal and
interest when due. As a result of such insurance, the Bonds in the Trust have
received a rating of "Aaa" by Moody's and both the Bonds in the Trust and the
Units of the Trust have received a rating of "AAA" by Standard & Poor's.
The Trust is considered to be concentrated in Bonds of College and
University Revenue Issuers whose revenues are subject to certain risks including
declines in "college age" individuals and the possible inability to raise
tuition and fees. For a discussion of the risks associated with investments in
the bonds of various issuers, see "RISK FACTORS" in Part B of this Prospectus.
ESSENTIAL INFORMATION
REGARDING THE NUVEEN MASSACHUSETTS INSURED TRUST 135
ON THE BUSINESS DAY PRIOR TO THE DATE OF DEPOSIT, APRIL 25, 1996
Sponsor and Evaluator.......... John Nuveen & Co. Incorporated
Trustee........................ The Chase Manhattan Bank, N.A.
------------------------------------------------
The income, expense and distribution data set forth below have been calculated
for Unitholders receiving monthly, quarterly or semi-annual distribution
options.
<TABLE>
<S> <C>
Principal Amount of Bonds in Trust.................. $ 3,500,000
Number of Units..................................... 35,000
Fractional Undivided Interest in Trust Per Unit..... 1/35,000
Public Offering Price--Less than 500 Units
Aggregate Offering Price of Bonds in Trust...... $ 3,307,695
Divided by Number of Units...................... $ 94.51
Plus Sales Charge 4.9% (5.152% of the Aggregate
Offering Price of the Bonds per Unit).......... $ 4.87
Public Offering Price Per Unit(1)............... $ 99.38
Redemption Price Per Unit (exclusive of accrued
interest)......................................... $ 94.05
Sponsor's Initial Repurchase Price Per Unit
(exclusive of accrued interest)................... $ 94.51
Excess of Public Offering Price Per Unit over
Redemption Price Per Unit......................... $ 5.33
Excess of Public Offering Price Per Unit over
Sponsor's Repurchase Price Per Unit............... $ 4.87
Average Maturity of Bonds in the Trust(2)........... 24.1 years
</TABLE>
- ----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
1 of 7
<PAGE>
ESSENTIAL INFORMATION (CONT.)
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMI-ANNUAL
----------- ----------- -----------
<S> <C> <C> <C>
Calculation of Estimated Net Annual
Interest Income Per Unit
Annual Interest Income(3)............ $5.4143 $5.4143 $5.4143
Less Estimated Annual Expense........ $.2433 $.2113 $.1923
----------- ----------- -----------
Estimated Net Annual Interest
Income(4).......................... $5.1710 $5.2030 $5.2220
Daily Rate of Accrual Per Unit........... $.01436 $.01445 $.01450
ESTIMATED CURRENT RETURN(5).............. 5.20% 5.24% 5.25 %
ESTIMATED LONG TERM RETURN(5)............ 5.28% 5.31% 5.33 %
Trustee's Annual Fees(6)................. $1.5546 $1.2346 $1.0446
Date of Deposit.....................................................................................April 26, 1996
Settlement Date........................................................................................May 1, 1996
Mandatory Termination Date....................................See "OTHER INFORMATION" in Part B of this Prospectus
Minimum Value of Each Trust...................................See "OTHER INFORMATION" in Part B of this Prospectus
Sponsor's Annual Evaluation Fee.........................................$0.17 per $1,000 principal amount of Bonds
Estimated Annual Organizational Expenses(7).......................................................$.03086 per Unit
- ----------
</TABLE>
The evaluation time for purpose of sale, purchase or redemption of Units is 4
p.m. Eastern time or as of any earlier closing time on a day on which the New
York Stock Exchange is scheduled in advance to close at such earlier time. (See
"HOW IS THE PUBLIC OFFERING PRICE DETERMINED?" in Part B of this Prospectus.)
(1) Units are offered at the Public Offering Price plus accrued interest from
the preceding Record Date to, but not including, the date of settlement
(normally three business days after purchase). The Date of Deposit of the
Fund has been designated as the First Record Date for all plans of
distribution of the Trust and, accordingly, for Units purchased on the Date
of Deposit, $.07 of accrued interest to the Settlement Date will be added to
the Public Offering Price. (See "WHAT IS ACCRUED INTEREST?" in Part B of
this Prospectus.)
(2) The Average Maturity of Bonds in the Trust is calculated based upon the
stated maturities of the Bonds in the Trust (or, with respect to Bonds for
which funds or securities have been placed in escrow to redeem such Bonds on
a stated call date, based upon such call date). The Average Maturity of
Bonds in the Trust may increase or decrease from time to time as Bonds
mature or are called or sold.
(3) Assumes delivery of all Bonds. (See "COMPOSITION OF TRUSTS" appearing in
Part B of this Prospectus.) Interest income does not include accretion of
original issue discount on "zero coupon" Bonds, Stripped Obligations or
other original issue discount Bonds. (See "RISK FACTORS" in Part B of this
Prospectus.)
(4) The amount and timing of interest distributions from the Trust under the
various plans of distribution are set forth below. It is anticipated that
the amount of interest to be distributed per Unit in each year under each
plan of distribution will initially be substantially equal to the Estimated
Net Annual Interest Income per Unit for that plan. The amount of interest to
be distributed annually per Unit, will generally change as Bonds are
redeemed, mature or are sold or as fees and expenses increase or decrease.
(5) Estimated Long Term Return for the Trust represents the average of the
yields to maturity (or call) of the Bonds in the Trust's portfolio
calculated in accordance with accepted bond practices and adjusted to
reflect a compounding factor, expenses and sales charges. Estimated Current
Return is computed by dividing the Net Annual Interest Income per Unit by
the Public Offering Price, and in contrast to Estimated Long Term Return
does not reflect the amortization of premium or accretion of discount, if
any. For more information see "WHAT ARE ESTIMATED LONG TERM RETURN AND
ESTIMATED CURRENT RETURN?" in Part B of this Prospectus.
(6) Each Trustee annual fee is per $1,000 principal amount of the underlying
Bonds in the Trust for that portion of the Trust that represents a
particular plan of distribution.
(7) The Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs (including costs of preparing the registration
statements, the trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the initial
audit of the Trust portfolio, legal fees and the initial fees and expenses
of the Trustee but not including the expenses incurred in the printing of
preliminary and final prospectuses, and expenses incurred in the preparation
and printing of brochures and other advertising materials and any other
selling expenses) as is common for mutual funds. Total organizational
expenses will be amortized over a five year period. See "WHAT ARE NORMAL
TRUST OPERATING EXPENSES?" in Part B of this Prospectus and "Statement of
Condition." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts.
2 of 7
<PAGE>
INTEREST DISTRIBUTION
Details of interest distributions per Unit of the Trust under the various
plans appear in the following table based upon estimated Net Annual Interest
Income at the Date of Deposit:
<TABLE>
<CAPTION>
NORMAL
DISTRIBUTIONS
1996 1997 PER YEAR
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------- --------------
Record Date*.......................... 6/1 8/1 11/1 2/1 5/1
Distribution Date..................... 6/15 8/15 11/15 2/15 5/15
- ---------------------------------------------------------------------------------------------------------------------------------
Monthly Distribution Plan............. $ .5026(1) $ 5.1710
--------$.4308 every month--------
Quarterly Distribution Plan........... $ .5026(1) $ .8670(2) $ 1.3005 $ 1.3005 $ 1.3005 $ 5.2030
Semi-Annual Distribution Plan......... $ .5026(1) $ 2.1750(3) $ 2.6100 $ 5.2220
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Record Dates for semi-annual distributions are May 1 and November 1; for
quarterly distributions, they are February 1, May 1, August 1 and November 1.
Record Dates for monthly distributions are the first day of each month.
Distribution Dates under each distribution plan are the fifteenth day of the
month in which the respective Record Date occurred. For additional
information see "WHEN ARE DISTRIBUTIONS MADE TO UNITHOLDERS?" in Part B of
this Prospectus.
(1) The first distribution will be paid to all Unitholders, regardless of the
distribution plan selected. Such distribution may be more or less than a
regular monthly distribution.
(2) The second distribution under the quarterly distribution plan represents a
2-month distribution; subsequent quarterly distributions will be regular
3-month distributions.
(3) The second distribution under the semi-annual distribution plan represents a
5-month distribution; subsequent semi-annual distributions will be regular
6-month distributions.
MASSACHUSETTS RISK FACTORS
The financial condition of the Commonwealth of Massachusetts is affected by
various national, economic, social and environmental policies and conditions.
Additionally, limitations imposed by statute and voter initiative upon the
Commonwealth and its local governments concerning taxes, bond indebtedness and
other matters may constrain the revenue-generating capacity of the Commonwealth
and its local governments and, therefore, the ability of the issuers of the
Bonds to satisfy their obligations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. The employment in the Commonwealth has been and
continues to be significantly and adversely affected by reductions in federal
government spending on defense-related industries. The Commonwealth has many
material future liabilities, including an underfunded retirement system and
Medicaid expenditures.
The Commonwealth is a party to numerous lawsuits in which an adverse final
decision could materially affect the Commonwealth's governmental operations and
consequently its ability to pay debt service on its obligations.
In recent years, the Commonwealth and certain of its public bodies and
municipalities have faced serious financial difficulties which have affected the
credit standing and borrowing abilities of Massachusetts and its respective
entities and may have contributed to higher interest rates on debt obligations.
Standard and Poor's currently rates the Commonwealth's uninsured general
obligation bonds at A+, while Moody's rates these obligations at A1.
Further information concerning Massachusetts risk factors may be obtained
upon written or telephonic request to the Trustee as described in "OTHER
INFORMATION -- Supplemental Information" appearing in Part B of this Prospectus.
TAX STATUS--MASSACHUSETTS INSURED TRUST
For a discussion of the Federal tax status of income earned on Trust Units,
see "WHAT IS THE TAX STATUS OF UNITHOLDERS?" appearing in Part B of this
Prospectus.
In the opinion of Edwards & Angell, special Massachusetts counsel to the
Trust, based on rulings by the Commissioner of Revenue and under existing law:
For Massachusetts income tax purposes, each Trust will be treated as a
corporate trust under Section 8 of Chapter 62 of the Massachusetts General Laws
("M.G.L.") and not as a grantor trust under Section 10(e) of M.G.L. Chapter 62.
The Trust will not be held to be engaging in business in Massachusetts
within the meaning of said Section 8 and will, therefore, not be subject to
Massachusetts income tax.
3 of 7
<PAGE>
Unitholders who are subject to Massachusetts income taxation under M.G.L.
Chapter 62 will not be required to include their respective shares of the
earnings of or distributions from the Trust in their Massachusetts gross income
to the extent that such earnings or distributions represent tax-exempt interest
excludable from gross income for Federal income tax purposes received by the
Trust on obligations issued by Massachusetts, its counties, municipalities,
authorities, political subdivisions or instrumentalities or by Puerto Rico, the
Virgin Islands, Guam, the Northern Mariana Islands or other possessions of the
United States within the meaning of Section 103(c) of the Internal Revenue Code
of 1986, as amended ("Massachusetts Obligations").
Unitholders who are subject to Massachusetts income taxation under M.G.L.
Chapter 62 will not be required to include their respective shares of the
earnings of or distributions from the Trust in their Massachusetts gross income
to the extent that such earnings or distributions are derived from the proceeds
of insurance obtained by the Sponsor of the Trust or by the issuer or
underwriter of an obligation held by the Trust that represent maturing interest
on defaulted obligations held by the Trustee, if and to the same extent that
such earnings or distributions would have been excludable from the gross income
of such Unitholders if derived from interest paid by the issuer of the defaulted
obligation.
Unitholders which are corporations subject to taxation under M.G.L. Chapter
63 will be required to include their respective shares of the earnings of or
distributions from the Trust in their Massachusetts gross income to the extent
that such earnings or distributions represent interest from bonds, notes or
indebtedness of any state, including Massachusetts, except for interest which is
specifically exempted from such tax by the acts authorizing issuance of said
Massachusetts Obligations.
The Trust's capital gains and/or capital losses which are includable in the
Federal gross income of Unitholders who are subject to Massachusetts income
taxation under M.G.L. Chapter 62, or Unitholders which are corporations subject
to Massachusetts taxation under M.G.L. Chapter 63 will be included as capital
gains and/or losses in the Unitholders' Massachusetts gross income, except for
capital gain which is specifically exempted from taxation under such Chapters by
the acts authorizing issuance of said Massachusetts Obligations.
Unitholders which are corporations subject to tax under M.G.L. Chapter 63
and which are tangible property corporations will not be required to include the
Units when determining the value of their tangible property. Unitholders which
are intangible property corporations will be required to include the Units when
determining their net worth.
Gains or losses realized on sales or redemptions of Units by Unitholders who
are subject to Massachusetts income taxation under M.G.L. Chapter 62, or
Unitholders which are corporations subject to Massachusetts income taxation
under M.G.L. Chapter 63, will be includable in their Massachusetts gross income.
In determining such gain or loss Unitholders will, to the same extent required
for Federal tax purposes, have to adjust their tax bases for their Units for
accrued interest received, if any, on Massachusetts Obligations delivered to the
Trustee after the Unitholders pay for their Units, for amortization of premiums,
if any, on Massachusetts Obligations held by the Trust, and for accrued original
issue discount with respect to each Massachusetts Obligation which, at the time
the Massachusetts Obligation was issued, had original issue discount.
The Units of the Trust are not subject to any property tax levied by
Massachusetts or any political subdivision thereof, nor to any income tax levied
by any such political subdivision. They are includable in the gross estate of a
deceased holder who is a resident of Massachusetts for purposes of the
Massachusetts Estate Tax.
4 of 7
<PAGE>
NUVEEN MASSACHUSETTS INSURED TRUST 135
(NUVEEN TAX-FREE UNIT TRUST SERIES 860)
SCHEDULE OF INVESTMENTS AT THE DATE OF DEPOSIT, APRIL 26, 1996
<TABLE>
<CAPTION>
Ratings(3) Trustee's
Optional --------------------- Determination
Aggregate Name of Issuer and Title of Issue Represented Redemption Standard of Offering
Principal by Sponsor's Contracts to Purchase Bonds(1) Provisions(2) & Poor's Moody's Price
<C> <C> <S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
$ 500,000 Massachusetts Bay Transportation Authority, 2005 at 102 AAA Aaa $ 493,830
General Transportation System Bonds, 1995
Series A, 5.75% Due 3/1/18. (General
Obligation Bonds.)
500,000 Massachusetts Health and Educational Facilities 2004 at 102 AAA Aaa 487,460
Authority, Revenue Bonds, The North Shore
Medical Center Issue, Series A, 5.625% Due
7/1/14.
500,000 Massachusetts Health and Educational Facilities 2006 at 102 AAA Aaa 489,435
Authority, Revenue Bonds, Suffolk University
Issue, Series C, 5.75% Due 7/1/26.
500,000 Massachusetts Industrial Finance Agency Revenue 2008 at 102 AAA Aaa 467,745
Bonds, Phillips Academy Issue, Series 1993,
5.375% Due 9/1/23.
500,000 Massachusetts Water Resources Authority, 2005 at 102 AAA Aaa 424,510
General Revenue Bonds, 1995 Series B, 4.75%
Due 12/1/21. (Original issue discount bonds
delivered on or about January 4, 1996 at a
price of 92.294% of principal amount.)
500,000 Town of Franklin, Massachusetts, General 2005 at 102 AAA Aaa 476,075
Obligation Bonds, 5.25% Due 11/15/12.
500,000 Commonwealth of Puerto Rico, Public Improvement 2006 at 101 1/2 AAA Aaa 468,640
Bonds of 1996 (General Obligation Bonds.),
5.40% Due 7/1/25.
- ----------- ---------------
$ 3,500,000 $ 3,307,695
- ----------- ---------------
- ----------- ---------------
</TABLE>
- ------------
(1) The Sponsor's contracts to purchase Bonds were entered into on April 24,
1996. Other information regarding the Bonds in the Trust on the Date of Deposit
is as follows:
<TABLE>
<CAPTION>
ANNUAL
PROFIT INTEREST
COST TO (OR LOSS) INCOME TO BID PRICE
TRUST SPONSOR TO SPONSOR TRUST OF BONDS
---------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
MASSACHUSETTS INSURED TRUST 135......... $ 3,296,745 $ 10,950 $ 189,500 $ 3,291,445
</TABLE>
In addition, the difference between the Trustee's determination of Offering
Price and Bid Price (as a percentage of principal amount) is .46%. Neither cost
to Sponsor nor profit (or loss) to Sponsor reflects underwriting profits or
losses received or incurred by the Sponsor through its participation in
underwriting syndicates. The Sponsor did not participate as either the sole
underwriter or as a manager or member of a syndicate that acted as the original
underwriter of any of the Bonds.
(2) The Bonds are first subject to optional redemption in the years, and at
the prices, shown. Unless otherwise indicated, the Bonds, except for Bonds
issued at a substantial original issue discount, are redeemable at declining
prices (but not below par value) in subsequent years. Original issue discount
bonds, including zero coupon bonds, are generally redeemable at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus, if applicable, some premium, the amount of which will decline
in subsequent years. The Bonds may also be subject to sinking fund redemption
without premium prior to the dates shown. Certain Bonds may be subject to
redemption without premium prior to the date shown pursuant to special or
mandatory call provisions specified in the instruments setting forth the terms
and provisions of such Bonds. See "COMPOSITION OF TRUSTS", "WHAT IS THE TAX
STATUS OF UNITHOLDERS?" and "RISK FACTORS" in Part B of this Prospectus.
(3) All the Bonds in the Insured Trusts, as insured by the Insurer, are
rated AAA by Standard & Poor's and Aaa by Moody's. In addition, Units of the
Trust are rated "AAA" by Standard & Poor's as a result of such insurance. The
"AAA" rating on the Units will be in effect for a period of thirteen months from
the Date of Deposit and will, unless renewed, terminate at the end of the
period. The insurance obtained by the Trust guarantees the payment of interest
and principal on the Bonds when due but does not cover certain market risks
associated with fixed income securities such as accelerated payments, premiums
payable on mandatory redemptions or interest rate risks. (See "WHY AND HOW ARE
THE BONDS INSURED?" in Part B of this Prospectus and "Description of Ratings" in
the Information Supplement.)
5 of 7
<PAGE>
Statement of Condition
NUVEEN MASSACHUSETTS INSURED TRUST 135
(Nuveen Tax-Free Unit Trust, Series 860)
AS OF APRIL 26, 1996
<TABLE>
<S> <C>
TRUST PROPERTY
Sponsor's contracts to purchase Tax-Free Bonds,
backed by an irrevocable letter of
credit(1)(2).................................... $ 3,307,695
Accrued interest to April 26, 1996 on underlying
Bonds(1)........................................ 51,806
Organizational costs(3)........................... 5,400
--------------
Total................................. $ 3,364,901
--------------
--------------
LIABILITIES AND INTEREST OF UNITHOLDERS
LIABILITIES:
Accrued interest to April 26, 1996 on
underlying Bonds(4).......................... $ 51,806
Accrued organizational costs(3)............... 5,400
--------------
Total................................. $ 57,206
--------------
--------------
INTEREST OF UNITHOLDERS:
Units of fractional undivided interest
outstanding (35,000)
Cost to investors(5)........................ $ 3,478,107
Less: Gross underwriting commission(6).... (170,412)
--------------
Net amount applicable to investors............ $ 3,307,695
--------------
Total................................. $ 3,364,901
--------------
--------------
</TABLE>
- ------------
(1) Represented by contracts to purchase Tax-Exempt Bonds which include "when
issued" or "regular way" or "delayed delivery" contracts for which an
irrevocable letter of credit issued by a major commercial bank has been
deposited with the Trustee on the Date of Deposit. The amount of such letter
of credit and any cash deposited exceeds the amount necessary for the
purchase of the Bonds plus accrued interest to the Date of Deposit. At the
Date of Deposit, Bonds may have been delivered to the Sponsor pursuant to
certain of these contracts; the Sponsor has assigned to the Trustee all of
its rights, title and interest in and to such Bonds.
(2) Aggregate value (at offering prices) as of the Date of Deposit of the Bonds
listed under "Schedule of Investments" herein, and their aggregate cost to
the Trust are the same. Such offering prices were determined by Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc., as of the close of
business on the business day prior to the Date of Deposit. (See "HOW WAS THE
PRICE OF THE BONDS DETERMINED AT THE DATE OF DEPOSIT?" in Part B of this
Prospectus.) Insurance coverage providing for the timely payment, when due,
of all principal of and interest on the Bonds in an Insured Trust has been
obtained by the Sponsor or by the issuers of such Bonds. Such insurance does
not guarantee the market value of the Bonds or the value of the Units. Both
the bid and the offering prices of the underlying Bonds and of the Units may
include value attributable to such policies of insurance.
(3) The Trust (and therefore Unitholders) will bear all or a portion of its
estimated organizational costs which will be deferred and amortized over
five years from the Date of Deposit.
(4) Representing, as set forth in "WHAT IS ACCRUED INTEREST?" in Part B of this
Prospectus, advancement by the Trustee of an amount equal to the accrued
Bond interest as of the Date of Deposit.
(5) Aggregate Public Offering Price (exclusive of accrued interest) computed as
set forth under "HOW IS THE PUBLIC OFFERING PRICE DETERMINED?" in Part B of
this Prospectus.
(6) The gross underwriting commission of 4.90% of the Public Offering Price has
been calculated on the assumption that the Units sold are not subject to a
reduction of sales charge for quantity purchases. In single transactions
involving 500 Units or more, the sales charge is reduced. (See "HOW IS THE
PUBLIC OFFERING PRICE DETERMINED?" in Part B of this Prospectus.)
6 of 7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF JOHN NUVEEN & CO. INCORPORATED AND UNITHOLDERS OF
MASSACHUSETTS INSURED TRUST 135:
We have audited the accompanying statement of condition and the schedule of
investments at date of deposit (included in Part A of this Prospectus) of
Massachusetts Insured Trust 135 (contained in Nuveen Tax-Free Unit Trust, Series
860), as of April 26, 1996. These financial statements are the responsibility of
the Sponsor. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of the irrevocable letter of credit arrangement for the purchase of
securities, described in Note (1) to the statement of condition, by
correspondence with the Trustee. An audit also includes assessing the accounting
principles used and significant estimates made by the Sponsor, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the statement of condition and the schedule of investments
at date of deposit referred to above present fairly, in all material respects,
the financial position of Massachusetts Insured Trust 135 as of April 26, 1996,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
April 26, 1996.
7 of 7
<PAGE>
APRIL 26, 1996
SUBJECT TO COMPLETION
A
NUVEEN NUVEEN MICHIGAN INSURED TRUST 65
(NUVEEN TAX-FREE UNIT TRUSTS SERIES 860)
CUSIP NUMBERS:
Monthly: 67095E 468
Quarterly: 67095E 476
Semi-Annually: 67095E 484
PROSPECTUS--PART A (SPECIFIC TERMS) -- APRIL 26, 1996
THIS PART A OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY THE
PART B OF
THE NUVEEN TAX-EXEMPT UNIT TRUSTS PROSPECTUS, TO WHICH SUCH REFERENCE HEREIN
APPLIES. ANY REFERENCE TO
"NUVEEN TAX-EXEMPT UNIT TRUSTS" IN PART B SHALL BE AMENDED TO READ "NUVEEN
TAX-FREE UNIT TRUSTS."
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
Michigan Insured Trust 65 (the "Trust") consists of a portfolio of
interest-bearing obligations issued by or on behalf of the State of Michigan,
certain United States Territories or authorities and political subdivisions
thereof which, in the opinion of recognized bond counsel to the issuing
authorities, provide income which is exempt from Federal income tax and Michigan
income, intangible and local taxes, to the extent indicated below.
The objectives of the Trust are income exempt from Federal income tax, state
income taxes and state intangible taxes, and conservation of capital. The
objectives are, of course, dependent upon the continuing ability of the issuers,
obligors and/or insurers to meet their respective obligations.
The Portfolio of the Trust consists of 8 obligations issued by entities
located in Michigan and one obligation issued by an entity located in the
Territory of Puerto Rico. The Bonds in the Trust are either general obligations
of the governmental entity issuing them and are backed by the taxing power
thereof or are payable as to principal and interest from the income of a
specific project or authority and are not supported by the issuer's power to
levy taxes. The sources of payment for the Bonds are divided as follows:
<TABLE>
<CAPTION>
NUMBER OF PORTFOLIO
ISSUES PURPOSE OF ISSUE PERCENTAGE
--------------- ----------------------------------------------------
<C> <S> <C>
4 General Obligations 50 %
3 Health Care Facility Revenue 33
1 Water and/or Sewer Revenue 14
1 College and University Revenue 3
</TABLE>
Approximately 18.4% of the aggregate principal amount of the Bonds in the
Trust (accounting for approximately 17.5% of the aggregate offering price of the
Bonds) are original issue discount bonds. See "RISK FACTORS" in Part B of this
Prospectus for a discussion of the characteristics of such obligations and of
the risks associated therewith.
All of the Bonds in the Trust are covered by policies of insurance obtained
from the MBIA Insurance Corporation guaranteeing payment of principal and
interest when due. As a result of such insurance, the Bonds in the Trust have
received a rating of "Aaa" by Moody's and both the Bonds in the Trust and the
Units of the Trust have received a rating of "AAA" by Standard & Poor's.
The Trust is considered to be concentrated in Bonds of Health Care Facility
Revenue Issuers whose revenues are subject to certain risks including increased
governmental regulation, fluctuating occupancy levels and increased competition.
For a discussion of the risks associated with investments in the bonds of
various issuers, see "RISK FACTORS" in Part B of this Prospectus.
ESSENTIAL INFORMATION
REGARDING THE NUVEEN MICHIGAN INSURED TRUST 65
ON THE BUSINESS DAY PRIOR TO THE DATE OF DEPOSIT, APRIL 25, 1996
Sponsor and Evaluator.......... John Nuveen & Co. Incorporated
Trustee........................ The Chase Manhattan Bank, N.A.
------------------------------------------------
The income, expense and distribution data set forth below have been calculated
for Unitholders receiving monthly, quarterly or semi-annual distribution
options.
<TABLE>
<S> <C>
Principal Amount of Bonds in Trust.................. $ 3,500,000
Number of Units..................................... 35,000
Fractional Undivided Interest in Trust Per Unit..... 1/35,000
Public Offering Price--Less than 500 Units
Aggregate Offering Price of Bonds in Trust...... $ 3,320,903
Divided by Number of Units...................... $ 94.88
Plus Sales Charge 4.9% (5.152% of the Aggregate
Offering Price of the Bonds per Unit).......... $ 4.89
Public Offering Price Per Unit(1)............... $ 99.77
Redemption Price Per Unit (exclusive of accrued
interest)......................................... $ 94.39
Sponsor's Initial Repurchase Price Per Unit
(exclusive of accrued interest)................... $ 94.88
Excess of Public Offering Price Per Unit over
Redemption Price Per Unit......................... $ 5.38
Excess of Public Offering Price Per Unit over
Sponsor's Repurchase Price Per Unit............... $ 4.89
Average Maturity of Bonds in the Trust(2)........... 26.7 years
</TABLE>
- ----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
1 of 7
<PAGE>
ESSENTIAL INFORMATION (CONT.)
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMI-ANNUAL
----------- ----------- -----------
<S> <C> <C> <C>
Calculation of Estimated Net Annual
Interest Income Per Unit
Annual Interest Income(3)............ $5.5186 $5.5186 $5.5186
Less Estimated Annual Expense........ $.2393 $.2073 $.1883
----------- ----------- -----------
Estimated Net Annual Interest
Income(4).......................... $5.2793 $5.3113 $5.3303
Daily Rate of Accrual Per Unit........... $.01466 $.01475 $.01480
ESTIMATED CURRENT RETURN(5).............. 5.29% 5.32% 5.34 %
ESTIMATED LONG TERM RETURN(5)............ 5.35% 5.39% 5.41 %
Trustee's Annual Fees(6)................. $1.5255 $1.2055 $1.0155
Date of Deposit.....................................................................................April 26, 1996
Settlement Date........................................................................................May 1, 1996
Mandatory Termination Date....................................See "OTHER INFORMATION" in Part B of this Prospectus
Minimum Value of Each Trust...................................See "OTHER INFORMATION" in Part B of this Prospectus
Sponsor's Annual Evaluation Fee.........................................$0.17 per $1,000 principal amount of Bonds
Estimated Annual Organizational Expenses(7).......................................................$.02971 per Unit
- ----------
</TABLE>
The evaluation time for purpose of sale, purchase or redemption of Units is 4
p.m. Eastern time or as of any earlier closing time on a day on which the New
York Stock Exchange is scheduled in advance to close at such earlier time. (See
"HOW IS THE PUBLIC OFFERING PRICE DETERMINED?" in Part B of this Prospectus.)
(1) Units are offered at the Public Offering Price plus accrued interest from
the preceding Record Date to, but not including, the date of settlement
(normally three business days after purchase). The Date of Deposit of the
Fund has been designated as the First Record Date for all plans of
distribution of the Trust and, accordingly, for Units purchased on the Date
of Deposit, $.07 of accrued interest to the Settlement Date will be added to
the Public Offering Price. (See "WHAT IS ACCRUED INTEREST?" in Part B of
this Prospectus.)
(2) The Average Maturity of Bonds in the Trust is calculated based upon the
stated maturities of the Bonds in the Trust (or, with respect to Bonds for
which funds or securities have been placed in escrow to redeem such Bonds on
a stated call date, based upon such call date). The Average Maturity of
Bonds in the Trust may increase or decrease from time to time as Bonds
mature or are called or sold.
(3) Assumes delivery of all Bonds. (See "COMPOSITION OF TRUSTS" appearing in
Part B of this Prospectus.) Interest income does not include accretion of
original issue discount on "zero coupon" Bonds, Stripped Obligations or
other original issue discount Bonds. (See "RISK FACTORS" in Part B of this
Prospectus.)
(4) The amount and timing of interest distributions from the Trust under the
various plans of distribution are set forth below. It is anticipated that
the amount of interest to be distributed per Unit in each year under each
plan of distribution will initially be substantially equal to the Estimated
Net Annual Interest Income per Unit for that plan. The amount of interest to
be distributed annually per Unit, will generally change as Bonds are
redeemed, mature or are sold or as fees and expenses increase or decrease.
(5) Estimated Long Term Return for the Trust represents the average of the
yields to maturity (or call) of the Bonds in the Trust's portfolio
calculated in accordance with accepted bond practices and adjusted to
reflect a compounding factor, expenses and sales charges. Estimated Current
Return is computed by dividing the Net Annual Interest Income per Unit by
the Public Offering Price, and in contrast to Estimated Long Term Return
does not reflect the amortization of premium or accretion of discount, if
any. For more information see "WHAT ARE ESTIMATED LONG TERM RETURN AND
ESTIMATED CURRENT RETURN?" in Part B of this Prospectus.
(6) Each Trustee annual fee is per $1,000 principal amount of the underlying
Bonds in the Trust for that portion of the Trust that represents a
particular plan of distribution.
(7) The Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs (including costs of preparing the registration
statements, the trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the initial
audit of the Trust portfolio, legal fees and the initial fees and expenses
of the Trustee but not including the expenses incurred in the printing of
preliminary and final prospectuses, and expenses incurred in the preparation
and printing of brochures and other advertising materials and any other
selling expenses) as is common for mutual funds. Total organizational
expenses will be amortized over a five year period. See "WHAT ARE NORMAL
TRUST OPERATING EXPENSES?" in Part B of this Prospectus and "Statement of
Condition." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts.
2 of 7
<PAGE>
INTEREST DISTRIBUTION
Details of interest distributions per Unit of the Trust under the various
plans appear in the following table based upon estimated Net Annual Interest
Income at the Date of Deposit:
<TABLE>
<CAPTION>
NORMAL
DISTRIBUTIONS
1996 1997 PER YEAR
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------- --------------
Record Date*.......................... 6/1 8/1 11/1 2/1 5/1
Distribution Date..................... 6/15 8/15 11/15 2/15 5/15
- ---------------------------------------------------------------------------------------------------------------------------------
Monthly Distribution Plan............. $ .5131(1) $ 5.2793
--------$.4398 every month--------
Quarterly Distribution Plan........... $ .5131(1) $ .8850(2) $ 1.3275 $ 1.3275 $ 1.3275 $ 5.3113
Semi-Annual Distribution Plan......... $ .5131(1) $ 2.2200(3) $ 2.6640 $ 5.3303
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Record Dates for semi-annual distributions are May 1 and November 1; for
quarterly distributions, they are February 1, May 1, August 1 and November 1.
Record Dates for monthly distributions are the first day of each month.
Distribution Dates under each distribution plan are the fifteenth day of the
month in which the respective Record Date occurred. For additional
information see "WHEN ARE DISTRIBUTIONS MADE TO UNITHOLDERS?" in Part B of
this Prospectus.
(1) The first distribution will be paid to all Unitholders, regardless of the
distribution plan selected. Such distribution may be more or less than a
regular monthly distribution.
(2) The second distribution under the quarterly distribution plan represents a
2-month distribution; subsequent quarterly distributions will be regular
3-month distributions.
(3) The second distribution under the semi-annual distribution plan represents a
5-month distribution; subsequent semi-annual distributions will be regular
6-month distributions.
MICHIGAN RISK FACTORS
The financial condition of the State of Michigan is affected by various
national, economic, social and environmental policies and conditions.
Additionally, Constitutional and statutory limitations imposed on the State and
its local governments concerning taxes, bond indebtedness and other matters may
constrain the revenue-generating capacity of the State and its local governments
and, therefore, the ability of the issuers of the Bonds to satisfy their
obligations. Historically, the State has experienced significant revenue
shortfalls. The State's Constitution limits the amount of total State revenues
that may be raised from taxes and other sources. State revenues (excluding
federal aid and revenues used for payment of principal and interest on general
obligation bonds) in any fiscal year are limited to a specified percentage of
State personal income in the prior calendar year or average of the prior three
calendar years, whichever is greater. The State may raise taxes in excess of the
limit in emergency situations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. The economy of the State continues to be dependent
on manufacturing, tourism, and agriculture. These sectors tend to be cyclical
and are facing increasing competition from foreign producers.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations.
All outstanding general obligation bonds of the State are rated "AA" by
Standard and Poor's, "Aa" by Moody's, and "AA" by Fitch Investors Service, Inc.
Further information concerning Michigan risk factors may be obtained upon
written or telephonic request to the Trustee as described in "OTHER INFORMATION
- -- Supplemental Information" appearing in Part B of this Prospectus.
TAX STATUS
For a discussion of the Federal tax status of income earned on Trust Units,
see "WHAT IS THE TAX STATUS OF UNITHOLDERS?" in Part B of this Prospectus.
In the opinion of Dickinson, Wright, Moon, Van Dusen & Freeman, special
Michigan counsel to the Trust, under existing law:
The assets of a Michigan Trust will consist of interest-bearing
obligations issued by or on behalf of the State of Michigan, and counties,
municipalities, authorities and political subdivisions thereof, and, in
limited instances, bonds issued by Puerto Rico, the Virgin Islands, Guam,
the Northern Mariana Islands or possessions of the United States (the
"Michigan Bonds").
Under the Michigan income tax act, the Michigan single business tax act,
the Michigan intangibles tax act, the Michigan city income tax act (which
authorizes the only income tax ordinance that may be adopted by cities
3 of 7
<PAGE>
in Michigan), and under the law which authorizes a "first class" school
district to levy an excise tax upon income, the Trust is not subject to tax.
The income of the Trust will be treated as the income of the Unitholders and
be deemed to have been received by them when received by the Trust.
Interest on the Michigan Bonds in the Trust which is exempt from Federal
income tax is exempt from Michigan state and local income taxes and from the
Michigan single business tax. Further, any amounts paid under the insurance
representing maturing interest on defaulted obligations held by the Trustee
will be excludable from Michigan state and local income taxes and from the
Michigan single business tax if, and to the same extent as, such interest
would have been excludable if paid by the respective issuer.
For purposes of the foregoing Michigan tax laws (corporations and
financial institutions are not subject to the Michigan income tax), each
Unitholder will be considered to have received his pro rata share of
Michigan Bond interest when it is received by the Trust, and each Unitholder
will have a taxable event when the Trust disposes of a Michigan Bond
(whether by sale, exchange, redemption or payment at maturity) or when the
Unitholder redeems or sells Units. Due to the requirement that tax cost be
reduced to reflect amortization of bond premium, under some circumstances a
Unitholder may realize taxable gain when Units are sold or redeemed for an
amount equal to, or less than, their original cost. The tax cost of each
Unit to a Unitholder will be allocated for purposes of these Michigan tax
laws in the same manner as the cost is allocated for Federal income tax
purposes.
Pursuant to the position of the Michigan Department of Treasury in a
bulletin dated December 19, 1986, reaffirmed in a bulletin dated March 31,
1989, the portion of the Trust represented by the Michigan Bonds will be
exempt from the Michigan Intangibles Tax. The Department of Treasury has not
indicated a position with respect to treatment of amounts paid under a
policy of insurance with respect to maturing interest on defaulted
obligations (which amounts would have been excludable if paid by the
respective issuer) for purposes of determining the income base for the
Michigan Intangibles Tax.
If a Unitholder is subject to the Michigan single business tax (i.e., is
engaged in a "business activity" as defined in the Michigan single business
tax act), and has a taxable event for Federal income tax purposes when the
Trust sells or exchanges Michigan Bonds or the Unitholder sells or exchanges
Units, such event may impact on the adjusted tax base upon which the single
business tax is computed. Any capital gain or loss realized from such
taxable event which was included in the computation of the Unitholder's
Federal taxable income, plus the portion, if any, of such capital gain
excluded in such computation and minus the portion, if any, of such capital
loss not deducted in such computation for the year the loss occurred, will
be included in the adjusted tax base. The adjusted tax base of any person
other than a corporation is affected by any gain or loss realized from the
taxable event only to the extent that the resulting Federal taxable income
is derived from "business activity."
4 of 7
<PAGE>
NUVEEN MICHIGAN INSURED TRUST 65
(NUVEEN TAX-FREE UNIT TRUST SERIES 860)
SCHEDULE OF INVESTMENTS AT THE DATE OF DEPOSIT, APRIL 26, 1996
<TABLE>
<CAPTION>
Ratings(3) Trustee's
Optional --------------------- Determination
Aggregate Name of Issuer and Title of Issue Represented Redemption Standard of Offering
Principal by Sponsor's Contracts to Purchase Bonds(1) Provisions(2) & Poor's Moody's Price
<C> <C> <S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
$ 500,000 Michigan State Hospital Finance Authority, 2006 at 102 AAA Aaa $ 451,555
Hospital Revenue and Refunding Bonds (Henry
Ford Health System), Series 1995A, 5.25% Due
11/15/25. (Original issue discount bonds
delivered on or about January 9, 1996 at a
price of 93.572% of principal amount.)
145,000 Michigan State Hospital Finance Authority, 2006 at 102 AAA Aaa 130,864
Hospital Revenue Bonds (St. John Hospital and
Medical Center), Series 1996A, 5.25% Due
5/15/26. (Original issue discount bonds
delivered on or about January 24, 1996 at a
price of 94.219% of principal amount.)
500,000 City of Detroit, Michigan, Water Supply System 2005 at 101 AAA Aaa 472,265
Revenue Second Lien Bonds, Series 1995-A,
5.50% Due 7/1/25.
500,000 The Economic Development Corporation of the 2005 at 102 AAA Aaa 486,245
City of Farmington Hills (Michigan), Revenue
Bonds (Botsford Continuing Care Corporation
Project), Series 1995A, 5.75% Due 2/15/25.
500,000 Fremont Public Schools, Counties of Newaygo, 2005 at 100 AAA Aaa 475,000
Muskegon and Oceana, State of Michigan, 1995
School Building and Site Bonds, 5.50% Due
5/1/21. (General Obligation Bonds.)
250,000 Grand Ledge Public Schools, Counties of Eaton, 2005 at 102 AAA Aaa 240,035
Clinton and Ionia, State of Michigan, 1995
Refunding Bonds, 5.50% Due 5/1/15. (General
Obligation Bonds.)
500,000 Marysville Public Schools, St. Claire County, 2004 at 101 AAA Aaa 492,500
Michigan, 1995 School Building and Site
Bonds, 5.75% Due 5/1/19. (General Obligation
Bonds.)
105,000 Board of Trustees of Oakland University, 2005 at 102 AAA Aaa 103,799
Michigan, General Revenue Bonds, Series 1995,
5.75% Due 5/15/15.
500,000 Commonwealth of Puerto Rico, Public Improvement 2006 at 101 1/2 AAA Aaa 468,640
Bonds of 1996 (General Obligation Bonds.),
5.40% Due 7/1/25.
- ----------- ---------------
$ 3,500,000 $ 3,320,903
- ----------- ---------------
- ----------- ---------------
</TABLE>
- ------------
(1) The Sponsor's contracts to purchase Bonds were entered into during the
period from April 24, 1996 to April 25, 1996. Other information regarding the
Bonds in the Trust on the Date of Deposit is as follows:
<TABLE>
<CAPTION>
ANNUAL
PROFIT INTEREST
COST TO (OR LOSS) INCOME TO BID PRICE
TRUST SPONSOR TO SPONSOR TRUST OF BONDS
---------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
MICHIGAN INSURED TRUST 65............... $ 3,314,476 $ 6,427 $ 193,150 $ 3,303,847
</TABLE>
In addition, the difference between the Trustee's determination of Offering
Price and Bid Price (as a percentage of principal amount) is .49%. Neither cost
to Sponsor nor profit (or loss) to Sponsor reflects underwriting profits or
losses received or incurred by the Sponsor through its participation in
underwriting syndicates. The Sponsor participated as either the sole underwriter
or manager or as a member of the syndicates which were the original underwriters
of 14.3% of the aggregate principal amount of the Bonds.
(2) The Bonds are first subject to optional redemption in the years, and at
the prices, shown. Unless otherwise indicated, the Bonds, except for Bonds
issued at a substantial original issue discount, are redeemable at declining
prices (but not below par value) in subsequent years. Original issue discount
bonds, including zero coupon bonds, are generally redeemable at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus, if applicable, some premium, the amount of which will decline
in subsequent years. The Bonds may also be subject to sinking fund redemption
without premium prior to the dates shown. Certain Bonds may be subject to
redemption without premium prior to the date shown pursuant to special or
mandatory call provisions specified in the instruments setting forth the terms
and provisions of such Bonds. See "COMPOSITION OF TRUSTS", "WHAT IS THE TAX
STATUS OF UNITHOLDERS?" and "RISK FACTORS" in Part B of this Prospectus.
(3) All the Bonds in the Insured Trusts, as insured by the Insurer, are
rated AAA by Standard & Poor's and Aaa by Moody's. In addition, Units of the
Trust are rated "AAA" by Standard & Poor's as a result of such insurance. The
"AAA" rating on the Units will be in effect for a period of thirteen months from
the Date of Deposit and will, unless renewed, terminate at the end of the
period. The insurance obtained by the Trust guarantees the payment of interest
and principal on the Bonds when due but does not cover certain market risks
associated with fixed income securities such as accelerated payments, premiums
payable on mandatory redemptions or interest rate risks. (See "WHY AND HOW ARE
THE BONDS INSURED?" in Part B of this Prospectus and "Description of Ratings" in
the Information Supplement.)
5 of 7
<PAGE>
Statement of Condition
NUVEEN MICHIGAN INSURED TRUST 65
(Nuveen Tax-Free Unit Trust, Series 860)
AS OF APRIL 26, 1996
<TABLE>
<S> <C>
TRUST PROPERTY
Sponsor's contracts to purchase Tax-Free Bonds,
backed by an irrevocable letter of
credit(1)(2).................................... $ 3,320,903
Accrued interest to April 26, 1996 on underlying
Bonds(1)........................................ 72,812
Organizational costs(3)........................... 5,200
--------------
Total................................. $ 3,398,915
--------------
--------------
LIABILITIES AND INTEREST OF UNITHOLDERS
LIABILITIES:
Accrued interest to April 26, 1996 on
underlying Bonds(4).......................... $ 72,812
Accrued organizational costs(3)............... 5,200
--------------
Total................................. $ 78,012
--------------
--------------
INTEREST OF UNITHOLDERS:
Units of fractional undivided interest
outstanding (35,000)
Cost to investors(5)........................ $ 3,491,996
Less: Gross underwriting commission(6).... (171,093)
--------------
Net amount applicable to investors............ $ 3,320,903
--------------
Total................................. $ 3,398,915
--------------
--------------
</TABLE>
- ------------
(1) Represented by contracts to purchase Tax-Exempt Bonds which include "when
issued" or "regular way" or "delayed delivery" contracts for which an
irrevocable letter of credit issued by a major commercial bank has been
deposited with the Trustee on the Date of Deposit. The amount of such letter
of credit and any cash deposited exceeds the amount necessary for the
purchase of the Bonds plus accrued interest to the Date of Deposit. At the
Date of Deposit, Bonds may have been delivered to the Sponsor pursuant to
certain of these contracts; the Sponsor has assigned to the Trustee all of
its rights, title and interest in and to such Bonds.
(2) Aggregate value (at offering prices) as of the Date of Deposit of the Bonds
listed under "Schedule of Investments" herein, and their aggregate cost to
the Trust are the same. Such offering prices were determined by Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc., as of the close of
business on the business day prior to the Date of Deposit. (See "HOW WAS THE
PRICE OF THE BONDS DETERMINED AT THE DATE OF DEPOSIT?" in Part B of this
Prospectus.) Insurance coverage providing for the timely payment, when due,
of all principal of and interest on the Bonds in an Insured Trust has been
obtained by the Sponsor or by the issuers of such Bonds. Such insurance does
not guarantee the market value of the Bonds or the value of the Units. Both
the bid and the offering prices of the underlying Bonds and of the Units may
include value attributable to such policies of insurance.
(3) The Trust (and therefore Unitholders) will bear all or a portion of its
estimated organizational costs which will be deferred and amortized over
five years from the Date of Deposit.
(4) Representing, as set forth in "WHAT IS ACCRUED INTEREST?" in Part B of this
Prospectus, advancement by the Trustee of an amount equal to the accrued
Bond interest as of the Date of Deposit.
(5) Aggregate Public Offering Price (exclusive of accrued interest) computed as
set forth under "HOW IS THE PUBLIC OFFERING PRICE DETERMINED?" in Part B of
this Prospectus.
(6) The gross underwriting commission of 4.90% of the Public Offering Price has
been calculated on the assumption that the Units sold are not subject to a
reduction of sales charge for quantity purchases. In single transactions
involving 500 Units or more, the sales charge is reduced. (See "HOW IS THE
PUBLIC OFFERING PRICE DETERMINED?" in Part B of this Prospectus.)
6 of 7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF JOHN NUVEEN & CO. INCORPORATED AND UNITHOLDERS OF
MICHIGAN INSURED TRUST 65:
We have audited the accompanying statement of condition and the schedule of
investments at date of deposit (included in Part A of this Prospectus) of
Michigan Insured Trust 65 (contained in Nuveen Tax-Free Unit Trust, Series 860),
as of April 26, 1996. These financial statements are the responsibility of the
Sponsor. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of the irrevocable letter of credit arrangement for the purchase of
securities, described in Note (1) to the statement of condition, by
correspondence with the Trustee. An audit also includes assessing the accounting
principles used and significant estimates made by the Sponsor, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the statement of condition and the schedule of investments
at date of deposit referred to above present fairly, in all material respects,
the financial position of Michigan Insured Trust 65 as of April 26, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
April 26, 1996.
7 of 7
<PAGE>
APRIL 26, 1996
SUBJECT TO COMPLETION
A
NUVEEN NUVEEN OHIO INSURED TRUST 133
(NUVEEN TAX-FREE UNIT TRUSTS SERIES 860)
CUSIP NUMBERS:
Monthly: 67102G 167
Quarterly: 67102G 175
Semi-Annually: 67102G 183
PROSPECTUS--PART A (SPECIFIC TERMS) -- APRIL 26, 1996
THIS PART A OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY THE
PART B OF
THE NUVEEN TAX-EXEMPT UNIT TRUSTS PROSPECTUS, TO WHICH SUCH REFERENCE HEREIN
APPLIES. ANY REFERENCE TO
"NUVEEN TAX-EXEMPT UNIT TRUSTS" IN PART B SHALL BE AMENDED TO READ "NUVEEN
TAX-FREE UNIT TRUSTS."
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
Ohio Insured Trust 133 (the "Trust") consists of a portfolio of
interest-bearing obligations issued by or on behalf of the State of Ohio,
certain United States Territories or authorities and political subdivisions
thereof which, in the opinion of recognized bond counsel to the issuing
authorities, provide income which is exempt from Federal income tax and Ohio
state and local income tax, to the extent indicated below.
The objectives of the Trust are income exempt from Federal and state income
taxes, and conservation of capital. The objectives are, of course, dependent
upon the continuing ability of the issuers, obligors and/or insurers to meet
their respective obligations.
The Portfolio of the Trust consists of 6 obligations issued by entities
located in Ohio and one obligation issued by an entity located in the Territory
of Puerto Rico. The Bonds in the Trust are either general obligations of the
governmental entity issuing them and are backed by the taxing power thereof or
are payable as to principal and interest from the income of a specific project
or authority and are not supported by the issuer's power to levy taxes. The
sources of payment for the Bonds are divided as follows:
<TABLE>
<CAPTION>
NUMBER OF PORTFOLIO
ISSUES PURPOSE OF ISSUE PERCENTAGE
--------------- ----------------------------------------------------
<C> <S> <C>
4 General Obligations 57 %
1 Electrical System Revenue 14
1 Health Care Facility Revenue 14
1 Water and/or Sewer Revenue 14
</TABLE>
All of the Bonds in the Trust are covered by policies of insurance obtained
from the MBIA Insurance Corporation guaranteeing payment of principal and
interest when due. As a result of such insurance, the Bonds in the Trust have
received a rating of "Aaa" by Moody's and both the Bonds in the Trust and the
Units of the Trust have received a rating of "AAA" by Standard & Poor's.
For a discussion of the risks associated with investments in the bonds of
various issuers, see "RISK FACTORS" in Part B of this Prospectus.
ESSENTIAL INFORMATION
REGARDING THE NUVEEN OHIO INSURED TRUST 133
ON THE BUSINESS DAY PRIOR TO THE DATE OF DEPOSIT, APRIL 25, 1996
Sponsor and Evaluator.......... John Nuveen & Co. Incorporated
Trustee........................ The Chase Manhattan Bank, N.A.
------------------------------------------------
The income, expense and distribution data set forth below have been calculated
for Unitholders receiving monthly, quarterly or semi-annual distribution
options.
<TABLE>
<S> <C>
Principal Amount of Bonds in Trust.................. $ 3,500,000
Number of Units..................................... 35,000
Fractional Undivided Interest in Trust Per Unit..... 1/35,000
Public Offering Price--Less than 500 Units
Aggregate Offering Price of Bonds in Trust...... $ 3,365,065
Divided by Number of Units...................... $ 96.14
Plus Sales Charge 4.9% (5.152% of the Aggregate
Offering Price of the Bonds per Unit).......... $ 4.95
Public Offering Price Per Unit(1)............... $ 101.09
Redemption Price Per Unit (exclusive of accrued
interest)......................................... $ 95.62
Sponsor's Initial Repurchase Price Per Unit
(exclusive of accrued interest)................... $ 96.14
Excess of Public Offering Price Per Unit over
Redemption Price Per Unit......................... $ 5.47
Excess of Public Offering Price Per Unit over
Sponsor's Repurchase Price Per Unit............... $ 4.95
Average Maturity of Bonds in the Trust(2)........... 26.4 years
</TABLE>
- ----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
1 of 7
<PAGE>
ESSENTIAL INFORMATION (CONT.)
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMI-ANNUAL
----------- ----------- -----------
<S> <C> <C> <C>
Calculation of Estimated Net Annual
Interest Income Per Unit
Annual Interest Income(3)............ $5.5143 $5.5143 $5.5143
Less Estimated Annual Expense........ $.2390 $.2070 $.1880
----------- ----------- -----------
Estimated Net Annual Interest
Income(4).......................... $5.2753 $5.3073 $5.3263
Daily Rate of Accrual Per Unit........... $.01465 $.01474 $.01479
ESTIMATED CURRENT RETURN(5).............. 5.22% 5.25% 5.27 %
ESTIMATED LONG TERM RETURN(5)............ 5.25% 5.28% 5.30 %
Trustee's Annual Fees(6)................. $1.5228 $1.2028 $1.0128
Date of Deposit.....................................................................................April 26, 1996
Settlement Date........................................................................................May 1, 1996
Mandatory Termination Date....................................See "OTHER INFORMATION" in Part B of this Prospectus
Minimum Value of Each Trust...................................See "OTHER INFORMATION" in Part B of this Prospectus
Sponsor's Annual Evaluation Fee.........................................$0.17 per $1,000 principal amount of Bonds
Estimated Annual Organizational Expenses(7).......................................................$.02971 per Unit
- ----------
</TABLE>
The evaluation time for purpose of sale, purchase or redemption of Units is 4
p.m. Eastern time or as of any earlier closing time on a day on which the New
York Stock Exchange is scheduled in advance to close at such earlier time. (See
"HOW IS THE PUBLIC OFFERING PRICE DETERMINED?" in Part B of this Prospectus.)
(1) Units are offered at the Public Offering Price plus accrued interest from
the preceding Record Date to, but not including, the date of settlement
(normally three business days after purchase). The Date of Deposit of the
Fund has been designated as the First Record Date for all plans of
distribution of the Trust and, accordingly, for Units purchased on the Date
of Deposit, $.07 of accrued interest to the Settlement Date will be added to
the Public Offering Price. (See "WHAT IS ACCRUED INTEREST?" in Part B of
this Prospectus.)
(2) The Average Maturity of Bonds in the Trust is calculated based upon the
stated maturities of the Bonds in the Trust (or, with respect to Bonds for
which funds or securities have been placed in escrow to redeem such Bonds on
a stated call date, based upon such call date). The Average Maturity of
Bonds in the Trust may increase or decrease from time to time as Bonds
mature or are called or sold.
(3) Assumes delivery of all Bonds. (See "COMPOSITION OF TRUSTS" appearing in
Part B of this Prospectus.) Interest income does not include accretion of
original issue discount on "zero coupon" Bonds, Stripped Obligations or
other original issue discount Bonds. (See "RISK FACTORS" in Part B of this
Prospectus.)
(4) The amount and timing of interest distributions from the Trust under the
various plans of distribution are set forth below. It is anticipated that
the amount of interest to be distributed per Unit in each year under each
plan of distribution will initially be substantially equal to the Estimated
Net Annual Interest Income per Unit for that plan. The amount of interest to
be distributed annually per Unit, will generally change as Bonds are
redeemed, mature or are sold or as fees and expenses increase or decrease.
(5) Estimated Long Term Return for the Trust represents the average of the
yields to maturity (or call) of the Bonds in the Trust's portfolio
calculated in accordance with accepted bond practices and adjusted to
reflect a compounding factor, expenses and sales charges. Estimated Current
Return is computed by dividing the Net Annual Interest Income per Unit by
the Public Offering Price, and in contrast to Estimated Long Term Return
does not reflect the amortization of premium or accretion of discount, if
any. For more information see "WHAT ARE ESTIMATED LONG TERM RETURN AND
ESTIMATED CURRENT RETURN?" in Part B of this Prospectus.
(6) Each Trustee annual fee is per $1,000 principal amount of the underlying
Bonds in the Trust for that portion of the Trust that represents a
particular plan of distribution.
(7) The Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs (including costs of preparing the registration
statements, the trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the initial
audit of the Trust portfolio, legal fees and the initial fees and expenses
of the Trustee but not including the expenses incurred in the printing of
preliminary and final prospectuses, and expenses incurred in the preparation
and printing of brochures and other advertising materials and any other
selling expenses) as is common for mutual funds. Total organizational
expenses will be amortized over a five year period. See "WHAT ARE NORMAL
TRUST OPERATING EXPENSES?" in Part B of this Prospectus and "Statement of
Condition." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts.
2 of 7
<PAGE>
INTEREST DISTRIBUTION
Details of interest distributions per Unit of the Trust under the various
plans appear in the following table based upon estimated Net Annual Interest
Income at the Date of Deposit:
<TABLE>
<CAPTION>
NORMAL
DISTRIBUTIONS
1996 1997 PER YEAR
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------- --------------
Record Date*.......................... 6/1 8/1 11/1 2/1 5/1
Distribution Date..................... 6/15 8/15 11/15 2/15 5/15
- ---------------------------------------------------------------------------------------------------------------------------------
Monthly Distribution Plan............. $ .5127(1) $ 5.2753
-------- $.4395 every month --------
Quarterly Distribution Plan........... $ .5127(1) $ .8844(2) $ 1.3266 $ 1.3266 $ 1.3266 $ 5.3073
Semi-Annual Distribution Plan......... $ .5127(1) $ 2.2185(3) $ 2.6622 $ 5.3263
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Record Dates for semi-annual distributions are May 1 and November 1; for
quarterly distributions, they are February 1, May 1, August 1 and November 1.
Record Dates for monthly distributions are the first day of each month.
Distribution Dates under each distribution plan are the fifteenth day of the
month in which the respective Record Date occurred. For additional
information see "WHEN ARE DISTRIBUTIONS MADE TO UNITHOLDERS?" in Part B of
this Prospectus.
(1) The first distribution will be paid to all Unitholders, regardless of the
distribution plan selected. Such distribution may be more or less than a
regular monthly distribution.
(2) The second distribution under the quarterly distribution plan represents a
2-month distribution; subsequent quarterly distributions will be regular
3-month distributions.
(3) The second distribution under the semi-annual distribution plan represents a
5-month distribution; subsequent semi-annual distributions will be regular
6-month distributions.
OHIO RISK FACTORS
The financial condition of the State of Ohio is affected by various
national, economic, social and environmental policies and conditions.
Additionally, Constitutional and statutory limitations imposed on the State and
its local governments concerning taxes, bond indebtedness and other matters may
constrain the revenue-generating capacity of the State and its local governments
and, therefore, the ability of the issuers of the Bonds to satisfy their
obligations. The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its fiscal
year or fiscal biennium in a deficit position.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds, are
affected by numerous factors. While diversifying more into the service and other
non-manufacturing areas, the Ohio economy continues to rely in part on durable
goods manufacturing, largely concentrated in motor vehicles and equipment,
steel, rubber products and household appliances. As a result, general economic
activity, as in many other industrially-developed states, tends to be more
cyclical than in some other states and in the nation as a whole. Agriculture is
an important segment of the economy, with over half the State's area devoted to
farming and approximately 15% of total employment in agribusiness.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State governmental operations and consequently its
ability to pay debt service on its obligations.
Further information concerning State risk factors may be obtained upon
written or telephonic request to the Trustee as described in "OTHER INFORMATION
- -- Supplemental Information" appearing in Part B of this Prospectus.
TAX STATUS
For a discussion of the Federal tax status of income earned on Trust Units,
see "WHAT IS THE TAX STATUS OF UNITHOLDERS?" in Part B of this Prospectus.
The Trust is comprised primarily of interest-bearing obligations issued by
or on behalf of the State of Ohio, political subdivisions thereof, or agencies
or instrumentalities thereof (the "Ohio Obligations"), or by the governments of
Puerto Rico, the Virgin Islands, the Northern Mariana Islands or Guam
(collectively, "Obligations").
In the opinion of Squire, Sanders & Dempsey, special Ohio counsel to the
Trust, provided that at all times at least fifty percent of the value of the
total assets of the Trust consist of Ohio Obligations, or similar obligations of
other states or their subdivisions, under existing Ohio law:
The Trust is not taxable as a corporation or otherwise for purposes of
the Ohio personal income tax, Ohio school district income taxes, the Ohio
corporation franchise tax, or the Ohio dealers in intangibles tax.
3 of 7
<PAGE>
Income of the Trust will be treated as the income of the Unitholders for
purposes of the Ohio personal income tax and municipal and school district
income taxes in Ohio and the Ohio corporation franchise tax in proportion to
the respective interest therein of each Unitholder.
Interest on Obligations held by the Trust is exempt from the Ohio
personal income tax, and municipal and school district income taxes in Ohio,
and is excluded from the net income base of the Ohio corporation franchise
tax when distributed or deemed distributed to Unitholders.
Proceeds paid under insurance policies, if any, to the Trustee of the
Trust representing maturing interest on defaulted obligations held by the
Trust that is excluded from gross income for federal income tax purposes
will be exempt from the Ohio personal income tax and municipal and school
district income taxes in Ohio and the net income base of the Ohio
corporation franchise tax.
Gains and losses realized on the sale, exchange or other disposition by
the Trust of Ohio Obligations are excluded in determining adjusted gross and
taxable income for purposes of the Ohio personal income tax, and municipal
and school district income taxes in Ohio, and are excluded from the net
income base of the Ohio corporation franchise tax when distributed or deemed
distributed to Unitholders.
4 of 7
<PAGE>
NUVEEN OHIO INSURED TRUST 133
(NUVEEN TAX-FREE UNIT TRUST SERIES 860)
SCHEDULE OF INVESTMENTS AT THE DATE OF DEPOSIT, APRIL 26, 1996
<TABLE>
<CAPTION>
Ratings(3) Trustee's
Optional --------------------- Determination
Aggregate Name of Issuer and Title of Issue Represented Redemption Standard of Offering
Principal by Sponsor's Contracts to Purchase Bonds(1) Provisions(2) & Poor's Moody's Price
<C> <C> <S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
$ 500,000 State of Ohio, Ohio Air Quality Development 2005 at 102 AAA Aaa $ 508,140
Authority, Air Quality Development Revenue
Refunding Bonds, 1995 Series (The Dayton
Power and Light Company Project), 6.10% Due
9/1/30.
500,000 County of Butler, Ohio, Waterworks System 2006 at 101 AAA Aaa 458,355
Revenue Bonds, Series 1996 (Butler County
Water District), 5.125% Due 12/1/21.
500,000 County of Cuyahoga, Ohio, Hospital Improvement 2006 at 102 AAA Aaa 487,500
and Refunding Revenue Bonds, Series 1996A
(University Hospitals Health System, Inc.
Project), 5.625% Due 1/15/21.
500,000 Jackson Local School District, Stark and Summit 2006 at 102 AAA Aaa 483,320
Counties, Ohio, School Building Construction
and Improvement Bonds, 5.50% Due 12/1/21.
(General Obligation Bonds.)
500,000 South Euclid-Lyndhurst City School District, 2004 at 102 AAA Aaa 468,565
Ohio, School Improvement Bonds, Series 1994,
5.25% Due 12/1/18. (General Obligation
Bonds.)
500,000 Westerville City School District, Franklin and 2005 at 102 AAA Aaa 490,545
Delaware Counties, Ohio, General Obligation
Library Improvement Bonds, 5.60% Due 12/1/18.
500,000 Commonwealth of Puerto Rico, Public Improvement 2006 at 101 1/2 AAA Aaa 468,640
Bonds of 1996 (General Obligation Bonds.),
5.40% Due 7/1/25.
- ----------- ---------------
$ 3,500,000 $ 3,365,065
- ----------- ---------------
- ----------- ---------------
</TABLE>
- ------------
(1) The Sponsor's contracts to purchase Bonds were entered into during the
period from April 24, 1996 to April 25, 1996. Other information regarding the
Bonds in the Trust on the Date of Deposit is as follows:
<TABLE>
<CAPTION>
ANNUAL
PROFIT INTEREST
COST TO (OR LOSS) INCOME TO BID PRICE
TRUST SPONSOR TO SPONSOR TRUST OF BONDS
---------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OHIO INSURED TRUST 133.................. $ 3,352,964 $ 12,101 $ 193,000 $ 3,346,940
</TABLE>
In addition, the difference between the Trustee's determination of Offering
Price and Bid Price (as a percentage of principal amount) is .52%. Neither cost
to Sponsor nor profit (or loss) to Sponsor reflects underwriting profits or
losses received or incurred by the Sponsor through its participation in
underwriting syndicates. The Sponsor did not participate as either the sole
underwriter or as a manager or member of a syndicate that acted as the original
underwriter of any of the Bonds.
(2) The Bonds are first subject to optional redemption in the years, and at
the prices, shown. Unless otherwise indicated, the Bonds, except for Bonds
issued at a substantial original issue discount, are redeemable at declining
prices (but not below par value) in subsequent years. Original issue discount
bonds, including zero coupon bonds, are generally redeemable at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus, if applicable, some premium, the amount of which will decline
in subsequent years. The Bonds may also be subject to sinking fund redemption
without premium prior to the dates shown. Certain Bonds may be subject to
redemption without premium prior to the date shown pursuant to special or
mandatory call provisions specified in the instruments setting forth the terms
and provisions of such Bonds. See "COMPOSITION OF TRUSTS", "WHAT IS THE TAX
STATUS OF UNITHOLDERS?" and "RISK FACTORS" in Part B of this Prospectus.
(3) All the Bonds in the Insured Trusts, as insured by the Insurer, are
rated AAA by Standard & Poor's and Aaa by Moody's. In addition, Units of the
Trust are rated "AAA" by Standard & Poor's as a result of such insurance. The
"AAA" rating on the Units will be in effect for a period of thirteen months from
the Date of Deposit and will, unless renewed, terminate at the end of the
period. The insurance obtained by the Trust guarantees the payment of interest
and principal on the Bonds when due but does not cover certain market risks
associated with fixed income securities such as accelerated payments, premiums
payable on mandatory redemptions or interest rate risks. (See "WHY AND HOW ARE
THE BONDS INSURED?" in Part B of this Prospectus and "Description of Ratings" in
the Information Supplement.)
5 of 7
<PAGE>
Statement of Condition
NUVEEN OHIO INSURED TRUST 133
(Nuveen Tax-Free Unit Trust, Series 860)
AS OF APRIL 26, 1996
<TABLE>
<S> <C>
TRUST PROPERTY
Sponsor's contracts to purchase Tax-Free Bonds,
backed by an irrevocable letter of
credit(1)(2).................................... $ 3,365,065
Accrued interest to April 26, 1996 on underlying
Bonds(1)........................................ 53,330
Organizational costs(3)........................... 5,200
--------------
Total................................. $ 3,423,595
--------------
--------------
LIABILITIES AND INTEREST OF UNITHOLDERS
LIABILITIES:
Accrued interest to April 26, 1996 on
underlying Bonds(4).......................... $ 53,330
Accrued organizational costs(3)............... 5,200
--------------
Total................................. $ 58,530
--------------
--------------
INTEREST OF UNITHOLDERS:
Units of fractional undivided interest
outstanding (35,000)
Cost to investors(5)........................ $ 3,538,433
Less: Gross underwriting commission(6).... (173,368)
--------------
Net amount applicable to investors............ $ 3,365,065
--------------
Total................................. $ 3,423,595
--------------
--------------
</TABLE>
- ------------
(1) Represented by contracts to purchase Tax-Exempt Bonds which include "when
issued" or "regular way" or "delayed delivery" contracts for which an
irrevocable letter of credit issued by a major commercial bank has been
deposited with the Trustee on the Date of Deposit. The amount of such letter
of credit and any cash deposited exceeds the amount necessary for the
purchase of the Bonds plus accrued interest to the Date of Deposit. At the
Date of Deposit, Bonds may have been delivered to the Sponsor pursuant to
certain of these contracts; the Sponsor has assigned to the Trustee all of
its rights, title and interest in and to such Bonds.
(2) Aggregate value (at offering prices) as of the Date of Deposit of the Bonds
listed under "Schedule of Investments" herein, and their aggregate cost to
the Trust are the same. Such offering prices were determined by Kenny S&P
Evaluation Services, a division of J.J. Kenny Co., Inc., as of the close of
business on the business day prior to the Date of Deposit. (See "HOW WAS THE
PRICE OF THE BONDS DETERMINED AT THE DATE OF DEPOSIT?" in Part B of this
Prospectus.) Insurance coverage providing for the timely payment, when due,
of all principal of and interest on the Bonds in an Insured Trust has been
obtained by the Sponsor or by the issuers of such Bonds. Such insurance does
not guarantee the market value of the Bonds or the value of the Units. Both
the bid and the offering prices of the underlying Bonds and of the Units may
include value attributable to such policies of insurance.
(3) The Trust (and therefore Unitholders) will bear all or a portion of its
estimated organizational costs which will be deferred and amortized over
five years from the Date of Deposit.
(4) Representing, as set forth in "WHAT IS ACCRUED INTEREST?" in Part B of this
Prospectus, advancement by the Trustee of an amount equal to the accrued
Bond interest as of the Date of Deposit.
(5) Aggregate Public Offering Price (exclusive of accrued interest) computed as
set forth under "HOW IS THE PUBLIC OFFERING PRICE DETERMINED?" in Part B of
this Prospectus.
(6) The gross underwriting commission of 4.90% of the Public Offering Price has
been calculated on the assumption that the Units sold are not subject to a
reduction of sales charge for quantity purchases. In single transactions
involving 500 Units or more, the sales charge is reduced. (See "HOW IS THE
PUBLIC OFFERING PRICE DETERMINED?" in Part B of this Prospectus.)
6 of 7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF JOHN NUVEEN & CO. INCORPORATED AND UNITHOLDERS OF
OHIO INSURED TRUST 133:
We have audited the accompanying statement of condition and the schedule of
investments at date of deposit (included in Part A of this Prospectus) of Ohio
Insured Trust 133 (contained in Nuveen Tax-Free Unit Trust, Series 860), as of
April 26, 1996. These financial statements are the responsibility of the
Sponsor. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of the irrevocable letter of credit arrangement for the purchase of
securities, described in Note (1) to the statement of condition, by
correspondence with the Trustee. An audit also includes assessing the accounting
principles used and significant estimates made by the Sponsor, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the statement of condition and the schedule of investments
at date of deposit referred to above present fairly, in all material respects,
the financial position of Ohio Insured Trust 133 as of April 26, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
April 26, 1996.
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B
NUVEEN Tax-Exempt Unit Trusts
PROSPECTUS -- PART B
(GENERAL TERMS)
SEPTEMBER 1, 1995
THIS PART B OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART
A. BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
FURTHER DETAIL REGARDING CERTAIN OF THE INFORMATION PROVIDED IN THE PROSPECTUS
MAY BE OBTAINED WITHIN FIVE BUSINESS DAYS OF WRITTEN OR TELEPHONIC REQUEST TO
THE TRUSTEE AT 770 BROADWAY, NEW YORK, NY 10003 OR (800) 257-8787.
INTEREST INCOME TO A TRUST AND TO UNITHOLDERS, IN THE OPINION OF COUNSEL, UNDER
EXISTING LAW IS EXEMPT FROM FEDERAL INCOME TAX. CAPITAL GAINS, IF ANY, ARE
SUBJECT TO TAX. IN ADDITION, INTEREST INCOME OF STATE TRUSTS IS, IN THE OPINION
OF COUNSEL, EXEMPT, TO THE EXTENT INDICATED, FROM STATE AND LOCAL TAXES.
INTEREST INCOME OF ANY TRUST OTHER THAN A STATE TRUST MAY BE SUBJECT TO STATE
AND LOCAL TAXES.
CURRENTLY OFFERED AT PUBLIC OFFERING PRICE PLUS INTEREST ACCRUED TO THE DATE OF
SETTLEMENT. MINIMUM PURCHASE-- EITHER $5,000 OR 50 UNITS, WHICHEVER IS LESS.
THIS NUVEEN TAX-EXEMPT UNIT TRUST SERIES consists of the underlying separate
unit investment trust set forth in Part A to this Prospectus. Each Trust
initially consists of delivery statements relating to contracts to purchase
Bonds and, thereafter, will consist of a diversified portfolio of obligations
issued by or on behalf of states and territories of the United States and
authorities and political subdivisions thereof (see "Schedule of Investments"
appearing in Part A of this Prospectus). Except in specific instances as noted
in Part A of this Prospectus, the information contained in this Part B shall
apply to each Trust in its entirety. All obligations in each Traditional Trust
are rated in the category "A" or better by Standard & Poor's, a division of the
McGraw Hill Companies ("Standard & Poor's") or Moody's Investors Service, Inc.
("Moody's") on the Date of Deposit. All obligations in each Insured Trust are
covered by policies of insurance obtained from the MBIA Insurance Corporation
guaranteeing payment of principal and interest when due. All such policies of
insurance remain effective so long as the obligations are outstanding. As a
result of such insurance, the Bonds in each portfolio of the Insured Trusts have
received a rating of "Aaa" by Moody's and the Bonds in the Insured Trusts and
the Units of each such Trust have received a rating of "AAA" by Standard &
Poor's. INSURANCE RELATES ONLY TO THE BONDS IN THE INSURED TRUSTS AND NOT TO THE
UNITS OFFERED HEREBY OR TO THEIR MARKET VALUE. (See "WHY AND HOW ARE THE BONDS
INSURED?".)
THE OBJECTIVES of a Trust are tax-exempt income and conservation of capital
through a diversified investment in tax-exempt Bonds. The payment of interest
and the preservation of principal are, of course, dependent upon the continuing
ability of the issuers of Bonds and of any insurer thereof to meet their
obligations thereunder. There is no guarantee that a Trust's objectives will be
achieved. (See "RISK FACTORS".)
DISTRIBUTIONS of interest received by a Trust will be made semi-annually unless
the Unitholder elects to receive them monthly or quarterly. (See "WHEN ARE
DISTRIBUTIONS MADE TO UNITHOLDERS?".) Distribution of funds in the Principal
Account, if any, will ordinarily be made semi-annually.
FOR ESTIMATED LONG TERM RETURNS AND ESTIMATED CURRENT RETURNS to Unitholders in
each Trust on the business day prior to the Date of Deposit. (See Part A of this
Prospectus and "WHAT ARE ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT
RETURN?".)
THE PUBLIC OFFERING PRICE per Unit of each Trust during the initial offering
period is equal to a pro rata share of the OFFERING prices of the Bonds in such
Trust's portfolio plus a sales charge of up to 4.90% of the Public Offering
Price (equivalent to 5.152% of the net amount invested); the sales charge is
somewhat lower on Trusts with lesser average maturities. (See "HOW IS THE PUBLIC
OFFERING PRICE DETERMINED?".) The Secondary Market Public Offering Price per
Unit for each Trust will be equal to a pro rata share of the sum of BID prices
of the Bonds in such Trust plus the sales charges determined based on the number
of years remaining to the maturity of each Bond. Accrued interest from the
preceding Record Date to, but not including, the settlement date (normally three
business days after purchase) is added to the Public Offering Price. The sales
charge is reduced on a graduated scale for sales involving at least $50,000 or
500 Units and will be applied on whichever basis is more favorable to the
purchaser. (See "HOW IS THE PUBLIC OFFERING PRICE DETERMINED?".)
A UNITHOLDER MAY REDEEM UNITS at the office of the Trustee at prices based upon
the BID prices of the Bonds. The price received upon redemption may be more or
less than the amount paid by Unitholders, depending upon the value of the Bonds
on the date of tender for redemption. (See "HOW UNITS MAY BE REDEEMED WITHOUT
CHARGE?".) The Sponsor, although not required to do so, intends to make a
secondary market for the Units of the Trusts at prices based upon the BID prices
of the Bonds in the respective Trusts. (See "MARKET FOR UNITS".) RETAIN BOTH
PART A AND PART B OF THIS PROSPECTUS FOR FUTURE REFERENCE.
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RISK FACTORS. An investment in a Trust should be made with an understanding of
the risks associated therewith, including, among other factors, the inability of
the issuer or an insurer to pay the principal of or interest on a bond when due,
volatile interest rates, early call provisions, and changes to the tax status of
the Bonds. See Part A of this Prospectus and "RISK FACTORS."
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK AND ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY AND
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
NUVEEN Tax-Exempt Unit Trusts
<TABLE>
<CAPTION>
INDEX PAGE
<C> <S> <C> <C>
WHAT IS THE NUVEEN TAX-EXEMPT UNIT TRUST? 3
WHAT ARE THE OBJECTIVES OF THE TRUSTS? 3
SUMMARY OF PORTFOLIOS 3
RISK FACTORS 4
COMPOSITION OF TRUSTS 6
WHY AND HOW ARE THE BONDS INSURED? 7
HOW IS THE PUBLIC OFFERING PRICE DETERMINED? 8
MARKET FOR UNITS 11
WHAT IS ACCRUED INTEREST? 11
WHAT ARE ESTIMATED LONG TERM RETURN AND ESTIMATED
CURRENT RETURN? 12
HOW WAS THE PRICE OF THE BONDS DETERMINED AT THE
DATE
OF DEPOSIT? 12
WHAT IS THE TAX STATUS OF UNITHOLDERS? 13
WHAT ARE NORMAL TRUST OPERATING EXPENSES? 14
WHEN ARE DISTRIBUTIONS MADE TO UNITHOLDERS? 15
ACCUMULATION PLAN 16
HOW DETAILED ARE REPORTS TO UNITHOLDERS? 17
UNIT VALUE AND EVALUATION 17
HOW UNITS OF THE TRUSTS ARE DISTRIBUTED TO THE
PUBLIC 17
OWNERSHIP AND TRANSFER OF UNITS 19
HOW UNITS MAY BE REDEEMED WITHOUT CHARGE 19
HOW UNITS MAY BE PURCHASED BY THE SPONSOR 20
HOW BONDS MAY BE REMOVED FROM THE TRUSTS 20
INFORMATION ABOUT THE TRUSTEE 21
INFORMATION ABOUT THE SPONSOR 22
OTHER INFORMATION 22
</TABLE>
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WHAT IS THE NUVEEN TAX-EXEMPT UNIT TRUST?
This Nuveen Tax-Exempt Unit Trust is one of a series of separate but similar
investment companies created by the Sponsor, each of which is designated by a
different Series number. The underlying unit investment trusts contained in this
Series are combined under one Trust Indenture and Agreement. Specific
information regarding this Trust is set forth in Part A of this Prospectus. The
various Nuveen Tax-Exempt Unit Trusts are collectively referred to herein as the
"Trusts"; the trusts in which few or none of the Bonds are insured are sometimes
referred to as the "Traditional Trusts", the trusts in which all of the Bonds
are insured as described herein are sometimes referred to as the "Insured
Trusts", and the state trusts (both Traditional and Insured) are sometimes
referred to as the "State Trusts." This Series was created under the laws of the
State of New York pursuant to a Trust Indenture and Agreement dated the Date of
Deposit (the "Indenture") between John Nuveen & Co. Incorporated (the "Sponsor")
and The Chase Manhattan Bank, N.A. (the "Trustee").
The Sponsor has deposited with the Trustee delivery statements relating to
contracts for the purchase of municipal debt obligations together with funds
represented by an irrevocable letter of credit issued by a major commercial bank
in the amount, including accrued interest, required for their purchase (or the
obligations themselves) (the "Bonds"). See "Schedule of Investments" in Part A
of this Prospectus, for a description of the Securities deposited in a Trust.
See "SUMMARY OF PORTFOLIOS" and "RISK FACTORS" for a discussion of zero coupon
bonds and stripped obligations included in the Trusts, if any. Some of the
delivery statements may relate to contracts for the purchase of "when issued" or
other Bonds with delivery dates after the date of settlement for a purchase made
on the Date of Deposit. See the "Schedule of Investments" in Part A of this
Prospectus and "COMPOSITION OF TRUSTS". For a discussion of the Sponsor's
obligations in the event of a failure of any contract for the purchase of any of
the Bonds and its limited right to substitute other bonds to replace any failed
contract, see "COMPOSITION OF TRUSTS."
Payment of interest on the Bonds in each Insured Trust, and of principal at
maturity, is guaranteed under policies of insurance obtained by the Sponsor or
by the issuers of the Bonds. (See "WHY AND HOW ARE THE BONDS INSURED?".) AS A
GENERAL MATTER, NEITHER THE ISSUER NOR THE SPONSOR HAS OBTAINED INSURANCE WITH
RESPECT TO THE BONDS IN ANY TRADITIONAL TRUST.
The Trustee has delivered to the Sponsor registered Units which represent
ownership of the entire Trust, and which are offered for sale by this
Prospectus. Each Unit of a Trust represents a fractional undivided interest in
the principal and net income of such Trust in the ratio set forth in "Essential
Information" in Part A of this Prospectus. Units may only be sold in states in
which they are registered. To the extent that any Units of any Trust are
redeemed by the Trustee, the aggregate value of the Trust's assets will decrease
by the amount paid to the redeeming Unitholder, but the fractional undivided
interest of each unredeemed Unit in such Trust will increase proportionately.
The Sponsor will initially, and from time to time thereafter, hold Units in
connection with their offering.
WHAT ARE THE OBJECTIVES OF THE TRUSTS?
The objectives of the Trusts are income exempt from Federal income tax and, in
the case of State Trusts, where applicable, state income and intangibles taxes,
and conservation of capital, through an investment in obligations issued by or
on behalf of states and territories of the United States and authorities and
political subdivisions thereof, the interest on which is, in the opinion of
recognized bond counsel to the issuing governmental authorities, exempt from
Federal income tax under existing law and certain state income tax and
intangibles taxes, if any, for purchasers who qualify as residents of that State
in which Bonds are issued. Insurance guaranteeing the timely payment, when due,
of all principal and interest on the Bonds in each Insured Trust has been
obtained by the Sponsor or by the issuers of such Bonds from MBIA Insurance
Corporation, and as a result of such insurance the obligations in the Insured
Trusts are rated "Aaa" by Moody's and "AAA" by Standard & Poor's. (See "WHY AND
HOW ARE THE BONDS INSURED?".) All obligations in each Traditional Trust are
rated in the category "A" or better (SP-1 or MIG 2 or better in the case of
short term obligations included in a Short Term Traditional Trust) by Standard &
Poor's or Moody's (including provisional or conditional ratings). In addition,
certain Bonds in certain Traditional Trusts may be covered by insurance
guaranteeing the timely payment, when due, of all principal and interest. There
is, of course, no guarantee that the Trusts' objectives will be achieved. For a
comparison of net after-tax return for various tax brackets see the "TAXABLE
EQUIVALENT ESTIMATED CURRENT RETURN TABLES" included in the Appendices to the
Information Supplement of this Prospectus.
SUMMARY OF PORTFOLIOS
In selecting Bonds for the respective Trusts, the following factors, among
others, were considered: (i) the Standard & Poor's Corporation rating of the
Bonds or the Moody's Investors Service, Inc. rating of the Bonds (see "WHAT ARE
THE OBJECTIVES OF THE TRUSTS?" for a description of minimum rating standards),
(ii) the prices of the Bonds relative to other bonds of comparable quality and
maturity, (iii) the diversification of Bonds as to purpose of issue and location
of issuer, (iv) the maturity dates of the Bonds, and (v) in the case of the
Insured Trusts only, the availability of MBIA Insurance Corporation insurance on
such Bonds. (See "WHY AND HOW ARE THE BONDS INSURED?".)
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RISK FACTORS
An investment in Units of any Trust should be made with an understanding of
the risks that such an investment may entail. Each Trust consists of fixed-rate
municipal debt obligations. As such, the value of the debt obligations and
therefore of the Units will decline with increases in interest rates. In
general, the longer the period until the maturity of a Bond, the more sensitive
its value will be to fluctuations in interest rates. The Sponsor cannot predict
the extent or timing of such fluctuations and, accordingly, their effect upon
the value of the debt obligations. Additional risk factors include the ability
of the issuer, or, if applicable, an insurer, to make payments of interest and
principal when due, "mandatory put" features, early call provisions and the
potential for changes in the tax status of the Bonds. As set forth in Part A of
this Prospectus, the Trusts may contain or be concentrated in one or more of the
types of bonds discussed below. The following paragraphs briefly discuss certain
circumstances which may adversely affect the ability of issuers of Bonds held in
the portfolio of a Trust to make payment of principal and interest thereon, and
which also therefore may adversely affect the ratings of such Bonds. With
respect to Insured Trusts, however, because of the insurance obtained by the
Sponsor or by the issuers of the Bonds, such changes should not adversely affect
an Insured Trust's receipt of principal and interest, the Standard & Poor's AAA
or Moody's Aaa ratings of the Bonds in the Insured Trust portfolio, or the
Standard & Poor's AAA rating of the Units of each such Insured Trust. The Bonds
described below may be subject to special or extraordinary redemption
provisions. For economic risks specific to the individual Trusts, see Part A of
this Prospectus and the Appendices to the Information Supplement of this
Prospectus.
HEALTH FACILITY OBLIGATIONS are obligations of issuers whose revenues are
derived from services provided by hospitals or other health care facilities,
including nursing homes. The ability of such issuers to make debt service
payments on these obligations is dependent on various factors, including
occupancy levels of the facility, demand for services, wages of employees,
overhead expenses, competition from other similar providers, government
regulation, the cost of malpractice insurance, and the degree of governmental
financial assistance, including Medicare and Medicaid.
HOUSING OBLIGATIONS are obligations of issuers whose revenues are primarily
derived from mortgage loans on single family residences or housing projects for
low to moderate income families. Housing obligations are generally prepayable at
any time and therefore their average life will ordinarily be less than their
stated maturities. The ability of such issuers to make debt service payments on
these obligations is dependent on various factors, including occupancy levels,
rental income, mortgage default rates, taxes, operating expenses, governmental
regulations and the appropriation of subsidies.
INDUSTRIAL REVENUE OBLIGATIONS are industrial revenue bonds ("IRBs"),
including pollution control revenue bonds, which are tax-exempt securities
issued by states, municipalities, public authorities or similar entities to
finance the cost of acquiring, constructing or improving various industrial
projects. Debt service payment on IRBs is dependent upon various factors,
including the creditworthiness of the corporate operator of the project and, if
applicable, corporate guarantor, revenues generated from the project, expenses
associated with the project and regulatory and environmental restrictions.
ELECTRIC UTILITY OBLIGATIONS are obligations of issuers whose revenues are
primarily derived from the sale of electric energy. The ability of such issuers
to make debt service payments on these obligations is dependent on various
factors, including the rates for electricity, the demand for electricity, the
degree of competition, governmental regulation, overhead expenses and variable
costs, such as fuel.
TRANSPORTATION FACILITY REVENUE OBLIGATIONS are obligations of issuers which
are payable from and secured by revenues derived from the ownership and
operation of airports, public transit systems and ports. The ability of issuers
to make debt service payments on airport obligations is dependent on the
capability of airlines to meet their obligations under use agreements. Due to
increased competition, deregulation, increased fuel costs and other factors,
many airlines may have difficulty meeting their obligations under these use
agreements. Bonds that are secured primarily by the revenue collected by a
public transit system typically are additionally secured by a pledge of sales
tax receipts collected at the state or local level, or of other governmental
financial assistance. The revenue of issuers of transit system obligations will
be affected by variations in utilization, which in turn may be affected by the
degree of local governmental subsidization, competition from other forms of
transportation, and increased costs. Port authorities derive their revenues
primarily from fees imposed on ships using the facilities which may fluctuate
depending on the local economy and on competition from competing forms of
transportation such as air, rail and trucks. The revenues of issuers which
derive their payments from bridge, road or tunnel toll revenues could be
adversely affected by increases in fuel costs, competition from toll-free
vehicular bridges and roads and alternative modes of transportation.
WATER AND/OR SEWERAGE OBLIGATIONS are obligations of issuers whose revenues
are payable from user fees from the sale of water and/or sewerage services. The
problems of such issuers include the ability to obtain rate
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increases, population declines, the limitations on operations and increased
costs and delays attributable to environmental considerations, the difficulties
obtaining new supplies of fresh water, the effect of conservation programs and
in "no-growth" zoning ordinances.
UNIVERSITY AND COLLEGE REVENUE OBLIGATIONS are obligations of issuers whose
revenues are derived mainly from tuition, dormitory revenues, grants and
endowments. General problems faced by such issuers include declines in the
number of "college" age individuals, possible inability to raise tuitions and
fees, the uncertainty of continued receipt of Federal grants and state funding,
and government legislation or regulations which may adversely affect the
revenues or costs of such issuers.
DEDICATED-TAX SUPPORTED OBLIGATIONS are obligations of issuers which are
payable from and secured by tax revenues from a designated source, which
revenues are pledged to secure the bonds. The various types of Bonds described
below differ in structure and with respect to the rights of the bondholders to
the underlying property. Each type of dedicated-tax supported Bond has distinct
risks, only some of which are set forth below. One type of dedicated-tax
supported Bond is secured by the incremental tax received on either real
property or on sales within a specifically defined geographical area; such tax
generally will not provide bondholders with a lien on the underlying property or
revenues. Another type of dedicated-tax supported Bond is secured by a special
tax levied on real property within a defined geographical area in such a manner
that the tax is levied on those who benefit from the project; such bonds
typically provide for a statutory lien on the underlying property for unpaid
taxes. A third type of dedicated-tax supported Bond may be secured by a tax
levied upon the manufacture, sale or consumption of commodities or upon the
license to pursue certain occupations or upon corporate privileges within a
taxing jurisdiction. As to any of these types of Bonds, the ability of the
designated revenues to satisfy the interest and principal payments on such bonds
may be affected by changes in the local economy, the financial success of the
enterprise responsible for the payment of the taxes, the value of any property
on which taxes may be assessed and the ability to collect such taxes in a timely
fashion. Each of these factors will have a different affect on each distinct
type of dedicated-tax supported bonds.
MUNICIPAL LEASE OBLIGATIONS are obligations that are secured by lease
payments of a governmental entity and are normally subject to annual budget
appropriations of the leasing governmental entity. A governmental entity that
enters into such a lease agreement cannot obligate future governments to
appropriate for and make lease payments but covenants to take such action as is
necessary to include any lease payments due in its budgets and to make the
appropriations therefor. A governmental entity's failure to appropriate for and
to make payments under its lease obligation could result in insufficient funds
available for payment of the obligations secured thereby.
ORIGINAL ISSUE DISCOUNT OBLIGATIONS AND STRIPPED OBLIGATIONS are bonds which
were issued with nominal interest rates less than the rates then offered by
comparable securities and as a consequence were originally sold at a discount
from their face, or par, values. In a stable interest rate environment, the
market value of an original issue discount bond would tend to increase more
slowly in early years and in greater increments as the bond approached maturity.
Certain of the original issue discount obligations in a Trust may be zero
coupon bonds. Zero coupon bonds do not provide for the payment of any current
interest; the buyer receives only the right to receive a final payment of the
face amount of the bond at its maturity. Zero coupon bonds are subject to
substantially greater price fluctuations during periods of changing market
interest rates than are securities of comparable quality that pay interest
currently.
Original issue discount obligations, including zero coupon bonds, may be
subject to redemption at prices based on the issue price plus the amount of
original issue discount accreted to redemption (the "accreted value") plus, if
applicable, some premium. Pursuant to such call provisions, an original issue
discount bond may be called prior to its maturity date at a price less than its
face value. See the "Schedule of Investments" appearing in Part A of this
Prospectus for more information about the call provisions of portfolio Bonds.
Certain of the Bonds in a Trust may be stripped obligations, which represent
evidences of ownership with respect to either the principal amount of or a
payment of interest on a tax-exempt obligation ("Stripped Obligations"). Each
Stripped Obligation has been purchased at a discount from the amount payable at
maturity. A Stripped Obligation therefore has economic characteristics similar
to zero coupon bonds, as described above.
Unitholders should consult their own tax advisers with respect to the state
and local tax consequences of owning original issue discount bonds or Stripped
Obligations. Under applicable provisions governing determination of state and
local taxes, interest on original issue discount obligations or Stripped
Obligations may be deemed to be received in the year of accrual even though
there is no corresponding cash payment.
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Certain bonds may carry a "mandatory put" (also referred to as a "mandatory
tender" or "mandatory repurchase") feature pursuant to which the holder of such
bonds will receive payment of the full principal amount thereof on a stated date
prior to the maturity date unless such holder affirmatively acts to retain the
bond. The Trustee does not have the authority to act to retain Bonds with such
features; accordingly, it will receive payment of the full principal amount of
any such Bonds on the stated put date and such date is therefore treated as the
maturity date of such Bonds in selecting Bonds for the respective Trusts and for
purposes of calculating the average maturity of the Bonds in any Trust.
COMPOSITION OF TRUSTS
Each Trust initially consists of delivery statements relating to contracts to
purchase Bonds (or of such Bonds) as are listed under "Schedule of Investments"
in Part A of this Prospectus and, thereafter, of such Bonds as may continue to
be held from time to time (including certain securities deposited in the Trust
in substitution for Bonds not delivered to a Trust or in exchange or
substitution for Bonds upon certain refundings), together with accrued and
undistributed interest thereon and undistributed cash realized from the
disposition of Bonds.
"WHEN-ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The contracts to
purchase Bonds delivered to the Trustee represent an obligation by issuers or
dealers to deliver Bonds to the Sponsor for deposit in the Trusts. Certain of
the contracts relate to Bonds which have not been issued as of the Date of
Deposit and which are commonly referred to as "when issued" or "when, as and if
issued" Bonds. Although the Sponsor believes it unlikely, if such Bonds, or
replacement bonds described below, are not acquired by a Trust or if their
delivery is delayed, the Estimated Current Returns and Estimated Long Term
Returns shown in Part A of this Prospectus may be reduced. Certain of the
contracts for the purchase of Bonds provide for delivery dates after the date of
settlement for purchases made on the Date of Deposit. Interest on such "when
issued" and "delayed delivery" Bonds accrues to the benefit of Unitholders
commencing with the first settlement date for the Units. However, in the opinion
of counsel, Unitholders who purchase their Units prior to the date such Bonds
are actually delivered to the Trustee must reduce the tax basis of their Units
for interest accruing on such Bonds during the interval between their purchase
of Units and the delivery of the Bonds because such amounts constitute a return
of principal. As a result of such adjustment, the Estimated Current Returns set
forth in Part A of this Prospectus (which are based on the Public Offering Price
as of the business day prior to the Date of Deposit) may be slightly lower than
Unitholders will receive after the first year, assuming the Portfolio does not
change and estimated annual expense does not vary from that set forth under
"Essential Information" in Part A of this Prospectus. Those Bonds in each Trust
purchased with delivery dates after the date of settlement for purchases made on
the Date of Deposit are so noted in the "Schedule of Investments" in Part A of
this Prospectus.
LIMITED REPLACEMENT OF CERTAIN BONDS. Neither the Sponsor nor the Trustee
shall be liable in any way for any default, failure or defect in any Bond. In
the event of a failure to deliver any Bond that has been purchased for a Trust
under a contract, including those Bonds purchased on a when, as and if issued
basis ("Failed Bonds"), the Sponsor is authorized under the Indenture to direct
the Trustee to acquire other specified Bonds ("Replacement Bonds") to make up
the original corpus of the Trust within 20 days after delivery of notice of the
failed contract and the cost to the Trust (exclusive of accrued interest) may
not exceed the amount of funds reserved for the purchase of the Failed Bonds.
The Replacement Bonds must satisfy the criteria previously described for the
Trusts and shall be substantially identical to the Failed Bonds they replace in
terms of (i) the exemption from federal and state taxation; (ii) maturity and;
(iii) cost to the Trust. In addition, Replacement Bonds shall not be "when, as
and if issued" Bonds. Whenever a Replacement Bond has been acquired for a Trust,
the Trustee shall, within five days after the delivery thereof, mail or deliver
a notice of such acquisition to all Unitholders of the Trust involved. Once the
original corpus of the Trust is acquired, the Trustee will have no power to vary
the investment of the Trust.
To the extent Replacement Bonds are not acquired, the Sponsor shall refund
to all Unitholders of the Trust involved the sales charge attributable to such
Failed Bonds not replaced, and the principal and accrued interest attributable
to such Bonds shall be distributed not more than 30 days after the determination
of such failure or at such earlier time as the Trustee in its sole discretion
deems to be in the interest of the Unitholders. Any such accrued interest paid
to Unitholders will be paid by the Sponsor and, accordingly, will not be treated
as tax-exempt income. In the event Failed Bonds in a Trust could not be
replaced, the Net Annual Interest Income per Unit for such Trust would be
reduced and the Estimated Current Return thereon might be lowered.
SALE, MATURITY AND REDEMPTION OF BONDS. Certain of the Bonds may from time
to time under certain circumstances be sold or redeemed or will mature in
accordance with their terms. The proceeds from such events will be used to pay
for Units redeemed or distributed to Unitholders and not reinvested;
accordingly, no assurance can be given that a Trust will retain for any length
of time its present size and composition.
All of the Bonds in each Trust are subject to being called or redeemed in
whole or in part prior to their stated maturities pursuant to the optional
redemption provisions described in the "Schedule of Investments" in Part A of
6
<PAGE>
this Prospectus and in most cases pursuant to sinking fund, special or
extraordinary redemption provisions. See the discussion of the various types of
bond issues, above, for information on the call provisions of such bonds,
particularly single family mortgage revenue bonds.
The exercise of redemption or call provisions will (except to the extent the
proceeds of the called Bonds are used to pay for Unit redemptions) result in the
distribution of principal and may result in a reduction in the amount of
subsequent interest distributions; it may also affect the current return on
Units of the Trust involved. The exercise of redemption or call provisions is
more likely to occur in situations where when the Bonds have an offering side
evaluation which represents a premium over par (as opposed to a discount from
par). (In the case of original issue discount bonds, such redemption is
generally to be made at the issue price plus the amount of original issue
discount accreted to the date of redemption; such price is referred to herein as
"accreted value"). Because Bonds may have been valued at prices above or below
par value or the then current accreted value at the time Units were purchased,
Unitholders may realize gain or loss upon the redemption of portfolio Bonds.
(See "WHAT IS THE TAX STATUS OF UNITHOLDERS?" and "WHEN ARE DISTRIBUTIONS MADE
TO UNITHOLDERS?" in Part B and the "Schedule of Investments" in Part A of this
Prospectus.)
CERTAIN TAX MATTERS; LITIGATION. Certain of the Bonds in a Trust's
portfolio may be subject to continuing requirements such as the actual use of
bond proceeds, manner of operation of the project financed from bond proceeds or
rebate of excess earnings on bond proceeds that may affect the exemption of
interest on such Bonds from Federal income taxation. Although at the time of
issuance of each of the Bonds in each Trust an opinion of bond counsel was
rendered as to the exemption of interest on such obligations from Federal income
taxation, and the issuers covenanted to comply with all requirements necessary
to retain the tax-exempt status of the Bonds, there can be no assurance that the
respective issuers or other obligors on such obligations will fulfill the
various continuing requirements established upon issuance of the Bonds. A
failure to comply with such requirements may cause a determination that interest
on such obligations is subject to Federal income taxation, perhaps even
retroactively from the date of issuance of such Bonds, thereby reducing the
value of the Bonds and subjecting Unitholders to unanticipated tax liabilities.
To the best knowledge of the Sponsor, there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be expected
to have a material adverse effect on any of the Trusts. It is possible that
after the Date of Deposit, litigation may be initiated with respect to Bonds in
any Trust. Any such litigation may affect the validity of such Bonds or the
tax-exempt nature of the interest thereon, but while the outcome of litigation
of such nature can never be entirely predicted, the opinions of bond counsel to
the issuer of each Bond on the date of issuance state that such Bonds were
validly issued and that the interest thereon is, to the extent indicated, exempt
from Federal income tax.
WHY AND HOW ARE THE BONDS INSURED?
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in each Insured Trust has been obtained by the Sponsor or
by the issuers or underwriters of the Bonds from the MBIA Insurance Corporation
(the "Insurer"). Certain of the Bonds in an Insured Trust may be covered by a
policy or policies of insurance obtained by the issuers or underwriters of the
Bonds from Municipal Bond Insurance Association (the "Association") or Bond
Investors Guaranty Insurance Company ("BIG"). The claims-paying ability of both
the Insurer and the Association was rated "AAA Prime Grade" by Standard &
Poor's. Moody's rates all bond issuers insured by either the Insurer or the
Association "Aaa" and short-term loans "MIG 1," both designated to be of the
highest quality. The Insurer has issued a policy or policies of insurance
covering each of the Bonds in the Insured Trusts, each policy to remain in force
until the payment in full of such Bonds and whether or not the Bonds continue to
be held by an Insured Trust. By the terms of each policy the Insurer will
unconditionally guarantee to the holders or owners of the Bonds the payment,
when due, required of the issuer of the Bonds of an amount equal to the
principal of and interest on the Bonds as such payments shall become due but not
be paid (except that in the event of any acceleration of the due date of
principal by reason of mandatory or optional redemption, default or otherwise,
the payments guaranteed will be made in such amounts and at such times as would
have been due had there not been an acceleration).
Insurance guaranteeing the timely payment, when due, of all principal and
interest on certain Bonds in a Traditional Trust may have been obtained by the
Sponsor, issuer or underwriter of the particular Bonds involved or by another
party. Such insurance, which provides coverage substantially the same as that
obtained with respect to Bonds in Insured Trusts as described above, is
effective so long as the insured Bond is outstanding and the insurer remains in
business. Insurance relates only to the particular Bond and not to the Units
offered hereby or to their market value. Insured Bonds have received a rating of
"Aaa" by Moody's and/or "AAA" by Standard & Poor's in recognition of such
insurance.
7
<PAGE>
If a Bond in a Traditional Trust is insured, the "Schedule of Investments"
appearing in Part A of this Prospectus will identify the insurer. The Sponsor to
date has purchased and presently intends to purchase insurance for Bonds in
Traditional Trusts exclusively from the Insurer. There can be no assurance that
any insurer listed therein will be able to satisfy its commitments in the event
claims are made in the future. However, Standard & Poor's and/or Moody's have
rated the claims-paying ability of each insurer "AAA" or "Aaa," respectively.
The Insurer is the principal operating subsidiary of MBIA, Inc., a New York
Stock Exchange listed company. MBIA, Inc. is not obligated to pay the debts of
or claims against the Insurer. The Insurer is a limited liability corporation
rather than a several liability association. The Insurer is domiciled in the
State of New York and licensed to do business in all 50 states, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the Virgin Islands of the United States and the Territory of
Guam. The Insurer has one European branch in the Republic of France.
As of June 30, 1995 the Insurer had admitted assets of $3.6 billion
(unaudited), total liabilities of $2.4 billion (unaudited), and total capital
and surplus of $1.2 billion (unaudited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1994, the Insurer had admitted assets of $3.4
billion (audited), total liabilities of $2.3 billion (audited), and total
capital and surplus of $1.1 billion (audited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities.
The Association is comprised of the five insurance companies set forth in
the following table, which provides certain unaudited financial information with
respect to each of the five insurance companies comprising the Association.
MUNICIPAL BOND INSURANCE ASSOCIATION
FIVE MEMBER COMPANIES ASSETS AND POLICYHOLDERS' SURPLUS (UNAUDITED)
AS OF SEPTEMBER 30, 1994.
(000'S OMITTED)
<TABLE>
<CAPTION>
NEW YORK NEW YORK NEW YORK
STATUTORY STATUTORY POLICYHOLDERS
ASSETS LIABILITIES SURPLUS
------------ ------------ --------------
<S> <C> <C> <C>
The AEtna Casualty & Surety Company........................................ $ 10,030,200 $ 8,275,300 $ 1,754,900
Fireman's Fund Insurance Company........................................... 6,815,775 4,904,534 1,911,241
The Travelers Indemnity Company............................................ 10,295,359 8,515,392 1,779,967
CIGNA Property and Casualty Company (formerly AEtna Insurance Company)..... 5,112,251 4,842,235 270,016
The Continental Insurance Company.......................................... 2,794,536 2,449,805 344,731
------------ ------------ --------------
Total.............................................................. $ 35,048,121 $ 28,987,266 $ 6,060,855
------------ ------------ --------------
------------ ------------ --------------
</TABLE>
Insurance companies are subject to extensive regulation and supervision
where they do business by state insurance commissioners who regulate the
standards of solvency which must be maintained, the nature of and limitations on
investments, reports of financial condition, and requirements regarding reserves
for unearned premiums, losses and other matters. A significant portion of the
assets of insurance companies are required by law to be held in reserve against
potential claims on policies and is not available to general creditors. Although
the federal government does not regulate the business of insurance, federal
initiatives including pension regulation, controls on medical care costs,
minimum standards for no-fault automobile insurance, national health insurance,
tax law changes affecting life insurance companies and repeal of the antitrust
exemption for the insurance business can significantly impact the insurance
business.
The above ratings are not recommendations to buy, sell or hold the Bonds,
and such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either or both ratings
may have an adverse effect on the market price of the Bonds. See the Information
Supplement--for further information concerning insurance.
Because the insurance on the Bonds, if any, will be effective so long as the
Bonds are outstanding, such insurance will be taken into account in determining
the market value of the Bonds and therefore some value attributable to such
insurance will be included in the value of the Units of the Insured Trusts. The
insurance does not, however, guarantee the market value of the Bonds or of the
Units.
HOW IS THE PUBLIC OFFERING PRICE DETERMINED?
The Public Offering Price of the Units of each Trust is equal to the Trustee's
determination of the aggregate OFFERING prices of the Bonds deposited therein
(minus any advancement to the principal account of the Trust made by the
8
<PAGE>
Trustee) plus a sales charge set forth in "Essential Information" in Part A of
this Prospectus, in each case adding to the total thereof cash held by the
Trust, if any, and dividing the sum so obtained by the number of Units
outstanding in the Trust. See "UNIT VALUE AND EVALUATION."
The sales charge applicable to quantity purchases is reduced on a graduated
scale for sales to any purchaser of at least $50,000 or 500 Units and will be
applied on whichever basis is more favorable to the purchaser. For purposes of
calculating the applicable sales charge, purchasers who have indicated their
intent to purchase a specified amount of Units of any Trust in the primary or
secondary offering period by executing and delivering a letter of intent to the
Sponsor, which letter of intent must be in a form acceptable to the Sponsor and
shall have a maximum duration of thirteen months, will be eligible to receive a
reduced sales charge according to the following tables based on the amount of
intended aggregate purchases as expressed in the letter of intent. Due to
administrative limitations and in order to permit adequate tracking, the only
secondary market purchases that will be permitted to be applied toward the
intended specified amount and that will receive the corresponding reduced sales
charge are those Units that are acquired through or from the Sponsor. By
establishing a letter of intent, a Unitholder agrees that the first purchase of
Units following the execution of such letter of intent will be at least 5% of
the total amount of the intended aggregate purchases expressed in such
Unitholder's letter of intent. Further, through the establishment of the letter
of intent, such Unitholder agrees that Units representing 5% of the total amount
of the intended purchases will be held in escrow by the Trustee pending
completion of these purchases. All distributions on Units held in escrow will be
credited to such Unitholder's account. If total purchases prior to the
expiration of the letter of intent period equal or exceed the amount specified
in a Unitholder's letter of intent, the Units held in escrow will be transferred
to such Unitholder's account. If the total purchases are less than the amount
specified, the Unitholder involved must pay the Sponsor an amount equal to the
difference between the amounts paid for these purchases and the amounts which
would have been paid if the higher sales charge had been applied. If such
Unitholder does not pay the additional amount within 20 days after written
request by the Sponsor or the Unitholder's securities representative, the
Sponsor will instruct the Trustee to redeem an appropriate number of the
escrowed Units to meet the required payment. By establishing a letter of intent,
a Unitholder irrevocably appoints the Sponsor as attorney to give instructions
to redeem any or all of such Unitholder's escrowed Units, with full power of
substitution in the premises. A Unitholder or his securities representative must
notify the Sponsor whenever such Unitholder makes a purchase of Units that he
wishes to be counted towards the intended amount. Sales charges during the
primary offering period are as follows:
<TABLE>
<CAPTION>
NATIONAL AND STATE TRUSTS LONG INTERMEDIATE TRUSTS INTERMEDIATE
TRUSTS
----------------------------- ----------------------------- ------------
<S> <C> <C> <C> <C> <C>
PERCENT PERCENT PERCENT PERCENT PERCENT
OF OF NET OF OF NET OF
OFFERING AMOUNT OFFERING AMOUNT OFFERING
NUMBER OF UNITS* PRICE INVESTED PRICE INVESTED PRICE
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Less than 500........................... 4.90 % 5.152% 4.25 % 4.439% 3.90%
500 but less than 1,000................. 4.75 4.987 4.15 4.330 3.70
1,000 but less than 2,500............... 4.50 4.712 3.85 4.004 3.50
2,500 but less than 5,000............... 4.25 4.439 3.60 3.734 3.25
5,000 but less than 10,000.............. 3.50 3.627 3.35 3.466 3.00
10,000 but less than 25,000............. 3.00 3.093 3.00 3.093 2.75
25,000 but less than 50,000............. 2.50 2.564 2.50 2.564 2.50
50,000 or more.......................... 2.00 2.041 2.00 2.041 2.00
<CAPTION>
<S> <C>
PERCENT
OF NET
AMOUNT
NUMBER OF UNITS* INVESTED
- ---------------------------------------- ------------
Less than 500........................... 4.058%
500 but less than 1,000................. 3.842
1,000 but less than 2,500............... 3.627
2,500 but less than 5,000............... 3.359
5,000 but less than 10,000.............. 3.093
10,000 but less than 25,000............. 2.828
25,000 but less than 50,000............. 2.564
50,000 or more.......................... 2.041
</TABLE>
<TABLE>
<CAPTION>
SHORT INTERMEDIATE TRUSTS
SHORT TERM TRUSTS
----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
PERCENT PERCENT PERCENT PERCENT
OF OF NET OF OF NET
OFFERING AMOUNT OFFERING AMOUNT
NUMBER OF UNITS* PRICE INVESTED PRICE INVESTED
- ---------------------------------------- ------------ ------------ ------------ ------------
Less than 500........................... 3.00 % 3.093% 2.50 % 2.564%
500 but less than 1,000................. 2.80 2.881 2.30 2.354
1,000 but less than 2,500............... 2.60 2.670 2.10 2.145
2,500 but less than 5,000............... 2.35 2.407 1.85 1.885
5,000 but less than 10,000.............. 2.10 2.145 1.60 1.626
10,000 but less than 25,000............. 1.85 1.885 1.35 1.368
25,000 but less than 50,000............. 1.80 1.833 1.25 1.266
50,000 or more.......................... 1.50 1.523 1.15 1.163
</TABLE>
*Breakpoint sales charges are computed both on a dollar basis and on the basis
of the number of Units purchased, using the equivalent of 500 Units to $50,000,
2,500 Units to $250,000 etc., and will be applied on that basis which is more
favorable to the purchaser.
For "secondary market" sales the Public Offering Price per Unit of each
Trust is determined by adding to the Trustee's determination of the BID price of
each Bond in the Trust a sales charge determined in accordance with the table
set forth below based upon the number of years remaining to the maturity of each
such Bond. See "UNIT VALUE AND EVALUATION." The effect of this method of sales
charge calculation will be that different sales charge
9
<PAGE>
rates will be applied to the various Bonds in a Trust portfolio based upon the
maturities of such Bonds. As shown, the sales charge on Bonds in each maturity
range (and therefore the aggregate sales charge on the purchase) is reduced with
respect to purchases of at least $50,000 or 500 Units:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE*
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$50,000 $100,000 $250,000 $500,000 $1,000,000 $2,500,000
UNDER TO TO TO TO TO TO $5,000,000
YEARS TO MATURITY $50,000 $99,999 $249,999 $499,999 $999,999 $2,499,999 $4,999,999 OR MORE
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less than 1................... 0 0 0 0 0 0 0 0
1 but less than 2............. 1.523 % 1.446 % 1.369 % 1.317 % 1.215 % 1.061 % .900 % .750 %
2 but less than 3............. 2.041 1.937 1.833 1.729 1.626 1.420 1.225 1.030
3 but less than 4............. 2.564 2.433 2.302 2.175 2.041 1.781 1.546 1.310
4 but less than 5............. 3.093 2.961 2.828 2.617 2.459 2.175 1.883 1.590
5 but less than 7............. 3.627 3.433 3.239 3.093 2.881 2.460 2.165 1.870
7 but less than 10............ 4.167 3.951 3.734 3.520 3.239 2.828 2.489 2.150
10 but less than 13........... 4.712 4.467 4.221 4.004 3.788 3.253 2.842 2.430
13 but less than 16........... 5.263 4.988 4.712 4.439 4.167 3.627 3.169 2.710
16 or more.................... 5.820 5.542 5.263 4.987 4.603 4.004 3.500 3.000
</TABLE>
*Breakpoint sales charges are computed both on a dollar basis and on the basis
of the number of Units purchased, using the equivalent of 500 Units to
$50,000, 2,500 Units to $250,000, etc., and will be applied on that basis
which is more favorable to the purchaser.
The secondary market sales charges above are expressed as a percent of the
net amount invested; expressed as a percent of the Public Offering Price, the
maximum sales charge on any Trust, including one consisting entirely of Bonds
with 16 years or more to maturity, would be 5.50% (5.820% of the net amount
invested). The actual secondary market sales charge included in the Public
Offering Price of any particular Trust will depend on the maturities of the
Bonds in the portfolio of such Trust.
Pursuant to the terms of the Indenture, the Trustee may terminate a Trust if
the net asset value of such Trust, as shown by any evaluation, is less than 20%
of the original principal amount of the Trust.
At all times while Units are being offered for sale, the Sponsor will
appraise or cause to be appraised daily the value of the underlying Bonds in
each Trust as of 4:00 p.m. eastern time on each day on which the New York Stock
Exchange (the "Exchange") is normally open and will adjust the Public Offering
Price of the Units commensurate with such appraisal. Such Public Offering Price
will be effective for all orders received by a dealer or the Sponsor at or prior
to 4:00 p.m. eastern time on each such day. Orders received after that time, or
on a day when the Exchange is closed for a scheduled holiday or weekend, will be
held until the next determination of price.
Accrued interest from the preceding Record Date to, but not including, the
settlement date of the transaction (three business days after purchase) will be
added to the Public Offering Price to determine the purchase price of Units. See
"WHAT IS ACCRUED INTEREST?".
The graduated sales charges set forth above will apply on all applicable
purchases of Nuveen investment company securities on any one day by the same
purchaser in the amounts stated, and for this purpose purchases of this Series
will be aggregated with concurrent purchases of any other Series or of shares of
any open-end management investment company of which the Sponsor is principal
underwriter and with respect to the purchase of which a sales charge is imposed.
Purchases by or for the account of an individual and his or her spouse and
children under 21 years of age ("immediate family members") will be aggregated
to determine the applicable sales charge. The graduated sales charges are also
applicable to a trustee or other fiduciary purchasing securities for a single
trust estate or single fiduciary account. Units may be purchased at the Public
Offering Price without a sales charge by officers or directors and by bona fide,
full-time employees of Nuveen, Nuveen Advisory Corp., Nuveen Institutional
Advisory Corp. and The John Nuveen Company, including in each case these
individuals and their immediate family members (as defined above).
Units may be purchased in the primary or secondary market at the Public
Offering Price for non-breakpoint purchases minus the concession the Sponsor
typically allows to brokers and dealers for non-breakpoint purchases (see "HOW
UNITS OF THE TRUSTS ARE DISTRIBUTED TO THE PUBLIC?") by (1) investors who
purchase Units through registered investment advisers, certified financial
planners and registered broker-dealers who in each case either charge periodic
fees for financial planning, investment advisory or asset management services,
or provide such services in connection with the establishment of an investment
account for which a comprehensive "wrap fee" charge is imposed, (2) bank trust
departments investing funds over which they exercise exclusive discretionary
investment authority and that are held in a fiduciary, agency, custodial or
similar capacity, (3) any person who for at least 90 days, has been an officer,
director or bona fide employee of any firm offering Units for sale to investors
or their immediate family members (as defined above) and (4) officers and
directors of bank holding companies that make Units available directly or
through subsidiaries or bank affiliates. Notwithstanding anything to the
contrary in this Prospectus, such investors, bank trust departments, firm
employees and bank holding company officers and directors who purchase Units
through this program will not receive sales charge reductions for quantity
purchases.
10
<PAGE>
The initial or primary Public Offering Price of the Units in each Trust is
based upon a pro rata share of the OFFERING prices per Unit of the Bonds in such
Trust plus the applicable sales charge. The secondary market Public Offering
Price of each Trust is based upon a pro rata share of the BID prices per Unit of
the Bonds in such Trust plus the applicable sales charge. The OFFERING prices of
Bonds in a Trust may be expected to average between 1/2% to 2% more than the BID
prices of such Bonds. The difference between the bid side evaluation and the
offering side evaluation of the Bonds in each Trust on the business day prior to
the Date of Deposit is shown in the discussion of each Trust portfolio.
Whether or not Units are being offered for sale, the Sponsor will determine
the aggregate value of each Trust as of 4:00 p.m. eastern time: (i) on each June
30 or December 31 (or, if such date is not a business day, the last business day
prior thereto), (ii) on any day on which a Unit is tendered for redemption (or
the next succeeding business day if the date of tender is a non-business day)
and (iii) at such other times as may be necessary. For this purpose, a "business
day" shall be any day on which the Exchange is normally open. (See "UNIT VALUE
AND EVALUATION.")
MARKET FOR UNITS
During the initial public offering period, the Sponsor intends to offer to
purchase Units of each Trust at a price equivalent to the pro rata share per
Unit of the OFFERING prices of the Bonds in such Trust (plus accrued interest).
Afterward, although it is not obligated to do so, the Sponsor intends to
maintain a secondary market for Units of each Trust at its own expense and
continuously to offer to purchase Units of each Trust at prices, subject to
change at any time, which are based upon the BID prices of Bonds in the
respective portfolios of the Trusts. UNITHOLDERS WHO WISH TO DISPOSE OF THEIR
UNITS SHOULD INQUIRE OF THE TRUSTEE OR THEIR BROKER AS TO THE CURRENT REDEMPTION
PRICE. (See "HOW UNITS MAY BE REDEEMED WITHOUT CHARGE?".) In connection with its
secondary marketmaking activities, the Sponsor may from time to time enter into
secondary market joint account agreements with other brokers and dealers.
Pursuant to such an agreement the Sponsor will purchase Units from the broker or
dealer at the bid price and will place the Units into a joint account managed by
the Sponsor; sales from the account will be made in accordance with the then
current prospectus and the Sponsor and the broker or dealer will share profits
and losses in the joint account in accordance with the terms of their joint
account agreement.
Certificates, if any, for Units are delivered to the purchaser as promptly
after the date of settlement (three business days after purchase) as the Trustee
can complete the mechanics of registration, normally within 48 hours after
registration instructions are received. Purchasers of Units to whom Certificates
are issued will be unable to exercise any right of redemption until they have
received their Certificates as tender of the Certificate, properly endorsed for
transfer. (See "HOW UNITS MAY BE REDEEMED WITHOUT CHARGE?".)
WHAT IS ACCRUED INTEREST?
Accrued interest is the accumulation of unpaid interest on a bond from the last
day on which interest thereon was paid. Interest on Bonds in each Trust is
accounted for daily on an accrual basis. For this reason, the purchase price of
Units of a Trust will include not only the Public Offering Price but also the
proportionate share of accrued interest to the date of settlement. Accrued
interest does not include accrual of original issue discount on zero coupon
bonds, Stripped Obligations or other original issue discount bonds. Interest
accrues to the benefit of Unitholders commencing with the settlement date of
their purchase transaction.
In an effort to reduce the amount of accrued interest that investors would
have to pay in addition to the Public Offering Price, the Trustee has agreed to
advance to each Trust the amount of accrued interest due on the Bonds as of the
Date of Deposit (which has been designated the first Record Date for all plans
of distribution). This accrued interest will be paid to the Sponsor as the
holder of record of all Units on the Date of Deposit. Consequently, the amount
of accrued interest to be added to the Public Offering Price of Units will
include only accrued interest from the Date of Deposit to, but not including,
the date of settlement of the investor's purchase (three business days after
purchase), less any distributions from the related Interest Account. The Trustee
will recover its advancements (without interest or other cost to the Trusts)
from interest received on the Bonds deposited in each Trust.
The Trustee has no cash for distribution to Unitholders until it receives
interest payments on the Bonds in the Trusts. Since municipal bond interest is
accrued daily but paid only semi-annually, during the initial months of the
Trusts, the Interest Accounts, consisting of accrued but uncollected interest
and collected interest (cash), will be predominantly the uncollected accrued
interest that is not available for distribution. However, due to advances by the
Trustee, the Trustee will provide a first distribution between approximately 30
and 60 days after the Date of Deposit. Assuming each Trust retains its original
size and composition and expenses and fees remain the same, annual interest
collected and distributed will approximate the estimated Net Annual Interest
Income stated herein. However, the amount of accrued interest at any point in
time will be greater than the amount that the Trustee will have actually
received and distributed to the Unitholders. Therefore, there will always remain
an item of accrued interest that is included in the Purchase Price and the
redemption price of the Units.
Interest is accounted for daily and a proportionate share of accrued and
undistributed interest computed from the preceding Record Date is added to the
daily valuation of each Unit of each Trust. (See Part A of this Prospectus and
"WHEN ARE DISTRIBUTIONS MADE TO UNITHOLDERS?".) As Bonds mature, or are redeemed
or sold, the accrued interest applicable to such bonds is collected and
subsequently distributed to Unitholders. Unitholders who
11
<PAGE>
sell or redeem all or a portion of their Units will be paid their proportionate
share of the remaining accrued interest to, but not including, the third
business day following the date of sale or tender.
WHAT ARE ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN?
The Estimated Long Term Return for each Trust is a measure of the return to the
investor expected to be earned over the estimated life of the Trust. The
Estimated Long Term Return represents an average of the yields to maturity (or
call) of the Bonds in the Trust's portfolio calculated in accordance with
accepted bond practice and adjusted to reflect expenses and sales charges. Under
accepted bond practice, tax-exempt bonds are customarily offered to investors on
a "yield price" basis, which involves computation of yield to maturity or to an
earlier call date (whichever produces the lower yield), and which takes into
account not only the interest payable on the bonds but also the amortization or
accretion of any premium over, or discount from, the par (maturity) value
inherent in the bond's purchase price. In the calculation of Estimated Long Term
Return, the average yield for the Trust's portfolio is derived by weighting each
Bond's yield by the market value of the Bond and by the amount of time remaining
to the date to which the Bond is priced. This weighted average yield is then
adjusted to reflect estimated expenses, is compounded, and is reduced by a
factor which represents the amortization of the sales charge over the expected
average life of the Trust. The Estimated Long Term Return calculation does not
take into account the effect of a first distribution which may be less than a
regular distribution or may be paid at some point after 30 days (or a second
distribution which may be less than a normal distribution for Unitholders who
choose quarterly or semi-annual plans of distribution), and it also does not
take into account the difference in timing of payments to Unitholders who choose
quarterly or semi-annual plans of distribution, each of which will reduce the
return.
Estimated Current Return is computed by dividing the Net Annual Interest
Income per Unit by the Public Offering Price. In contrast to Estimated Long Term
Return, Estimated Current Return does not reflect the amortization of premium or
accretion of discount, if any, on the Bonds in the Trust's portfolio. Net Annual
Interest Income per Unit is calculated by dividing the annual interest income to
the Trust, less estimated expenses, by the number of Units outstanding.
Net Annual Interest Income per Unit, used to calculate Estimated Current
Return, will vary with changes in fees and expenses of the Trustee and the
Evaluator and with the redemption, maturity, exchange or sale of Bonds. A
Unitholder's actual return may vary significantly from the Estimated Long-Term
Return, based on their holding period, market interest rate changes, other
factors affecting the prices of individual bonds in the portfolio, and
differences between the expected remaining life of portfolio bonds and the
actual length of time that they remain in the Trust; such actual holding periods
may be reduced by termination of the Trust, as described in "OTHER INFORMATION."
Since both the Estimated Current Return and the Estimated Long Term Return
quoted herein are based on the market value of the underlying Bonds on the
business day prior to the Date of Deposit, subsequent calculations of these
performance measures will reflect the then current market value of the
underlying Bonds and may be higher or lower. The Sponsor will provide estimated
cash flow information relating to a Trust without charge to each potential
investor in a Trust who receives this prospectus and makes an oral or written
request to the Sponsor for such information.
A portion of the monies received by a Trust may be treated, in the first
year only, as a return of principal due to the inclusion in the Trust portfolio
of "when-issued" or other Bonds having delivery dates after the date of
settlement for purchases made on the Date of Deposit. A consequence of this
treatment is that in the computation of Estimated Current Return for the first
year, such monies are excluded from Net Annual Interest Income and treated as an
adjustment to the Public Offering Price. (See "Essential Information" appearing
in Part A of this Prospectus, "COMPOSITION OF TRUSTS" and "WHAT IS THE TAX
STATUS OF UNITHOLDERS?")
A comparison of tax-free and equivalent taxable estimated current returns
with the returns on various taxable investments is one element to consider in
making an investment decision. The Sponsor may from time to time in its
advertising and sales materials compare the then current estimated returns on a
Trust and returns over specified periods on other similar Nuveen Trusts with
returns on taxable investments such as corporate or U.S. Government bonds, bank
CD's and money market accounts or money market funds, each of which has
investment characteristics that may differ from those of the Trust. U.S.
Government bonds, for example, are backed by the full faith and credit of the
U.S. Government and bank CD's and money market accounts are insured by an agency
of the federal government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the condition
of the short-term debt market. The investment characteristics of the Trusts are
described more fully elsewhere in the Prospectus.
HOW WAS THE PRICE OF THE BONDS DETERMINED AT THE DATE OF DEPOSIT?
The prices at which the Bonds deposited in the Trusts would have been offered to
the public on the business day prior to the Date of Deposit were determined by
the Trustee on the basis of an evaluation of such Bonds prepared by Kenny S&P
Evaluation Services, a division of J. J. Kenny Co., Inc., a firm regularly
engaged in the business of evaluating, quoting or appraising comparable bonds.
With respect to Bonds in Insured Trusts and insured Bonds in Traditional Trusts,
Kenny S&P Evaluation Services, a division of J. J. Kenny Co., Inc., evaluated
the Bonds as so insured. (See "WHY AND HOW ARE THE BONDS INSURED?".)
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<PAGE>
The amount by which the Trustee's determination of the OFFERING PRICES of
the Bonds deposited in the Trusts was greater or less than the cost of such
Bonds to the Sponsor was PROFIT OR LOSS to the Sponsor exclusive of any
underwriting profit. (See Part A of this Prospectus.) The Sponsor also may
realize FURTHER PROFIT OR SUSTAIN FURTHER LOSS as a result of fluctuations in
the Public Offering Price of the Units. Cash, if any, made available to the
Sponsor prior to the settlement date for a purchase of Units, or prior to the
acquisition of all Portfolio securities by a Trust, may be available for use in
the Sponsor's business, and may be of benefit to the Sponsor.
WHAT IS THE TAX STATUS OF UNITHOLDERS?
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exemption of interest thereon from Federal income
tax were rendered by bond counsel to the respective issuing authorities. In
addition, with respect to State Trusts, where applicable, bond counsel to the
issuing authorities rendered opinions as to the exemption of interest on such
Bonds, when held by residents of the state in which the issuers of such Bonds
are located, from state income taxes and certain state or local intangibles and
local income taxes. For a discussion of the tax status of State Trusts see Part
A of this Prospectus. Neither the Sponsor nor its counsel have made any special
review for the Trusts of the proceedings relating to the issuance of the Bonds
or of the basis for the opinions rendered in connection therewith. If the
interest on a Bond should be determined to be taxable, the Bond would generally
have to be sold at a substantial discount. In addition, investors could be
required to pay income tax on interest received prior to the date of which
interest is determined to be taxable.
Federally tax-exempt income, including income on Units of the Trusts, will
be taken into consideration in computing the portion, if any, of social security
benefits received that will be included in a taxpayer's gross income subject to
the Federal income tax.
Gain realized on the sale or redemption of the Bonds by the Trustee or of a
Unit by a Unitholder is includable in gross income for Federal income tax
purposes, and may be includable in gross income for state tax purposes. (Such
gain does not include any amounts received in respect of tax-exempt accrued
interest or accrued original issue discount, if any.) A portion of a
Unitholder's gain, to the extent of accreted market discount, may be treated as
ordinary income rather than capital gain if the Bonds were purchased by a Trust
at a market discount or if the Unitholder purchased his or her Units at a market
discount on or after April 30, 1993. Market discount can arise based on the
price the Trust pays for the Bonds or the price a Unitholder pays for his or her
Units. Market discount that accretes while the Trust holds a Bond would be
recognized as ordinary income by the Unitholders when principal payments are
received on the Bond, upon sale or at redemption (including early redemption),
or upon the sale or redemption of his or her Units, unless a Unitholder elects
to include market discount in taxable income as it accrues. The market discount
rules are complex and Unitholders should consult their tax advisors regarding
these rules and their application.
In the opinion of Chapman and Cutler, Counsel to the Sponsor, under existing
law:
(1) the Trusts are not associations taxable as corporations for Federal
income tax purposes. Tax-exempt interest received by each of the Trusts
on Bonds deposited therein will retain its status as tax-exempt
interest, for Federal income tax purposes, when received by the Trusts
and when distributed to the Unitholders, except that the alternative
minimum tax and environmental tax (the "Superfund Tax") applicable to
corporate Unitholders may, in certain circumstances, include in the
amount on which such taxes are calculated a portion of the interest
income received by the Trust. See "CERTAIN TAX MATTERS APPLICABLE TO
CORPORATE UNITHOLDERS", below;
(2) each Unitholder of a Trust is considered to be the owner of a pro rata
portion of such Trust under Subpart E, subchapter J of Chapter 1 of the
Internal Revenue Code of 1986 (the "Code") and will have a taxable event
when the Trust disposes of a Bond or when the Unitholder redeems or
sells Units. Unitholders must reduce the tax basis of their Units for
their share of accrued interest received by the Trust, if any, on Bonds
delivered after the date the Unitholders pay for their Units and,
consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or
loss upon the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis of the
Units. If the Trustee disposes of Bonds (whether by sale, payment at
maturity, redemption or otherwise), gain or loss is recognized to the
Unitholder. The amount of any such gain or loss is measured by comparing
the Unitholder's pro rata share of the total proceeds from such
disposition with the Unitholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unitholder who
purchases Units, such basis (before adjustment for earned original issue
discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the date of acquisition of the Units.
The tax cost reduction requirements of said Code relating to
amortization of bond premium may, under some circumstances, result in
the Unitholder realizing a taxable gain when his or her Units are sold
or redeemed for an amount equal to their original cost; and
(3) any amounts paid on defaulted Bonds held by the Trustee under policies
of insurance issued with respect to such Bonds will be excludable from
Federal gross income if, and to the same extent as, such interest would
13
<PAGE>
have been so excludable if paid by the respective issuer provided that,
at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the bonds, rather than the insurer, will
pay debt service on the bonds. Paragraph (2) of this opinion is
accordingly applicable to policy proceeds representing maturing
interest.
In the opinion of Carter, Ledyard & Milburn, counsel to the Trustee, and, in the
absence of a New York Trust from the Series, special counsel for the Series for
New York tax matters, under existing law:
Under the income tax laws of the State and City of New York, each Trust
is not an association taxable as a corporation and the income of each Trust
will be treated as the income of the Unitholders.
For a summary of each opinion of special counsel to the respective State
Trusts for state tax matters, see Part A of this Prospectus.
ALL STATEMENTS IN THE PROSPECTUS CONCERNING EXEMPTION FROM FEDERAL, STATE OR
OTHER TAXES ARE THE OPINION OF COUNSEL AND ARE TO BE SO CONSTRUED.
The Internal Revenue Code provides that interest on indebtedness incurred or
continued to purchase or carry obligations, the interest on which is wholly
exempt from Federal income taxes, is not deductible. Because each Unitholder is
treated for Federal income tax purposes as the owner of a pro rata share of the
Bonds owned by the applicable Trust, interest on borrowed funds used to purchase
or carry Units of such Trust will not be deductible for Federal income tax
purposes. Under rules used by the Internal Revenue Service for determining when
borrowed funds are considered used for the purpose of purchasing or carrying
particular assets, the purchase of Units may be considered to have been made
with borrowed funds even though the borrowed funds are not directly traceable to
the purchase of Units (however, these rules generally do not apply to interest
paid on indebtedness incurred to purchase or improve a personal residence).
Similar rules are generally applicable for state tax purposes. Special rules
apply in the case of certain financial institutions that acquire Units.
Investors with questions regarding these issues should consult with their tax
advisers.
For purposes of computing the alternative minimum tax for individuals and
corporations, interest on certain specified tax-exempt private activity bonds is
included as a preference item. The Trusts do not include any such bonds.
CERTAIN TAX MATTERS APPLICABLE TO CORPORATE UNITHOLDERS. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax depend
upon the corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the adjustment
items used in computing AMTI and the Superfund Tax of a corporation (other than
an S corporation, Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's "adjusted
current earnings" over an amount equal to its AMTI (before such adjustment item
and the alternative tax net operation loss deduction). Although tax-exempt
interest received by each of the Trusts on Bonds deposited therein will not be
included in the gross income of corporations for Federal income tax purposes,
"adjusted current earnings" includes all tax-exempt interest, including interest
on all Bonds in the Trust and tax-exempt original issue discount.
Corporate Unitholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them resulting under the Federal
tax law, including the corporate alternative minimum tax, the Superfund Tax and
the branch profits tax imposed by Section 884 of the Code.
EXCEPT AS NOTED ABOVE AND IN PART A OF THIS PROSPECTUS, THE EXEMPTION OF
INTEREST ON STATE AND LOCAL OBLIGATIONS FOR FEDERAL INCOME TAX PURPOSES DOES NOT
NECESSARILY RESULT IN EXEMPTION UNDER THE INCOME OR OTHER TAX LAWS OF ANY STATE
OR CITY. THE LAWS OF THE SEVERAL STATES VARY WITH RESPECT TO THE TAXATION OF
SUCH OBLIGATIONS.
WHAT ARE NORMAL TRUST OPERATING EXPENSES?
No annual advisory fee is charged to the Trusts by the Sponsor. The Sponsor
does, however, receive a fee as set forth in "Essential Information" in Part A
of this Prospectus for regularly evaluating the Bonds and for maintaining
surveillance over the portfolio. (See "UNIT VALUE AND EVALUATION.")
The Trustee receives for ordinary recurring services an annual fee for each
plan of distribution for each Trust as set forth in "Essential Information"
appearing in Part A of this Prospectus. Each annual fee is per $1,000 principal
amount of the underlying Bonds in a Trust for that portion of the Trust that
represents a particular plan of distribution. The Trustee's fee may be
periodically adjusted in response to fluctuations in short-term interest rates
(reflecting the cost to the Trustee of advancing funds to a Trust to meet
scheduled distributions) and may be further adjusted in accordance with the
cumulative percentage increase of the United States Department of Labor's
Consumer Price Index entitled "All Services Less Rent of Shelter" since the
establishment of the Trusts. The Trustee has the use of funds, if any, being
held in the Interest and Principal Accounts of each Trust for future
distributions, payment of expenses and redemptions. These Accounts are
non-interest bearing to Unitholders. Pursuant to normal banking procedures, the
Trustee benefits from the use of funds held therein. Part of the Trustee's
compensation for its services to the Fund is expected to result from such use of
these funds.
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<PAGE>
Premiums for the policies of insurance obtained by the Sponsor or by the
Bond issuers with respect to the Bonds in the Insured Trusts and with respect to
insured Bonds in Traditional Trusts have been paid in full prior to the deposit
of the Bonds in the Trusts, and the value of such insurance has been included in
the evaluation of the Bonds in each Trust and accordingly in the Public Offering
Price of Units of each Trust. There are no annual continuing premiums for such
insurance.
All or a portion of the expenses incurred in establishing the Trusts,
including costs of preparing the registration statement, the trust indenture and
other closing documents, registering Units with the Securities and Exchange
Commission and states, the initial audit of each Trust portfolio, legal fees,
the initial fees and expenses of the Trustee and any other non-material
out-of-pocket expenses, will be paid by the Trusts and amortized over the first
five years of such Trusts. The following are additional expenses of the Trusts
and, when paid by or are owed to the Trustee, are secured by a lien on the
assets of the Trust or Trusts to which such expenses are allocable: (1) the
expenses and costs of any action undertaken by the Trustee to protect the Trusts
and the rights and interests of the Unitholders; (2) all taxes and other
governmental charges upon the Bonds or any part of the Trusts (no such taxes or
charges are being levied or made or, to the knowledge of the Sponsor,
contemplated); (3) amounts payable to the Trustee as fees for ordinary recurring
services and for extraordinary non-recurring services rendered pursuant to the
Indenture, all disbursements and expenses including counsel fees (including fees
of bond counsel which the Trustee may retain) sustained or incurred by the
Trustee in connection therewith; and (4) any losses or liabilities accruing to
the Trustee without negligence, bad faith or willful misconduct on its part. The
Trustee is empowered to sell Bonds in order to pay these amounts if funds are
not otherwise available in the applicable Interest and Principal Accounts.
The Indenture requires each Trust to be audited on an annual basis at the
expense of the Trust by independent public accountants selected by the Sponsor.
The Trustee shall not be required, however, to cause such an audit to be
performed if its cost to a Trust shall exceed $.05 per Unit on an annual basis.
Unitholders of a Trust covered by an audit may obtain a copy of the audited
financial statements upon request.
WHEN ARE DISTRIBUTIONS MADE TO UNITHOLDERS?
Interest received by the Trustee on the Bonds in each Trust, including that part
of the proceeds of any disposition of Bonds which represents accrued interest
and including any insurance proceeds representing interest due on defaulted
Bonds, shall be credited to the "Interest Account" of such Trust and all other
moneys received by the Trustee shall be credited to the "Principal Account" of
such Trust.
The pro rata share of cash in the Principal Account in each Trust will be
computed as of each semi-annual Record Date and distributions to the Unitholders
as of such Record Date will be made on or shortly after the fifteenth day of the
month. Proceeds received from the disposition, including sale, call or maturity,
of any of the Bonds and all amounts paid with respect to zero coupon bonds and
Stripped Obligations will be held in the Principal Account and either used to
pay for Units redeemed or distributed on the Distribution Date following the
next semi-annual Record Date. The Trustee is not required to make a distribution
from the Principal Account of any Trust unless the amount available for
distribution in such account equals at least ten cents per Unit.
The pro rata share of the Interest Account in each Trust will be computed by
the Trustee each month as of each Record Date and distributions will be made on
or shortly after the fifteenth day of the month to Unitholders of such Trust as
of the Record Date who are entitled to distributions at that time under the plan
of distribution chosen. Persons who purchase Units between a Record Date and a
Distribution Date will receive their first distribution on the Distribution Date
following the next Record Date under the applicable plan of distribution.
Purchasers of Units who desire to receive interest distributions on a
monthly or quarterly basis may elect to do so at the time of purchase during the
initial public offering period. Those indicating no choice will be deemed to
have chosen the semi-annual distribution plan. All Unitholders, however, who
purchase Units during the initial public offering period and who hold them of
record on the first Record Date will receive the first distribution of interest.
Thereafter, Record Dates for monthly distributions will be the first day of each
month; Record Dates for quarterly distributions will be the first day of
February, May, August and November; and Record Dates for semi-annual
distributions will be the first day of May and November. See Part A of this
Prospectus for details of distributions per Unit of each Trust under the various
plans based upon estimated Net Annual Interest Income at the Date of Deposit.
The amount of the regular distributions will generally change when Bonds are
redeemed, mature or are sold or when fees and expenses increase or decrease. For
the purpose of minimizing fluctuations in the distributions from the Interest
Account of a Trust, the Trustee is authorized to advance such amounts as may be
necessary to provide for interest distributions of approximately equal amounts.
The Trustee shall be reimbursed, without interest, for any such advances from
funds in the Interest Account of such Trust. The Trustee's fee takes into
account the costs attributable to the outlay of capital needed to make such
advances.
The plan of distribution selected by a Unitholder will remain in effect
until changed. Unitholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. Unitholders desiring to change their plan of distribution may do so by
sending a written notice requesting the change, together with any
Certificate(s), to the Trustee. The notice and any Certificate(s) must be
received by the
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<PAGE>
Trustee not later than the semi-annual Record Date to be effective as of the
semi-annual distribution following the subsequent semi-annual Record Date.
Unitholders are requested to make any such changes within 45 days prior to the
applicable Record Date. Certificates should only be sent by registered or
certified mail to minimize the possibility of their being lost or stolen. (See
"OWNERSHIP AND TRANSFER OF UNITS.")
As of the first day of each month the Trustee will deduct from the Interest
Account of a Trust or, to the extent funds are not sufficient therein, from the
Principal Account of a Trust, amounts needed for payment of expenses of such
Trust. The Trustee also may withdraw from said accounts such amount, if any, as
it deems necessary to establish a reserve for any governmental charges payable
out of such Trust. Amounts so withdrawn shall not be considered a part of the
Trust's assets until such time as the Trustee shall return all or any part of
such amounts to the appropriate account. In addition, the Trustee shall withdraw
from the Interest Account and the Principal Account of a Trust such amounts as
may be necessary to cover redemptions of Units of such Trust by the Trustee.
Funds which are available for future distributions, redemptions and payment of
expenses are held in accounts which are non-interest bearing to Unitholders and
are available for use by the Trustee pursuant to normal banking procedures.
ACCUMULATION PLAN
The Sponsor is also the principal underwriter of the Accumulation Funds
described in the following table. Each of these funds is an open-end,
diversified management investment company into which Unitholders may choose to
reinvest Trust distributions automatically, without any sales charge.
(Reinvestment generally is available only to Unitholders who are residents of
the states for which such portfolios are named.) Unitholders may reinvest both
interest and principal distributions or principal distributions only. Each
Accumulation Fund has investment objectives which differ in certain respects
from those of the Trusts and may invest in securities which would not be
eligible for deposit in the Trusts. The investment adviser to each Accumulation
Fund is Nuveen Advisory Corp., a wholly-owned subsidiary of the Sponsor. For a
more detailed description, Unitholders of each Accumulation Fund should read
carefully the prospectus of the Accumulation Fund in which they are interested.
For additional information concerning the Accumulation Plan see the Information
Supplement of this Prospectus.
<TABLE>
<CAPTION>
ACCUMULATION FUND GENERAL FUND DESCRIPTION
- -------------------------------------------------------------- --------------------------------------------------------------
<S> <C>
Nuveen Municipal Bond Fund Tax-exempt income by investing in long-term municipal
securities.
Nuveen Tax-Free Reserves, Inc. and Nuveen Tax-Free Money
Market Fund, Inc.:
Nuveen Massachusetts Tax-Free Money Market Fund Nuveen New Tax-exempt and in certain cases double and triple tax- exempt
York Tax-Free Money Market Fund "money market" funds with checkwriting privileges.
Nuveen California Tax-Free Fund:
Nuveen California Tax-Free Value Fund Double tax-exempt income by investing in long-term investment
grade California tax-exempt securities.
Nuveen California Insured Tax-Free Value Fund Double tax-exempt income by investing in insured California
tax-exempt securities.
Nuveen California Tax-Free Money Market Fund California tax-exempt "money market" fund with checkwriting
privileges.
Nuveen Tax-Free Bond Fund, Inc. and the Nuveen Multistate
Tax-Free Trust:
Nuveen Massachusetts Tax-Free Value Fund, Nuveen New York Double and in certain cases triple tax-exempt income by
Tax-Free Value Fund, Nuveen Ohio Tax-Free Value Fund, Nuveen investing in tax-exempt securities in the state for which the
New Jersey Tax-Free Value Fund, Nuveen Arizona Tax-Free Value portfolio is named.
Fund, Nuveen Florida Tax-Free Value Fund, Nuveen Maryland
Tax-Free Value Fund, Nuveen Michigan Tax-Free Value Fund,
Nuveen Pennsylvania Tax-Free Value Fund and Nuveen Virginia
Tax-Free Value Fund
Nuveen Insured Tax-Free Bond Fund, Inc.:
Nuveen Insured Municipal Bond Fund, Nuveen Massachusetts Tax-exempt and in certain cases double and triple tax- exempt
Insured Tax-Free Value Fund and the Nuveen New York Insured funds investing in insured tax-exempt securities in the state
Tax-Free Value Fund. for which the portfolio is named.
</TABLE>
Shareholder Services, Inc. will mail to each participant in the Accumulation
Plan a quarterly statement containing a record of all transactions involving
purchases of Accumulation Fund shares (or fractions thereof) with Trust interest
distributions or as a result of reinvestment of Accumulation Fund dividends. Any
distribution of principal used
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<PAGE>
to purchase shares of an Accumulation Fund will be separately confirmed by
Shareholder Services, Inc. Unitholders will also receive distribution statements
from the Trustee detailing the amounts transferred to their Accumulation Fund
accounts.
Participants may at any time, by so notifying the Trustee in writing, elect to
change the Accumulation Fund into which their distributions are being
reinvested, to change from principal only reinvestment to reinvestment of both
principal and interest or vice versa, or to terminate their participation in the
Accumulation Plan altogether and receive future distributions on their Units in
cash. There will be no charge or other penalty for such change of election or
termination. The character of Trust distributions for income tax purposes will
remain unchanged even if they are reinvested in an Accumulation Fund.
HOW DETAILED ARE REPORTS TO UNITHOLDERS?
The Trustee shall furnish Unitholders of a Trust in connection with each
distribution, a statement of the amount of interest, if any, and the amount of
other receipts (received since the preceding distribution) being distributed,
expressed in each case as a dollar amount representing the pro rata share of
each Unit of a Trust outstanding and a year to date summary of all distributions
paid on said Units. Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each person who at any time during
the calendar year was a registered Unitholder of a Trust a statement with
respect to such Trust (i) as to the Interest Account: interest received
(including amounts representing interest received upon any disposition of
Bonds), and, except for any State Trust, the percentage of such interest by
states in which the issuers of the Bonds are located, deductions for fees and
expenses of such Trust, redemption of Units and the balance remaining after such
distributions and deductions, expressed in each case both as a total dollar
amount and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (ii) as to the
Principal Account: the dates of disposition of any Bonds and the net proceeds
received therefrom (excluding any portion representing accrued interest), the
amount paid for purchase of Replacement Bonds, the amount paid upon redemption
of Units, deductions for payment of applicable taxes and fees and expenses of
the Trustee, and the balance remaining after such distributions and deductions
expressed both as a total dollar amount and as a dollar amount representing the
pro rata share of each Unit outstanding on the last business day of such
calendar year; (iii) a list of the Bonds held and the number of Units
outstanding on the last business day of such calendar year; (iv) the Unit Value
based upon the last computation thereof made during such calendar year; and (v)
amounts actually distributed during such calendar year from the Interest Account
and from the Principal Account, separately stated, expressed both as total
dollar amounts and as dollar amounts representing the pro rata share of each
Unit outstanding. Each annual statement will reflect pertinent information in
respect of all plans of distribution so that Unitholders may be informed
regarding the results of other plans of distribution.
UNIT VALUE AND EVALUATION
The value of each Trust is determined by the Sponsor on the basis of (1) the
cash on hand in the Trust or moneys in the process of being collected, (2) the
value of the Bonds in the Trust based on the BID prices of the Bonds and (3)
interest accrued thereon not subject to collection, LESS (1) amounts
representing taxes or governmental charges payable out of the Trust and (2) the
accrued expenses of the Trust. The result of such computation is divided by the
number of Units of such Trust outstanding as of the date thereof to determine
the per Unit value ("Unit Value") of such Trust. The Sponsor may determine the
value of the Bonds in each Trust (1) on the basis of current BID prices of the
Bonds obtained from dealers or brokers who customarily deal in bonds comparable
to those held by the Trust, (2) if bid prices are not available for any of the
Bonds, on the basis of bid prices for comparable bonds, (3) by causing the value
of the Bonds to be determined by others engaged in the practice of evaluating,
quoting or appraising comparable bonds or (4) by any combination of the above.
Although the Unit Value of each Trust is based on the BID prices of the Bonds,
the Units are sold initially to the public at the Public Offering Price based on
the OFFERING prices of the Bonds.
Because the insurance obtained by the Sponsor or by the issuers of Bonds
with respect to the Bonds in the Insured Trusts and with respect to insured
Bonds in Traditional Trusts is effective so long as such Bonds are outstanding,
such insurance will be taken into account in determining the bid and offering
prices of such Bonds and therefore some value attributable to such insurance
will be included in the value of Units of Trusts that include such Bonds.
HOW UNITS OF THE TRUSTS ARE DISTRIBUTED TO THE PUBLIC
John Nuveen & Co. Incorporated is the Sponsor and sole Underwriter of the Units.
It is the intention of the Sponsor to qualify Units of National, Long
Intermediate, Intermediate, Short Intermediate and Short Term Trusts for sale
under the laws of substantially all of the states of the United States of
America, and Units of State Trusts only in the state for which the Trust is
named and selected other states.
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<PAGE>
Promptly following the deposit of Bonds in exchange for Units of the Trusts,
it is the practice of the Sponsor to place all of the Units as collateral for a
letter or letters of credit from one or more commercial banks under an agreement
to release such Units from time to time as needed for distribution. Under such
an arrangement the Sponsor pays such banks compensation based on the then
current interest rate. This is a normal warehousing arrangement during the
period of distribution of the Units to public investors. To facilitate the
handling of transactions, sales of Units shall be limited to transactions
involving a minimum of either $5,000 or 50 Units, whichever is less. The Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units.
The Sponsor plans to allow a discount to brokers and dealers in connection
with the primary distribution of Units and also in secondary market
transactions. The primary market discounts are as follows:
<TABLE>
<CAPTION>
DISCOUNT PER UNIT
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATIONAL LONG INTER- SHORT INTER-
AND STATE MEDIATE INTERMEDIATE MEDIATE SHORT TERM
NUMBER OF UNITS* TRUSTS TRUSTS TRUSTS TRUSTS TRUSTS
- ------------------------------ ---------- ------------- ------------- ------------- -----------
Less than 500................. $3.20 $2.90 $2.70 $2.00 $1.50
500 but less than 1,000....... 3.20 2.90 2.70 2.00 1.50
1,000 but less than 2,500..... 3.20 2.70 2.50 1.80 1.30
2,500 but less than 5,000..... 3.20 2.45 2.25 1.55 1.05
5,000 but less than 10,000.... 2.50 2.45 2.25 1.55 1.05
10,000 but less than 25,000... 2.00 2.00 2.00 1.30 .80
25,000 but less than 50,000... 1.75 1.75 1.75 1.30 .60
50,000 or more................ 1.75 1.50 1.50 1.00 .60
</TABLE>
*Breakpoint sales charges and related dealer concessions are computed both on a
dollar basis and on the basis of the number of Units purchased, using the
equivalent of 500 Units to $50,000, 2,500 Units to $250,000 etc. and will be
applied on that basis which is more favorable to the purchaser.
The Sponsor currently intends to maintain a secondary market for Units of
each Trust. See "MARKET FOR UNITS." The amount of the dealer concession on
secondary market purchases of Trust Units through the Sponsor will be computed
based upon the value of the Bonds in the Trust portfolio, including the sales
charge computed as described in "HOW IS THE PUBLIC OFFERING PRICE DETERMINED?",
and adjusted to reflect the cash position of the Trust principal account, and
will vary with the size of the purchase as shown in the following table:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE*
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$50,000 $100,000 $250,000 $500,000 $1,000,000 $2,500,000
UNDER TO TO TO TO TO TO $5,000,000
YEARS TO MATURITY $50,000 $99,999 $249,999 $499,999 $999,999 $2,499,999 $4,999,999 OR MORE
- -------------------------- --------- --------- --------- --------- --------- ---------- ---------- ----------
Less than 1............... 0 0 0 0 0 0 0 0
1 but less than 2......... 1.00% .90% .85% .80% .70% .55% .467% .389%
2 but less than 3......... 1.30% 1.20% 1.10% 1.00% .90% .73% .634% .538%
3 but less than 4......... 1.60% 1.45% 1.35% 1.25% 1.10% .90% .781% .662%
4 but less than 5......... 2.00% 1.85% 1.75% 1.55% 1.40% 1.25% 1.082% .914%
5 but less than 7......... 2.30% 2.15% 1.95% 1.80% 1.65% 1.50% 1.320% 1.140%
7 but less than 10........ 2.60% 2.45% 2.25% 2.10% 1.95% 1.70% 1.496% 1.292%
10 but less than 13....... 3.00% 2.80% 2.60% 2.45% 2.30% 2.00% 1.747% 1.494%
13 but less than 16....... 3.25% 3.15% 3.00% 2.75% 2.50% 2.15% 1.878% 1.606%
16 or more................ 3.50% 3.50% 3.40% 3.35% 3.00% 2.50% 2.185% 1.873%
</TABLE>
*Breakpoint sales charges and related dealer concessions are computed both on a
dollar basis and on the basis of the number of Units purchased, using the
equivalent of 500 Units to $50,000, 2,500 Units to $250,000, etc., and will be
applied on that basis which is more favorable to the purchaser.
The Sponsor reserves the right to change the foregoing dealer concessions
from time to time.
Registered investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management services, or provide such
services in connection with the establishment of an investment account for which
a comprehensive "wrap fee" charge is imposed, and bank trust departments
investing funds over which they exercise exclusive discretionary investment
authority and that are held in a fiduciary, agency, custodial or similar
capacity, are not entitled to receive any dealer concession for primary or
secondary market purchases in which an investor purchases any number of Units at
the Public Offering Price for non-breakpoint purchases minus the concession the
sponsor typically allows to brokers and dealers for non-breakpoint purchases
(see "HOW IS THE PUBLIC OFFERING PRICE DETERMINED?").
Certain commercial banks are making Units of the Trusts available to their
customers on an agency basis. A portion of the sales charge paid by these
customers is retained by or remitted to the banks in the amounts shown in the
above table. The Glass-Steagall Act prohibits banks from underwriting Trust
Units; the Act does, however, permit certain agency transactions and banking
regulators have not indicated that these particular agency transactions
18
<PAGE>
are not permitted under the Act. In Texas and in certain other states, any bank
making Units available must be registered as a broker-dealer under state law.
OWNERSHIP AND TRANSFER OF UNITS
The ownership of Units is evidenced by book entry positions recorded on the
books and records of the Trustee unless the Unitholder expressly requests that
the purchased Units be evidenced in Certificate form. The Trustee is authorized
to treat as the owner of Units that person who at the time is registered as such
on the books of the Trustee. Any Unitholder who holds a Certificate may change
to book entry ownership by submitting to the Trustee the Certificate along with
a written request that the Units represented by such Certificate be held in book
entry form. Likewise, a Unitholder who holds Units in book entry form may obtain
a Certificate for such Units by written request to the Trustee. Units may be
held in denominations of one Unit or any multiple or fraction thereof. Fractions
of Units are computed to three decimal places. Any Certificates issued will be
numbered serially for identification, and are issued in fully registered form,
transferable only on the books of the Trustee. Book entry Unitholders will
receive a Book Entry Position Confirmation reflecting their ownership.
For Trusts allowing optional plans of distribution, Certificates for Units
will bear an appropriate notation on their face indicating which plan of
distribution has been selected. When a change is made, the existing Certificates
must be surrendered to the Trustee and new Certificates issued to reflect the
currently effective plan of distribution. There will be no charge for this
service. Holders of book entry Units can change their plan of distribution by
making a written request to the Trustee, which will issue a new Book Entry
Position Confirmation to reflect such change.
Units are transferable by making a written request to the Trustee and, in
the case of Units evidenced by Certificate(s), by presenting and surrendering
such Certificate(s) to the Trustee, at its address listed on the back cover of
this Part B of the Prospectus, properly endorsed or accompanied by a written
instrument or instruments of transfer. The Certificate(s) should be sent
registered or certified mail for the protection of the Unitholder. Each
Unitholder must sign such written request, and such Certificate(s) or transfer
instrument, exactly as his name appears on (a) the face of the Certificate(s)
representing the Units to be transferred, or (b) the Book Entry Position
Confirmation(s) relating to the Units to be transferred. Such signature(s) must
be guaranteed by a guarantor acceptable to the Trustee. In certain instances the
Trustee may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or administrator or
certificates of corporate authority. Mutilated Certificates must be surrendered
to the Trustee in order for a replacement Certificate to be issued. Although at
the date hereof no charge is made and none is contemplated, a Unitholder may be
required to pay $2.00 to the Trustee for each Certificate reissued or transfer
of Units requested and to pay any governmental charge which may be imposed in
connection therewith.
REPLACEMENT OF LOST, STOLEN OR DESTROYED CERTIFICATES.
To obtain a new Certificate replacing one that has been lost, stolen, or
destroyed, the Unitholder must furnish the Trustee with sufficient
indemnification and pay such expenses as the Trustee may incur. This
indemnification must be in the form of an Open Penalty Bond of Indemnification.
The premium for such an indemnity bond may vary, but currently amounts to 1% of
the market value of the Units represented by the Certificate. In the case
however, of a Trust as to which notice of termination has been given, the
premium currently amounts to 0.5% of the market value of the Units represented
by such Certificate.
HOW UNITS MAY BE REDEEMED WITHOUT CHARGE
Unitholders may redeem all or a portion of their Units by (1) making a written
request for such redemption (book entry Unitholders may use the redemption form
on the reverse side of their Book Entry Position Confirmation) to the Trustee at
its address listed on the back cover of this Part B of the Prospectus
(redemptions of 1,000 Units or more will require a signature guarantee), (2) in
the case of Units evidenced by a Certificate, by also tendering such Certificate
to the Trustee, duly endorsed or accompanied by proper instruments of transfer
with signatures guaranteed as explained above, or provide satisfactory indemnity
required in connection with lost, stolen or destroyed Certificates and (3)
payment of applicable governmental charges, if any. Certificates should be sent
only by registered or certified mail to minimize the possibility of their being
lost or stolen. (See "OWNERSHIP AND TRANSFER OF UNITS".) No redemption fee will
be charged. A Unitholder may authorize the Trustee to honor telephone
instructions for the redemption of Units held in book entry form. Units
represented by Certificates may not be redeemed by telephone. The proceeds of
Units redeemed by telephone will be sent by check either to the Unitholder at
the address specified on his account or to a financial institution specified by
the Unitholder for credit to the account of the Unitholder. A Unitholder wishing
to use this method of redemption must complete a Telephone Redemption
Authorization Form and furnish the Form to the Trustee. Telephone Redemption
Authorization Forms can be obtained from a Unitholder's registered
representative or by calling the Trustee. Once the completed Form is on file,
the Trustee will honor telephone redemption requests by any person. The time a
telephone redemption request is received
19
<PAGE>
determines the "date of tender" as discussed below. The redemption proceeds will
be mailed within three business days following the telephone redemption request.
Only Units held in the name of individuals may be redeemed by telephone;
accounts registered in broker name, or accounts of corporations or fiduciaries
(including among others, trustees, guardians, executors and administrators) may
not use the telephone redemption privilege.
On the third business day following the date of tender, the Unitholder will
be entitled to receive in cash for each Unit tendered an amount equal to the
Unit Value of such Trust determined by the Trustee, as of 4:00 p.m. eastern time
on the date of tender as defined hereafter, plus accrued interest to, but not
including, the third business day after the date of tender ("Redemption Price").
The price received upon redemption may be more or less than the amount paid by
the Unitholder depending on the value of the Bonds on the date of tender.
Unitholders should check with the Trustee or their broker to determine the
Redemption Price before tendering Units.
The "date of tender" is deemed to be the date on which the request for
redemption of Units is received in proper form by the Trustee, except that as
regards a redemption request received after 4:00 p.m. eastern time or on any day
on which the New York Stock Exchange (the "Exchange") is normally closed, the
date of tender is the next day on which such Exchange is normally open for
trading and such request will be deemed to have been made on such day and the
redemption will be effected at the Redemption Price computed on that day.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account of the appropriate Trust or, if the balance therein is insufficient,
from the Principal Account of such Trust. All other amounts paid on redemption
shall be withdrawn from the Principal Account. The Trustee is empowered to sell
underlying Bonds of a Trust in order to make funds available for redemption.
(See "HOW BONDS MAY BE REMOVED FROM THE TRUSTS.") Units so redeemed shall be
cancelled. To the extent that Bonds are sold from a Trust, the size and
diversity of such Trust will be reduced. Such sales may be required at a time
when Bonds would not otherwise be sold and might result in lower prices than
might otherwise be realized.
The Redemption Price is determined on the basis of the BID prices of the
Bonds in each Trust, while the initial Public Offering Price of Units will be
determined on the basis of the OFFERING prices of the Bonds as of 4:00 p.m.
eastern time on any day on which the Exchange is normally open for trading and
such determination is made. As of any given time, the difference between the bid
and offering prices of such Bonds may be expected to average 1/2% to 2% of
principal amount. In the case of actively traded Bonds, the difference may be as
little as 1/4 to 1/2 of 1%, and in the case of inactively traded Bonds such
difference usually will not exceed 3%.
The right of redemption may be suspended and payment postponed for any
period during which the Securities and Exchange Commission determines that
trading in the municipal bond market is restricted or an emergency exists, as a
result of which disposal or evaluation of the Bonds is not reasonably
practicable, or for such other periods as the Securities and Exchange Commission
may by order permit.
Under regulations issued by the Internal Revenue Service, the Trustee will
be required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the Unitholder only when filing his or her tax return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker at the time the Certificate or Book Entry Return
Confirmation is issued, and this number is printed on the Certificate or Book
Entry Return Confirmation and on distribution statements. If a Unitholder's tax
identification number does not appear as described above, or if it is incorrect,
the Unitholder should contact the Trustee before redeeming Units to determine
what action, if any, is required to avoid this "back-up withholding."
HOW UNITS MAY BE PURCHASED BY THE SPONSOR
The Trustee will notify the Sponsor of any tender of Units for redemption. If
the Sponsor's bid in the secondary market at that time equals or exceeds the
Redemption Price it may purchase such Units by notifying the Trustee before the
close of business on the second succeeding business day and by making payment
therefor to the Unitholder not later than the day on which payment would
otherwise have been made by the Trustee. (See "HOW UNITS MAY BE REDEEMED WITHOUT
CHARGE.") The Sponsor's current practice is to bid at the Redemption Price in
the secondary market. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units.
HOW BONDS MAY BE REMOVED FROM THE TRUSTS
Bonds will be removed from a Trust as they mature or are redeemed by the issuers
thereof. See Part A of this Prospectus and "RISK FACTORS" for a discussion of
call provisions of portfolio Bonds.
20
<PAGE>
The Indenture also empowers the Trustee to sell Bonds for the purpose of
redeeming Units tendered by any Unitholder, and for the payment of expenses for
which income may not be available. Under the Indenture the Sponsor is obligated
to provide the Trustee with a current list of Bonds in each Trust to be sold in
such circumstances. In deciding which Bonds should be sold the Sponsor intends
to consider, among other things, such factors as: (1) market conditions; (2)
market prices of the Bonds; (3) the effect on income distributions to
Unitholders of the sale of various Bonds; (4) the effect on principal amount of
underlying Bonds per Unit of the sale of various Bonds; (5) the financial
condition of the issuers; and (6) the effect of the sale of various Bonds on the
investment character of the Trust. Such sales, if required, could result in the
sale of Bonds by the Trustee at prices less than original cost to the Trust. To
the extent Bonds are sold, the size and diversity of such Trust will be reduced.
In addition, the Sponsor is empowered to direct the Trustee to liquidate
Bonds upon the happening of certain other events, such as default in the payment
of principal and/or interest, an action of the issuer that will adversely affect
its ability to continue payment of the principal of and interest on its Bonds,
or an adverse change in market, revenue or credit factors affecting the
investment character of the Bonds. If a default in the payment of the principal
of and/or interest on any of the Bonds occurs, and if the Sponsor fails to
instruct the Trustee whether to sell or continue to hold such Bonds within 30
days after notification by the Trustee to the Sponsor of such default, the
Indenture provides that the Trustee shall liquidate said Bonds forthwith and
shall not be liable for any loss so incurred. The Sponsor may also direct the
Trustee to liquidate Bonds in a Trust if the Bonds in the Trust are the subject
of an advanced refunding, generally considered to be when refunding bonds are
issued and the proceeds thereof are deposited in irrevocable trust to retire the
refunded Bonds on their redemption date.
Except as stated in "COMPOSITION OF TRUSTS" regarding the limited right of
substitution of Replacement Bonds for Failed Bonds, and except for refunding
securities that may be exchanged for Bonds under certain conditions specified in
the Indenture, the Indenture does not permit either the Sponsor or the Trustee
to acquire or deposit bonds either in addition to, or in substitution for, any
of the Bonds initially deposited in a Trust.
INFORMATION ABOUT THE TRUSTEE
The Trustee and its address are stated on the back cover of this Part B of the
Prospectus. The Trustee is subject to supervision and examination by the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal Reserve
System and either the Comptroller of the Currency or state banking authorities.
LIMITATIONS ON LIABILITIES OF SPONSOR AND TRUSTEE
The Sponsor and the Trustee shall be under no liability to Unitholders for
taking any action or for refraining from any action in good faith pursuant to
the Indenture, or for errors in judgment, but shall be liable only for their own
negligence, lack of good faith or willful misconduct. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the Trustee of
any of the Bonds. In the event of the failure of the Sponsor to act under the
Indenture, the Trustee may act thereunder and shall not be liable for any action
taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Bonds or upon the interest thereon or upon it
as Trustee under the Indenture or upon or in respect of any Trust which the
Trustee may be required to pay under any present or future law of the United
States of America or of any other taxing authority having jurisdiction. In
addition, the Indenture contains other customary provisions limiting the
liability of the Trustee.
SUCCESSOR TRUSTEES AND SPONSORS
The Trustee or any successor trustee may resign by executing an instrument
of resignation in writing and filing same with the Sponsor and mailing a copy of
a notice of resignation to all Unitholders then of record. Upon receiving such
notice, the Sponsor is required to promptly appoint a successor trustee. If the
Trustee becomes incapable of acting or is adjudged a bankrupt or insolvent, or a
receiver or other public officer shall take charge of its property or affairs,
the Sponsor may remove the Trustee and appoint a successor by written
instrument. The resignation or removal of a trustee and the appointment of a
successor trustee shall become effective only when the successor trustee accepts
its appointment as such. Any successor trustee shall be a corporation authorized
to exercise corporate trust powers, having capital, surplus and undivided
profits of not less than $5,000,000. Any corporation into which a trustee may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which a trustee shall be a party, shall be the
successor trustee.
If upon resignation of a trustee no successor has been appointed and has
accepted the appointment within 30 days after notification, the retiring trustee
may apply to a court of competent jurisdiction for the appointment of a
successor.
21
<PAGE>
If the Sponsor fails to undertake any of its duties under the Indenture, and
no express provision is made for action by the Trustee in such event, the
Trustee may, in addition to its other powers under the Indenture (1) appoint a
successor sponsor or (2) terminate the Indenture and liquidate the Trusts.
INFORMATION ABOUT THE SPONSOR
John Nuveen & Co. Incorporated, the Sponsor and Underwriter, was founded in 1898
and is the oldest and largest investment banking firm specializing in the
underwriting and distribution of tax-exempt securities and maintains the largest
research department in the investment banking community devoted exclusively to
the analysis of municipal securities. In 1961 the Sponsor began sponsoring the
Nuveen Tax-Exempt Unit Trust and, since this time, it has issued more than $30
billion in tax-exempt unit trusts, including over $8 billion in insured trusts.
The Sponsor is also principal underwriter of 16 mutual funds and 60 closed-end
funds. These registered open-end and closed-end investment companies currently
have approximately $32.8 billion in tax-exempt securities under management.
Nationwide, more than 1,000,000 individual investors have purchased Nuveen's tax
exempt trusts and funds. The present corporation was organized in 1967 as a
wholly-owned subsidiary of Nuveen Corporation, successor to the original John
Nuveen & Co. founded in 1898 as a sole proprietorship and incorporated in 1953.
In 1974, John Nuveen & Co. Incorporated became a wholly-owned subsidiary of The
St. Paul Companies, Inc., a financial services management company located in St.
Paul, Minnesota. On May 19, 1992, common shares comprising a minority interest
in The John Nuveen Company ("JNC"), a newly organized corporation which holds
all of the shares of Nuveen, were sold to the general public in an initial
public offering. St. Paul retains a controlling interest in JNC with over 70% of
JNC's shares. The Sponsor is a member of the National Association of Securities
Dealers, Inc. and the Securities Industry Association and has its principal
offices located in Chicago (333 W. Wacker Drive) and New York (Swiss Bank Tower,
10 East 50th Street). It maintains 14 regional offices.
To help advisers and investors better understand and more efficiently use an
investment in the Trust to reach their investment goals, the Sponsor may
advertise and create specific investment programs and systems. For example, such
activities may include presenting information on how to use an investment in the
Trust, alone or in combination with an investment in other mutual funds or unit
investment trusts sponsored by Nuveen, to accumulate assets for future education
needs or periodic payments such as insurance premiums. The Trust's sponsor may
produce software or additional sales literature to promote the advantages of
using the Trust to meet these and other specific investor needs.
OTHER INFORMATION
AMENDMENT OF INDENTURE
The Indenture may be amended by the Trustee and the Sponsor without the
consent of any of the Unitholders (1) to cure any ambiguity or to correct or
supplement any provision thereof which may be defective or inconsistent, or (2)
to make such other provisions as shall not adversely affect the Unitholders,
provided, however, that the Indenture may not be amended to increase the number
of Units in any Trust or to permit the deposit or acquisition of bonds either in
addition to, or in substitution for any of the Bonds initially deposited in any
Trust except as stated in "COMPOSITION OF TRUSTS" regarding the limited right of
substitution of Replacement Bonds and except for the substitution of refunding
bonds under certain circumstances. The Trustee shall advise the Unitholders of
any amendment promptly after execution thereof.
TERMINATION OF INDENTURE
Each Trust may be liquidated at any time by written consent of 100% of the
Unitholders or by the Trustee when the value of such Trust, as shown by any
evaluation, is less than 20% of the original principal amount of such Trust and
will be liquidated by the Trustee in the event that Units not yet sold
aggregating more than 60% of the Units originally created are tendered for
redemption by the Sponsor thereby reducing the net worth of such Trust to less
than 40% of the principal amount of the Bonds originally deposited in the
portfolio. (See "Essential Information" appearing in Part A of this Prospectus.)
The sale of Bonds from the Trusts upon termination may result in realization of
a lesser amount than might otherwise be realized if such sale were not required
at such time. For this reason, among others, the amount realized by a Unitholder
upon termination may be less than the principal amount of Bonds originally
represented by the Units held by such Unitholder. The Indenture will terminate
upon the redemption, sale or other disposition of the last Bond held thereunder,
but in no event shall it continue beyond the end of the calendar year preceding
the fiftieth anniversary of its execution for National and State Trusts, beyond
the end of the calendar year preceding the twentieth anniversary of its
execution for Long Intermediate, and Intermediate Trusts or beyond the end of
the calendar year preceding the tenth anniversary of its execution for Short
Intermediate and Short Term Trusts.
Written notice of any termination specifying the time or times at which
Unitholders may surrender their Certificates, if any, for cancellation shall be
given by the Trustee to each Unitholder at the address appearing on the
22
<PAGE>
registration books of the Trust maintained by the Trustee. Within a reasonable
time thereafter the Trustee shall liquidate any Bonds in the Trust then held and
shall deduct from the assets of the Trust any accrued costs, expenses or
indemnities provided by the Indenture which are allocable to such Trust,
including estimated compensation of the Trustee and costs of liquidation and any
amounts required as a reserve to provide for payment of any applicable taxes or
other governmental charges. The Trustee shall then distribute to Unitholders of
such Trust their pro rata share of the balance of the Interest and Principal
Accounts. With such distribution the Unitholders shall be furnished a final
distribution statement, in substantially the same form as the annual
distribution statement, of the amount distributable. At such time as the Trustee
in its sole discretion shall determine that any amounts held in reserve are no
longer necessary, it shall make distribution thereof to Unitholders in the same
manner.
LEGAL OPINION
The legality of the Units offered hereby has been passed upon by Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603. Special counsel for the
Trusts for respective state tax matters are named in "Tax Status" for each Trust
appearing in Part A of this Prospectus. Carter, Ledyard & Milburn, 2 Wall
Street, New York, New York 10005, has acted as counsel for the Trustee with
respect to the Series, and, in the absence of a New York Trust from the Series,
as special New York tax counsel for the Series.
AUDITORS
The "Statement of Condition" and "Schedule of Investments" at Date of
Deposit included in Part A of this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report in
Part A of this Prospectus, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
SUPPLEMENTAL INFORMATION
Upon written or telephonic request to the Trustee, investors will receive at
no cost to the investor supplemental information about this Trust, which has
been filed with the Securities and Exchange Commission and is intended to
supplement information contained in Part A and Part B of this Prospectus. The
supplemental information includes more detailed information concerning certain
of the Bonds included in the Trusts contained in the applicable Series and more
specific risk information concerning the individual state Trusts. This
supplement also includes additional general information about the Sponsor and
the Trusts.
23
<PAGE>
NUVEEN Tax-Exempt Unit Trusts
PROSPECTUS -- PART B
SEPTEMBER 1, 1995
<TABLE>
<C> <S> <C>
SPONSOR John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
Telephone: 312.917.7700
Swiss Bank Tower
10 East 50th Street
New York, NY 10022
212.207.2000
TRUSTEE The Chase Manhattan Bank, N.A.
770 Broadway
New York, NY 10003
800.257.8787
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR 111 West Monroe Street
Chicago, IL 60603
INDEPENDENT Arthur Andersen LLP
PUBLIC 33 West Monroe Street
ACCOUNTANTS Chicago, IL 60603
FOR THE TRUSTS
</TABLE>
--------------
Except as to statements made herein furnished by the Trustee, the
Trustee has assumed no responsibility for the accuracy, adequacy and
completeness of the information contained in this Prospectus.
This Prospectus does not contain all of the information set forth in
the registration statement and exhibits relating thereto, filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933, and to which reference is made.
No person is authorized to give any information or to make
representations not contained in this Prospectus or in supplemental information
or sales literature prepared by the Sponsor, and any information or
representation not contained therein must not be relied upon as having been
authorized by either the Trusts, the Trustee or the Sponsor. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy,
securities in any State to any person to whom it is not lawful to make such
offer in such state. The Trusts are registered as a Unit Investment Trust under
the Investment Company Act of 1940. Such registration does not imply that the
Trusts or any of their Units has been guaranteed, sponsored, recommended or
approved by the United States or any State or agency or officer thereof.
<PAGE>
NUVEEN TAX-FREE UNIT TRUSTS
---------------------------------------------
INFORMATION SUPPLEMENT
NUVEEN SERIES 860
This Information Supplement provides additional
information concerning the structure, operations and
risks of a Nuveen Tax-Free Unit Trust not found in the
prospectuses for the Trusts. This Information Supplement
is not a prospectus and does not include all of the
information that a prospective investor should consider
before investing in a Trust. This Information Supplement
should be read in conjunction with the prospectus for
the Trust in which an investor is considering investing
("Prospectus"). Copies of the Prospectus can be obtained
by calling or writing the Trustee at the telephone
number and address indicated in Part B of the
Prospectus. This Information Supplement has been created
to supplement information contained in the Prospectus.
This Information Supplement is dated April 26, 1996.
Capitalized terms have been defined in the Prospectus.
TABLE OF CONTENTS
--------------------------------------------------
<TABLE>
<S> <C>
GENERAL RISK DISCLOSURE..................................................... 2
Health Facility Obligations............................................... 2
Housing Obligations....................................................... 2
Single Family Mortgage Revenue Bonds...................................... 2
Federally Enhanced Obligations............................................ 3
Industrial Revenue Obligations............................................ 3
Electric Utility Obligations.............................................. 3
Transportation Facility Revenue Bonds..................................... 4
Water and/or Sewerage Obligations......................................... 4
University and College Revenue Obligations................................ 4
Bridge Authority and Tollroad Obligations................................. 4
Dedicated-Tax Supported Bonds............................................. 4
Municipal Lease Bonds..................................................... 5
Original Issue Discount Bonds and Stripped Obligations.................... 5
WHY AND HOW ARE THE BONDS INSURED?.......................................... 6
ACCUMULATION PLAN........................................................... 8
INFORMATION ABOUT THE SPONSOR............................................... 10
DESCRIPTION OF RATINGS...................................................... 11
HOW THE TRUST COMPARES PERFORMANCE.......................................... 13
HOW TO CALCULATE YOUR ESTIMATED INCOME...................................... 14
Appendix A -- Georgia Disclosure............................................ A-1
Appendix B -- Massachusetts Disclosure...................................... B-1
Appendix C -- Michigan Disclosure........................................... C-1
Appendix D -- Ohio Disclosure............................................... D-1
</TABLE>
<PAGE>
GENERAL RISK DISCLOSURE
An investment in Units of any Trust should be made with an understanding of
the risks that such an investment may entail. These include the ability of the
issuer, or, if applicable, an insurer, to make payments of interest and
principal when due, the effects of changes in interest rates generally, early
call provisions and the potential for changes in the tax status of the Bonds. As
set forth in the portfolio summaries in Part A of this Prospectus, the Trusts
may contain or be concentrated in one or more of the types of bonds discussed
below. The following paragraphs discuss certain circumstances which may
adversely affect the ability of issuers of Bonds held in the portfolio of a
Trust to make payment of principal and interest thereon or which may adversely
affect the ratings of such Bonds; with respect to Insured Trusts, however,
because of the insurance obtained by the Sponsor or by the issuers of the Bonds,
such changes should not adversely affect an Insured Trust's receipt of principal
and interest, the Standard & Poor's AAA or Moody's Aaa ratings of the Bonds in
the Insured Trust portfolio, or the Standard & Poor's AAA rating of the Units of
each such Insured Trust. For economic risks specific to the individual Trusts,
see "Risk Factors" for each Trust.
HEALTH FACILITY OBLIGATIONS. Some of the Bonds in a Trust may be
obligations of issuers whose revenues are derived from services provided by
hospitals or other health care facilities, including nursing homes. Ratings of
bonds issued for health care facilities are sometimes based on feasibility
studies that contain projections of occupancy levels, revenues and expenses. A
facility's gross receipts and net income available for debt service may be
affected by future events and conditions including, among other things, demand
for services, the ability of the facility to provide the services required, an
increasing shortage of qualified nurses or a dramatic rise in nursing salaries,
physicians' confidence in the facility, management capabilities, economic
developments in the service area, competition from other similar providers,
efforts by insurers and governmental agencies to limit rates, legislation
establishing state rate-setting agencies, expenses, government regulation, the
cost and possible unavailability of malpractice insurance, and the termination
or restriction of governmental financial assistance, including that associated
with Medicare, Medicaid and other similar third party payor programs. Medicare
reimbursements are currently calculated on a prospective basis and are not based
on a provider's actual costs. Such method of reimbursement may adversely affect
reimbursements to hospitals and other facilities for services provided under the
Medicare program and thereby may have an adverse effect on the ability of such
institutions to satisfy debt service requirements. In the event of a default
upon a bond secured by hospital facilities, the limited alternative uses for
such facilities may result in the recovery upon such collateral not providing
sufficient funds to fully repay the bonds.
Certain hospital bonds provide for redemption at par upon the damage,
destruction or condemnation of the hospital facilities or in other special
circumstances.
HOUSING OBLIGATIONS. Some of the Bonds in a Trust may be obligations of
issuers whose revenues are primarily derived from mortgage loans to housing
projects for low to moderate income families. Such issues are generally
characterized by mandatory redemption at par or, in the case of original issue
discount bonds, accreted value in the event of economic defaults and in the
event of a failure of the operator of a project to comply with certain covenants
as to the operation of the project. The failure of such operator to comply with
certain covenants related to the tax-exempt status of interest on the Bonds,
such as provisions requiring that a specified percentage of units be rented or
available for rental to low or moderate income families, potentially could cause
interest on such Bonds to be subject to Federal income taxation from the date of
issuance of the Bonds. The ability of such issuers to make debt service payments
will be affected by events and conditions affecting financed projects,
including, among other things, the achievement and maintenance of sufficient
occupancy levels and adequate rental income, employment and income conditions
prevailing in local labor markets, increases in taxes, utility costs and other
operating expenses, the managerial ability of project managers, changes in laws
and governmental regulations, the appropriation of subsidies, and social and
economic trends affecting the localities in which the projects are located.
Occupancy of such housing projects may be adversely affected by high rent levels
and income limitations imposed under Federal and state programs.
SINGLE FAMILY MORTGAGE REVENUE BONDS. Some of the Bonds in a Trust may be
single family mortgage revenue bonds, which are issued for the purpose of
acquiring from originating financial institutions notes secured by mortgages on
residences located within the issuer's boundaries and owned by persons of low or
moderate income. Mortgage loans are generally partially or completely prepaid
prior to their final maturities as a result of events such as sale of the
mortgaged premises, default, condemnation or casualty loss. Because these bonds
are subject to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will probably
be redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. Extraordinary mandatory redemption without premium could also result
from the failure of the originating financial institutions to make mortgage
loans in sufficient amounts within a specified time period. The
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redemption price of such issues may be more or less than the offering price of
such bonds. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of principal of or
interest on such mortgage revenue bonds. Single family mortgage revenue bonds
issued after December 31, 1980 were issued under Section 103A of the Internal
Revenue Code of 1954, as amended, or Section 143 of the Internal Revenue Code of
1986, which Sections contain certain requirements relating to the use of the
proceeds of such bonds in order for the interest on such bonds to retain its
tax-exempt status. In each case, the issuer of the bonds has covenanted to
comply with applicable requirements and bond counsel to such issuer has issued
an opinion that the interest on the bonds is exempt from Federal income tax
under existing laws and regulations. There can be no assurance that such
continuing requirements will be satisfied; the failure to meet such requirements
could cause interest on the Bonds to be subject to Federal income taxation,
possibly from the date of issuance of the Bonds.
FEDERALLY ENHANCED OBLIGATIONS. Some of the mortgages which secure the
various health care or housing projects which underlie the previously discussed
Health Facility, Housing, and Single Family Mortgage Revenue Obligations (the
"Obligations") in a Trust may be insured by the Federal Housing Administration
("FHA"). Under FHA regulations, the maximum insurable mortgage amount cannot
exceed 90% of the FHA's estimated value of the project. The FHA mortgage
insurance does not constitute a guarantee of timely payment of the principal of
and interest on the Obligations. Payment of mortgage insurance benefits may be
(1) less than the principal amount of Obligations outstanding or (2) delayed if
disputes arise as to the amount of the payment or if certain notices are not
given to the FHA within the prescribed time periods. In addition, some of the
previously discussed Obligations may be secured by mortgage-backed certificates
guaranteed by the Government National Mortgage Association ("GNMA"), a wholly
owned corporate instrumentality of the United States, and/or the Federal
National Mortgage Association ("Fannie Mae") a federally chartered and
stockholder-owed corporation. GNMA and Fannie Mae guarantee timely payment of
principal and interest on the mortgage-backed certificates, even where the
underlying mortgage payments are not made. While such mortgage-backed
certificates are often pledged to secure payment of principal and interest on
the Obligations, timely payment of interest and principal on the Obligations is
not insured or guaranteed by the United States, GNMA, Fannie Mae or any other
governmental agency or instrumentality. The GNMA mortgage-backed certificates
constitute a general obligation of the United States backed by its full faith
and credit. The obligations of Fannie Mae, including its obligations under the
Fannie Mae mortgage-backed securities, are obligations solely of Fannie Mae and
are not backed by, or entitled to, the full faith and credit of the United
States.
INDUSTRIAL REVENUE OBLIGATIONS. Certain of the Bonds in a Trust may be
industrial revenue bonds ("IRBs"), including pollution control revenue bonds,
which are tax-exempt securities issued by states, municipalities, public
authorities or similar entities to finance the cost of acquiring, constructing
or improving various industrial projects. These projects are usually operated by
corporate entities. Issuers are obligated only to pay amounts due on the IRBs to
the extent that funds are available from the unexpended proceeds of the IRBs or
receipts or revenues of the issuer under an arrangement between the issuer and
the corporate operator of a project. The arrangement may be in the form of a
lease, installment sale agreement, conditional sale agreement or loan agreement,
but in each case the payments to the issuer are designed to be sufficient to
meet the payments of amounts due on the IRBs. Regardless of the structure,
payment of IRBs is solely dependent upon the creditworthiness of the corporate
operator of the project and, if applicable, corporate guarantor. Corporate
operators or guarantors may be affected by many factors which may have an
adverse impact on the credit quality of the particular company or industry.
These include cyclicality of revenues and earnings, regulatory and environmental
restrictions, litigation resulting from accidents or environmentally-caused
illnesses, extensive competition and financial deterioration resulting from a
corporate restructuring pursuant to a leveraged buy-out, takeover or otherwise.
Such a restructuring may result in the operator of a project becoming highly
leveraged which may have an impact on such operator's creditworthiness which in
turn would have an adverse impact on the rating and/or market value of such
Bonds. Further, the possibility of such a restructuring may have an adverse
impact on the market for and consequently the value of such Bonds, even though
no actual takeover or other action is ever contemplated or effected. The IRBs in
a Trust may be subject to special or extraordinary redemption provisions which
may provide for redemption at par or, in the case of original issue discount
bonds, accreted value. The Sponsor cannot predict the causes or likelihood of
the redemption of IRBs in a Trust prior to the stated maturity of such Bonds.
ELECTRIC UTILITY OBLIGATIONS. Some of the Bonds in a Trust may be
obligations of issuers whose revenues are primarily derived from the sale of
electric energy. The problems faced by such issuers include the difficulty in
obtaining approval for timely and adequate rate increases from the applicable
public utility commissions, the difficulty of financing large construction
programs, increased competition, reductions in estimates of future demand for
electricity in certain areas of the country, the limitations on operations and
increased costs and delays
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attributable to environmental considerations, the difficulty of the capital
market in absorbing utility debt, the difficulty in obtaining fuel at reasonable
prices and the effect of energy conservation. All of such issuers have been
experiencing certain of these problems in varying degrees. In addition, Federal,
state and municipal governmental authorities may from time to time review
existing, and impose additional, regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of certain of the Bonds in a Trust to make payments
of principal and/or interest on such Bonds.
TRANSPORTATION FACILITY REVENUE BONDS. Some of the Bonds in a Trust may be
obligations of issuers which are payable from and secured by revenues derived
from the ownership and operation of airports, public transit systems and ports.
The major portion of an airport's gross operating income is generally derived
from fees received from airlines pursuant to use agreements which consist of
annual payments for airport use, occupancy of certain terminal space, service
fees and leases. Airport operating income may therefore be affected by the
ability of the airlines to meet their obligations under the use agreements. The
air transport industry is experiencing significant variations in earnings and
traffic, due to increased competition, excess capacity, increased costs,
deregulation, traffic constraints and other factors, and several airlines are
experiencing severe financial difficulties. In particular, facilities with use
agreements involving airlines experiencing financial difficulty may experience a
reduction in revenue due to the possible inability of these airlines to meet
their use agreement obligations because of such financial difficulties and
possible bankruptcy. The Sponsor cannot predict what effect these industry
conditions may have on airport revenues which are dependent for payment on the
financial condition of the airlines and their usage of the particular airport
facility. Bonds that are secured primarily by the revenue collected by a public
transit system typically are additionally secured by a pledge of sales tax
receipts collected at the state or local level, or of other governmental
financial assistance. Transit system net revenues will be affected by variations
in utilization, which in turn may be affected by the degree of local
governmental subsidization, demographic and population shifts, and competition
from other forms of transportation; and by increased costs, including costs
resulting from previous deferrals of maintenance. Port authorities derive their
revenues primarily from fees imposed on ships using the facilities. The rate of
utilization of such facilities may fluctuate depending on the local economy and
on competition from competing forms of transportation such as air, rail and
trucks.
WATER AND/OR SEWERAGE OBLIGATIONS. Some of the Bonds in a Trust may be
obligations of issuers whose revenues are derived from the sale of water and/or
sewerage services. Such Bonds are generally payable from user fees. The problems
of such issuers include the ability to obtain timely and adequate rate
increases, population decline resulting in decreased user fees, the difficulty
of financing large construction programs, the limitations on operations and
increased costs and delays attributable to environmental considerations, the
increasing difficulty of obtaining or discovering new supplies of fresh water,
the effect of conservation programs and the impact of "no-growth" zoning
ordinances. All of such issuers have been experiencing certain of these problems
in varying degrees.
UNIVERSITY AND COLLEGE REVENUE OBLIGATIONS. Some of the Bonds in a Trust
may be obligations of issuers which are, or which govern the operation of,
colleges and universities and whose revenues are derived mainly from tuition,
dormitory revenues, grants and endowments. General problems of such issuers
include the prospect of a declining percentage of the population consisting of
"college" age individuals, possible inability to raise tuitions and fees
sufficiently to cover increased operating costs, the uncertainty of continued
receipt of Federal grants and state funding, and government legislation or
regulations which may adversely affect the revenues or costs of such issuers.
All of such issuers have been experiencing certain of these problems in varying
degrees.
BRIDGE AUTHORITY AND TOLLROAD OBLIGATIONS. Some of the Bonds in a Trust may
be obligations of issuers which derive their payments from bridge, road or
tunnel toll revenues. The revenues of such an issuer could be adversely affected
by competition from toll-free vehicular bridges and roads and alternative modes
of transportation. Such revenues could also be adversely affected by a reduction
in the availability of fuel to motorists or significant increases in the costs
thereof. Specifically, governmental regulations restricting the use of vehicles
in the New York City metropolitan area may adversely affect revenues of the
Triborough Bridge and Tunnel Authority.
DEDICATED-TAX SUPPORTED BONDS. Some of the Bonds in a Trust may be
obligations of issuers which are payable from and secured by tax revenues from a
designated source, which revenues are pledged to secure the bonds. The various
types of Bonds described below differ in structure and with respect to the
rights of the bondholders to the underlying property. Each type of dedicated-tax
supported Bond has distinct risks, only some of which are set forth below. One
type of dedicated-tax supported Bond is secured by the incremental tax received
on either real property or on sales within a specifically defined geographical
area; such tax generally will not provide bondholders with a lien on the
underlying property or revenues. Another type of dedicated-tax supported Bond is
secured by a special tax levied on real property within a defined geographical
area in such a manner that the tax is levied on those who benefit from the
project; such bonds typically provide for a statutory lien on the
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underlying property for unpaid taxes. A third type of dedicated-tax supported
Bond may be secured by a tax levied upon the manufacture, sale or consumption of
commodities or upon the license to pursue certain occupations or upon corporate
privileges within a taxing jurisdiction. As to any of these types of Bonds, the
ability of the designated revenues to satisfy the interest and principal
payments on such bonds may be affected by changes in the local economy, the
financial success of the enterprise responsible for the payment of the taxes,
the value of any property on which taxes may be assessed and the ability to
collect such taxes in a timely fashion. Each of these factors will have a
different affect on each distinct type of dedicated-tax supported bonds.
MUNICIPAL LEASE BONDS. Some of the Bonds in a Trust may be obligations that
are secured by lease payments of a governmental entity. Such payments are
normally subject to annual budget appropriations of the leasing governmental
entity. A governmental entity that enters into such a lease agreement cannot
obligate future governments to appropriate for and make lease payments but
covenants to take such action as is necessary to include any lease payments due
in its budgets and to make the appropriations therefor. A governmental entity's
failure to appropriate for and to make payments under its lease obligation could
result in insufficient funds available for payment of the obligations secured
thereby.
ORIGINAL ISSUE DISCOUNT BONDS AND STRIPPED OBLIGATIONS. Certain of the
Bonds in a Trust may be original issue discount bonds. These Bonds were issued
with nominal interest rates less than the rates then offered by comparable
securities and as a consequence were originally sold at a discount from their
face, or par, values. This original issue discount, the difference between the
initial purchase price and face value, is deemed under current law to accrue on
a daily basis and the accrued portion is treated as tax-exempt interest income
for federal income tax purposes. On sale or redemption, gain, if any, realized
in excess of the earned portion of original issue discount will be taxable as
capital gain. See "What is the Tax Status of Unitholders". The current value of
an original issue discount bond reflects the present value of its face amount at
maturity. In a stable interest rate environment, the market value of an original
issue discount bond would tend to increase more slowly in early years and in
greater increments as the bond approached maturity.
Certain of the original issue discount bonds in a Trust may be zero coupon
bonds. Zero coupon bonds do not provide for the payment of any current interest;
the buyer receives only the right to receive a final payment of the face amount
of the bond at its maturity. The effect of owning a zero coupon bond is that a
fixed yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of the obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable to
reinvest the income on such obligation at a rate as high as the implicit yield,
but at the same time also eliminates the holder's ability to reinvest at higher
rates in the future. For this reason, zero coupon bonds are subject to
substantially greater price fluctuations during periods of changing market
interest rates than are securities of comparable quality that pay interest
currently.
Original issue discount bonds, including zero coupon bonds, may be subject
to redemption at prices based on the issue price plus the amount of original
issue discount accreted to redemption (the "accreted value") plus, if
applicable, some premium. Pursuant to such call provisions an original issue
discount bond may be called prior to its maturity date at a price less than its
face value. See the "Schedules of Investments" for more information about the
call provisions of portfolio Bonds.
Certain of the Bonds in a Trust may be Stripped Obligations, which represent
evidences of ownership with respect to either the principal amount of or a
payment of interest on a tax-exempt obligation. An obligation is "stripped" by
depositing it with a custodian, which then effects a separation in ownership
between the bond and any interest payment which has not yet become payable, and
issues evidences of ownership with respect to such constituent parts. A Stripped
Obligation therefore has economic characteristics similar to zero coupon bonds,
as described above.
Each Stripped Obligation has been purchased at a discount from the amount
payable at maturity. With respect to each Unitholder, the Internal Revenue Code
treats as "original issue discount" that portion of the discount which produces
a yield to maturity (as of the date of purchase of the Unitholder's Units) equal
to the lower of the coupon rate of interest on the underlying obligation or the
yield to maturity on the basis of the purchase price of the Unitholder's Units
which is allocable to each Stripped Obligation. Original issue discount which
accrues with respect to a Stripped Obligation will be exempt from Federal income
taxation to the same extent as interest on the underlying obligations. (See
"WHAT IS THE TAX STATUS OF UNITHOLDERS?" in Part B of this Prospectus.)
Unitholders should consult their own tax advisers with respect to the state
and local tax consequences of owning original issue discount bonds or Stripped
Obligations. Under applicable provisions governing determination of state and
local taxes, interest on original issue discount bonds or Stripped Obligations
may be deemed to be received in the year of accrual even though there is no
corresponding cash payment.
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WHY AND HOW ARE THE BONDS INSURED?
INSURANCE ON BONDS
INSURED TRUSTS--The Insurer's policy unconditionally and irrevocably guarantees
the full and complete payment required to be made by or on behalf of the Issuer
to the Paying Agent or its successor of an amount equal to (i) the principal of
(either at the stated maturity or by an advancement of maturity pursuant to a
mandatory sinking fund payment) and interest on, the Bonds as such payments
shall become due but shall not be so paid (except that in the event of any
acceleration of the due date of such principal by reason of mandatory or
optional redemption or acceleration resulting from default or otherwise, other
than any advancement of maturity pursuant to a mandatory sinking fund payment,
the payments guaranteed by the Insurer's policy shall be made in such amounts
and at such times as such payments of principal would have been due had there
not been any such acceleration); and (ii) the reimbursement of any such payment
which is subsequently removed from any owner of the Bonds purusant to a final
judgment by a court of competent jurisdiction that such payment constitutes an
avoidable preference to such owner within the meaning of any applicable
bandruptcy law (a "Preference").
The Insurer's policy does not insure against loss of any prepayment premium
which may at any time be payable with respect to any Bond. The Insurer's policy
does not, under any circumstance, insure against loss relating to: (i) optional
or mandatory redemptions (other than mandatory sinking fund redemptions); (ii)
any payments to be made on an accelerated basis; (iii) payments of the purchase
price of Bonds upon tender by an owner thereof; or (iv) any Preference relating
to (i) through (iii) above. The Insurer's policy also does not insure against
nonpayment of principal of or interest on the Bonds resulting from the
insolvency, negligence or any other act or omission of the Paying Agent or any
other paying agewnt for the Bonds.
Upon receipt of telephonic notice, such notice subsequently confirmed in
writing by registered or certified mail, or upon receipt of written notice by
registered or certified mail, by the Insurer from the Paying Agent or any owner
of a Bond the payment of an insured amount for which is then due, that such
required payment has not been made, the Insurer on the due date of such payment
or within one business day after receipt of notice of such nonpayment, whichever
is later, will make a deposit of funds, in an account with State Street Bank and
Trust Company, N.A., in New York, New York, or its successor, sufficient for the
payment of any such insured amounts which are then due. Upon presentment and
surrender of such Bonds or presentment of such other proof of ownership of the
Bonds, together with any appropriate instruments of assignment to evidence the
assignment of the insured amounts due on the Bonds as are paid by the Insurer,
and appropriate instruments to effect the appointment of the Insurer as agent
for such owners of the Bonds in any legal proceeding related to payment of
insured amounts on the Bonds, such instruments being in a form satisfactory to
State Street bank and Trust Company, N.A. State Street Bank and Trust Company,
N.A. shall disclose to such owners or the Paying Agent payment of the insured
amounts due on such Bonds, less any amount held by the Paying Agent for the
payment of such insured amounts and legally available therefor.
The Insurer, formerly known as Municipal Bond Investors Assurance
Corporation, is the principal operating subsidiary of MBIA, Inc., a New York
Stock Exchange listed company. MBIA Inc. is not obligated to pay the debts of or
claims against the Insurer. The Insurer is domiciled in the State of New York
and licensed to do business in all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands,
the Virgin Islands of the United States and the Territory of Guam. The Insurer
has one European branch in the Republic of France.
As of December 31, 1995 the Insurer had admitted assets of $3.8 billion
(audited), total liabilities of $2.5 billion (audited), and total capital and
surplus of $1.3 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1994, the Insurer had admitted assets of $3.4
billion (audited), total liabilities of $2.3 billion (audited), and total
capital and surplus of $1.1 billion (audited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities. All information regarding the Insurer, a wholly owned subsidiary of
MBIA Inc., including the financial statements of the Insurer for the year ended
December 31, 1995, prepared in accordance with generally accepted accounting
principles, included in the Annual Report on Form 10-K of MBIA Inc. for the year
ended December 31, 1995 is hereby incorporated by reference into this Official
Statement and shall be deemed to be a part hereof. Any statement contained in a
document incorporated by reference herein shall be modified or superceded for
purposes of this Official Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is incorporated by
reference herein modifies or supercedes such statement. Any statement so
modified or superceded shall not be deemed, except as so modified or superceded,
to constitute a part of this Official Statement.
Furthermore, copies of the Insurer's year end financial statements prepared
in accordance with statutory accounting practices are available from the
Insurer. A copy of the Annual Report on Form 10-K of MBIA, Inc. is
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available from the Insurere or the Securities and Exchange Commission. The
address of the Insurer is 113 King Street, Armonk, New York 10504.
Moody's Investors Service ("Moody's") rates the claims paying ability of the
Insurer "Aaa".
Standard & Poor's Ratings Service, a division of the McGraw Hill Companies,
Inc. ("Standard & Poor's") rates the claims paying ability of the Insurer "AAA".
Fitch Investors Service, L.P., rates the claims paying ability of the
Insurer "AAA".
Each rating of the Insurer should be evaluated independently. No application
has been made to any other rating agency in order to obtain additional ratings
on the Bonds. The ratings reflect the respective rating agency's current
assessment of the creditworthiness of the Insurer and its ability to pay claims
on its policies of insurance. Any further explanation as to the significance of
the above ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the Bonds,
and such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either or both ratings
may have an adverse effect on the market price of the Bonds. The Insurer does
not guaranty the market price of the Bonds nor does it guaranty that the ratings
on the Bonds will not be revised or withdrawn.
TRADITIONAL TRUSTS--Insurance guaranteeing the timely payment, when due, of all
principal and interest on certain Bonds in a Traditional Trust may have been
obtained by the Sponsor, issuer or underwriter of the particular Bonds involved
or by another party. Such insurance, which provides coverage substantially the
same as that obtained with respect to Bonds in Insured Trusts as described
above, is effective so long as the insured Bond is outstanding and the insurer
remains in business. Insurance relates only to the particular Bond and not to
the Units offered hereby or to their market value. Insured Bonds have received a
rating of "Aaa" by Moody's Investors Service, Inc. and/or "AAA" by Standard &
Poor's Corporation in recognition of such insurance.
If a Bond in a Traditional Trust is insured, the Schedule of Investments in
Part A of this Prospectus will identify the insurer. Such insurance will be
provided by Financial Guaranty Insurance Company ("FGIC"), AMBAC Indemnity
Corporation ("AMBAC"), Bond Investors Guaranty Insurance Company, now known as
MBIA Corp. of Illinois ("BIG"), Capital Guaranty Insurance Company ("CGIC"),
Financial Security Assurance, Inc. ("FSA"), Municipal Bond Insurance Association
(the "Association"), MBIA Insurance Corporation ("MBIA") or Connie Lee Insurance
Company ("ConnieLee"). The Sponsor to date has purchased and presently intends
to purchase insurance for Bonds in Traditional Trusts exclusively from MBIA (see
the preceding disclosure regarding MBIA). There can be no assurance that any
insurer listed therein will be able to satisfy its commitments in the event
claims are made in the future. However, Standard & Poor's Corporation has rated
the claims-paying ability of each insurer "AAA," and Moody's Investors Service
has rated all bonds insured by each such insurer, except ConnieLee, "Aaa."
Moody's Investor's Service gives no ratings for bonds insured by ConnieLee.
Because any such insurance will be effective so long as the insured Bonds
are outstanding, such insurance will be taken into account in determining the
market value of such Bonds and therefore some value attributable to such
insurance will be included in the value of the Units of the Trust that includes
such Bonds. The insurance does not, however, guarantee the market value of the
Bonds or of the Units.
ACCUMULATION PLAN
The Sponsor, John Nuveen & Co. Incorporated, is also the principal underwriter
of the Nuveen Municipal Bond Fund, Inc. (the "Bond Fund"), Nuveen Tax-Free
Reserves, Inc. ("Tax-Free Reserves"), Nuveen California Tax-Free Fund, Inc. (the
"California Fund"), Nuveen Tax-Free Bond Fund, Inc. ("Tax-Free Bond Fund"),
Nuveen Insured Tax-Free Bond Fund, Inc. (the "Insured Bond Fund") and Nuveen
Tax-Free Money Market Fund, Inc. (the "Money Market Fund") and the Nuveen
Multistate Tax-Free Trust (the "Multistate Trust"). Each of these funds
(together, the "Accumulation Funds") is an open-end, diversified management
investment company into which Unitholders may choose to reinvest Trust
distributions automatically, without any sales charge. (Reinvestment in the
California Fund is available only to Unitholders who are California residents.
Reinvestment in the State Portfolios of the Tax-Free Bond Fund, the Insured Bond
Fund, the Money Market Fund and the Multistate Trust is available only to
Unitholders who are residents of the states for which such portfolios are
named.) Unitholders may reinvest both interest and principal distributions or
principal distributions only. Each Accumulation Fund has investment objectives
which differ in certain respects from those of the Trusts and may invest in
securities which would not be eligible for deposit in the Trusts. The investment
adviser to each Accumulation Fund is Nuveen Advisory Corp., a wholly-owned
subsidiary of the Sponsor. The following is a general description of the
investment objectives and policies of each Accumulation Fund. For a more
detailed description, Unitholders should read the prospectus of the Accumulation
Fund in which they are interested.
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THE BOND FUND
The Bond Fund has the objective of providing, through investment in a
professionally managed portfolio of long-term municipal bonds, as high a level
of current interest income exempt from Federal income tax as is consistent with
preservation of capital. The Bond Fund may include in its portfolio tax-exempt
bonds rated Baa or BBB or better by Moody's or Standard & Poor's, unrated bonds
which, in the opinion of the investment adviser, have credit characteristics
equivalent to bonds rated Baa or BBB or better, and certain temporary
investments, including securities the interest income from which may be subject
to Federal income tax.
TAX-FREE RESERVES
Tax-Free Reserves is a "money market" fund that includes in its portfolio
only obligations maturing within one year from the date of acquisition,
maintains an average maturity of all investments of 120 days or less, values its
portfolio at amortized cost and seeks to maintain a net asset value of $1.00 per
share. It provides checkwriting and expedited wire redemption privileges for its
shareholders. Tax-Free Reserves has the objective of providing, through
investment in a professionally managed portfolio of high quality short-term
municipal obligations, as high a level of current interest income exempt from
Federal income tax as is consistent with preservation of capital and the
maintenance of liquidity. Tax- Free Reserves may include in its portfolio
municipal obligations rated Aaa, Aa, MIG-1, VMIG-1 or Prime-1 by Moody's or AAA,
AA, SP-1 or A-1 by Standard & Poor's, unrated municipal obligations that, in the
opinion of the investment adviser, have credit characteristics equivalent to
obligations rated as above, tax-exempt obligations backed by the U.S.
Government, and temporary investments that may be subject to Federal income tax.
THE CALIFORNIA FUND
The California Fund has the objective of providing, through investment in
professionally managed portfolios of California municipal obligations, as high a
level of current interest income exempt from both Federal and California income
taxes as is consistent with the investment policies of each of the portfolios of
the California Fund and with preservation of capital. Each portfolio of the
California Fund may include temporary investments that may be subject to tax.
California Unitholders may reinvest in one of three portfolios of the California
Fund: The Nuveen California Tax-Free Value Fund, the Nuveen California Insured
Tax-Free Value Fund and the Nuveen California Tax-Free Money Market Fund.
The Nuveen California Tax-Free Value Fund invests primarily in long-term
investment grade California tax-exempt bonds (I.E., bonds rated in the four
highest categories by Moody's or Standard & Poor's or, if unrated, that have
equivalent credit characteristics). The Nuveen California Insured Tax-Free Value
Fund invests primarily in the same type of investments as the Nuveen California
Tax-Free Value Fund, each of which is covered by insurance guaranteeing the
timely payment of principal and interest or is backed by a deposit of U.S.
Government securities.
The Nuveen California Tax-Free Money Market Fund invests primarily in
high-quality short term California tax- exempt money market instruments (I.E.,
obligations rated in the two highest categories by Moody's or Standard & Poor's
or, if unrated, that have equivalent credit characteristics). This portfolio
will include only obligations maturing within one year from the date of
acquisition, will maintain an average maturity of all investments of 120 days or
less, will value its portfolio at amortized cost and will seek to maintain a net
asset value of $1.00 per share. The Nuveen California Tax-Free Money Market Fund
provides for an expedited wire redemption privilege.
THE TAX-FREE BOND FUND
The Tax-Free Bond Fund consists of the Nuveen Massachusetts Tax-Free Value
Fund, the Nuveen New York Tax-Free Value Fund, the Nuveen Ohio Tax-Free Value
Fund, and the Nuveen New Jersey Tax-Free Value Fund, which are each available
for reinvestment to Unitholders who are residents of the state for which such
portfolio is named. The Tax-Free Bond Fund has the objective of providing,
through investment in a professionally managed portfolio of municipal bonds, as
high a level of current interest income exempt both from Federal income tax and
from the income tax imposed by each portfolio's designated state as is
consistent with preservation of capital. The Tax-Free Bond Fund may include in
each of its portfolios tax-exempt bonds rated Baa or BBB or better; unrated
bonds which, in the opinion of the investment adviser, have credit
characteristics equivalent to bonds rated Baa or BBB or better; and certain
temporary investments, including securities the interest income from which may
be subject to Federal and state income tax.
THE INSURED BOND FUND
The Insured Bond Fund consists of the Nuveen Insured Municipal Bond Fund,
the Nuveen Massachusetts Insured Tax-Free Value Fund and the Nuveen New York
Insured Tax-Free Value Fund, which are each available for reinvestment to
Unitholders. (The Massachusetts and New York Portfolios are available only to
those Unitholders
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who are residents of the state for which the portfolio is named.) The Insured
Bond Fund has the objective of providing, through investment in professionally
managed portfolios of municipal bonds, as high a level of current interest
income exempt from both Federal income tax and, in the case of designated state
portfolios, from the income tax imposed by each portfolio's designated state, as
is consistent with preservation of capital. The Insured Bond Fund may include in
each of its portfolios the same type of investments as the Tax-Free Bond Fund,
each of which is covered by insurance guaranteeing the timely payment of
principal and interest or is backed by a deposit of U.S. Government securities.
THE MONEY MARKET FUND
The Money Market Fund consists of the Nuveen Massachusetts Tax-Free Money
Market Fund and the Nuveen New York Tax-Free Money Market Fund, which are each
available for reinvestment to Unitholders who are residents of the state for
which such portfolio is named. The Money Market Fund includes in its portfolios
only obligations maturing within one year from the date of acquisition,
maintains an average maturity of 120 days or less, values its portfolios at
amortized cost and seeks to maintain a net asset value of $1.00 per share. The
Money Market Fund has the objective of providing, through investment in
professionally managed portfolios of high quality short-term municipal
obligations, as high a level of current interest income exempt both from Federal
income tax and from the income tax imposed by each portfolio's designated state
as is consistent with stability of principal and the maintenance of liquidity.
The Money Market Fund may include in each of its portfolios municipal
obligations rated Aaa, Aa, MIG-1, MIG- 2, VMIG-1, VMIG-2, Prime 1 or Prime 2 by
Moody's or AAA, AA, SP-1, SP-2, A-1 or A-2 by Standard & Poor's; unrated
municipal obligations that, in the opinion of the investment adviser, have
credit characteristics equivalent to obligations rated as above; and temporary
investments that may be subject to Federal and state income tax.
THE MULTISTATE TRUST
The Multistate Trust consists of the Nuveen Arizona Tax-Free Value Fund, the
Nuveen Florida Tax-Free Value Fund, the Nuveen Maryland Tax-Free Value Fund, the
Nuveen Michigan Tax-Free Value Fund, the Nuveen New Jersey Tax-Free Value Fund,
the Nuveen Pennsylvania Tax-Free Value Fund and the Nuveen Virginia Tax Free
Value Fund, which are each available for reinvestment to Unitholders who are
residents of the state for which such portfolio is named. The Multistate Trust
has the objective of providing, through investment in a professionally managed
portfolio of municipal bonds, as high a level of current interest income exempt
from both regular Federal income tax and the applicable state personal income
tax as is consistent with preservation of capital. The Multistate Trust may
include in each of its portfolios tax-exempt bonds rated "Baa" or "BBB" or
better, unrated bonds which, in the opinion of the investment advisor, have
credit characteristics equivalent to bonds rated "baa" or "BBB" or better,
limited to no more than 20% of the Multistate Trust's assets, and certain
temporary investments that may be subject to Federal and state income tax.
Each person who purchases Units of a Trust may become a participant in the
Accumulation Plan and elect to have his or her distributions on Units of the
Trust invested directly in shares of one of the Accumulation Funds. Reinvesting
Unitholders may select any interest distribution plan. Thereafter, each
distribution of interest income or principal on the participant's Units
(principal only in the case of a Unitholder who has chosen to reinvest only
principal distributions) will, on the applicable distribution date, or the next
day on which the New York Stock Exchange is normally open ("business day") if
the distribution date is not a business day, automatically be received by
Shareholder Services, Inc., transfer agent for each of the Accumulation Funds,
on behalf of such participant and applied on that date to purchase shares (or
fractions thereof) of the Accumulation Fund chosen at net asset value as
computed as of 4:00 p.m. eastern time on each such date. All distributions will
be reinvested in the Accumulation Fund chosen and no part thereof will be
retained in a separate account. These purchases will be made without a sales
charge.
INFORMATION ABOUT THE SPONSOR
John Nuveen & Co. Incorporated, the Sponsor and Underwriter, was founded in 1898
and is the oldest and largest investment banking firm specializing in the
underwriting and distribution of tax-exempt securities and maintains the largest
research department in the investment banking community devoted exclusively to
the analysis of municipal securities. In 1961 the Sponsor began sponsoring the
Nuveen Tax-Free Unit Trust and, since this time, it has issued more than $30
billion in tax-exempt unit trusts, including over $8 billion in insured trusts.
The Sponsor is also principal underwriter of the Nuveen Municipal Bond Fund,
Inc., the Nuveen Tax-Free Money Market Fund, Inc., Nuveen Tax-Free Reserves,
Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Bond Fund, Inc.,
Nuveen Insured Tax-Free Bond Fund, Inc. and Nuveen Tax-Exempt Money Market Fund,
Inc., all registered open-end management investment companies, and acted as
co-managing underwriter of Nuveen Municipal Value Fund, Inc., Nuveen California
Municipal Value Fund, Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen
Municipal Income Fund, Inc., Nuveen California Municipal Income Fund, Inc.,
Nuveen New York Municipal Income
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Fund, Inc., Nuveen Premium Income Municipal Fund, Inc., Nuveen Performance Plus
Municipal Fund, Inc., Nuveen California Performance Plus Municipal Fund, Inc.,
Nuveen New York Performance Plus Municipal Fund, Inc., Nuveen Municipal
Advantage Fund, Inc., Nuveen Municipal Market Opportunity Fund, Inc., Nuveen
California Municipal Market Opportunity Fund, Inc., Nuveen New York Municipal
Market Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc.,
Nuveen California Investment Quality Municipal Fund, Inc., Nuveen New York
Investment Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund,
Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen Pennsylvania
Investment Quality Municipal Fund, Nuveen New Jersey Investment Quality
Municipal Fund, Inc., and the Nuveen Select Quality Municipal Fund, Inc., Nuveen
California Quality Municipal Fund, Inc., Nuveen New York Select Quality
Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured
Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund,
Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen New Jersey Quality
Income Municipal Fund, Inc., Nuveen Ohio Quality Income Municipal Fund, Inc.,
Nuveen Pennsylvania Quality Income Municipal Fund, Nuveen Texas Quality Income
Municipal Fund, Nuveen California Quality Income Municipal Fund, Inc., Nuveen
New York Quality Income Municipal Fund, Inc., Nuveen Premier Insured Municipal
Income Fund, Inc., Nuveen Select Tax Free Income Portfolio, Nuveen Select Tax
Free Income Portfolio 2, Nuveen Insured California Select Tax-Free Income
Portfolio, Nuveen Insured New York Select Tax-Free Income Portfolio, Nuveen
Premium Income Municipal Fund 2, Inc., Nuveen Select Tax Free Income Portfolio
3, Nuveen Select Maturities Municipal Fund, Nuveen Insured California Premium
Income Municipal Fund, Inc., Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Premium Income Municipal Fund, Inc., Nuveen Insured Florida
Premium Income Municipal Fund, Nuveen Michigan Premium Income Municipal Fund,
Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc., Nuveen Insured New
York Premium Income Municipal Fund, Inc., Nuveen Ohio Premium Income Municipal
Fund, Inc., Nuveen Pennsylvania Premium Income Municipal Fund, Nuveen Texas
Premium Income Municipal Fund, Nuveen Premium Income Municipal Fund 4, Inc.,
Nuveen Pennsylvania Premium Income Municipal Fund 2, Nuveen Insured Florida
Premium Income Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund,
Nuveen Virginia Premium Income Municipal Fund, Nuveen Massachusetts Premium
Income Municipal Fund, Nuveen Insured California Premium Income Municipal Fund
2, Inc., Nuveen Insured New York Premium Income Municipal Fund 2, Nuveen New
Jersey Premium Income Municipal Fund 2, Nuveen Washington Premium Income
Municipal Fund, Nuveen Michigan Premium Income Municipal Fund 2, Nuveen Georgia
Premium Income Municipal Fund, Nuveen Missouri Premium Income Municipal Fund,
Nuveen Connecticut Premium Income Municipal Fund, Nuveen North Carolina Premium
Income Municipal Fund, Nuveen New Jersey Premium Income Municipal Fund 3, Nuveen
Florida Premium Income Municipal Fund, Nuveen New York Premium Income Municipal
Fund, Nuveen California Premium Income Municipal Fund, Nuveen Pennsylvania
Premium Income Municipal Fund 3, Nuveen Maryland Income Municipal Fund 2, Nuveen
Virginia Premium Income Municipal Fund 2, Nuveen Ohio Premium Income Municipal
Fund 2, Nuveen Insured Premium Income Municipal Fund 2, Nuveen California
Premium Income Municipal Fund 2, all registered closed-end management investment
companies. These registered open-end and closed-end investment companies
currently have approximately $32.8 billion in tax-exempt securities under
management. Nationwide, more than 1,000,000 individual investors have purchased
Nuveen's tax exempt trusts and funds. The present corporation was organized in
1967 as a wholly-owned subsidiary of Nuveen Corporation, successor to the
original John Nuveen & Co. founded in 1898 as a sole proprietorship and
incorporated in 1953. In 1974, John Nuveen & Co. Incorporated became a
wholly-owned subsidiary of The St. Paul Companies, Inc., a financial services
management company located in St. Paul, Minnesota. On May 19, 1992, common
shares comprising a minority interest in The John Nuveen Company ("JNC"), a
newly organized corporation which holds all of the shares of Nuveen, were sold
to the general public in an initial public offering. St. Paul retains a
controlling interest in JNC with over 70% of JNC's shares. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and the
Securities Industry Association and has its principal offices located in Chicago
(333 W. Wacker Drive) and New York (Swiss Bank Tower, 10 East 50th Street). It
maintains 14 regional offices.
The Nuveen Tax-Free Unit Trusts and the Sponsor have adopted a code of ethics
which essentially prohibits all Nuveen investment personnel from engaging in
personal investments which compete or interfere with, or attempt to take
advantage of, a Trust's anticipated or actual portfolio transactions, and is
designed to assure that the interest of Unitholders is placed before the
interest of Nuveen personnel in connection with personal investment
transactions.
To help advisers and investors better understand and more efficiently use an
investment in the Trust to reach their investment goals, the Trust's sponsor,
John Nuveen & Co. Incorporated, may advertise and create specific investment
programs and systems. For example, such activities may include presenting
information on how to use an investment in the Trust, alone or in combination
with an investment in other mutual funds or unit investment trusts sponsored by
Nuveen, to accumulate assets for future education needs or periodic payments
such as
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insurance premiums. The Trust's sponsor may produce software or additional sales
literature to promote the advantages of using the Trust to meet these and other
specific investor needs.
The Sponsor offers a program of advertising support to registered
broker-dealer firms, banks and bank affiliates ("Firms") that sell Trust Units
or shares of Nuveen Open-End Tax-Free Mutual Funds (excluding money-market
funds) ("Funds"). Under this program, the Sponsor will pay or reimburse the Firm
for up to one half of specified media costs incurred in the placement of
advertisements which jointly feature the Firm and the Nuveen Funds and Trusts.
Reimbursements to the Firm will be based on the number of the Firm's registered
representatives who have sold Fund Shares and/or Trust Units during the prior
calendar year according to an established schedule. Reimbursements under this
program will be made by the Sponsor and not by the Funds or Trusts.
DESCRIPTION OF RATINGS*
STANDARD & POOR'S CORPORATION. A description of the applicable Standard &
Poor's Corporation rating symbols and their meanings follows:
A Standard & Poor's rating is a current assessment of the creditworthiness
of an obligor with respect to a specific debt obligation. This assessment may
take into consideration obligors such as guarantors, insurers or lessees.
The rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance
with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal, and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in the higher rated categories.
PLUS (+) OR MINUS (-): The ratings from "AA" to "BB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the issuance of the bonds being rated and indicates
that payment of debt service requirements is largely or entirely dependent upon
the successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes no
comment on the likelihood of, or the risk of default upon failure of, such
completion. Accordingly, the investor should exercise his own judgment with
respect to such likelihood and risk.
NOTE RATINGS: A Standard & Poor's note rating reflects the liquidity
concerns and market access risks unique to notes. Notes due in 3 years or less
will likely receive a note rating. Notes maturing beyond 3 years will most
likely receive a long-term debt rating.
- ----------
*As published by the rating companies.
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Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
RATINGS OF INSURED TRUST UNITS
A Standard & Poor's rating on the units of an insured investment trust
(hereinafter referred to collectively as "units" and "trusts") is a current
assessment of creditworthiness with respect to the investment held by such
trust. This assessment takes into consideration the financial capacity of the
issuers and of any guarantors, insurers, lessees or mortgagors with respect to
such investments. The assessment, however, does not take into account the extent
to which trust expenses or portfolio asset sales for less than the trust
purchase price will reduce payment to the unitholder of the interest and
principal required to be paid on the portfolio assets. In addition, the rating
is not a recommendation to purchase, sell or hold units, inasmuch as the rating
does not comment as to market price of the units or suitability for a particular
investor.
Units rated "AAA" are composed exclusively of assets that are rated "AAA" by
Standard & Poor's and/or certain short-term investments. Standard & Poor's
defines its AAA rating for such assets as the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest and repay
principal is very strong. However, unit ratings may be subject to revision or
withdrawal at any time by Standard & Poor's and each rating should be evaluated
independently of any other rating.
MOODY'S INVESTORS SERVICE, INC. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follows:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Their safety is so absolute that,
with the occasional exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by money market
fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. Their market value is virtually immune to all but money market
influences, with the occasional exception of oversupply in a few specific
instances.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future. The market
value of A-rated bonds may be influenced to some degree by economic performance
during a sustained period of depressed business conditions, but, during periods
of normalcy, A-rated bonds frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few specific
instances.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the high
end of its category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. The market value of Baa-rated
bonds is more sensitive to changes in economic circumstances, and aside from
occasional speculative factors applying to some bonds of this class, Baa market
valuations move in parallel with Aaa, Aa and A obligations during periods of
economic normalcy, except in instances of oversupply.
Con. (--)--Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
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NOTE RATINGS:
MIG 1-- This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2-- This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
HOW THE TRUST COMPARES PERFORMANCE
The Sponsor may compare the estimated returns of the Trust with the returns
or yields of other tax-free and taxable investments, often on a taxable
equivalent basis. In addition, the Sponsor from time to time may quote various
performance measures and studies in order to compare the historical returns
available from an investment in municipal securities with investments in both
tax-free and taxable securities.
In September 1995, Nuveen Research prepared one such study which compared
the after-tax value of $100,000 initially invested in 1975 in various asset
classes including municipal bonds, treasury bonds and corporate bonds. As
indicated in the chart provided below, the 20-year study shows that municipal
bonds significantly outperformed corporate and treasury bonds once the effects
of taxes were factored in. In fact, over the 20-year period, municipal bond
returns in dollars were more than double those of treasury bonds.
AFTER-TAX VALUE OF $100,000 INVESTED IN 1975*
The graph appearing on this page of the Information Supplement compares
after-tax total returns of $100,000 initially in 1975 in each of the Lehman
Brothers MuniBond Index, Long-Term Treasury Index and Long-Term Corporate Index.
As indicated in the graph, such an investment in the Lehman Brothers MuniBond
Index, Long-Term Treasury Index and Long-Term Corporate Index would have
appreciated to $448,740, $267,668, and $304,049, respectively at the end of
1994. The graph assumes all proceeds of investment are reinvested at the
respective index rates at the time of reinvestment and also assumes that 20% of
the assets in each category are turned over annually and proceeds are reinvested
in the respective indexes. The tax rates assumed to generate the after-tax total
returns were based upon the income and capital gain rates applicable each year
from 1975-1994 for an investor who earned the inflation-adjusted equivalents of
$400,000 in 1994. In addition, treasury returns were "grossed up" an assumed 5%
to take into account the Treasuries' exemption from state income tax. The graph
is for illustrative purposes only, and does not represent the return or
performance of any Nuveen Tax-Free Unit Trust and is not intended to predict
future results.
* The graph compares after-tax total returns using the Lehman Brothers
MuniBond Index, Long-Term Treasury Index and Long-Term Corporate Index. The
graph assumes all proceeds of investment are reinvested at the respective index
rates at the time of reinvestment and also assumes that 20% of the assets in
each category are turned over annually and proceeds are reinvested in the
respective indexes. The tax rates assumed to generate the after-tax total
returns were based upon the income and capital gain rates applicable each year
from 1975-1994 for an investor who earned the inflation-adjusted equivalents of
$100,000 in 1994. In addition, treasury returns were "grossed up" an assumed 5%
to take into account the Treasuries' exemption from state income tax. The graph
is for illustrative purposes only, and does not represent the return or
performance of any Nuveen Tax-Free Unit Trust and is not intended to predict
future results.
A comparison of the estimated returns of the Trust and the historic
performance of municipal bonds to the returns and performance of other
investments is one element to consider in making an informed investment
decision. Taxable investments have investment characteristics that differ from
those of the Trust. U.S. Government bonds are long-term investments backed by
the full faith and credit of the U.S. Government and are subject to federal
income tax but are exempt from state income taxes. Bank CDs are generally
short-term FDIC insured investments, which pay fixed principal and interest but
are subject to fluctuating rollover rates. Both bank CDs and corporate bonds are
generally subject to both federal and state income taxes. Money market funds are
short term investments with stable net asset values, fluctuating yields and
special features that enhance liquidity.
HOW TO CALCULATE YOUR ESTIMATED INCOME
The examples provided below illustrate how to calculate the estimated annual
income generated by a hypothetical $10,000 investment in each respective Trust.
The illustrations assume that the investment was made on the day prior to the
date of deposit by an investor electing the monthly distribution plan. These
hypothetical
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examples are for illustrative purposes only and not intended to reflect or
predict the results of any actual investment.
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE OF HOW TO CALCULATE YOUR ESTIMATED INCOME:
GEORGIA INSURED TRUST 51
$10,000 DIVIDED BY $100.00 = 100.000
Investment Offering price and # of units purchased
(as of 04/25/96) accrued interest
100.000 X $5.1252 = $512.52
# of units purchased Annual income per unit annual income
(monthly plan)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE OF HOW TO CALCULATE YOUR ESTIMATED INCOME:
MASSACHUSETTS INSURED TRUST 135
$10,000 DIVIDED BY $99.45 = 100.553
Investment Offering price and # of units purchased
(as of 04/25/96) accrued interest
100.553 X $5.1710 = $519.96
# of units purchased Annual income per unit annual income
(monthly plan)
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE OF HOW TO CALCULATE YOUR ESTIMATED INCOME:
MICHIGAN INSURED TRUST 65
$10,000 DIVIDED BY $99.84 = 100.160
Investment Offering price and # of units purchased
(as of 04/25/96) accrued interest
100.160 X $5.2793 = $528.77
# of units purchased Annual income per unit annual income
(monthly plan)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE OF HOW TO CALCULATE YOUR ESTIMATED INCOME:
OHIO INSURED TRUST 133
$10,000 DIVIDED BY $101.16 = 98.853
Investment Offering price and # of units purchased
(as of 04/25/96) accrued interest
98.853 X $5.2753 = $521.48
# of units purchased Annual income per unit annual income
(monthly plan)
</TABLE>
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APPENDIX A
GEORGIA DISCLOSURE
ECONOMIC FACTORS--GEORGIA
The following brief summary regarding the economy of Georgia is based upon
information drawn from publicly available sources and is included for purposes
of providing information about general economic conditions that may or may not
affect issuers of the Georgia obligations. The Sponsor has not independently
verified any of the information contained in such publicly available documents.
CONSTITUTIONAL CONSIDERATIONS. The Georgia Constitution permits the
issuance by the State of general obligation debt and of certain guaranteed
revenue debt. The State may incur guaranteed revenue debt by guaranteeing the
payment of certain revenue obligations issued by an instrumentality of the
State. The Georgia Constitution prohibits the incurring of any general
obligation debt or guaranteed revenue debt if the highest aggregate annual debt
service requirement for the then current year or any subsequent fiscal year for
outstanding general obligation debt and guaranteed revenue debt, including the
proposed debt, exceed 10 percent of the total revenue receipts, less refunds, of
the State treasury in the fiscal year immediately preceding the year in which
any such debt is to be incurred.
The Georgia Constitution also permits the State to incur public debt to
supply a temporary deficit in the State treasury in any fiscal year created by a
delay in collecting the taxes of that year. Such debt must not exceed, in the
aggregate, 5% of the total revenue receipts, less refunds, of the State treasury
in the fiscal year immediately preceding the year in which such debt is
incurred. The debt incurred must be repaid on or before the last day of the
fiscal year in which it is to be incurred out of the taxes levied for that
fiscal year. No such debt may be incurred in any fiscal year if there is then
outstanding unpaid debt from any previous fiscal year which was incurred to
supply a temporary deficit in the State treasury. No such short-term debt has
been incurred under this provision since the inception of the constitutional
authority referred to in this paragraph.
Virtually all of the issues of long-term debt obligations issued by or on
behalf of the State of Georgia and counties, municipalities and other political
subdivisions and public authorities thereof are required by law to be validated
and confirmed in a judicial proceeding prior to issuance. The legal effect of an
approved validation in Georgia is to render incontestable the validity of the
pertinent bond issue and the security therefor.
THE STATE AND ITS ECONOMY. The State operates on a fiscal year beginning
July 1 and ending June 30. Thus, the 1994 fiscal year ended June 30, 1994. The
state's recovery from the recent economic recession has been steady and is
better than regional trends, albeit half the rate of earlier recoveries. While
this recovery does not meet the explosive patterns set in past cycles, recent
state data reveal that Georgia ranks among the top five states in the nation in
employment and total population growth. The 1992 annual average unemployment
rate for Georgia was 6.9% as compared to the 1992 national annual average
unemployment rate of 7.4%. The 1993 annual average unemployment rate for Georgia
was 5.7% as compared to the 1993 national annual average unemployment rate of
6.7%. Throughout 1994, the monthly unemployment rate for Georgia (not seasonally
adjusted) has remained below the national average monthly unemployment rate (not
seasonally adjusted). In December 1994, Georgia's unemployment rate was 4.6% as
compared to the national average unemployment rate of 5.1% (not seasonally
adjusted).
Stronger economic trends and conservative revenue forecasting resulted in
the continuation of improved financial results for the fiscal year ended June
30, 1994. The state's general fund closed fiscal 1994 with a total fund balance
position of $480.6 million, of which $249.5 million was in the revenue shortfall
reserve fund (3% of revenues), marking the second consecutive year of buildup in
that reserve. The midyear adjustment reserve was fully funded at $89.1 million.
The state's fiscal 1995 adopted budget called for an increase in state
spending to $9.8 billion, up 6.5% from the prior period. Economic growth is
estimated to be in the 6%-8% range for the second straight year. The budget
report forecasted general fund revenues to grow to $9.4 billion, an increase of
$490.0 million, or 5.5% above actual fiscal 1994 levels. Sales and income taxes
account for the majority of that increase, despite a $100 million cut in
personal income taxes. Additional revenues provided by lottery proceeds ($240
million) and indigent-care trust fund monies support the remaining spending.
Revenues for the first three months of the current year are running nearly 8.4%
above fiscal 1994 levels. Most of the increase is attributable to the growth in
personal and corporate income and sales taxes. As a result, the state
anticipates that fiscal 1995 will once again produce positive financial results.
The debt burden is low at only $593 per capita, or 3.3% of personal income,
and 5% of expenditures.
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In July, 1994, widespread flooding in central and southern Georgia caused
extensive damage and destruction of farmland, private residences, businesses and
local and state government facilities. As of July 12, 1994, Governor Zell Miller
refused to estimate the dollar value of the damage but other sources estimate
that damage could exceed $300 million. Thirty-one counties have been declared
federal disaster areas. Moody's Investors Service, Inc. and Standard and Poor's
Corporation are observing the situation in Georgia, but neither rating agency
has expressed any immediate credit concerns.
BOND RATINGS. Currently, Moody's Investors Service, Inc. rates Georgia
general obligation bonds Aaa and Standard & Poor's Corporation rates such bonds
AA+.
LEGAL PROCEEDINGS. Georgia is involved in certain legal proceedings that,
if decided against the State, may require the State to make significant future
expenditures or may substantially impair revenues.
Three suits have been filed against the State of Georgia seeking refunds of
liquor taxes under O.C.G.A. Section 48-2-35, in light of BACCHUS IMPORTS, LTD.
V. DIAS, 468 U.S. 263 (1984) under Georgia's pre-BACCHUS statute. In JAMES
B.BEAM DISTILLING CO. V. STATE, 501 U.S. 529 (decided June 20, 1991) the Supreme
Court indicated that BACCHUS was retroactive, but only within the bounds of
State statutes of limitations and procedural bars, and left State courts to
determine any remedy in light of reliance interests, equitable considerations,
and other defenses. Georgia's statute of limitations in O.C.G.A. Section 48-2-35
has run on all pre-BACCHUS claims for refund except five pending claims seeking
31.7 million dollars in tax plus interest. On remand, the Fulton County Superior
Court has ruled that procedural bars and other defenses bar any recovery by
taxpayers on Beam's claims for refund. The Georgia Supreme Court has affirmed,
and Beam's petition to the United States Supreme Court for a rehearing was
denied on February 21, 1995.
In BOARD OF PUBLIC EDUCATION FOR SAVANNAH/CHATHAM COUNTY V. STATE OF
GEORGIA, the local school board claimed that the State should finance the major
portion of the costs of its desegregation program. The Savannah Board originally
requested restitution in the amount of $30 million, but the Federal District
Court set forth a formula which would require a State payment in the amount of
approximately $6 million. Subsequently the parties agreed to a settlement, the
terms of which have not been finalized. The proposed settlement calls for the
State to pay approximately $10 million to the school board. A similar complaint
has been filed by DeKalb County and there are approximately five other school
districts which potentially might attempt to file similar claims. In the DeKalb
County case alone, the plaintiffs appear to be seeking approximately $67.5
million of restitution. The DeKalb case has recently been tried and is awaiting
final argument and decision.
On December 6, 1994 the Supreme Court ruled in REICH V. COLLINS, that
Georgia had employed a "bait-and-switch" scheme to tax federal pension income in
the State and then to deny retirees' requests for a tax refund. The Court left
it up to the Georgia Supreme Court to provide retirees with "meaningful
backward-looking relief." Governor Zell Miller tentatively agreed that the State
would pay such retirees $108 million. The State potentially owes another $100
million to those federal retirees who did not apply for a refund by the State's
April 1992 deadline. The Chairman of the Georgia State Senate Appropriations
Committee said that the Georgia budget could absorb the impact of the $108
million settlement.
The foregoing information does not purport to be a complete or exhaustive
description of all conditions to which the issuers of Bonds in the Georgia
Insured Trust are subject. Many factors including national economic, social and
environmental policies and conditions, which are not within the control of the
issuers of Bonds could affect or could have an adverse impact on the financial
condition of the State and various agencies and political subdivisions located
in the State. Since Georgia Bonds in the Georgia Insured Trust (other than
general obligation bonds issued by the State) are payable from revenue derived
from a specific source or authority, the impact of a pronounced decline in the
national economy or difficulties in significant industries within the State
could result in a decrease in the amount of revenues realized from such source
or by such authority and thus adversely affect the ability of the respective
issuers of the Georgia Bonds in the Georgia Insured Trust to pay the debt
service requirements on the Georgia Bonds. Similarly, such adverse economic
developments could result in a decrease in tax revenues realized by the State
and thus could adversely affect the ability of the State to pay the debt service
requirements of any Georgia general obligation bonds in the Georgia Insured
Trust.
GEORGIA TAXABLE ESTIMATED CURRENT RETURN TABLE
The following tables show the approximate taxable estimated current returns
for individuals that are equivalent to tax-exempt estimated current returns
under combined Federal and state taxes, using published 1996 marginal Federal
tax rates and marginal state tax rates currently available and scheduled to be
in effect. The tables incorporate increased tax rates for higher-income
taxpayers that were included in the Revenue Reconciliation Act of 1993. The
table assumes that federal taxable income is equal to state income subject to
tax, and for cases in
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which more than one state rate falls within a Federal bracket, the highest state
rate corresponding to the highest income within that Federal bracket is used.
The combined state and Federal tax brackets shown reflect the fact that state
tax payments are currently deductible for Federal tax purposes. The table does
not reflect any local taxes or any taxes other than personal income taxes. The
tables illustrate what you would have to earn on taxable investments to equal
the tax-exempt estimated current return for your income tax bracket. A
taxpayer's marginal tax rate is affected by both his taxable income and his
adjusted gross income. Locate your adjusted gross and your taxable income (which
is your adjusted gross income reduced by any deductions and exemptions), then
locate your tax bracket based on joint or single tax filing. Read across to the
equivalent taxable estimated current return you would need to match the tax-free
income.
COMBINED MARGINAL TAX RATES FOR JOINT TAXPAYERS WITH FOUR PERSONAL EXEMPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL --------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.25% 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00%
------------- ------------- ----------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 40.1 $ 0-117.95 20.0 % 5.31 5.63 5.94 6.25 6.56 6.88 7.19 7.50
40.1- 96.9 0-117.95 32.5 6.30 6.67 7.04 7.41 7.78 8.15 8.52 8.89
117.95-176.95 33.0 6.34 6.72 7.09 7.46 7.84 8.21 8.58 8.96
96.9-147.7 0-117.95 35.0 6.54 6.92 7.31 7.69 8.08 8.46 8.85 9.23
117.95-176.95 36.0 6.64 7.03 7.42 7.81 8.20 8.59 8.98 9.38
176.95-299.45 38.5 6.91 7.32 7.72 8.13 8.54 8.94 9.35 9.76
147.7-263.75 117.95-176.95 41.0 7.20 7.63 8.13 8.47 8.90 9.32 9.75 10.17
176.95-299.45 43.5 7.52 7.96 8.41 8.85 9.29 9.73 10.18 10.62
Over 299.45 41.0 2 7.20 7.63 8.05 8.47 8.90 9.32 9.75 10.17
Over 263.75 176.95-299.45 47.5 8.10 8.57 9.05 9.52 10.00 10.48 10.95 11.43
Over 299.45 44.5 3 7.66 8.11 8.56 9.01 9.46 9.91 10.36 10.81
</TABLE>
COMBINED MARGINAL TAX RATES FOR SINGLE TAXPAYERS WITH ONE PERSONAL EXEMPTION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL --------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.25% 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00%
------------- ------------- ----------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 24.00 $ 0-117.95 20.0 5.31 5.63 5.94 6.25 6.56 6.88 7.19 7.50
24.00- 58.15 0-117.95 32.5 6.30 6.67 7.04 7.41 7.78 8.15 8.52 8.89
58.15-121.30 0-117.95 35.0 6.54 6.92 7.31 7.69 8.08 8.46 8.85 9.23
117.95-240.45 36.5 6.69 7.09 7.48 7.87 8.27 8.66 9.06 9.45
121.30-263.75 117.95-240.45 41.5 7.26 7.69 8.12 8.55 8.97 9.40 9.83 10.26
Over 240.45 41.0 2 7.20 7.63 8.05 8.47 8.90 9.32 9.75 10.17
Over 263.75 Over 240.45 44.5 3 7.66 8.11 8.56 9.01 9.46 9.91 10.36 10.81
</TABLE>
- ------------------
1 The table reflects the effect of the limitations on itemized deductions
and the deduction for personal exemptions. They were designed to phase out
certain benefits of these deductions for higher income taxpayers. These
limitations, in effect, raise the current maximum marginal combined tax rate to
approximately 47.48 percent for taxpayers filing a joint return and entitled to
four personal exemptions and to approximately 44.45 percent for taxpayers filing
a single return entitled to only one personal exemption. These limitations are
subject to certain maximums, which depend on the number of exemptions claimed
and the total amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to lose more than
80% of his allowable itemized deductions, with certain exceptions.
2 Combined tax rate reverts to 39.84% after the 80% cap on the limitation
on itemized deductions has been met.
3 Combined tax rate reverts to 43.22% after the 80% cap on the limitation
on itemized deductions has been met.
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APPENDIX B
MASSACHUSETTS DISCLOSURE
ECONOMIC FACTORS--MASSACHUSETTS
Without intending to be complete, the following briefly summarizes the
current financial situation, as well as some of the complex factors affecting
the financial situation, in the Commonwealth of Massachusetts (the
"COMMONWEALTH"). It is derived from sources that are generally available to
investors and is based in part on information obtained from various agencies in
Massachusetts. No independent verification has been made of the accuracy or
completeness of the following information.
There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on Commonwealth or local
governmental finances generally, will not adversely affect the market value of
Massachusetts Obligations in the Trust or the ability of particular obligors to
make timely payments of debt service on (or relating to) those obligations.
Since 1988, there has been a significant slowdown in the Commonwealth's
economy, as indicated by a rise in unemployment, a slowing of its per capita
income growth and declining state revenues. In fiscal 1991, the Commonwealth's
expenditures for state government programs exceeded current revenues, and
although fiscal 1992, 1993 and 1994 revenues exceeded expenditures, no assurance
can be given that lower than expected tax revenues will not resume and continue.
1996 FISCAL YEAR BUDGET. On June 21, 1995, the Governor signed the
Commonwealth's budget for fiscal 1996. The fiscal 1996 budget is based on an
estimated budgeted revenues and other sources of approximately $16.802 billion,
which includes tax revenue estimates of approximately $11.654 billion, an
increase of approximately $475 million, as compared to estimated 1995 tax
revenues of $11.179 billion. The fiscal 1996 budgeted expenditures are $16.820
billion, which represents an approximately 2.6% increase from fiscal 1995
expenditures.
1995 FISCAL YEAR BUDGET. On July 10, 1994, the Governor signed the
Commonwealth's budget for fiscal 1995. The fiscal 1995 budget is based on
estimated budgeted revenues and other sources of approximately $16.360 billion,
which includes revised tax revenue estimates of approximately $11.179 billion.
Tax revenues for fiscal 1995 were originally estimated at $11.328 billion in
May, 1994, however, due to the slowing of the rate of growth in certain tax
revenue categories in the months following the signing of the budget,
particularly income tax, the Secretary of the Administration on September 26,
1994, as required by law, reduced the fiscal 1995 tax revenue estimate by $75
million. On January 25, 1995, the Secretary for Administration and Finance
further revised the fiscal 1995 tax revenue estimate to $11.179 billion, a
reduction of approximately $55 million from the September 26, 1994 estimate. The
tax revenue estimate includes $19.3 million of tax cuts signed by the Governor
in the fiscal 1995 budget. Estimated fiscal 1995 tax revenues are approximately
$572 million higher than fiscal 1994 tax revenues of $10.607 billion.
As signed by the Governor, the budget authorizes approximately $16.482
billion in fiscal 1995 expenditures. The Governor exercised his authority to
veto and reduce individual line items and reduced total expenditures by
approximately $298.2 million and vetoed certain other law changes contained in
the fiscal 1995 budget. The $16.449 billion of fiscal 1995 expenditures includes
a reserve against certain contingencies currently in the amount of $98.6
million. On January 25, 1995, the Governor filed a supplemental appropriation
recommendation aggregating approximately $43.6 million, which expenditures are
included in the $98.6 million contingency reserve for fiscal 1995 expenditures.
Included in the approximately $298.2 million of vetoes noted above, the Governor
vetoed approximately $296.9 million in appropriations for the Executive Office
of Human Services and the Department of Public Welfare, representing the
estimate, at the time, of 4 months of funding for the Commonwealth's public
assistance programs.
On February 10, 1995, the Governor signed into law certain reforms to the
Commonwealth's program for Aid to Families with Dependent Children ("AFDC")
which take effect on July 1, 1995, subject to federal approval of certain
waivers. The revised program reduces AFDC benefits to able bodied recipients by
2.75%, while allowing them to keep a larger portion of their earned wages,
requires approximately 22,000 able-bodied parents of school-aged children to
work or perform community service for 20 hours per week and requires
approximately 16,000 recipients who have children between the ages of two and
six to participate in an education or training program or perform community
service. The plan also establishes a pilot program for up to 2,000 participants
that offers tax credits and wage subsidies to employers who hire welfare
recipients. Parents who find employment will be provided with extended medical
benefits and day care benefits for up to one year. The plan mandates paternal
identification, expands funding for anti-fraud initiatives, and requires parents
on AFDC to immunize their children. Parents who are disabled, caring for a
disabled child, have a child under the age of two, or are teen-agers living at
home and attending high school, will continue to receive cash assistance. Since
most provisions of the
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new law do not take effect until July 1, 1995, the Executive Office for
Administration projects that the reforms will not materially affect fiscal 1995
public assistance spending. The fiscal 1995 expenditure estimate of $16.449
billion includes $247.8 million appropriated to fund the Commonwealth's public
assistance programs for the last four months of fiscal 1995. The Commonwealth is
currently evaluating the new law's impact on fiscal 1996 projected spending for
public assistance programs.
The fiscal 1995 budget is based on numerous spending and revenue estimates
the achievement of which cannot be assured.
On November 8, 1994, the voters in the statewide general election approved
an initiative petition that would slightly increase the portion of the gasoline
tax revenue credited to the Highway Fund, one of the Commonwealth's three major
budgetary funds, prohibit the transfer of money from the Highway Fund to other
funds for non-highway purposes and not permit including the Highway Fund balance
in the computation "consolidated net surplus" for purposes of state finance
laws. The initiative petition also provides that no more than 15% of gasoline
tax revenues may be used for mass transportation purposes, such as expenditures
related to the Massachusetts Bay Transit Authority. The Executive Office of
Administration and Finance is analyzing the effect, if any, this initiative
petition, which became law on December 8, 1994, may have on the fiscal 1995
budget and it currently does not expect it to have any materially adverse
impact. This is not a constitutional amendment and is subject to amendment or
repeal by the Legislature, which may also, notwithstanding the terms of the
petition, appropriate moneys from the Highway Fund in such amounts and for such
purposes as it determines, subject only to a constitutional restriction that
such moneys be used for highways or mass transit purposes.
1994 FISCAL YEAR. Fiscal 1994 tax revenue collections were approximately
$10.607 billion, $87 million below the Department of Revenue's fiscal year 1994
tax revenue estimate of $10.694 billion and $677 million above fiscal 1993 tax
revenues of $9.930 billion. Budgeted revenues and other sources, including
non-tax revenues, collected in fiscal 1994 were approximately $15.550 billion.
Total revenues and other sources increased by approximately 5.7% from fiscal
1993 to fiscal 1994 while tax revenues increased by 6.8% for the same period.
Budgeted expenditures and other uses of funds in fiscal 1994 were approximately
$15.523 billion, which is $826.5 million or approximately 5.6% higher than
fiscal 1993 budgeted expenditures and other uses.
As of June 30, 1994, the Commonwealth showed a year-end cash position of
approximately $757 million, as compared to a projected position of $599 million.
In June, 1993, the Legislature adopted and the Governor signed into law
comprehensive education reform legislation. This legislation required an
increase in expenditures for education purposes above fiscal 1993 base spending
of $1.288 billion of approximately $175 million in fiscal 1994. The Executive
Office for Administration and Finance expects the annual increases in
expenditures above the fiscal 1993 base spending of $1.288 billion to be
approximately $396 million in fiscal 1995, $625 million in fiscal 1996 and $868
million in fiscal 1997. Additional annual increases are also expected in later
fiscal years. The fiscal 1995 budget as signed by the Governor includes $896
million in appropriations to satisfy this legislation.
1993 FISCAL YEAR. The Commonwealth's budgeted expenditures and other uses
were approximately $14.696 billion in fiscal 1993, which is approximately $1.280
billion or 9.6% higher than fiscal 1992 expenditures and other uses. Final
fiscal 1993 budgeted expenditures were $23 million lower than the initial July
1992 estimates of fiscal 1993 budgeted expenditures. Budgeted revenues and other
sources for fiscal 1993 totalled approximately $14.710 billion, including tax
revenues of $9.930 billion. Total revenues and other sources increased by
approximately 6.9% from fiscal 1992 to fiscal 1993, while tax revenues increased
by 4.7% for the same period. Overall, fiscal 1993 ended with a surplus of
revenues and other sources over expenditures and other uses of $13.1 million and
aggregate ending fund balances in the budgeted operating funds of the
Commonwealth of approximately $562.5 million. After payment in full of the
distribution of local aid to the Commonwealth's cities and towns ("Local Aid")
and the retirement of short term debt, the Commonwealth showed a year end cash
position of approximately $622.2 million, as compared to a projected position of
$485.1 million.
1992 FISCAL YEAR. The Commonwealth's budgeted expenditures and other uses
were approximately $13.4 billion in fiscal 1992, which is $238.7 million or 1.7%
lower than fiscal 1991 budgeted expenditures. Final fiscal 1992 budgeted
expenditures were $300 million more than the initial July 1991 estimates of
budgetary expenditures, due in part to increases in certain human services
programs, including an increase of $268.7 million for the Medicaid program and
$50.0 million for mental retardation consent decree requirements. Budgeted
revenues and other sources for fiscal 1992 totalled approximately $13.7 billion
(including tax revenues of approximately $9.5 billion), reflecting an increase
of approximately 0.7% from fiscal 1991 to 1992 and an increase of 5.4% in tax
revenues for the same period. Overall, fiscal 1992 is estimated to have ended
with an excess of revenues and other sources over expenditures and other uses of
$312.3 million. After payment in full of Local Aid in the amount of $514.0
million due on June 30, 1992, retirement of the Commonwealth's outstanding
commercial paper (except
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<PAGE>
for approximately $50 million of bond anticipation notes) and certain other
short term borrowings, as of June 30, 1992, the end of fiscal 1992, the
Commonwealth showed a year-end cash position of approximately $731 million, as
compared with the Commonwealth's cash balance of $182.3 million at the end of
fiscal 1991.
1991 FISCAL YEAR. Budgeted expenditures for fiscal 1991 were approximately
$13.659 billion, as against budgeted revenues and other sources of approximately
$13.634 billion. The Commonwealth suffered an operating loss of approximately
$21.2 million. Application of the adjusted fiscal 1990 fund balances of $258.3
million resulted in a fiscal 1991 budgetary surplus of $237.1 million. State law
requires that approximately $59.2 million of the fiscal year ending balances of
$237.1 million be placed in the Stabilization Fund, a reserve from which funds
can be appropriated (i) to make up any difference between actual state revenues
in any fiscal year in which actual revenues fall below the allowable amount,
(ii) to replace state and local losses by federal funds or (iii) for any event,
as determined by the legislature, which threatens the health, safety or welfare
of the people or the fiscal stability of the Commonwealth or any of its
political subdivisions.
Upon taking office in January 1991, the new Governor proposed a series of
legislative and administrative actions, including withholding of allotments
under Section 9C of Chapter 29 of the General Laws, intended to eliminate the
projected deficits. The new Governor's review of the Commonwealth's budget
indicated projected spending of approximately $14.1 billion with an estimated
$850 million in budget balancing measures that would be needed prior to the
close of fiscal 1991. At that time, estimated tax revenues were revised to
approximately $8.8 billion, $903 million less than was estimated at the time the
fiscal 1991 budget was adopted. The Legislature adopted a number of the
Governor's recommendations and the Governor took certain administrative actions
not requiring legislative approval, including the adoption of a state employee
furlough program. It is estimated by the Commonwealth that spending reductions
achieved through savings initiatives and withholding of allotments total
approximately $484.3 million in aggregate for fiscal 1991. However, these
savings and reductions may be impacted negatively by litigation pursued by third
parties concerning the Governor's actions under Section 9C of Chapter 29 of the
General Laws and with regard to the state employee furlough program.
In addition, the new administration in May 1991 filed an amendment to its
Medicaid state plan that enables it to claim 50% federal reimbursement on
uncompensated care payments for certain hospitals in the Commonwealth. As a
result, in fiscal 1991, the Commonwealth obtained additional non-tax revenues in
the form of federal reimbursements equal to approximately $513 million on
account of uncompensated care payments. This reimbursement claim was based upon
recent amendments of federal law contained in the Omnibus Budget Reconciliation
Act of 1990 and, consequently, on relatively undeveloped federal laws,
regulations and guidelines. At the request of the federal Health Care Financing
Administration, the Office of Inspector General of the United States Department
of Health and Human Services has commenced an audit of the reimbursement. The
administration, which had reviewed the matter with the Health Care Financing
Administration prior to claiming the reimbursement, believes that the
Commonwealth will prevail in the audit. If the Commonwealth does not prevail,
the Commonwealth would have the right to contest an appeal, but could be
required to pay all or part of Medicaid reimbursements with interest and to have
such amount deducted from future reimbursement payments.
1990 AND 1989 FISCAL YEARS. In July 1989, the former Governor vetoed
certain provisions included in the budget legislation for fiscal 1990, including
approximately $273 million of the fiscal 1990 appropriations, including $100
million for Local Aid. One of the Governor's vetoes occasioned a default by the
Commonwealth on a September 1, 1989 payment of $2.5 million on a general
obligation contract with the Massachusetts Community Development Finance
Corporation to which its full faith and credit had been pledged, which payment
was made on September 17, 1990 after a supplemental appropriation was proposed
by the Governor and passed by the legislature. The legislature overrode the
Governor's veto of $100 million of Local Aid and the Governor then indicated
that he was withholding the allotment for such expenditure. The Supreme Judicial
Court invalidated the Governor's withholding of $210 million of appropriated
funds for certain Local Aid purposes in May 1990.
Budgeted expenditures for fiscal 1989 and 1990 totalled approximately $12.6
billion and $13.3 billion, respectively. Budgeted revenues for fiscal 1989 and
1990 totalled approximately $12.0 billion and $12.0 billion, respectively.
EMPLOYMENT. Reversing a trend of relatively low unemployment during the
early and mid 1980's, the Massachusetts unemployment rate beginning in 1990
increased significantly to where the Commonwealth's unemployment rate exceeded
the national unemployment rate. During 1990, the Massachusetts unemployment rate
increased from 4.5% in January to 6.1% in July to 6.7% in August. During 1991,
the Massachusetts unemployment rate averaged 9.0% while the average United
States unemployment rate was 6.7%. The Massachusetts unemployment rate during
1992 averaged 8.5% while the average United States unemployment rate was 7.4%.
Since 1993, the average monthly unemployment rate has declined steadily. The
Massachusetts unemployment rate in December 1994 was 5.7%, as compared with the
United States unemployment rate of 5.4% for the
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same period. Other factors which may significantly and adversely affect the
employment rate in the oCmmonwealth include reductions in federal government
spending on defense-related industries. Due to this and other considerations,
there can be no assurances that unemployment in the Commonwealth will not
increase in the future.
DEBT RATINGS. S&P currently rates the Commonwealth's uninsured general
obligation bonds at A+. At the same time, S&P currently rates state and agency
notes at SP1. From 1989 through 1992, the Commonwealth had experienced a steady
decline in its S&P rating, with its decline beginning in May 1989, when S&P
lowered its rating on the Commonwealth's general obligation bonds and other
Commonwealth obligations from AA+ to AA and continuing a series of further
reductions until March 1992, when the rating was affirmed at BBB.
Moody's currently rates the Commonwealth's uninsured general obligation
bonds at A1. From 1989 through 1992, the Commonwealth had experienced a steady
decline in its rating by Moody's since May 1989. In May 1989, Moody's lowered
its rating on the Commonwealth's notes from MIG-1 to MIG-2, and its rating on
the Commonwealth's commercial paper from P-1 to P-2. On June 21, 1989 Moody's
reduced the Commonwealth's general obligation rating from Aa to A. On November
15, 1989, Moody's reduced the rating on the Commonwealth's general obligations
from A to Baa1, and on March 9, 1990, Moody's reduced the rating of the
Commonwealth's general obligation bonds from Baa1 to Baa. There can be no
assurance that these ratings will continue.
In recent years, the Commonwealth and certain of its public bodies and
municipalities have faced serious financial difficulties which have affected the
credit standing and borrowing abilities of Massachusetts and its respective
entities and may have contributed to higher interest rates on debt obligations.
The continuation of, or an increase in, such financial difficulties could result
in declines in the market values of, or default on, existing obligations
including Massachusetts Obligations in the Trust. Should there be during the
term of the Trust a financial crisis relating to Massachusetts, its public
bodies or municipalities, the market value and marketability of all outstanding
bonds issued by the Commonwealth and its public authorities or municipalities
including the Massachusetts Obligations in the Trust and interest income to the
Trust could be adversely affected.
TOTAL BOND AND NOTE LIABILITIES. The total general obligation bond
indebtedness of the Commonwealth (including Fiscal Recovery Bonds) as of April
1, 1995 was approximately $9.6 billion. There were also outstanding
approximately $245 million in general obligation notes and other short term
general obligation debt. The total bond and note liabilities of the Commonwealth
as of April 1, 1995, including guaranteed bond and contingent liabilities, was
approximately $12.9 billion.
DEBT SERVICE. During the 1980s, capital expenditures were increased
substantially, which has had a short term impact on the cash needs of the
Commonwealth and also accounts for a significant rise in debt service during
that period. Payments for debt service on Commonwealth general obligation bonds
and notes have risen at an average annual rate of 22.2% from $770.9 million in
fiscal 1990 to an estimated $942.3 million in fiscal 1991. Debt service payments
in fiscal 1992 were $898.3 million. Debt service payments for fiscal 1992
reflect a $261 million one-time reduction achieved as a result of the issuance
of the refunding bonds in September and October 1991. Debt service expenditures
were approximately $1.140 billion and $1.149 billion for fiscal 1993 and 1994,
respectively, and are projected to be approximately $1.241 billion for fiscal
1995. The fiscal 1993 and fiscal 1994 debt service expenditures reflect savings
of $62.9 million and $57.3 million, respectively, achieved through the issuance
of refunding bonds in October 1992, and March, May and August 1993. The amounts
represented do not include debt service on notes issued to finance the fiscal
1989 deficit and certain Medicaid related liabilities, certain debt service
contract assistance to the Massachusetts Bay Transportation Authority ($181.9
million projected in fiscal 1995), the Massachusetts Convention Center Authority
($24.6 million projected in fiscal 1995), the Massachusetts Government Land Bank
($6.0 million projected in fiscal 1995) and the Massachusetts Water Pollution
Abatement Trust ($13.9 million projected in fiscal 1995), as well as grants to
municipalities under the school building assistance program to defray a portion
of the debt service costs on local school bonds ($179.2 million projected in
fiscal 1995).
In January 1990, legislation was passed to impose a limit on debt service
beginning in fiscal 1991, providing that no more than 10% of the total
appropriations in any fiscal year may be expended for payment of interest and
principal on general obligation debt (excluding the Fiscal Recovery Bonds). The
percentage of total appropriations expended from the budgeted operating funds
for debt service (excluding debt service on Fiscal Recovery Bonds) for fiscal
1994 is 5.6% (on a preliminary unaudited basis) which is projected to increase
to 5.9% in fiscal 1995.
CERTAIN LIABILITIES. Among the material future liabilities of the
Commonwealth are significant unfunded general liabilities of its retirement
systems and a program to fund such liabilities; a program whereby, starting in
1978, the Commonwealth began assuming full financial responsibility for all
costs of the administration of justice within the Commonwealth; continuing
demands to raise aggregate aid to cities, towns, schools and other districts and
transit authorities above current levels; and Medicaid expenditures which have
increased each year since the
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program was initiated. The Commonwealth has signed consent decrees to continue
improving mental health care and programs for the mentally retarded in order to
meet federal standards, including those governing receipt of federal
reimbursements under various programs, and the parties in those cases have
worked cooperatively to resolve the disputed issues.
As a result of comprehensive legislation approved in January, 1988, the
Commonwealth is required, beginning in fiscal 1989 to fund future pension
liabilities currently and to amortize the Commonwealth's unfunded liabilities
over 40 years. The estimated pension costs (inclusive of current benefits and
pension reserves) for fiscal year 1996 are $1.044 billion, representing an
increase of 5.0% over estimated fiscal 1995 expenditures of $994.3 million.
LITIGATION. The Commonwealth is engaged in various lawsuits involving
environmental and related laws, including an action brought on behalf of the
U.S. Environmental Protection Agency alleging violations of the Clean Water Act
and seeking to enforce the clean-up of Boston Harbor. The MWRA, successor in
liability to the Metropolitan District Commission, has assumed primary
responsibility for developing and implementing a court-approved plan for the
construction of the treatment facilities necessary to achieve compliance with
federal requirements. Under the Clean Water Act, the Commonwealth may be liable
for costs of compliance in these or any other Clean Water cases if the MWRA or a
municipality is prevented from raising revenues necessary to comply with a
judgment. The MWRA currently projects that the total cost of construction of the
treatment facilities required under the court's order is approximately $3.5
billion in current dollars, with approximately $1.84 billion to be spent on or
after July 1, 1994.
The Department of Public Welfare has been sued for the alleged unlawful
denial of personal care attendant services to certain disabled Medicaid
recipients. The Superior Court has denied the plaintiff's motion for preliminary
injunction and has also denied the plaintiff's motion for class certification.
If the plaintiffs were to prevail on their claims and the Commonwealth were
required to provide all of the services sought by the plaintiffs to all
similarly situation persons, it would substantially increase in the annual cost
to the Commonwealth that these services might eventually be required. The
Department of Public Welfare currently estimates this increase to be as much as
$200 million per year.
There are also actions pending in which recipients of human services
benefits, such as welfare recipients, the mentally retarded, the elderly, the
handicapped, children, residents of state hospitals and inmates of corrections
institutions, seek expanded levels of services and benefits and in which
providers of services to such recipients challenge the rates at which they are
reimbursed by the Commonwealth. To the extent that such actions result in
judgments requiring the Commonwealth to provide expanded services or benefits or
pay increased rates, additional operating and capital expenditures might be
needed to implement such judgments.
The Massachusetts Hospital Association has brought an action challenging an
element of the Medicaid rate setting methodologies for hospitals. On October 12,
1993, the case was settled with the hospital association and most acute
hospitals, thereby reducing the Commonwealth's potential liability in the
pending case or in related appeals to approximately $10 million.
In addition there are several tax matters in litigation which could result
in significant refunds to taxpayers if decisions unfavorable to the Commonwealth
are rendered. In BAYBANK, ET AL. V. COMMISSIONER OF REVENUE, the banks challenge
the inclusion of income from tax exempt obligations in the measure of the bank
excise tax. The Appellate Tax Board issued findings of fact and a report in
favor of the Commissioner of Revenue on September 30, 1993. The Supreme Judicial
Court heard the appeal on March 7, 1995. Taking into account all banks and all
years at issue (1974 through 1986), there are 142 appeals consolidated in this
case. The amount at issue is currently estimated to be approximately $1.4
billion, which amount includes interest of approximately $1.1 billion and
amounts involved in other related applications for abatement pending with the
Commissioner of Revenue or with the Appellate Tax Board.
In March 30, 1995, the parties reported to the Supreme Judicial Court that
they had agreed in principle to settle the case and related litigation. The
agreement in principle includes an agreement that the Commonwealth will pay to
the banks $25 million, payable in installments of $10 million on August 1, 1996
and August 1, 1997, and $5 million and all accrued interest on the settlement
amount on August 1, 1998, with an option for the Commonwealth to prepay such
amounts.
On March 22, 1995, the Supreme Judicial Court, in its opinion in PERINI
CORPORATION ET AL. V. COMMISSIONER OF REVENUE, held that certain deductions from
the net worth measure of the Massachusetts corporate excise tax violate the
Commerce Clause of the United States Constitution. The court remanded the case
for entry of a declaration and further proceedings, if necessary, to determine
other appropriate remedies. The Commonwealth intends to file a petition for a
writ of certiorari in the United States Supreme Court. The Department of Revenue
is analyzing the impact of this decision, but cannot yet determine the likely
effect on future aggregate annual
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corporate excise tax receipts. The amount of taxes and interest at issue in
other cases is approximately $150 million.
In NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES V. COMMONWEALTH, the
Superior Court declared that a line item in the Commonwealth's general
appropriations act for fiscal 1994 that increased the state employees'
percentage share of their group health insurance premiums from 10% to 15%
violated the terms of several collective bargaining agreements, and therefore
was invalid under the United States Constitution as regards employees covered by
the agreements. The Commonwealth appealed the Superior Court's decision and the
Supreme Judicial Court has granted direct appellate review. Several other unions
have filed a companion suit asserting that the premium increase similarly
violated other collective bargaining agreements. The latter suit is in its
initial stages. If the Superior Court decision in favor of the state employees
is upheld, the Commonwealth's aggregate liability is estimated to be
approximately $32 million.
A variety of other civil suits pending against the Commonwealth may also
affect its future liabilities. These include challenges to the Commonwealth's
allocation of school aid under Section 9C of Chapter 29 of the General Laws and
to adopt a state employee furlough program. No prediction is possible as to the
ultimate outcome of these proceedings.
Many factors, in addition to those cited above, do or may have a bearing
upon the financial condition of the Commonwealth, including social and economic
conditions, many of which are not within the control of the Commonwealth.
EXPENDITURE AND TAX LIMITATION MEASURES. Limits have been established on
state tax revenues by legislation approved by the Governor on October 25, 1986
and by an initiative petition approved by the voters on November 4, 1986. The
Executive Office for Administration and Finance currently estimates that state
tax revenues will not reach the limit imposed by either the initiative petition
or the legislative enactment in fiscal 1992.
Proposition 2 1/2, passed by the voters in 1980, led to large reductions in
property taxes, the major source of income for cities and towns, and large
increases in state aid to offset such revenue losses. According to the Executive
Office for Administration and Finance, all of the 351 cities and towns have now
achieved a property tax level of no more than 2.5% of full property values.
Under the terms of Proposition 2 1/2, the property tax levy can now be increased
annually for all cities and towns, almost all by 2.5% of the prior fiscal year's
tax levy plus 2.5% of the value of new properties and of significant
improvements to property. Legislation has also been enacted providing for
certain local option taxes. A voter initiative petition approved at the
statewide general election in November, 1990 further regulates the distribution
of Local Aid of no less than 40% of collections from individual income taxes,
sales and use taxes, corporate excise taxes, and the balance of the state
lottery fund. If implemented in accordance with its terms (including
appropriation of the necessary funds), the petition as approved would shift
several hundred million dollars to direct Local Aid.
OTHER TAX MEASURES. To provide revenue to pay debt service on both the
deficit and Medicaid-related borrowings and to fund certain direct Medicaid
expenditures, legislation was enacted imposing an additional tax on certain
types of personal income for 1989 and 1990 taxable years at rates of 0.375% and
0.75% respectively, effectively raising the tax rate of 1989 from 5% to 5.375%
and for 1990 to 5.75%. Recent legislation has effectively further increased tax
rates to 5.95% for tax year 1990 to 6.25% for tax year 1991 and returning to
5.95% for tax year 1992 and subsequent tax years. The tax is applicable to all
personal income except income derived from dividends, capital gains,
unemployment compensation, alimony, rent, interest, pensions, annuities and
IRA/Keogh distributions. The income tax rate on other interest (excluding
interest on obligations of the United States and of the Commonwealth and its
subdivisions), dividends and net capital gains (after a 50% reduction) was
increased from 10% to 12% for tax year 1990 and subsequent years, by recently
enacted legislation.
ESTATE TAX REVISIONS. The fiscal 1993 budget included legislation which
gradually phases out the current Massachusetts estate tax and replaces it with a
"sponge tax" in 1997. The "sponge tax" is based on the maximum amount of the
credit for state taxes allowed for federal estate tax purposes. The estate tax
is phased out by means of annual increases in the basic exemption from the
current $200,000 level. The exemption is increased to $300,000 for 1993,
$400,000 for 1994, $500,000 for 1995 and $600,000 for 1996. In addition, the
legislation includes a full marital deduction starting July 1, 1994. Currently
the marital deduction is limited to 50% of the Massachusetts adjusted gross
estate. The static fiscal impact of the phase out of the estate tax was
estimated to be approximately $24.8 million in fiscal 1994 and is estimated to
be approximately $72.5 million in fiscal 1995.
OTHER ISSUERS OF MASSACHUSETTS OBLIGATIONS. There are a number of state
agencies, instrumentatlities and political subdivisions of the Commonwealth that
issue Municipal Obligations, some of which may be conduit revenue obligations
payable from payments from private borrowers. These entities are subject to
various economic risks and uncertainties, and the credit quality of the
securities issued by them may vary considerably from the
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credit quality of obligations backed by the full faith and credit of the
Commonwealth. The brief summary above does not address, nor does it attempt to
address, any difficulties and the financial situations of those other issuers of
Massachusetts Obligations.
MASSACHUSETTS TAXABLE ESTIMATED CURRENT RETURN TABLE
The following tables show the approximate taxable estimated current returns
for individuals that are equivalent to tax-exempt estimated current returns
under combined Federal and state taxes, using published 1996 marginal Federal
tax rates and marginal state tax rates currently available and scheduled to be
in effect. The tables incorporate increased tax rates for higher-income
taxpayers that were included in the Revenue Reconciliation Act of 1993. The
combined state and Federal tax brackets shown reflect the fact that state tax
payments are currently deductible for Federal tax purposes. The Massachusetts
state tax rate shown is the rate at which interest is taxed. Certain other types
of income are taxed at other rates. The table does not reflect any local taxes
or any taxes other than personal income taxes. The tables illustrate what you
would have to earn on taxable investments to equal the tax-exempt estimated
current return for your income tax bracket. A taxpayer's marginal tax rate is
affected by both his taxable income and his adjusted gross income. Locate your
adjusted gross and your taxable income (which is your adjusted gross income
reduced by any deductions and exemptions), then locate your tax bracket based on
joint or single tax filing. Read across to the equivalent taxable estimated
current return you would need to match the tax-free income.
COMBINED MARGINAL TAX RATES FOR JOINT TAXPAYERS WITH FOUR PERSONAL EXEMPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL --------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
------------- ------------- ----------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 40.1 $ 0-117.95 25.0 % 6.00 6.33 6.67 7.00 7.33 7.67 8.00 8.33
40.1- 96.9 0-117.95 36.5 7.09 7.48 7.87 8.27 8.66 9.06 9.45 9.84
117.95-176.95 37.5 7.20 7.60 8.00 8.40 8.80 9.20 9.60 10.00
96.9-147.7 0-117.95 39.5 7.44 7.85 8.26 8.68 9.09 9.50 9.92 10.33
117.95-176.95 40.0 7.50 7.92 8.33 8.75 9.17 9.58 10.00 10.42
176.95-299.45 42.5 7.83 8.26 8.70 9.13 9.57 10.00 10.43 10.87
147.7-263.75 117.95-176.95 44.5 8.11 8.56 9.01 9.46 9.91 10.36 10.81 11.26
176.95-299.45 47.0 8.49 8.96 9.43 9.91 10.38 10.85 11.32 11.79
Over 299.45 44.5 2 8.11 8.56 9.01 9.46 9.91 10.36 10.81 11.26
Over 263.75 176.95-299.45 50.5 9.09 9.60 10.10 10.61 11.11 11.62 12.12 12.63
Over 299.45 48.0 3 8.65 9.13 9.62 10.10 10.58 11.06 11.54 12.02
</TABLE>
COMBINED MARGINAL TAX RATES FOR SINGLE TAXPAYERS WITH ONE PERSONAL EXEMPTION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL --------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
------------- ------------- ----------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 24.00 $ 0-117.95 25.0 % 6.00 6.33 6.67 7.00 7.33 7.67 8.00 8.33
24.00- 58.15 0-117.95 36.5 7.09 7.48 7.87 8.27 8.66 9.06 9.45 9.84
58.15-121.30 0-117.95 39.5 7.44 7.85 8.26 8.68 9.09 9.50 9.92 10.33
117.95-240.45 40.5 7.56 7.98 8.40 8.82 9.24 9.66 10.08 10.50
121.30-263.75 117.95-240.45 45.5 8.26 8.72 9.17 9.63 10.09 10.55 11.01 11.47
Over 240.45 44.5 2 8.11 8.56 9.01 9.46 9.91 10.36 10.81 11.26
Over 263.75 Over 240.45 48.0 3 8.65 9.13 9.62 10.10 10.58 11.06 11.54 12.02
</TABLE>
- ------------------
1 The table reflects the effect of the limitations on itemized deductions
and the deduction for personal exemptions. They were designed to phase out
certain benefits of these deductions for higher income taxpayers. These
limitations, in effect, raise the current maximum marginal Federal tax rate to
approximately 44.0 percent for taxpayers filing a joint return and entitled to
four personal exemptions and to approximately 41.0 percent for taxpayers filing
a single return entitled to only one personal exemption. These limitations are
subject to certain maximums, which depend on the number of exemptions claimed
and the total amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to lose more than
80% of his allowable itemized deductions, with certain exceptions.
2 Federal tax rate reverts to 36.0% after the 80% cap on the limitation on
itemized deductions has been met.
3 Federal tax rate reverts to 39.6% after the 80% cap on the limitation on
itemized deductions has been met.
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APPENDIX C
MICHIGAN DISCLOSURE
ECONOMIC FACTORS--MICHIGAN
As described above, except to the extent the Michigan Insured Trust invests
in temporary investments, the Michigan Insured Trust will invest substantially
all of its net assets in Michigan Bonds. The Michigan Insured Trust is therefore
susceptible to political, economic or regulatory factors affecting issuers of
Michigan Bonds. The information set forth below is derived from official
statements prepared in connection with the issuance of Michigan Bonds and other
sources that are generally available to investors. The information is provided
as general information intended to give a recent historical description and is
not intended to indicate future or continuing trends in the financial or other
positions of the State of Michigan (the "State"). This information has not been
independently verified.
There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on issuers and other obligors
with respect to the Michigan Insured Trust generally, will not adversely affect
the market value of Michigan Bonds held in the portfolio of the Michigan Insured
Trust or the ability of particular obligors to make timely payments of debt
service on (or relating to) those obligations.
The principal sectors of the State's economy are manufacturing of durable
goods (including automobile and office equipment manufacturing), tourism and
agriculture. As reflected in historical employment figures, the State's economy
has lessened its dependence upon durable goods manufacturing. In 1960,
employment in such industry accounted for 33% of the State's workforce. This
figure fell to 17% by 1994. However, manufacturing (including auto-related
manufacturing) continues to be an important part of the State's economy. These
industries are highly cyclical. This factor could adversely affect the revenue
streams of the State and its political subdivisions because of its impact on tax
sources, particularly sales taxes, income taxes and single business taxes.
Historically, the average monthly unemployment rate in the State has been
higher than the average figures for the United States. For 1994, however, the
average monthly unemployment rate in the State was 5.9% as compared to a
national average of 6.1% and for 1995, the average monthly unemployment rate in
the State was 5.3% as compared to a national average of 6.1%.
BUDGET. The budget of the State is a complete financial plan and
encompasses the revenues and expenditures, both operating and capital outlay, of
the General Fund and special revenue funds. The budget is prepared on a basis
consistent with generally accepted accounting principles (GAAP). The State's
Fiscal Year begins on October 1 and ends September 30 of the following year.
Under State law, the executive budget recommendations for any fund may not
exceed the estimated revenue thereof, and an itemized statement of estimated
revenues in each operating fund must be contained in an appropriation bill as
passed by the Legislature, the total of which may not be less than the total of
all appropriations made from the fund for that fiscal year. The State
Constitution provides that proposed expenditures from and revenues of any fund
must be in balance and that any prior year's surplus or deficit in any fund must
be included in the succeeding year's budget for that fund.
The State's Constitution limits the amount of total State revenues that may
be raised from taxes and other sources. State revenues (excluding federal aid
and revenues used for payment of principal and interest on general obligation
bonds) in any fiscal year are limited to a specified percentage of State
personal income in the prior calendar year or average of the prior three
calendar years, whichever is greater. The State may raise taxes in excess of the
limit in emergency situations.
The State finances its operations through the State's General Fund and
special revenue funds. The General Fund receives revenues of the State that are
not specifically required to be included in the special revenue funds. General
Fund revenues are obtained approximately 59 percent from the payment of State
taxes and 41 percent from federal and non-tax revenue sources. Tax revenues
credited to the General Fund include the State's personal income tax, single
business tax, use tax, and approximately 15% of sales tax collections. In
addition the State levies various other taxes. Approximately one-half of total
General Fund expenditures are made by the State's Department of Education and
Department of Social Services. Other significant expenditures from the General
Fund provide funds for law enforcement, general State government, debt service
and capital outlays.
Despite modest surplus in the three preceding fiscal years, the State ended
fiscal years 1989-90 and 1990-91 with negative balances of $310.3 million and
$169.4 million, respectively. This negative balance had been eliminated as of
the end of fiscal year 1991-92, which ended September 30, 1992. The State ended
fiscal year 1992-93 with a projected balance of $26 million after the transfer
of $282.6 million to the Counter-Cyclical Budget and Economic Stabilization Fund
("BSF") described below. The state ended fiscal year 1993-94 with a $460.2
million surplus. General Fund balance of $460.2 million which was transferred to
the BSF. The State's preliminary
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results for fiscal year 1994-95 indicate an $84.5 million surplus which will be
transferred to the Counter-Cyclical Budget and Economic Stabilization fund
described below.
The State budget for the 1995-96 fiscal year, which began on October 1,
1995, was passed by the Legislature in June 1995. This budget passed by the
Legislature totaled $8,438.6 million from General Fund/general purpose revenues.
The Governor vetoed $45.7 million of these appropriations and the Legislature
has adopted supplemental appropriations of $30.8 million.
The Governor's Executive Budget for fiscal year 1995-96 was submitted to the
Legislature on February 9, 1995. The fiscal year 1995-96 General Fund/general
purpose Executive Budget recommendation totaled $8,507.6 million.
The State also maintains the BSF which accumulates balances during the years
of significant economic growth and which may be utilized during periods of
budgetary shortfalls. The unreserved balance for the BSF for the 1990-91 fiscal
year end was $182.2 million, for the 1991-92 fiscal year end was $20.1 million
and for the 1992-93 fiscal year was $303.4 million and for the 1993-94 fiscal
year end was $775.5. The accrued balance of the BSF as of September 30, 1995 is
estimated to be $1,003.2 million.
DEBT. The State Constitution limits State general obligation debt to (i)
short-term debt for State operating purposes which must be repaid in the same
fiscal year in which it is issued and which cannot exceed 15% of the undedicated
revenues received by the State during the preceding fiscal year, (ii) short and
long term debt unlimited in amount for the purpose of making loans to school
districts and (iii) long term debt for voter-approved purposes.
The State has issued and has outstanding general obligation full faith and
credit bonds for water resources, environmental protection program, recreation
program and school loan program purposes totalling, as of September 30, 1995,
approximately $706 million. The State anticipates issuing additional general
obligation environmental bonds in 1995. In November 1988 the State's voters
approved the issuance of $800 million of general obligation bonds for
environmental protection and recreational purposes; of this amount approximately
$265 million remains to be issued. The State issued $900 million in general
obligation notes on February 20, 1996 which will mature September 30, 1996.
OTHER ISSUERS OF MICHIGAN MUNICIPAL OBLIGATIONS. There are a number of
state agencies, instrumentalities and political subdivisions of the State that
issue bonds, some of which may be conduit revenue obligations payable from
payments from private borrowers. These entities are subject to various economic
risks and uncertainties, and the credit quality of the securities issued by them
may vary considerably from obligations backed by the full faith and credit of
the State.
RATINGS. Currently the State's general obligation bonds are rated Aa by
Moody's, "AA" by S&P and "AA" by Fitch Investors Service, Inc.
LITIGATION. The State is a party to various legal proceedings seeking
damages or injunctive or other relief. In addition to routine litigation,
certain of these proceedings could, if unfavorably resolved from the point of
view of the State, substantially affect State programs or finances. These
lawsuits involve programs generally in the areas of corrections, highway
maintenance, social services, tax collection, commerce and budgetary reductions
to school districts and governmental units and court funding. The ultimate
disposition of these proceedings is not determinable.
PROPERTY TAX AND SCHOOL FINANCE REFORM. The State Constitution limits the
extent to which municipalities or political subdivisions may levy taxes upon
real and personal property through a process that regulates assessments.
On August 19, 1993, the Governor signed into law Act 145, Public Acts of
Michigan, 1993 ("Act 145"), a measure which would have significantly impacted
financing of primary and secondary school operations and which has resulted in
additional property tax and school finance reform legislation. Act 145 would
have exempted all property in the State of Michigan from millage levied for
local and intermediate school districts operating purposes, other than millage
levied for community colleges, effective July 1, 1994. In order to replace local
property tax revenues lost as a result of Act 145, the Michigan Legislature, in
December 1993, enacted several statutes which address property tax and school
finance reform.
The property tax and school finance reform measures included a ballot
proposal which was approved by the voters on March 15, 1994. Effective May 1,
1994, the State sales and use tax was increased from 4% to 6%, the State income
tax was decreased from 4.6% to 4.4%, the cigarette tax was increased from $.25
to $.75 per pack and an additional tax of 16% of the wholesale price was imposed
on certain other tobacco products. A .75% real estate transfer tax become
effective January 1, 1995. Beginning in 1994, state property tax of 6 mills
began to be imposed on all real and personal property currently subject to the
general property tax. The ability of school districts to
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levy property taxes for school operating purposes will be partially restored. A
school board will, with voter approval, be able to levy up to the lesser of 18
mills or the number of mills levied in 1993 for school operating purposes, on
non-homestead property. The adopted ballot proposal contained additional
provisions regarding the ability of local school districts to levy taxes as well
as a limit on assessment increases for each parcel of property, beginning in
1995 to the lesser of 5% or the rate of inflation. When property is subsequently
sold, its assessed value will revert to the current assessment level of 50% of
true cash value. Under the adopted ballot proposal, much of the additional
revenue generated by the new taxes will be dedicated to the State School Aid
Fund.
The adopted ballot proposal contained a system of financing local school
operating costs relying upon a foundation allowance amount which may vary by
district based upon historical spending levels. State funding will provide each
school district an amount equal to the difference between their foundation
allowance and the revenues generated by their local property tax levy. Local
school districts would also be entitled to levy supplemental property taxes to
generate additional revenue if their foundation allowance is less than their
historical per pupil expenditures. The adopted ballot proposal also contained
provisions which allow for the levy of a limited number of enhancement mills on
regional and local school district bases.
The adopted ballot proposal shifted significant portions of the cost of
local school operations from local school districts to the State and raised
additional State revenues to fund these additional State expenses. These
additional revenues will be included within the State's constitutional revenue
limitations and may impact the State's ability to raise additional revenues in
the future.
MICHIGAN TAXABLE ESTIMATED CURRENT RETURN TABLE
The following tables show the approximate taxable estimated current returns
for individuals that are equivalent to tax-exempt estimated current returns
under combined Federal and state taxes, using published 1996 marginal Federal
tax rates and marginal state tax rates currently available and scheduled to be
in effect. The tables incorporate increased tax rates for higher-income
taxpayers that were included in the Revenue Reconciliation Act of 1993. The
combined state and Federal tax brackets shown reflect the fact that state tax
payments are currently deductible for Federal tax purposes. The combined rate
for Michigan includes both the individual income tax rate and the intangible tax
rate, because the intangible tax is generally based on income received from
intangibles. The table does not reflect any local taxes or any taxes other than
the personal income taxes and the Michigan intangible tax. The tables illustrate
what you would have to earn on taxable investments to equal the tax-exempt
estimated current return for your income tax bracket. A taxpayer's marginal tax
rate is affected by both his taxable income and his adjusted gross income.
Locate your adjusted gross and your taxable income (which is your adjusted gross
income reduced by any deductions and exemptions), then locate your tax bracket
based on joint or single tax filing. Read across to the equivalent taxable
estimated current return you would need to match the tax-free income.
C-3
<PAGE>
COMBINED MARGINAL TAX RATES FOR JOINT TAXPAYERS WITH FOUR PERSONAL EXEMPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE* AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL --------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
------------- ------------- ----------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 40.1 $ 0-117.95 20.0 % 5.63 5.94 6.25 6.56 6.88 7.19 7.50 7.81
40.1- 96.9 0-117.95 32.5 6.67 7.04 7.41 7.78 8.15 8.52 8.89 9.26
117.95-176.95 33.0 6.72 7.09 7.46 7.84 8.21 8.58 8.96 9.33
96.9-147.7 0-117.95 35.0 6.92 7.31 7.69 8.08 8.46 8.85 9.23 9.62
117.95-176.95 36.0 7.03 7.42 7.81 8.20 8.59 8.98 9.38 9.77
176.95-299.45 38.5 7.32 7.72 8.13 8.54 8.94 9.35 9.76 10.16
147.7-263.75 117.95-176.95 41.0 7.63 8.05 8.47 8.90 9.32 9.75 10.17 10.59
176.95-299.45 43.5 7.96 8.41 8.85 9.29 9.73 10.18 10.62 11.06
Over 299.45 41.0 2 7.63 8.05 8.47 8.90 9.32 9.75 10.17 10.59
Over 263.75 176.95-299.45 47.5 8.57 9.05 9.52 10.00 10.48 10.95 11.43 11.90
Over 299.45 44.5 3 8.11 8.56 9.01 9.46 9.91 10.36 10.81 11.26
</TABLE>
COMBINED MARGINAL TAX RATES FOR SINGLE TAXPAYERS WITH ONE PERSONAL EXEMPTION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE* AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL --------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
------------- ------------- ----------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 24.00 $ 0-117.95 20.0 % 5.63 5.94 6.25 6.56 6.88 7.19 7.50 7.81
24.00- 58.15 0-117.95 32.5 6.67 7.04 7.41 7.78 8.15 8.52 8.89 9.26
58.15-121.30 0-117.95 35.0 6.92 7.31 7.69 8.08 8.46 8.85 9.23 9.62
117.95-240.45 36.5 7.09 7.48 7.87 8.27 8.66 9.06 9.45 9.84
121.30-263.75 117.95-240.45 41.5 7.69 8.12 8.55 8.97 9.40 9.83 10.26 10.68
Over 240.45 41.0 2 7.63 8.05 8.47 8.90 9.32 9.75 10.17 10.59
Over 263.75 Over 240.45 44.5 3 8.11 8.56 9.01 9.46 9.91 10.36 10.81 11.26
- ------------------
* The state tax rate which is used in the table is based on a 4.4% state personal income tax rate and a 1.75% tax on intangible
income. The combined tax brackets reflect Federal and state income and state intangibles taxes.
1 The table reflects the effect of the limitations on itemized deductions and the deduction for personal exemptions. They
were designed to phase out certain benefits of these deductions for higher income taxpayers. These limitations, in effect, raise
the current maximum marginal Federal tax rate to approximately 44.0 percent for taxpayers filing a joint return and entitled to
four personal exemptions and to approximately 41.0 percent for taxpayers filing a single return entitled to only one personal
exemption. These limitations are subject to certain maximums, which depend on the number of exemptions claimed and the total
amount of the taxpayer's itemized deductions. For example, the limitation on itemized deductions will not cause a taxpayer to
lose more than 80% of his allowable itemized deductions, with certain exceptions.
2 Federal tax rate reverts to 36.0% after the 80% cap on the limitation on itemized deductions has been met.
3 Federal tax rate reverts to 39.6% after the 80% cap on the limitation on itemized deductions has been met.
</TABLE>
C-4
<PAGE>
APPENDIX D
OHIO DISCLOSURE
ECONOMIC FACTORS--OHIO
As described above, the Trust will invest substantially all of its net
assets in securities issued by or on behalf of (or in certificates of
participation in lease purchase obligations of) the State of Ohio, political
subdivisions of the State, or agencies or instrumentalities of the State or its
political subdivisions (Ohio Obligations). The Trust is therefore susceptible to
general or particular economic, political, or regulatory factors that may affect
issuers of Ohio Obligations. The following information constitutes only a brief
summary of some of the many complex factors that may have an effect. The
information does not apply to "conduit" obligations on which the public issuer
itself has no financial responsibility. This information is derived from
official statements of certain Ohio issuers published in connection with their
issuance of securities and from other publicly available information, and is
believed to be accurate. No independent verification has been made of any of the
following information.
Generally, the creditworthiness of Ohio Obligations of local issuers is
unrelated to that of obligations of the State itself, and the State has no
responsibility to make payments on those local obligations. There may be
specific factors that at particular times apply in connection with investment in
particular Ohio Obligations or in those obligations of particular Ohio issuers.
It is possible that the investment may be in particular Ohio Obligations, or in
those of particular issuers, as to which those factors apply. However, the
information below is intended only as a general summary, and is not intended as
a discussion of any specific factors that may affect any particular obligation
or issuer.
The timely payment of principal of and interest on Ohio Obligations has been
guaranteed by bond insurance purchased by the issuers, the Trust or other
parties. Those Ohio Obligations may not be subject to the factors referred to in
this section of the Prospectus.
Ohio is the seventh most populous state. The 1990 Census count of 10,847,000
indicated a 0.5% population increase from 1980. The Census estimate for 1994 is
11,102,000.
While diversifying more into the service and other non-manufacturing areas,
the Ohio economy continues to rely in part on durable goods manufacturing
largely concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, general economic activity, as in many other
industrially-developed states, tends to be more cyclical than in some other
states and in the nation as a whole. Agriculture is an important segment of the
economy, with over half the State's area devoted to farming and approximately
15% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly somewhat
higher than the national figure. For example, the reported 1990 average monthly
State rate was 5.7%, compared to the 5.5% national figure. However, for the last
four years the State rates were below the national rates (4.8% versus 6.5% in
1995). The unemployment rate and its effects vary among geographic areas of the
State.
There can be no assurance that future national, regional or state-wide
economic difficulties, and the resulting impact on State or local government
finances generally, will not adversely affect the market value of Ohio
Obligations held in the Trust portfolio or the ability of particular obligors to
make timely payments of debt service on (or lease payments relating to) those
obligations.
The State operates on the basis of a fiscal biennium for its appropriations
and expenditures, and is precluded by law from ending its July 1 to June 30
fiscal year "FY" or fiscal biennium in a deficit position. Most State operations
are financed through the General Revenue Fund "GRF", for which personal income
and sales-use taxes are the major sources. Growth and depletion of GRF ending
fund balances show a consistent pattern related to national economic conditions,
with the ending FY balance reduced during less favorable and increased during
more favorable economic periods. The State has well-established procedures for,
and has timely taken, necessary actions to ensure resource/expenditure balances
during less favorable economic periods. Those procedures included general and
selected reductions in appropriations spending.
Key biennium-ending fund balances at June 30, 1989 were $475.1 million in
the GRF and $353 million in the Budget Stabilization Fund ("BSF", a cash and
budgetary management fund). June 30, 1991 ending fund balances were $135.3
million (GRF) and $300 million (BSF).
The next biennium, 1992-93, presented significant challenges to State
finances, successfully addressed. To allow time to resolve certain budget
differences, an interim appropriations act was enacted effective July 1, 1991;
it included GRF debt service and lease rental appropriations for the entire
biennium, while continuing most other appropriations for a month. Pursuant to
the general appropriations act for the entire biennium, passed on July 11, 1991,
$200 million was transfered from the BSF to the GRF in FY 1992.
D-1
<PAGE>
Based on the updated results and forecast in the course of that FY, both in
light of a continuing uncertain nationwide economic situation, there was
projected, and then timely addressed, an FY 1992 imbalance in GRF resources and
expenditures. In response, the Governor ordered most State agencies to reduce
GRF spending in the last six months of FY 1992 by a total of approximately $184
million; the $100.4 million BSF balance and additional amounts from certain
other funds were transferred late in the FY to the GRF; and adjustments were
made in the timing of certain tax payments.
A significant GRF shortfall (approximately $520 million) was then projected
for FY 1993. It was addressed by appropriate legislative and administrative
actions, including the Governor's ordering $300 million in selected GRF spending
reductions and subsequent executive and legislative action (a combination of tax
revisions and additional spending reductions). The June 30, 1993 ending GRF fund
balance was approximately $111 million, of which, as a first step to BSF
replenishment, $21 million was deposited in the BSF.
None of the spending reductions were applied to appropriations needed for
debt service on or lease rentals relating to any State obligations.
The 1994-95 biennium presented a more affirmative financial picture. Based
on June 30, 1994 balances, an additional $260 million was deposited in the BSF.
The biennium ended June 30, 1995 with a GRF ending fund balance of $928 million,
of which $535.2 million has been transferred into the BSF (which had a January
4, 1996 balance of over $828 million).
The GRF appropriations act for the 1995-96 biennium was passed on June 28,
1995 and promptly signed (after selective vetoes) by the Governor. All necessary
GRF appropriations for State debt service and lease rental payments then
projected for the biennium were included in that act. In accordance with the
appropriations act, the significant June 30, 1995 GRF fund balance, after
leaving in the GRF an unreserved and undesignated balance of $70 million has
been transferred to the BSF and other funds including school assistance funds
and, in anticipation of possible federal program changes, a human services
stabilization fund.
The State's incurrence or assumption of debt without a vote of the people
is, with limited exceptions, prohibited by current State constitutional
provisions. The State may incur debt, limited in amount to $750,000, to cover
casual deficits or failures in revenues or to meet expenses not otherwise
provided for. The Constitution expressly precludes the State from assuming the
debts of any local government or corporation. An exception is made in both cases
for any debt incurred to repel invasion, suppress insurrection, or defend the
State in war.
By 14 constitutional amendments, the last adopted in 1995, Ohio voters have
authorized the incurrence of State debt and the pledge of taxes or excises to
its payment. At April 3, 1996, $892 million (excluding certain highway bonds
payable primarily from highway use charges) of this debt was outstanding. The
only such State debt at that date still authorized to be incurred were portions
of the highway bonds, and the following: (a) up to $100 million of obligations
for coal research and development may be outstanding at any one time ($39.6
million outstanding); (b) $240 million of obligations previously authorized for
local infrastructure improvements, no more than $120 million of which may to be
issued in any calendar year ($805.4 million outstanding); and (c) up to $200
million in general obligation bonds for parks, recreation and natural resource
purposes which may be outstanding at any one time ($47.2 million outstanding,
with no more than $50 million to be issued in any one year).
The electors approved in November 1995 a constitutional amendment that
extends the local infrastructure bond program (authorizing an additional $1.2
billion of State full faith and credit ogligations to be issued over 10 years
for the purpose) and authorizes additional highway bonds (expected to be payable
primarily from highway use receipts). The latter supersedes the prior $500
million highway obligaton authorization, and authorizes not more than $1.2
billion to be outstanding at any time and not more than $220 million to be
issued in a fiscal year.
Common resolutions are pending in both houses of the General Assembly that
would submit a constitutional amendment relating to certain other aspects of
State debt. The proposal would authorize, among other things, the issuance of
State general obligation debt for a variety of purposes with debt service on all
State general obligation debt and GRF-supported obligations not to exceed 5% of
the preceding fiscal year's GRF expenditures.
The Constitution also authorizes the issuance of State obligations for
certain purposes, the owners of which do not have the right to have excises or
taxes levied to pay debt service. Those special obligations include obligations
issued by the Ohio Public Facilities Commission and the Ohio Building Authority,
and certain obligations issued by the State Treasurer, over $4.8 billion of
which was outstanding awaiting delivery at April 3, 1996.
A 1990 constitutional amendment authorizes greater State and political
subdivision participation (including financing) in the provision of housing. The
General Assembly may for that purpose authorize the issuance of State
obligations secured by a pledge of all or such portion as it authorizes of State
revenues or receipts, (but not by a pledge of the State's full faith and
credit).
D-2
<PAGE>
A 1994 constitutional amendment pledges the full faith and credit and taxing
power of the State to meeting certain guarantees under the State's tuition
credit program which provides for the purchase of tuition credits, for the
benefit of State residents, guaranteed to cover a specified amount when applied
to the cost of higher education tuition. (1965 constitutional provision that
authorized student loan guarantees payable from available State moneys has never
been implemented, apart from a "guarantee fund" approach funded essentially from
program revenues.)
The House has adopted a resolution that would submit to the electors a
constitutional amendment prohibiting the General Assembly from imposing a new
tax or increasing an existing tax unless aproved by a three-fifths vote of each
house or by a majority vote of the electors. It cannot be predicted whether
required Senate concurrence to submission will be received.
State and local agencies issue obligations that are payable from revenues
from or relating to certain facilities (but not from taxes). By judicial
interpretation, these obligations are not "debt" within constitutional
provisions. In general, payment obligations under lease-purchase agreements of
Ohio public agencies (in which certificates of participation may be issued) are
limited in duration to the agency's fiscal period, and are renewable only upon
appropriations being made available for the subsequent fiscal period.
Local school districts in Ohio receive a major portion (state-wide aggregate
approximately 44% in recent years) of their operating moneys from State
subsidies, but are dependent on local property taxes, and in 120 districts from
voter-authorized income taxes, for significant portions of their budgets.
Litigation, similar to that in other states, is pending questioning the
constitutionality of Ohio's system of school funding. The trial court concluded
that aspects of the system (including basic operating assistance) are
unconstitutional, and ordered the State to provide for and fund a system
complying with the Ohio Constitution. The State appealed and a court of appeals
reversed the trial court's findings for plaintiff districts. The case is now
pending on appeal in the Ohio Supreme Court. A small number of the State's 612
local school districts have in any year required special assistance to avoid
year-end deficits. A current program provides for school district cash need
borrowing directly from commercial lenders, with diversion of State subsidy
distributions to repayment if needed. Recent borrowings under this program
totalled $94.5 million for 27 districts (including $75 million for one) in FY
1993, $41.1 million for 28 districts in FY 1994, and $71.1 million for 29
districts in FY 1995.
Ohio's 943 incorporated cities and villages rely primarily on property and
municipal income taxes for their operations. With other subdivisions, they also
receive local government support and property tax relief moneys distributed by
the State. For those few municipalities that on occasion have faced significant
financial problems, there are statutory procedures for a joint State/local
commission to monitor the municipality's fiscal affairs and for development of a
financial plan to eliminate deficits and cure any defaults. Since inception in
1979, these procedures have been applied to 23 cities and villages; for 19 of
them the fiscal situation was resolved and the procedures terminated.
At present the State itself does not levy ad valorem taxes on real or
tangible personal property. Those taxes are levied by political subdivisions and
other local taxing districts. The Constitution has since 1934 limited to 1% of
true value in money the amount of the aggregate levy (including a levy for
unvoted general obligations) of property taxes by all overlapping subdivisions,
without a vote of the electors or a municipal charter provision, and statutes
limit the amount of the aggregate levy to 10 mills per $1 of assessed valuation
(commonly referred to as the "ten-mill limitation"). Voted general obligations
of subdivisions are payable from property taxes that are unlimited as to amount
or rate.
OHIO TAXABLE ESTIMATED CURRENT RETURN TABLE
The following tables show the approximate taxable estimated current returns
for individuals that are equivalent to tax-exempt estimated current returns
under combined Federal and state taxes, using published 1996 marginal Federal
tax rates and marginal state tax rates currently available and scheduled to be
in effect. The tables incorporate increased tax rates for higher-income
taxpayers that were included in the Revenue Reconciliation Act of 1993. The
table assumes that federal taxable income is equal to state income subject to
tax, and for cases in which more than one state rate falls within a Federal
bracket, the highest state rate corresponding to the highest income within that
Federal bracket is used. The combined state and Federal tax brackets shown
reflect the fact that state tax payments are currently deductible for Federal
tax purposes. The table does not reflect any local taxes or any taxes other than
personal income taxes. The tables illustrate what you would have to earn on
taxable investments to equal the tax-exempt estimated current return for your
income tax bracket. A taxpayer's marginal tax rate is affected by both his
taxable income and his adjusted gross income. Locate your adjusted gross and
your taxable income (which is your adjusted gross income reduced by any
deductions and exemptions), then locate your tax bracket based on joint or
single tax filing. Read across to the equivalent taxable estimated current
return you would need to match the tax-free income.
D-3
<PAGE>
COMBINED MARGINAL TAX RATES FOR JOINT TAXPAYERS WITH FOUR PERSONAL EXEMPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL --------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
------------- ------------- ----------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 40.1 $ 0-117.95 19.5 % 5.59 5.90 6.21 6.52 6.83 7.14 7.45 7.76
40.1- 96.9 0-117.95 32.5 6.67 7.04 7.41 7.78 8.15 8.52 8.89 9.26
117.95-176.95 33.0 6.72 7.09 7.46 7.84 8.21 8.58 8.96 9.33
96.9-147.7 0-117.95 36.0 7.03 7.42 7.81 8.20 8.59 8.98 9.38 9.77
117.95-176.95 36.5 7.09 7.48 7.87 8.27 8.66 9.06 9.45 9.84
176.95-299.45 39.0 7.38 7.79 8.20 8.61 9.02 9.43 9.84 10.25
147.7-263.75 117.95-176.95 42.0 7.76 8.19 8.62 9.05 9.48 9.91 10.34 10.78
176.95-299.45 44.5 8.11 8.56 9.01 9.46 9.91 10.36 10.81 11.26
Over 299.45 42.0 2 7.76 8.19 8.62 9.05 9.48 9.91 10.34 10.78
Over 263.75 176.95-299.45 48.0 8.65 9.13 9.62 10.10 10.58 11.06 11.54 12.02
Over 299.45 45.0 3 8.18 8.64 9.09 9.55 10.00 10.45 10.91 11.36
</TABLE>
COMBINED MARGINAL TAX RATES FOR SINGLE TAXPAYERS WITH ONE PERSONAL EXEMPTION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL --------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
------------- ------------- ----------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 24.00 $ 0-117.95 19.0 % 5.56 5.86 6.17 6.48 6.79 7.10 7.41 7.72
24.00- 58.15 0-117.95 31.5 6.57 6.93 7.30 7.66 8.03 8.39 8.76 9.12
58.15-121.30 0-117.95 36.0 7.03 7.42 7.81 8.20 8.59 8.98 9.38 9.77
117.95-240.45 37.0 7.14 7.54 7.94 8.33 8.73 9.13 9.52 9.92
121.30-263.75 117.95-240.45 42.5 7.83 8.26 8.70 9.13 9.57 10.00 10.43 10.87
Over 240.45 42.0 2 7.76 8.19 8.62 9.05 9.48 9.91 10.34 10.78
Over 263.75 Over 240.45 45.0 3 8.18 8.64 9.09 9.55 10.00 10.45 10.91 11.36
</TABLE>
- ------------------
1 The table reflects the effect of the limitations on itemized deductions
and the deduction for personal exemptions. They were designed to phase out
certain benefits of these deductions for higher income taxpayers. These
limitations, in effect, raise the current maximum marginal combined tax rate to
approximately 48.22 percent for taxpayers filing a joint return and entitled to
four personal exemptions and to approximately 45.23 percent for taxpayers filing
a single return entitled to only one personal exemption. These limitations are
subject to certain maximums, which depend on the number of exemptions claimed
and the total amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to lose more than
80% of his allowable itemized deductions, with certain exceptions. The table
does not reflect the Ohio joint filing credit, which has the effect of reducing
the state tax rates by 5% to 20% of such rates for certain married taxpayers
filing a joint return. The amount of this credit cannot exceed $650.00.
2 Marginal combined tax rate reverts to 40.8% after the 80% cap on the
limitation on itemized deductions has been met.
3 Marginal combined tax rate reverts to 44.13% after the 80% cap on the
limitation on itemized deductions has been met.
D-4
<PAGE>
STATEMENT OF DIFFERENCES BETWEEN ELECTRONIC FILING AND PRINTED DOCUMENT.
Pursuant to Rule 499(c) (7) under the Securities Act of 1933 and Rule 20-11
under the Investment Company Act of 1940, Registrant hereby identifies those
differences in the foregoing document between the electronic format in which it
is filed and the printed form in which it will be circulated:
(1) The printed and distributed prospectus may be paged differently because
the printed document may contain a different amount of information on each page
from that contained in the electronic transmission.
(2) In the printed document, footnote symbols may include a "dagger" or
multiple "dagger". The "dagger" symbol is represented as # in the electronic
document.
(3) The printed and distributed prospectus will not contain the preliminary
prospectus legend included at the beginning of the first prospectus page.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
A. BONDING ARRANGEMENTS OF DEPOSITOR:
The Depositor has obtained the following Stockbrokers Blanket Bonds for its
officers, directors and employees:
<TABLE>
<S> <C>
INSURER/POLICY NO. AMOUNT
United Pacific Insurance Co. $ 10,000,000
Reliance Insurance Company
B 74 92 20
Aetna Casualty and Surety $ 10,000,000
08 F10618BCA
St. Paul Insurance Co. $ 6,000,000
400 HC 1051
</TABLE>
B. THIS AMENDMENT OF REGISTRATION STATEMENT COMPRISES THE FOLLOWING PAPERS AND
DOCUMENTS:
The facing sheet
The cross-reference sheet
The Prospectus
The signatures
Consents of Independent Public
Accountants and Counsel as indicated
Exhibits as listed on page S-5
C. EXPLANATORY NOTE:
This Amendment No. 1 to the Registration Statement contains multiple
separate prospectuses. Each prospectus will relate to an individual unit
investment trust and will consist of a Part A, a Part B and an Information
Supplement. Each prospectus will be identical will the exception of the
respective Part A which will contain the financial information specific to such
underlying unit investment trust.
D. UNDERTAKINGS:
1. With the exception of the information included in the state specific
appendices to the Information Supplement, which will vary depending upon the
make-up of a Fund or updated to reflect current events, any amendment to a
Fund's Information Supplement will be subject to the review of the staff of the
Securities and Exchange Commission prior to distribution; and
2. The Information Supplement to the Trust will not include third party
financial information.
S-1
<PAGE>
SIGNATURES
The Registrant, Nuveen Tax-Free Unit Trust, Series 860 hereby identifies
Series 401, 507, 512, 515, 517, 519, 723, 814 and 823 of the Nuveen Tax-Exempt
Unit Trust (the former name of the Nuveen Tax-Free Unit Trust) for purposes of
the representations required by Rule 487 and represents the following:
(1) that the portfolio securities deposited in the series as to the
securities of which this Registration Statement is being filed do not differ
materially in type or quality from those deposited in such previous series;
(2) that, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential financial information for, the
series with respect to the securities of which this Registration Statement is
being filed, this Registration Statement does not contain disclosures that
differ in any material respect from those contained in the registration
statements for such previous series as to which the effective date was
determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Nuveen Tax-Free Unit Trust, Series 860 has duly caused this Amendment of
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Chicago and State of Illinois on April 26, 1996.
NUVEEN TAX-FREE UNIT TRUST, SERIES 860
(Registrant)
By JOHN NUVEEN & CO. INCORPORATED
(Depositor)
By: Anna R. Kucinskis
--------------------------------------
Vice President
Attest: Morrison C. Warren
--------------------------------------
Assistant Secretary
S-2
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
of Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE* DATE
<S> <C> <C> <C>
Richard J. Franke Chairman, Board of Directors )
Chief Executive Officer and )
Director )
)
Donald E. Sveen President, Chief Operating )
Officer and Director )
)
)
Anthony T. Dean Executive Vice President )
and Director ) Larry Woods Martin
) Attorney-In-Fact**
)
Timothy T. Schwertfeger Executive Vice President )
and Director )
) April 26, 1996
)
John P. Amboian Chief Financial Officer and )
Executive Vice President )
)
)
O. Walter Renfftlen Vice President and Controller )
(Principal Accounting Officer) )
)
)
</TABLE>
- --------------
* The titles of the persons named herein represent their capacity in and
relationship to John Nuveen & Co. Incorporated, the Depositor.
** The powers of attorney were filed on Form SE for Messrs. Franke, Sveen,
Renfftlen, Dean and Schwertfeger with the Amendment to the Registration
Statement on Form S-6 of Nuveen Tax-Free Unit Trust, Series 671 (File No.
33-49175). The Power of Attorney for Messr. Amboian was filed with the Amendment
to the Registration statement on Form S-6 of Nuveen Tax-Free Unit Trust, Series
823 (File No. 33-62325).
S-3
<PAGE>
860
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The consent of Arthur Andersen LLP to the use of its name in the Prospectus
included in the Registration Statement is filed by this amendment as Exhibit 4.4
to the Registratin Statement.
CONSENT OF CHAPMAN AND CUTLER
The consent of Chapman and Cutler to the use of its name in the Prospectus
included in the Registration Statement is contained in its opinions filed by
this amendment as Exhibits 3.1 and 3.2 to the Registration Statement.
CONSENT OF STATE COUNSEL
The consents of special counsel to the Fund for state tax matters to the use
of their names in the Prospectus included in the Registration Statement are
contained in their opinions filed by this amendment as Exhibit 3.3 to the
Registration Statement.
CONSENT OF STANDARD & POOR'S,
A DIVISION OF THE MCGRAW-HILL COMPANIES
The consent of Standard & Poor's, a Division of The McGraw-Hill Companies,
to the use of its name in the Prospectus included in the Registration Statement
is filed by this amendment as Exhibit 4.1 to the Registration Statement.
CONSENT OF KENNY S&P EVALUATION SERVICES
The consent of Kenny S&P Evaluation Services to the use of its name in the
Prospectus included in the Registration Statement is filed by this amendment as
Exhibit 4.2 to the Registration Statement.
CONSENT OF CARTER, LEDYARD & MILBURN
The consent of Carter, Ledyard & Milburn to the use of its name in the
Prospectus included in the Registration Statement is filed by this amendment as
Exhibit 4.3 to the Registration Statement.
S-4
<PAGE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
1.1(a) Copy of Standard Terms and Conditions of Trust between John Nuveen & Co. Incorporated,
Depositor, and The Chase Manhattan Bank (National Association), Trustee (as Exibit 1.1
(a) to the Sponsor's Registration Statement on Form S-6 relating to Series 823 of the
Fund (file No. 33-62325) and incorporated herein by reference).
1.1(b) Trust Indenture and Agreement.
2.1 Copy of Certificate of Ownership (Included in Exhibit 1.1(a) on pages 2 to 8,
inclusive, and incorporated herein by reference).
3.1 Opinion of counsel as to legality of securities being registered.
3.2 Opinion of counsel as to Federal income tax status of securities being registered.
3.3 Opinions of special state counsel to the Fund for state tax matters as to income tax
status to residents of the respective states of the units of the respective trusts and
consents to the use of their names in the Prospectus.
4.1 Consent of Standard & Poor's, a Division of The McGraw-Hill Companies.
4.2 Consent of Kenny S&P Evaluation Services.
4.3 Consent of Carter, Ledyard & Milburn.
4.4 Consent of Arthur Andersen LLP
6.1 List of Directors and Officers of Depositor and other related information (incorporated
by reference to Form S-6 [File No. 33-62325] filed on September 7, 1995 on behalf of
Nuveen Tax-Free Unit Trust, Series 823).
</TABLE>
S-5
<PAGE>
EXHIBIT 1.1(B)
NUVEEN TAX-FREE UNIT TRUST SERIES 860
TRUST INDENTURE AND AGREEMENT
DATED APRIL 26, 1996
This Trust Indenture and Agreement by and between John Nuveen & Co.
Incorporated, as Depositor and The Chase Manhattan Bank (National Association),
as Trustee, sets forth certain provisions in full and incorporates other
provisions by reference to the document entitled 'Standard Terms and Conditions
of Trust for Nuveen Tax-Free Unit Trust Series 823 and subsequent Series,
effective September 7, 1995' (herein called the 'Standard Terms and Conditions
of Trust'), and such provisions as are set forth in full and such provisions as
are incorporated by reference constitute a single instrument. All references
herein to Articles and Sections are to Articles and Sections of the Standard
Terms and Conditions of Trust.
Witnesseth That:
In consideration of the promises and of the mutual agreements herein
contained, the Depositor and the Trustee, agree as follows:
PART I
Standard Terms and Conditions of Trust Subject to the Provisions of Part II
hereof, all the provisions contained in the Standard Terms and Conditions of
Trust are herein incorporated by reference in their entirety and shall be deemed
to be a part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
PART II
Special Terms and Conditions of Trust The following special terms and
conditions are hereby agreed to:
(a) The Bonds defined in Section 1.01(1) listed in Schedule A hereto have
been deposited in trust under this Trust Indenture and Agreement.
(b) The fractional undivided interest in and ownership of the Trust Fund
represented by each Unit for a Trust on the Initial Date of Deposit is the
amount set forth under the captions "Essential Information -- Fractional
Undivided Interest in the Trust per Unit" in the Prospectus.
(c) The number of Units created of each Trust are as set forth under the
caption "Essential Information -- Number of Units" in the Prospectus for each
Trust.
(d) Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust, the phrase "Nuveen Tax-Exempt Unit Trust" shall be hereby
replaced with the phrase "Nuveen Tax-Free Unit Trust."
<PAGE>
In Witness Whereof, John Nuveen & Co. Incorporated, has caused this Trust
Indenture and Agreement for Nuveen Tax-Free Unit Trust Series 860 to be executed
by its President, one of its Vice Presidents or one of its Assistant Vice
Presidents and its corporate seal to be hereto affixed and attested by its
Secretary or its Assistant Secretary and The Chase Manhattan Bank (National
Association) has caused this Trust Indenture and Agreement to be executed by one
of its Vice Presidents or Second Vice Presidents and its corporate seal to be
hereto affixed and attested to by one of its Assistant Treasurers; all as of the
day, month and year first above written.
John Nuveen & Co. Incorporated,
Depositor
By Larry Woods Martin
Authorized Officer
(Seal)
Attest:
By Morrison C. Warren
Assistant Secretary
The Chase Manhattan Bank (National Association), Trustee
By Timothy Kelley
Second Vice President
(Seal)
Attest:
By Joseph Lyons
Assistant Treasurer
Schedule A to the Trust Indenture and Agreement Securities Initially Deposited
in Nuveen Tax-Free Unit Trust Series 860
(Note: Incorporated herein and made a part hereof is the "Schedule of
Investments" as set forth for each Trust in the Prospectus.)
<PAGE>
EXHIBIT 3.1
(ON CHAPMAN AND CUTLER LETTERHEAD)
April 26, 1996
John Nuveen & Co. Incorporated
333 W. Wacker Drive
Chicago, Illinois 60606
RE: Nuveen Tax-Free Unit Trust, Series 860
Gentlemen:
We have served as counsel for you, as depositor of Nuveen Tax-Free Unit
Trust, Series 860 (hereinafter referred to as the "Fund"), in connection with
the issuance under the Trust Indenture and Agreement dated the date hereof
between John Nuveen & Co. Incorporated, as Depositor, and The Chase Manhattan
Bank (National Association), as Trustee, of Units of fractional undivided
interest in the one or more Trusts of said Fund (hereinafter referred to as the
"Units").
In connection therewith, we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Indenture and Agreement and the
establishment of book entry positions and the execution and issuance of
certificates evidencing the Units in the Trusts of the Fund have been duly
authorized; and
2. The book entry positions and certificates positions evidencing the Units
in the Trusts of the Fund when duly executed and delivered or duly established
by the Depositor and the Trustee in accordance with the aforementioned Trust
Indenture and Agreement, will constitute valid and binding obligations of such
Trusts and the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-02243) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
<PAGE>
EXHIBIT 4.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 26, 1996
<PAGE>
EXHIBIT 4.2
(On J. J. Kenny Co., Inc. Letterhead)
April 26, 1996
John Nuveen & Company
333 West Wacker Drive
Chicago, IL 60606
Re: Nuveen Tax Free Unit Trust, Series 860
Gentlemen:
We have examined the registration statement File No. 333-02243 for the
above-captioned trust. We hereby acknowledge that Kenny S&P Evaluation Services,
a division of J. J. Kenny Co., Inc. is currently acting as the evaluator for the
trust. We hereby consent to the use in the Registration Statement of the
reference to Kenny S&P Evaluation Services, a division of J. J. Kenny Co., Inc.
as evaluator.
In addition, we hereby confirm that the ratings indicated in the
Registration Statement for the respective bonds comprising the trust portfolio
are the ratings currently indicated in our KENNYBASE database.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.
Sincerely,
Frank A. Ciccotto
<PAGE>
EXHIBIT 4.1
(ON STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES LETTERHEAD)
April 26, 1996
John Nuveen & Co. Incorporated
333 W. Wacker Drive
Chicago, IL 60606
RE:--Nuveen Tax-Free Unit Trust, Series 860
Gentlemen:
This is in response to your requests regarding the above-captioned fund
which consists of separate underlying unit investment trusts (the "trusts"), SEC
file # 333-02243.
We have reviewed the information presented to us and have assigned a "AAA"
rating to the units of each insured trust and a "AAA" rating to the securities
contained in each insured trust. The ratings are direct reflections of the
portfolio of each insured trust, which will be composed solely of securities
covered by bond insurance policies that insure against default in the payment of
principal and interest on the securities contained in each insured trust for as
long as they remain outstanding. We understand that the bonds described in the
prospectus are the same as those in the attached list. Since such policies have
been issued by MBIA which has been assigned a 'AAA' claims paying ability rating
by S&P, S&P has assigned a "AAA" rating to the units of each insured trust and a
"AAA" rating to the securities contained in each insured trust.
Standard & Poor's will maintain surveillance on the "AAA" rating until May
22, 1997. On this date the rating will be automatically withdrawn by Standard &
Poor's unless a post effective letter is requested by the trust.
You have permission to use the name of Standard & Poor's, a Division of The
McGraw-Hill Companies and the above-assigned rating in connection with your
dissemination of information relating to the insured trusts provided that it is
understood that the ratings are not "market" ratings nor recommendations to buy,
hold or sell the units of the insured trusts or the securities contained in the
insured trusts. Further, it should be understood the rating on the units of each
insured trust does not take into account the extent to which the trust's
expenses or portfolio asset sales for less than the trust's purchase price will
reduce payment to the unit holders of the interest and principal required to be
paid on the portfolio assets. S&P reserves the right to advise its own clients,
subscribers, and the public of the ratings. S&P relies on the sponsor and its
counsel, accountants, and other experts for the accuracy and completeness of the
information submitted in connection with the ratings. S&P does not independently
verify the truth or accuracy of any such information.
This letter evidences our consent to the use of the name of Standard &
Poor's, a Division of The McGraw-Hill Companies in connection with the rating
assigned to the units of each insured trust in the registration statement or
prospectus relating to the units and the trusts. However, this letter should not
be construed as a consent by us, within the meaning of Section 7 of the
Securities Act of 1933, to the use of the name of Standard & Poor's, a Division
of The McGraw-Hill Companies in connection with the ratings assigned to the
securities contained in the insured trusts. You are hereby authorized to file a
copy of this letter with the Securities and Exchange Commission.
Please be certain to send us three copies of your final prospectus as soon
as it becomes available. Should we not receive them within a reasonable amount
of time after the closing or should they not conform to the certification
received by us, we reserve the right to nullify the ratings.
Very truly yours,
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES
By Sanford Bragg
<PAGE>
EXHIBIT 3.2
(ON CHAPMAN AND CUTLER LETTERHEAD)
April 26, 1996
John Nuveen & Co. Incorporated
333 W. Wacker Drive
Chicago, Illinois 60606
RE: Nuveen Tax-Free Unit Trust, Series 860
Gentlemen:
We have served as counsel for you, as Depositor of Nuveen Tax-Free Unit
Trust, Series 860 (the "Fund") in connection with the issuance under the Trust
Indenture and Agreement, dated the date hereof between John Nuveen & Co.
Incorporated, as Depositor, and The Chase Manhattan Bank (National Association),
as Trustee, of Units of fractional undivided interest (the "Units"), as
evidenced by a book entry position or certificate, if requested by the purchaser
of Units, in the one or more Trusts of said Fund.
We have also served as counsel for you in connection with all previous
Series of the Nuveen Tax-Free Unit Trust and as such have previously examined
such pertinent records and documents and matters of law as we have deemed
necessary, including (but not limited to) the Trust Indenture and Agreements
with respect to those series. We have also examined such pertinent records and
documents and matters of law as we have deemed necessary including (but not
limited to) the Trust Indenture and Agreement relating to Nuveen Tax-Free Unit
Trust, Series 860.
We have concluded that the Trust Indenture and Agreement for the Fund and
its counterpart in each of the prior issues of Nuveen Tax-Free Unit Trust are in
all material respects substantially identical.
Based upon the foregoing, and upon such matters of law as we consider to be
applicable we are of the opinion that, under existing federal income law:
(i) For Federal income tax purposes, each of the Trusts will not be an
association taxable as a corporation but will be governed by the provisions of
Subchapter J (relating to Trusts) of Chapter 1, Internal Revenue Code of 1986
(the "Code").
(ii) Each Unitholder will be considered as owning a pro rata share of each
asset of the respective Trust of the Fund in the proportion that the number of
Units of such Trust held by him bears to the total number of outstanding Units
of such Trust. Under Subpart E, Subchapter J of Chapter 1 of the Code, income of
each Trust will be treated as income of each Unitholder thereof in the
proportion described and an item of Trust income will have the same character in
the hands of a Unitholder as it would have in the hands of the Trustee.
Accordingly, to the extent that the income of a Trust consists of interest and
original issue discount excludable from gross income under Section 103 of the
Code, such income will be excludable from Federal gross income of the
Unitholder, except in the case of a Unitholder who is a substantial user (or a
person related to such user) of a facility financed through issuance of any
industrial development bonds or certain private activity bonds held by the
Trust. In the case of such Unitholder who is a substantial user (and no other)
interest received with respect to his Units attributable to such industrial
development bonds or such private activity bonds is includable in his gross
income. In the case of certain corporations, interest on the Bonds is included
in computing the alternative minimum tax pursuant to Sections 56(c) of the Code,
the enviromental tax (the "Superfund Tax") imposed by Sections 59A of the Code,
and the branch profits tax imposed by Section 884 of the Code with respect to
U.S. branches of foreign corporations.
(iii) Gain or loss will be recognized to a Unitholder upon redemption or
sale of his Units. Such gain or loss is measured by comparing the proceeds of
such redemption or sale with the adjusted basis of such Units. Before
adjustment, such basis would normally be cost if the Unitholder had acquired his
Units by purchase, plus his aliquot share of advances by the Trustee to the
Trust to pay interest on Bonds delivered after the Unitholder's settlement date
to the extent that such interest accrued on the Bonds during the period from the
Unitholder's settlement date to the date such Bonds are delivered to the Trust,
but only to the extent that such advances are to be repaid to the Trustee out of
interest received by the Fund with respect to such Bonds. In addition, such
basis will be increased by both the Unitholder's aliquot share of the accrued
original issue discount (and market discount, if the Unitholder elects to
include market discount in income as it accrues) with respect to
<PAGE>
each Bond held by the Trust with respect to which there was an original issue
discount at the time the Bond was issued (or which was purchased with market
discount) and reduced by the annual amortization of bond premium, if any, on
Bonds held by the Trust.
(iv) If the Trustee disposes of a Trust asset (whether by sale, payment on
maturity, redemption or otherwise), gain or loss is recognized to the Unitholder
and the amount thereof is measured by comparing the Unitholder's aliquot share
of the total proceeds from the transaction with his basis for his fractional
interest in the asset disposed of. Such basis is ascertained by apportioning the
tax basis for his Units among each of the Trust assets (as of the date on which
his Units were acquired) ratably according to their values as of the valuation
date nearest the date on which he purchased such Units. A Unitholder's basis in
his Units and of his fractional interest in each Trust asset must be reduced by
the amount of his aliquot share of interest received by the Trust, if any, on
Bonds delivered after the Unitholder's settlement date to the extent that such
interest accrued on the Bonds during the period from the Unitholder's settlement
date to the date such Bonds are delivered to the Trust, must be reduced by the
annual amortization of bond premium, if any, on Bonds held by the Trust; and
must be increased by the Unitholder's share of accrued original issue discount
(and market discount, if the Unitholder elects to include market discount in
income as it accrues) with respect to each Bond which, at the time the Bond was
issued, had original issue discount (or which was purchased with market
discount).
(v) In the case of any Bond held by the Trust where the "stated redemption
price at maturity" exceeds the "issue price," such excess shall be original
issue discount. With respect to each Unitholder, upon the purchase of his Units
subsequent to the original issuance of Bonds held by the Trust Section
1272(a)(7) of the Code provides for a reduction in the accrued "daily portion"
of such original issue discount upon the purchase of a Bond subsequent to the
Bond's original issue, under certain circumstances. In the case of any Bond held
by the Trust the interest on which is excludable from gross income under Section
103 of the Code, any original issue discount which accrues with respect thereto
will be treated as interest which is excludable from gross income under Section
103 of the Code.
(vi) In the case of Trusts for which MBIA Insurance Corporation ("MBIA")
insurance with respect to each of the Bonds deposited therein has been obtained
by the Depositor or the issuer or underwriter of the Bonds, we have examined the
form of MBIA's policy or several policies of insurance (the "Policies") which
have been delivered to the Trustee. Assuming issuance of Policies in such form,
in our opinion, any amounts paid under said Policies representing maturing
interest on defaulted obligations held by the Trustee will be excludable from
Federal gross income if, and to the same extent as, such interest would have
been so excludable if paid in normal course by the respective issuer, provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the bonds, rather than the insurer, will pay debt
service on the bonds. Paragraph (ii) of this opinion is accordingly applicable
to Policy proceeds representing maturing interest.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original issue
discount accrues either on the basis of a constant compound interest rate or
ratably over the term of the Bond, depending on the date the Bond was issued. In
addition, special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount which would have
previously accrued based upon its issue price (its "adjusted issue price"). The
application of these rules will also vary depending on the value of the bond on
the date a Unitholder acquires his Units, and the price the Unitholder pays for
his Units.
Because the Trusts do not include any "private activity bonds" within the
meaning of Section 57(a)(5) of the Code issued on or after August 8, 1986, none
of the Trust Fund's interest income shall be treated as an item of tax
preference when computing the alternative minimum tax. In the case of
corporations, for taxable years beginning after December 31, 1986, the
alter-native minimum tax and the Superfund Tax depend upon the corporation's
alternative minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment items used in
computing AMTI and the Superfund Tax of a corporation (other than an S
Corporation, Regulated Investment Company, Real Estate Investment Trust or
REMIC) for tax years beginning in 1989 is an amount equal to 75% of the excess
of such corporation's "adjusted current earnings" over an amount equal to its
AMTI
<PAGE>
(before such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt interest,
including interest on all Bonds in the Trust, and tax-exempt original issue
discount.
Effective for tax returns filed after December 31, 1987, all taxpayers are
required to disclose to the Internal Revenue Service the amount of tax-exempt
interest earned during the year.
Section 265 of the Code provides for a reduction in each taxable year of
100% of the otherwise deductible interest on indebtedness incurred or continued
by financial institutions, to which either Section 585 or Section 593 of the
Code applies, to purchase or carry obligations acquired after August 7, 1986
(with certain exceptions), the interest on which is exempt from Federal income
taxes for such taxable year. Under rules prescribed by Section 265, the amount
of interest otherwise deductible by such financial institutions in any taxable
year which is deemed to be attributable to tax-exempt obligations acquired after
August 7, 1986 will be the amount that bears the same ratio to the interest
deduction otherwise allowable (determined without regard to Section 265) to the
taxpayer for the taxable year as the taxpayer's average adjusted basis (within
the meaning of Section 1016) of tax-exempt obligations acquired after August 7,
1986, bears to such average adjusted basis for all assets of the taxpayer,
unless such financial institution can otherwise establish under regulations to
be prescribed by the Secretary of the Treasury, the amount of interest on
indebtedness incurred or continued to purchase or carry such obligations. On
December 7, 1995 the U.S. Treasury Department released proposed legislation
that, if adopted, would generally extend the financial institution rules to all
corporations, effective for obligations acquired after the date of announcement.
We also call attention to the fact that, under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units is not
deductible for Federal income tax purposes. Under rules used by the Internal
Revenue Service for determining when borrowed funds are con-sidered used for the
purpose of purchasing or carrying particular assets, the purchase of Units may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of Units. However, these rules
generally do not apply to interest paid on indebtedness incurred for
expenditures of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") subjects tax-exempt
bonds to the market discount rules of the Code effective for bonds purchased
after April 30, 1993. In general, market discount is the amount (if any) by
which the stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable to
original issue discount not yet accrued) subject to a statutory de minimis rule.
Market discount can arise based on the price a Trust pays for Bonds or the price
a Unitholder pays for his or her Units. Under the Tax Act, accretion of market
discount is taxable as ordinary income; under prior law, the accretion had been
treated as capital gain. Market discount that accretes while a Trust holds a
Bond would be recognized as ordinary income by the Unitholders when principal
payments are received on the Bond, upon sale or at redemption (including early
redemption), or upon the sale or redemption of his or her Units, unless a
Unitholder elects to include market discount in taxable income as it accrues.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-02243) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
<PAGE>
EXHIBIT 3.3
(ON CHAPMAN & CUTLER LETTERHEAD)
APRIL 26, 1996
Nuveen Tax-Free Unit Trust,
Series 860
c/o John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
The Chase Manhattan Bank (National Association),
as Trustee for Nuveen Tax-Free Unit
Trust, Series 860
770 Broadway
New York, New York 10003
Re:--Georgia Insured Trust 51
Gentlemen:
We have acted as counsel to Nuveen Tax-Free Unit Trust, Series 860, with
respect to certain matters preliminary to the issuance and sale of units of
interest therein (the "Units") pursuant to a Trust Indenture and Agreement,
dated as of the date hereof (the "Indenture"), between John Nuveen & Co.
Incorporated, as depositor (the "Depositor"), and The Chase Manhattan Bank N.A.,
as trustee (the "Trustee"). The Units represent fractional undivided interests
in the principal of and net income on obligations deposited in one of several
separate trusts including the above-captioned trust (the "Trust"), will be
evidenced by a certificate (the "Certificate") and will be sold to various
investors (the "Unitholders"). Each separate trust will be administered as a
distinct entity with separate certificates, investments, expenses, books and
records.
The assets of the Trust will consist of interest-bearing obligations issued
by or on behalf of the State of Georgia (the "State") or counties,
municipalities, authorities or political subdivisions thereof (the "Georgia
Bonds") or by the Commonwealth of Puerto Rico (the "Puerto Rico Bonds")
(collectively, the "Bonds"). Distributions of interest on the Bonds received by
the Trust will be made semi-annually unless a Unitholder elects to receive them
monthly or quarterly.
Although we express no opinion with respect therto, in rendering the opinion
expressed herein, we have assumed that the Bonds were validly issued by the
State of Georgia or its instrumentalities or municipalities and the Commonwealth
of Puerto Rico, as the case may be.
Based on the foregoing, and review and consideration of existing State laws,
it is our opinion, and we herewith advise you, as follows:
1.--For purposes of income taxation by the State of Georgia or any of its
counties or municipalities:
(a)--The Trust is not an association taxable as a corporation and each
Unitholder of the Trust will be treated as the owner of a pro-rata portion of
the Trust, and the income of the Trust will therefore be treated as the income
of the Unitholder;
(b)--Interest on the Georgia Bonds and the Puerto Rico Bonds which is
excludable from gross income for federal income tax purposes when received by
the Trust will be exempt from Georgia income taxation and therefore will not be
includable in the income of the Unitholder for income tax purposes when
distributed by the Trust and received by the Unitholder;
(c)--Each Unitholder of the Trust will recognize gain or loss for income tax
purposes if the Trustee disposes of a Bond (whether by sale, exchange, payment
on maturity, retirement or otherwise) or if the Unitholder redeems or sells
Units of the Trust to the extent that such transaction results in a recognized
gain or loss for federal income tax purposes;
(d)--Due to the amortization of bond premium and the basis adjustments
required by the Internal Revenue Code, a Unitholder, under some circumstances,
may realize taxable gain when his or her Units are sold or redeemed prior to the
maturity of Bonds held by the Trust for an amount less than or equal to such
Units' original cost;
(e)--In the case of Bonds issued before March 11, 1987 with original issue
discount the amount of gain or loss recognized for income tax purposes upon such
sale or redemption of the Bonds or Units may differ from the
<PAGE>
amount recognized for federal income tax purposes because original issue
discount on such Bonds may accrue on ratable basis under Georgia law;
(f)--Interest on indebtedness incurred by a Unitholder to purchase or carry
Units of the Trust and Trustee fees and related expenses incurred by the Trust
which are not deductible for federal income tax purposes are also not deductible
under Georgia law;
2.--Units of the Trust are not subject to sales or use taxation by the State
of Georgia or any political subdivision thereof;
3.--Georgia Bonds and Puerto Rico Bonds are not subject to intangible
personal property taxation by the State of Georgia or any political subdivision
thereof. But see below regarding intangible personal property tax legislation;
4.--No opinion is expressed regarding whether Units of the Trust are subject
to intangilble personal property taxation by the State of Georgia, however,
according to discussions with the Georgia Department of Revenue, it is the
Department's view that Units of the Trust would be subject to such tax. But see
below regarding intangible personal property tax legislation;
5.--Georgia Bonds and Puerto Rico Bonds are not subject to sales or use
taxation by the State of Georgia or any political subdivision thereof;
6.--In the case of Trusts for which an insurance policy or policies with
respect to the payment of principal and interest on the Georgia Bonds and Puerto
Rico Bonds has been obtained by the Depositor, any proceeds paid under such
policy or policies issued to the Trust, if any, with respect to the Bonds in the
Trust which represent maturing interest on defaulted obligations held by the
Trustee will be exempt from State income taxes if, and to the same extent as,
such interest would have been so exempt if paid by the issurer of the defaulted
obligations provided that, at the time such policies are purchased, the amounts
paid for such policies are reasonable, customary and consistent with the
reasonable expectation that the issuer of the Bonds, rather than the insurer,
will pay debt service on the Bonds. Paragraph 1(b) of this opinion is
accordingly applicable to policy proceeds representing maturing interest.
The Georgia state legislature has recently passed legislation that would
repeal the intangible personal property tax in Georgia. Although such
legislation would be effective immediately, lawmakers in Georgia are uncertain
as to whether the tax could be abolished by the General Assembly or whether a
constitutional amendment is necessary. Thus, additional legislation was passed
which enables the Georgia legislature to repeal the intangible tax, but only if
voters approve a constitutional amendment in the fall. As the effectiveness of
the legislation repealing the tax is uncertain at this time, Unitholders are
advised to consult their tax advisers in this regard.
We have not examined any of the Bonds to be deposited and held in the Trust
or the proceedings for the issuance thereof or the opinions of bond counsel with
respect thereto, and therefore express no opinion as to the exemption from State
income taxes of interest on the Bonds if received directly by a Unitholder.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (No. 333-02243) filed pursuant to the Securities Act of
1933, as amended (the "Act"), with respect to the registration of the sale of
the Units by Nuveen Tax-Free Unit Trust, Series 860, and to the references to
our firm in such Registration Statement and the preliminary prospectus included
therein. In giving such consent, we do not thereby admit that we are persons
whose consent is required by Section 7 of the Act, or the rules and regulations
thereunder.
Very truly yours,
Chapman & Cutler
<PAGE>
EXHIBIT 3.3
(ON EDWARDS & ANGELL LETTERHEAD)
APRIL 26, 1996
Nuveen Tax-Free Unit Trust, Series 860
In care of John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606
Attention of James J. Wesolowski, Esq.
Vice President, General Counsel
and Secretary
The Chase Manhattan Bank, N.A.,
as Trustee of Nuveen Tax-Free Unit Trust, Series 860
770 Broadway
New York, NY 10003
Re: Massachusetts Insured Trust 135
Dear Sirs:
We have acted as special counsel, with respect to Massachusetts State and
local tax matters, to the above mentioned Trust(s) ("Trust(s)") of Nuveen Tax-
Free Unit Trust, Series 860 (the "Fund") concerning a Registration Statement
(No. 333-02243) on Form S-6 under the Securities Act of 1933, as amended (the
"Registration Statement"), covering the issuance by the Fund of Units of
fractional undivided interest in the Fund.
We have not been furnished with a copy of the Registration Statement or the
prospectus, which is a part of the Registration Statement, relating to the
issuance by the Fund of the Units. However, John Nuveen & Co. Incorporated has
authorized us to assume that the proposed offer and sale of the Units will be
carried out in that same manner and upon the same terms and conditions as that
described in the prospectus for the Nuveen Tax-Exempt Unit Trust, Series 351 --
Massachusetts Trust 182, dated November 6, 1985.
We have been furnished with a copy of the opinion of Chapman and Cutler on
the federal tax status of the Fund, its constituent Trusts and their
Unitholders.
In addition, we have also examined applicable Massachusetts law and a ruling
of the Massachusetts Department of Revenue dated February 7, 1985, relating to
Multi-State Series 162.
Based on the foregoing it is our opinion that under existing law and
administration of the affairs of the Trust(s):
A.--For Massachusetts income tax purposes, each Trust will be treated as a
corporate trust under Section 8 of Chapter 62 of the Massachusetts General Laws
("M.G.L.") and not as a grantor trust under Section 10(e) of M.G.L. Chapter 62.
B.--The Trust(s) will not be held to be engaging in business in
Massachusetts within the meaning of said Section 8 and will, therefore, not be
subject to Massachusetts income tax.
C.--Unitholders who are subject to Massachusetts income taxation under
M.G.L. Chapter 62 will not be required to include their respective shares of the
earnings of or distributions from the Trust(s) in their Massachusetts gross
income to the extent that such earnings or distributions represent tax-exempt
interest excludable from gross income for federal income tax purposes received
by the Trust(s) on obligations issued by Massachusetts, its counties,
municipalities, authorities, political subdivisions or instrumentalities or by
Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands or other
possessions of the United States within the meaning of Section 103(c) of the
Internal Revenue Code of 1986, as amended ("Obligations").
D.--In the case of a Massachusetts Insured Trust, Unitholders who are
subject to Massachusetts income taxation under M.G.L. Chapter 62 will not be
required to include their respective shares of the earnings of or distributions
from such Trust in their Massachsetts gross income to the extent that such
earnings or distributions are derived from the proceeds of insurance obtained by
the Sponsor of such Trust or by the issuer or underwriter of an obligation held
by such Trust that represent maturing interest on defaulted obligations held by
the Trustee, if and to the same extent that such earnings or distributions would
have been excludable from the gross income of such Unitholders if derived from
interest paid by the issuer of the defaulted obligation.
<PAGE>
E.--Unitholders which are corporations subject to taxation under M.G.L.
Chapter 63 will be required to include their respective shares of the earnings
of or distributions from the Trust(s) in their Massachusetts gross income to the
extent that such earnings or distributions represent interest from bonds, notes
or indebtedness of any state, including Massachusetts, except for interest which
is specifically exempted from such tax by the acts authorizing issuance of said
Obligations.
F.--Each Trust's capital gains and/or capital losses which are includable in
the federal gross income of Unitholders who are subject to Massachusetts income
taxation under M.G.L. Chapter 62, or Unitholders which are corporations subject
to Massachusetts taxation under M.G.L. Chapter 63 will be included as capital
gains and/or losses in the Unitholders' Massachusetts gross income, except for
capital gain which is specifically exempted from taxation under such Chapters by
the acts authorizing issuance of said Obligations.
G.--Unitholders which are corporations subject to tax under M.G.L. Chapter
63 and which are tangible property corporations will not be required to include
the Units when determining the value of their tangible property; such
Unitholders which are intangible property corporations will be required to
include the Units when determining their net worth.
H.--Gains or losses realized on sales or redemptions of Units by Unitholders
who are subject to Massachusetts income taxation under M.G.L. Chapter 62 or
Unitholders which are corporations subject to Massachusetts taxation under
M.G.L. Chapter 63 will be includable in their Massachusetts gross income. In
determining such gain or loss Unitholders will, to the same extent required for
Federal tax purposes, have to adjust their tax bases for their Units for accrued
interest received, if any, on Obligations delivered to the Trustee after the
Unitholders pay for their Units, for amortization of premiums, if any, on
Obligations held by the Trust(s), and for accrued original issue discount with
respect to each Obligation which, at the time the Obligation was issued, had
original issue discount.
I.--The Units of the Trust(s) are not subject to any property tax levied by
Massachusetts or any political subdivision thereof, nor to any income tax levied
by any such political subdivision. They are includable in the gross estate of a
deceased Unitholder who is a resident of Massachusetts for purposes of the
Massachusetts Estate Tax.
The foregoing opinions are based upon present provisions of federal and
Massachusetts law, administrative interpretations thereof and court decisions.
With respect to Unitholders which are corporations subject to Massachusetts
taxation under M.G.L. Chapter 63, no opinion is rendered on the includability of
their respective shares of the earnings of or distributions from the Trust(s) in
their Massachusetts gross income to the extent that such earnings or
distributions represent interest from bonds, notes, or indebtedness of Puerto
Rico, the Virgin Islands, Guam, the Northern Mariana Islands or other
possessions of the United States within the meaning of Section 103(c) of the
Internal Revenue Code of 1986, as amended.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in such Registration
Statement and the Prospectus included therein.
Very truly yours,
EDWARDS & ANGELL
<PAGE>
EXHIBIT 3.3
(ON DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN LETTERHEAD)
APRIL 26, 1996
John Nuveen & Co. Incorporated
333 W. Wacker Drive
Chicago, Illinois 60606
Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
Re: Nuveen Tax-Free Unit Trust, Series 860
Michigan Insured Trust 65
Gentlemen:
We have acted as special Michigan counsel to the captioned Trust(s)(the
"Michigan Trust(s)") of Nuveen Tax-Free Unit Trust - Series 860 (the "Fund")
concerning a Registration Statement (No. 333-02243) on Form S-6 under the
Securities Act of 1933, as amended, covering the issuance by the Michigan
Trust(s) of Units of fractional undivided interest in the Michigan Trust(s) (the
"Units").
The Michigan Trust(s) has (have) been organized under a Trust Indenture and
Agreement dated as of April 26, 1996 between John Nuveen & Co. Incorporated, as
Depositor ("Nuveen"), and Chase Manhattan Bank, N.A., as Trustee ("Trustee").
The Fund will contain several trusts, including the Michigan Trust(s), which
will issue the Units. The Units of the Michigan Trust(s) will be purchased by
various investors (the "Unitholders"). Each Unit of a Michigan Trust represents
a fractional undivided interest in a Michigan Trust. The Michigan Trust(s) and
the other trusts each will be administered as a distinct entity with separate
certificates, investments, expenses, books and records. Further, Nuveen, the
Trustee and Municipal Bond Investors Assurance Corporation will enter into an
agreement for any Michigan Insured Trust providing for the provision of
insurance (the "Insurance") against the nonpayment of principal and interest
when due.
The assets of a Michigan Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Michigan, and counties, municipalities,
authorities and political subdivisions thereof, and, in limited instances, bonds
issued by Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands or
possessions of the United States (the "Bonds"). Distributions of the interest
received by a Michigan Trust will generally be made semi-annually unless the
Unitholder elects otherwise. We have been advised by Nuveen that in the opinion
of bond counsel to each issuer, the interest on all Bonds in a Michigan Trust is
exempt from Federal income tax under existing law.
Chapman and Cutler, counsel for Nuveen, has advised us that for federal
income tax purposes a Michigan Trust will not be taxable as an association but
will be governed by the provisions of Subchapter J (relating to Trusts) of
Chapter 1 of the Internal Revenue Code of 1986, as amended. Each Unitholder will
be considered the owner of a pro rata portion of the Unitholder's repective
Michigan Trust and will be subject to tax on the income therefrom under the
provisions of Subpart E of Subchapter J of Chapter 1 of the Internal Revenue
Code of 1986, as amended. A Michigan Trust itself will not be subject to federal
income taxes. For federal income tax purposes, each item of income from a
Michigan Trust will have the same character in the hands of a Unitholder as it
would have in the hands of the Trustee. Accordingly, to the extent that the
income of a Michigan Trust consists of interest excludable from gross income
under Section 103 of the Internal Revenue Code of 1986, as amended, such income
will be excludable from federal gross income of the Unitholder. In addition, if
Insurance has been obtained, Chapman and Cutler has examined the form of the
policy of Insurance being issued with respect to the Bonds and based thereon has
advised us that any amounts paid under the Insurance representing maturing
interest on defaulted obligations held by the Trustee will be excludable from
federal gross income if, and to the same extent as, such interest would have
been so excludable if paid by the respective issuer.
Based upon the above information which, with Nuveen's consent, we have
relied upon, it is our opinion that for Michigan state and local tax purposes, a
Michigan Trust will be recognized as a trust not taxable as a corporation.
We are further of the opinion that under existing law:
Under the Michigan income tax act, the Michigan single business tax act, the
Michigan intangibles tax act, the Michigan city income tax act (which authorizes
the only income tax ordinance which may be adopted by cities in
<PAGE>
Michigan), and under the law which authorizes a "first class" school district to
levy an excise tax upon income, the Michigan Trust(s) will not be subject to
tax. The income of a Michigan Trust will be treated as the income of the
Unitholders and be deemed to have been received by them when received by their
respective Michigan Trust.
Interest on the Bonds in a Michigan Trust which is exempt from Federal
income tax is exempt from Michigan state and local income taxes and from the
Michigan single business tax. Further, any amounts paid under any Insurance
representing maturing interest on defaulted obligations held by the Trustee will
be excludable from Michigan state and local income taxes and from the Michigan
single business tax if, and to the same extent as, such interest would have been
so excludable if paid by the respective issuer.
For purposes of the foregoing Michigan tax laws (corporations and financial
institutions are not subject to the Michigan income tax), each Unitholder will
be considered to have received his pro rata share of Bond interest when it is
received by the Unitholder's respective Michigan Trust, and each Unitholder will
have a taxable event when the Unitholder's respective Michigan Trust disposes of
a Bond (whether by sale, exchange, redemption or payment at maturity) or when
the Unitholder redeems or sells Units. Due to the requirement that tax cost be
reduced to reflect amortization of bond premium, under some circumstances a
Unitholder may realize taxable gain when Units are sold or redeemed for an
amount equal to, or less than, their original cost. The tax cost of each Unit to
a Unitholder will be allocated for purposes of these Michigan tax laws in the
same manner as the cost is allocated for Federal income tax purposes.
Pursuant to the position of the Michigan Department of Treasury in a
bulletin dated December 19, 1986, the portion of the tax exempt bond fund
represented by the Bonds will be exempt from the Michigan Intangibles Tax. The
Department of Treasury has not indicated a position with respect to treatment of
amounts paid under a policy of insurance with respect to maturing interest on
defaulted obligations (which amounts would have been exludable if paid by the
respective issuer) for purposes of determining the income base for the Michigan
Intangibles Tax.
If a Unitholder is subject to the Michigan single business tax (i.e. is
engaged in a "business activity" as defined in the Michigan single business tax
act) and has a taxable event for Federal income tax purposes when a Michigan
Trust sells or exchanges Bonds or the Unitholder sells or exchanges Units, such
event may impact on the adjusted tax base upon which the single business tax is
computed. Any capital gain or loss realized from such taxable event which was
included in the computation of the Unitholder's Federal taxable income, plus the
portion, if any, of such capital gain excluded in such computation and minus the
portion, if any, of such capital loss not deducted in such computation for the
year the loss occurred, will be included in the adjusted tax base. The adjusted
tax base of any person other than a corporation is affected by any gain or loss
realized from the taxable event only to the extent that the resulting Federal
taxable income is derived from "business activity".
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-02243) relating to the Units and to the
reference to our Firm as special Michigan counsel in the Registration Statement
and in the related Prospectus.
Very truly yours,
DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN
<PAGE>
EXHIBIT 3.3
(ON SQUIRE, SANDERS & DEMPSEY LETTERHEAD)
APRIL 26, 1996
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
RE: Nuveen Tax-Free Unit Trust, Series 860
Ohio Insured Trust 133
Gentlemen:
You have requested our opinion as to the Ohio tax aspects of the above-
captioned Trust(s) (the "Ohio Trust(s)"), which is(are) part of the Nuveen
Tax-Free Unit Trust -- Series 860 (the "Fund"). We understand that the Fund is
organized under the Trust Indenture and Agreement, dated the date hereof,
between John Nuveen & Co. Incorporated, as Depositor, and The Chase Manhattan
Bank, N.A., as Trustee. We further understand that (i) the Fund will issue Units
of fractional undivided interests in several state trusts, including the Ohio
Trust(s), (ii) the Units will be purchased by various investors ("Unitholders"),
(iii) each Unit of the Ohio Trust(s) represents a fractional undivided interest
in the principal and net income of the Ohio Trust(s) in the ratio of ten Units
for each $1,000 of principal amount of the obligations initially acquired by the
Ohio Trust(s), and (iv) each state trust will be administered as a distinct
entity with separate certificates, investments, expenses, books and records.
In addition, we understand that (i) the Ohio Trust(s) is(are) comprised
primarily of interest-bearing obligations issued by or on behalf of the State of
Ohio, political subdivisions thereof, or agencies or instrumentalities thereof
("Ohio Obligations"), or by the governments of Puerto Rico, the Virgin Islands,
the Northern Mariana Islands or Guam ("Territorial Obligations") (collectively,
"Obligations"), (ii) at all times at least fifty percent of the total assets of
the Ohio Trust(s) will consist of Ohio Obligations, or similar obligations of
other states or their subdivisions, and (iii) distributions of interest received
by the Ohio Trust(s) will be made semi-annually unless the Unitholder elects
otherwise. We further understand that, based on the opinion of bond counsel with
respect to each issue of Ohio Obligations held or to be held by the Ohio Trust,
rendered on the date of issuance thereof, interest on each such issue is
excluded from gross income for federal income tax purposes under Section 103(a)
of the Internal Revenue Code of 1986, as amended ("Code"), or other provisions
of federal law, provided that with respect to certain Ohio and Territorial
Obligations, certain representations are accurate and certain covenants are
satisfied.
We understand that Chapman and Cutler has rendered an opinion that for
federal income tax purposes the Ohio Trust(s) will not be taxable as (an)
association(s) but will be governed by the provisions of subchapter J (relating
to trusts) of Chapter 1 of the Code; each Unitholder will be considered the
owner of a pro rata portion of the Unitholder's respective Ohio Trust under
Section 676(a) of the Code; the Ohio Trust(s) will not be subject to federal
income tax; each Unitholder will be considered to have received his pro rata
share of interest on the underlying bonds in the Unitholder's respective Ohio
Trust when it is received by such Ohio Trust; and each Unitholder will have a
taxable event when the Unitholder's respective Ohio Trust disposes of an
underlying obligation (whether by sale, exchange, redemption, or payment at
maturity) or when the Unitholder redeems or sells his Units.
Based on the foregoing and upon an examination of such other documents and
an investigation of such other matters of law as we have deemed necessary, we
are of the opinion that under existing Ohio law:
1.--The Ohio Trust(s) is(are) not taxable as (a) corporation(s) or otherwise
for purposes of the Ohio personal income tax, Ohio school district income taxes,
the Ohio corporation franchise tax, or the Ohio dealers in intangibles tax.
2.--Income of the Ohio Trust(s) will be treated as the income of the
Unitholders for purposes of the Ohio personal income tax and municipal and
school district income taxes in Ohio and the Ohio corporation franchise tax in
proportion to the respective interest therein of each Unitholder.
<PAGE>
3.--Interest on Obligations held by the Ohio Trust(s) is exempt from the
Ohio personal income tax, and municipal and school district income taxes in
Ohio, and is excluded from the net income base of the Ohio corporation franchise
tax when distributed or deemed distributed to Unitholders.
4.--Proceeds paid under insurance policies, if any, to the Trustee of the
Ohio Trust(s) representing maturing interest on defaulted obligations held by
the Ohio Trust(s) that is excluded from gross income for federal income tax
purposes will be exempt from the Ohio personal income tax and municipal and
school district income taxes in Ohio and the net income base of the Ohio
corporation franchise tax.
5.--Gains and losses realized on the sale, exchange or other disposition by
the Ohio Trust(s) of Ohio Obligations are excluded in determining adjusted gross
and taxable income for purposes of the Ohio personal income tax, and municipal
and school district income taxes in Ohio, and are excluded from the net income
base of the Ohio corporation franchise tax when distributed or deemed
distributed to Unitholders.
We have not examined any of the obligations to be deposited in the Ohio
Trust(s) and express no opinion as to whether such obligations, interest
thereon, or gain from the sale or other disposition thereof would in fact be
exempt from any federal or Ohio taxes if such obligations were held, or such
interest or gain were received, directly by the Unitholders.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (No. 333-02243) relating to the Units referred to above,
and to the reference to our firm as special Ohio tax counsel in said
Registration Statement and in the Prospectus contained therein.
Respectfully submitted,
SQUIRE, SANDERS & DEMPSEY
<PAGE>
EXHIBIT 4.3
(ON CARTER LEDYARD & MILBURN LETTERHEAD)
April 26, 1996
Nuveen Tax-Free Unit Trust, Series 860
c/o John Nuveen & Co. Incorporated,
as Depositor of Nuveen Tax-Free Unit
Trust, Series 860
333 W. Wacker Drive
Chicago, Illinois 60606
RE: Nuveen Tax-Free Unit Trust, Series 860
Dear Sirs:
We hereby consent to the reference to our firm under the caption "What is
the Tax Status of Unitholders?" in the Registration Statement and related
Prospectus of Nuveen Tax-Free Unit Trust, Series 860 for the registration of
units of fractional undivided interest in the Fund in the aggregate principal
amount as set forth in the Closing Memorandum dated today's date.
Very truly yours,
CARTER, LEDYARD & MILBURN
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Georgia
Insured Trust 51 which is incorporated in the Prospectus dated April 26, 1996
and is qualified in its entirety by reference to such prospectus.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> Georgia Insured
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 3,317,756
<INVESTMENTS-AT-VALUE> 3,326,141
<RECEIVABLES> 62,391
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,393,632
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 62,391
<TOTAL-LIABILITIES> 62,391
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 35,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,326,141
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 95.03
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Massachusetts Insured Trust 135 which is incorporated in the Prospectus dated
April 26, 1996 and is qualified in its entirety by reference to such
prospectus.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> Massachusetts Insured
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 3,296,745
<INVESTMENTS-AT-VALUE> 3,307,695
<RECEIVABLES> 51,806
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,364,901
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,806
<TOTAL-LIABILITIES> 51,806
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 35,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,307,695
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 94.51
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Michigan
Insured Trust 65 which is incorporated in the Prospectus dated April 26, 1996
and is qualified in its entirety by reference to such prospectus.
</LEGEND>
<SERIES>
<NUMBER> 003
<NAME> Michigan Insured
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 3,314,476
<INVESTMENTS-AT-VALUE> 3,320,903
<RECEIVABLES> 72,812
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,398,915
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72,812
<TOTAL-LIABILITIES> 72,812
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 35,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,320,903
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 94.88
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Ohio
Insured Trust 133 which is incorporated in the Prospectus dated April 26, 1996
and is qualified in its entirety by reference to such prospectus.
</LEGEND>
<SERIES>
<NUMBER> 004
<NAME> Ohio Insured
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 3,352,964
<INVESTMENTS-AT-VALUE> 3,365,065
<RECEIVABLES> 53,330
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,423,595
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,330
<TOTAL-LIABILITIES> 53,330
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 35,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,365,065
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 96.14
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
MEMORANDUM
NUVEEN TAX-FREE UNIT TRUST, SERIES 860
FILE NO. 333-02243
The Prospectus and the Indenture filed with Amendment No. 1 of the
Registration Statement on Form S-6 have been revised to reflect information
regarding the execution of the Indenture and the deposit of bonds on April 26,
1996, and to set forth certain statistical data based thereon. In addition,
there are a number of other changes from the Prospectus as originally filed to
which reference is made, including the increase in the size of the Fund, a
corresponding increase in the number of Units and a change in the individual
trusts constituting the Fund. All references to the Units, prices and related
statistical data will apply to each trust of the Fund and the Units thereof
individually.
Except for such updating, an effort has been made to set forth below each of
the changes and also to reflect the same by marking the Prospectus transmitted
with the Amendment. Also, differences between the Final Prospectus relating to
the previous series of the Nuveen Tax-Exempt Unit Trust and the subject
Prospectus have been indicated.
FORM S-6
FACING SHEET. The file number is now shown.
THE PROSPECTUS
PART A-PAGE 2.--The "Estimated Long-Term Return" and "Estimated Current
Return" to Unitholders under each Trust under each of the distribution plans are
stated.
PART A-PAGES 1 - 2.--Essential information for each of the Trusts, including
applicable footnotes, has been completed for this Series.
PART A-PAGES 1 - 2.--The date of the Indenture has been inserted in Section
1 along with the size and number of Units of each of the Trusts.
PART A-PAGES 1 - 6 et seq.--The following information for each Trust appears
on the pages relating to such trust:
The estimated daily accrual of interest under the plans of distribution
for each of the Trusts
Data regarding the composition of the portfolio of each Trust
Disclosure regarding the states' economic and legislative matters
relevant to investors of state trusts
Concentrations of issues by purpose in each Trust
The approximate percentage of the bonds in the portfolio of each Trust
acquired in distributions where the Sponsor was either the sole
underwriter or manager or member of the underwriting syndicate
The percentage of "when issued" bonds in the portfolio of each Trust
The schedule of investments for each Trust, including the notes thereto
Descriptions of the opinions of the special tax counsel for state trusts
The Record Dates and Distribution Dates for interest distributions for
each Trust
The statements of condition for each Trust and the accountant's report
with regard thereto.
The amount of the Trustee's Fee
CHAPMAN AND CUTLER
Chicago, Illinois
April 26, 1996
