File No. 333-02833
Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
Fidelity Defined Trusts, Series 2
(Exact Name of Trust)
National Financial Services Corporation
(Exact Name of Depositor)
82 Devonshire Street N7A
Boston, Massachusetts 02109-3614
(Complete address of Depositor's principal executive offices)
National Financial Services Corporation Chapman and Cutler
Attention: David J. Pearlman Attention: Mark J. Kneedy
82 Devonshire Street N7A 111 West Monroe Street
Boston, Massachusetts 02109-3614 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective
on October 1, 1997 pursuant to paragraph (b) of Rule 485.
CONTENTS OF POST-EFFECTIVE AMENDMENT
TO REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement comprises
the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
The investor is advised to read and retain this Prospectus for future
reference.
UNITS OF THE TRUSTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE
PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE
INVESTMENT RISK INCLUDING LOSS OF PRINCIPAL.
Sponsor: National Financial
Services Corporation
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.
FIDELITY
DEFINED TRUSTS
PROSPECTUS - PART II
OCTOBER 1, 1997
This Part II of the Prospectus may not be distributed unless
accompanied by Part I of the Prospectus. Both Parts I and II of the
Prospectus should be retained for future reference.
FIDELITY
INVESTMENTS(Registered trademark)
82 Devonshire Street, Boston, MA 02109
TABLE OF CONTENTS
Page
The Trusts 4
General Information 4
Risk Factors 5
Rating of Units 12
Insurance on the Corporate Bonds 12
Retirement Plans 14
Tax Status 14
Distribution Reinvestment 23
Interest, Estimated Long-Term Return and Estimated Current Return 24
Public Offering of Units 24
Market for Units 29
Redemption 29
Unitholders 31
Investment Supervision 35
Trust Administration 36
Trust Expenses 38
The Sponsor 40
Legal Opinions 41
Independent Certified Public Accountants 41
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 the Investment Company Act of 1940, and to
which reference is made.
_______________
No person is authorized to give any information or to make any
representations not contained in this Prospectus and any information
or representation not contained herein must not be relied upon as
having been authorized by the Trusts, the Trustee, or the Sponsor.
The Trusts are registered as unit investment trusts under the
Investment Company Act of 1940. Such registration does not imply that
the Trusts or the Units have been guaranteed, sponsored, recommended
or approved by the United States or any state or any agency or officer
thereof.
_______________
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
Fidelity Defined Trusts are unit investments trusts consisting of
portfolios containing U.S. Treasury obligations, mortgage-backed
securities of the fully modified pass-through type, the payments of
principal and interest on which are fully guaranteed by the Government
National Mortgage Association ("GNMA SECURITIES") and/or corporate
debt obligations ("CORPORATE BONDS"). See Part I of the Prospectus
for a description of the portfolio for each trust. The various trusts
are collectively referred to herein as the "FIDELITY DEFINED TRUSTS,"
the "FIDELITY ADVISOR DEFINED TRUSTS" or the "TRUSTS." Each Trust is
divided into "UNITS" representing equal shares of the underlying
assets of such Trust. Trusts which contain a laddered portfolio of
U.S. Treasury Obligations are sometimes referred to herein as
"LADDERED TRUSTS." Trusts which contain a portfolio of U.S. Treasury
Obligations or GNMA Securities which provide for the reinvestment of
principal distributions into additional U.S. Treasury Obligations or
GNMA Securities, respectively, over a specific period (as set forth in
Part I) are sometimes referred to herein as "ROLLING TRUSTS." Trusts
which contain a portfolio of corporate debt obligations and, in
certain Trusts, U.S. Treasury Obligations are sometimes referred to
herein as "CORPORATE TRUSTS." Certain Corporate Trusts may contain a
portfolio of insured corporate debt obligations, in which case they
shall sometimes be referred to herein as "INSURED CORPORATE TRUSTS."
As used herein, "SECURITIES" shall collectively refer to the U.S.
Treasury Obligations, GNMA Securities or Corporate Bonds deposited in
the Trusts. Each of the Trusts is separate and is designated by a
different series number. Each of the Trusts was created under the
laws of the State of New York pursuant to a trust indenture dated the
Initial Date of Deposit (the "TRUST AGREEMENT") between National
Financial Services Corporation (the "SPONSOR"), The Chase Manhattan
Bank (the "TRUSTEE") and for Trusts in which Muller Data corporation
acts as Evaluator (as set forth in Part I), Muller Data Corporation
(the "Evaluator").<F1>
General Information
Because certain of the Securities in certain of the Trusts may from
time to time under certain circumstances be sold or redeemed or will
mature in accordance with their terms and because the proceeds from
such events will be distributed to Unitholders and will not be
reinvested, no assurance can be given that a Trust will retain for any
length of time its present size and composition. Neither the Sponsor
nor the Trustee shall be liable in anyway for any default, failure or
defect in any Security.
Subsequent to the date of Part I of this Prospectus, a Security may
cease to be rated or its rating may be reduced below any minimum
required as of a Trust's Initial Date of Deposit. Neither event
requires the elimination of such investment from a Trust, but may be
considered in the Sponsor's determination to direct the Trustee to
dispose of such Security. See "Investment Supervision."
<F1> Reference is made to the Trustee Agreement, and any statements
contained herein are qualified in their entirety by the provisions of
the Trust Agreement
The Sponsor may not alter the portfolio of a Trust except upon the
occurrence of certain extraordinary circumstances or, in the case of a
Rolling Trust, in connection with a reinvestment of principal. See
"Investment Supervision." Certain of the Securities may be subject to
optional call or mandatory redemption pursuant to sinking fund
provisions, in each case prior to their stated maturity. A bond
subject to optional call is one which is subject to redemption or
refunding prior to maturity at the option of the issuer, often at a
premium over par. A refunding is a method by which a bond issue is
redeemed, at or before maturity, by the proceeds of a new bond issue.
A bond subject to sinking fund redemption is one which is subject to
partial call from time to time at par with proceeds from a fund
accumulated for the scheduled retirement of a portion of an issue
prior to maturity. Special or extraordinary redemption provisions may
provide for redemption at par of all or a portion of an issue upon the
occurrence of certain circumstances, which may be prior to the
optional call dates shown under "Portfolio" in Part I of this
Prospectus for each Trust. Redemption pursuant to optional call
provisions is more likely to occur, and redemption pursuant to special
or extraordinary redemption provisions may occur, when the Securities
have an offering side evaluation which represents a premium over par,
that is, when they are able to be refinanced at a lower cost. The
proceeds from any such call or redemption pursuant to sinking fund
provisions, as well as proceeds from the sale of Securities and from
Securities which mature in accordance with their terms from a Trust,
unless utilized to pay for Units tendered for redemption, or
reinvested in the case of the Rolling Trust, will be distributed to
Unitholders of such Trust and will not be used to purchase additional
Securities for such Trust. Accordingly, any such call, redemption,
sale or maturity will reduce the size and diversity of a Trust and the
net annual interest income of such Trust and may reduce the Estimated
Current Return and the Estimated Long-Term Return. See "Interest,
Estimated Long-Term Return and Estimated Current Return." The call,
redemption, sale or maturity of Securities also may have tax
consequences to a Unitholder. See "Tax Status." Information with
respect to the call provisions and maturity dates of the Securities is
contained under "Portfolio" in Part I of this Prospectus for each
Trust.
Each Unit of a Trust represents an undivided fractional interest in
the Securities deposited therein, in the ratio shown under "Essential
Information" in Part I of this Prospectus. Units may be purchased and
certificates, if requested, will be issued in denominations of one
Unit or any multiple or fraction thereof, subject to each Trust's
minimum investment requirement of one Unit. Fractions of Units will
be computed to three decimal points. To the extent that Units of a
Trust are redeemed, the principal amount of Securities in such Trust
will be reduced and the undivided fractional interest represented by
each outstanding Unit of such Trust will increase. See "Redemption."
Risk Factors
U.S. TREASURY OBLIGATIONS. U.S. Treasury Obligations are direct
obligations of the United States and are backed by its full faith and
credit although the Units are not so backed. The U.S. Treasury
Obligations are not rated but in the opinion of the Sponsor have
credit characteristics comparable to those of securities rated "AAA"
by nationally recognized rating agencies.
An investment in Units of a Trust which contains U.S. Treasury
Obligations should be made with an understanding of the risks which an
investment in fixed rate debt obligations may entail, including the
risk that the value of the Securities and hence the Units will decline
with increases in interest rates. The high inflation of prior years,
together with the fiscal measures adopted to attempt to deal with it,
have resulted in wide fluctuations in interest rates and, thus, in the
value of fixed rate debt obligations generally. The Sponsor cannot
predict whether such fluctuations will continue in the future.
During the Reinvestment Period for a Rolling Trust which contains U.S.
Treasury Obligations, the Sponsor will direct the Trustee to reinvest
principal payments on the U.S. Treasury Obligations into additional
U.S. Treasury Obligations as described in Part I of this Prospectus.
Principal amounts which cannot be reinvested will be distributed to
Unitholders of such a Trust semiannually unless the amount available
for distribution is less than $0.01 per Unit. After the Reinvestment
Period, principal will not be reinvested and will be distributed
monthly (subject to amount limitations) to Unitholders.
GNMA SECURITIES. An investment in Units of a Rolling Trust which
contains GNMA Securities should be made with an understanding of the
risks inherent therein, including the risk that the value of the
portfolio and hence of the Units will decline with increases in
interest rates. The value of the underlying GNMA Securities will
fluctuate inversely with changes in interest rates. In addition, the
potential for appreciation of the underlying GNMA Securities, which
might otherwise be expected to occur as a result of a decline in
interest rates, may be limited or negated by increased principal
prepayments in respect of the underlying mortgages. The high
inflation of prior years, together with the fiscal measures adopted to
attempt to deal with it, have resulted in wide fluctuations in
interest rates and, thus, in the value of fixed rate long term
obligations generally. The Sponsor cannot predict whether such
fluctuations will continue in the future.
GNMA Securities included in a Rolling Trust are backed by the
indebtedness secured by underlying mortgage pools of long-term
mortgages on 1- to 4-family dwellings. The pool of mortgages which is
to underlie a particular new issue of Ginnie Maes is assembled by the
proposed issuer of such Ginnie Maes. The issuer is typically a
mortgage banking firm, and in every instance must be a mortgagee
approved by and in good standing with the Federal Housing
Administration ("FHA"). In addition, GNMA imposes its own criteria on
the eligibility of issuers, including a net worth requirement.
During the Reinvestment Period for a Rolling Trust which contains GNMA
Securities, the Sponsor will direct the Trustee to reinvest principal
payments and prepayments on the Ginnie Maes into additional Ginnie Mae
securities. While precise duplication of the Ginnie Maes to be
purchased with reinvested principal is the goal of the Sponsor, this
may not be possible because fractions of Ginnie Maes may not be
purchased and substantially similar securities may not be available.
Principal amounts which cannot be reinvested will be distributed to
Unitholders of such Trust semiannually unless the amount available for
distribution is less than $0.01 per Unit. After the Reinvestment
Period, principal will not be reinvested and will be distributed
monthly (subject to amount limitations) to Unitholders.
The mortgages underlying a Ginnie Mae may be prepaid at any time
without any significant premium or penalty at the option of the
mortgagors. It has been the experience of the mortgage industry that
the average life of mortgages comparable to those contained in a
Rolling Trust, owing to prepayments, refinancings and payments from
foreclosures is considerably less than the stated maturity set forth
in "Essential Information" in Part I of this Prospectus. A lower or
higher return on Units may occur depending on (i) whether the price at
which the respective Ginnie Maes were acquired by a Trust is lower or
higher than par (which represents the price at which such Ginnie Maes
will be redeemed upon prepayment), (ii) whether principal is
reinvested or distributed to Unitholders and (iii) if reinvestment
occurs, whether the Ginnie Maes purchased by the Trustee with
reinvested principal are purchased at a premium or discount from par.
During periods of declining interest rates, prepayments of Ginnie Maes
may occur with increasing frequency because, among other reasons,
mortgagors may be able to refinance their outstanding mortgages at
lower interest rates. In such a case, (i) the reinvestment of
principal may be at prices which result in a lower return on Units or
(ii) principal will be distributed to Unitholders who cannot reinvest
such principal distributions in other securities at an attractive
yield.
The Ginnie Maes in a Rolling Trust are guaranteed as to timely payment
of principal and interest by GNMA. Funds received by the issuers on
account of the mortgages backing the Ginnie Maes in the Rolling Trust
are intended to be sufficient to make the required payments of
principal of and interest on such Ginnie Maes but, if such funds are
insufficient for that purpose, the guaranty agreements between the
issuers and GNMA require the issuers to make advances sufficient for
such payments. If the issuers fail to make such payments, GNMA will
do so. Any statement in this Prospectus that a particular Security is
backed by the full faith and credit of the United States is based upon
the opinion of an Assistant Attorney General of the United States and
should be so construed.
THE GNMA GUARANTIES REFERRED TO HEREIN RELATE ONLY TO PAYMENT OF
PRINCIPAL OF AND INTEREST ON THE GINNIE MAES IN THE PORTFOLIO AND NOT
THE UNITS OFFERED HEREBY.
A number of factors, including homeowners' mobility, change in family
size and mortgage market interest rates will affect the average life
of the Ginnie Maes in a Rolling Trust. For example, Ginnie Maes
issued during a period of high interest rates will be backed by a pool
of mortgage loans bearing similarly high rates. In general, during a
period of declining interest rates, new mortgage loans with interest
rates lower than those charged during periods of high rates will
become available. To the extent a homeowner has an outstanding
mortgage with a high rate, he may refinance his mortgage at a lower
interest rate or he may rapidly repay his old mortgage. Should this
happen, a Ginnie Mae issued with a high interest rate may experience a
rapid prepayment of principal as the underlying mortgage loans prepay
in whole or in part. Accordingly, there can be no assurance that the
prepayment levels which will be actually realized will conform to the
experience of the FHA, other mortgage lenders or other Ginnie Mae
investors. It is not possible to meaningfully predict prepayment
levels regarding the Ginnie Maes in a Rolling Trust. Therefore, the
termination of a Rolling Trust which contains GNMA Securities might be
accelerated as a result of prepayments made as described herein.
PUBLIC UTILITY ISSUES. Certain of the Corporate Bonds in a Corporate
Trust may be obligations of public utility issuers. In general,
public utilities are regulated monopolies engaged in the business of
supplying light, water, power, heat, transportation or means of
communication. Historically, the utilities industry has provided
investors with high levels of reliability, stability and relative
total return on their investments. However, an investment in a
Corporate Trust containing obligations of public utility issuers
should be made with an understanding of the characteristics of such
issuers and the risks which such an investment may entail. General
problems of such issuers include the difficulty in financing large
construction programs in an inflationary period, the limitations on
operations and increased costs and delays attributable to
environmental considerations, the difficulty of the capital markets 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 Corporate Bonds in a Corporate Trust to make payments
of principal and/or interest on such Corporate Bonds.
Utilities are generally subject to extensive regulation by state
utility commissions which, for example, establish the rates which may
be charged and the appropriate rate of return on an approved asset
base, which must be approved by the state commissions. Certain
utilities have had difficulty from time to time in persuading
regulators, who are subject to political pressures, to grant rate
increases necessary to maintain an adequate return on investment and
voters in many states have the ability to impose limits on rate
adjustments (for example, by initiative or referendum). Any
unexpected limitations could negatively affect the profitability of
utilities whose budgets are planned far in advance. Also, changes in
certain accounting standards currently under consideration by the
Federal Accounting Standards Board could cause significant write-downs
of assets and reductions in earnings for many investor-owned
utilities. In addition, gas pipeline and distribution companies have
had difficulties in adjusting to short and surplus energy supplies,
enforcing or being required to comply with long-term contracts and
avoiding litigation from their customers, on the one hand, or
suppliers, on the other hand.
Certain of the issuers of the Bonds in a Corporate Trust may own or
operate nuclear generating facilities. Governmental authorities may
from time to time review existing, and impose additional, requirements
governing the licensing, construction and operation of nuclear power
plants. Nuclear generating projects in the electric utility industry
have experienced substantial cost increases, construction delays and
licensing difficulties. These have been caused by various factors,
including inflation, high financing costs, required design changes and
rework, allegedly faulty construction, objections by groups and
governmental officials, limits on the ability to finance, reduced
forecasts of energy requirements and economic conditions. This
experience indicates that the risk of significant cost increases,
delays and licensing difficulties remains present through completion
and achievement of commercial operation of any nuclear project. Also,
nuclear generating units in service have experienced unplanned outages
or extensions of scheduled outages due to equipment problems or new
regulatory requirements sometimes followed by a significant delay in
obtaining regulatory approval to return to service. A major accident
at a nuclear plant anywhere could cause the imposition of limits or
prohibitions on the operation, construction or licensing of nuclear
units in the United States.
In view of the uncertainties discussed above, there can be no
assurance that any bond issuer's share of the full cost of nuclear
units under construction ultimately will be recovered in rates or of
the extent to which a bond issuer could earn an adequate return on its
investment in such units. The likelihood of a significantly adverse
event occurring in any of the areas of concern described above varies,
as does the potential severity of any adverse impact. It should be
recognized, however, that one or more of such adverse events could
occur and individually or collectively could have a material adverse
impact on the financial condition or the results of operations or on a
bond issuer's ability to make interest and principal payments on its
outstanding debt.
Other general problems of the gas, water, telephone and electric
utility industry (including state and local joint action power
agencies) include difficulty in obtaining timely and adequate rate
increases, difficulty in financing large construction programs to
provide new or replacement facilities during an inflationary period,
rising costs of rail transportation to transport fossil fuels, the
uncertainty of transmission service costs for both interstate and
intrastate transactions, changes in tax laws which adversely affect a
utility's ability to operate profitably, increased competition in
service costs, reductions in estimates of future demand for
electricity and gas in certain areas of the country, restrictions on
operations and increased cost and delays attributable to environmental
considerations, uncertain availability and increased cost of capital,
unavailability of fuel for electric generation at reasonable prices,
including the steady rise in fuel costs and the costs associated with
conversion to alternate fuel sources such as coal, availability and
cost of natural gas for resale, technical and cost factors and other
problems associated with construction, licensing, regulation and
operation of nuclear facilities for electric generation, including
among other considerations the problems associated with the use of
radioactive materials and the disposal of radioactive wastes, the
effects of energy conservation and the effects of deregulation. Each
of the problems referred to could adversely affect the ability of the
issuers of any utility bonds in a Corporate Trust to make payments due
on these bonds.
In addition, the ability of state and local joint action power
agencies to make payments on bonds they have issued is dependent in
large part on payments made to them pursuant to power supply or
similar agreements. Courts in Washington and Idaho have held that
certain agreements between Washington Public Power Supply System
("WPPSS") and the WPPSS participants are unenforceable because the
participants did not have the authority to enter into the agreements.
While these decisions are not specifically applicable to agreements
entered into by public entities in other states, they may cause a
reexamination of the legal structure and economic viability of certain
projects financed by joint action power agencies, which might
exacerbate some of the problems referred to above and possibly lead to
legal proceedings questioning the enforceability of agreements upon
which payment of these bonds may depend.
CORPORATE BONDS. An investment in Units of a Corporate Trust should
be made with an understanding of the risks that an investment in fixed
rate, investment grade corporate debt obligations may entail,
including the risk that the value of the Units will decline with
increases in interest rates. In recent years, there have been wide
fluctuations in interest rates and thus in the value of fixed-rate
debt obligations generally. Generally bonds with longer maturities
will fluctuate in value more than bonds with shorter maturities. A
slowdown in the economy, or a development adversely affecting an
issuer's creditworthiness, may result in the issuer being unable to
maintain earnings or sell assets at the rate and at the prices,
respectively, that are required to produce sufficient cash flow to
meet its interest and principal requirements. The Sponsor cannot
predict future economic policies or their consequences or, therefore,
the course or extent of any similar market fluctuations in the future.
Should the issuer of any Corporate Bond default in the payment of
principal or interest, a Corporate Trust may incur additional expenses
seeking payment on the defaulted Corporate Bond. Because amounts (if
any) recovered by a Trust in payment under the defaulted Corporate
Bond may not be reflected in the value of the Units until actually
received by a Corporate Trust, and depending upon when a Unitholder
purchases or sells his Units, it is possible that a Unitholder would
bear a portion of the cost of recovery without receiving any portion
of the payment recovered.
GENERAL. Certain of the Securities in certain of the Trusts may have
been acquired at a market discount from par value at maturity. The
coupon interest rates on discount securities at the time they were
purchased and deposited in the Trusts were lower than the current
market interest rates for newly issued bonds of comparable rating and
type. If such interest rates for newly issued comparable securities
increase, the market discount of previously issued securities will
become greater, and if such interest rates for newly issued comparable
securities decline, the market discount of previously issued
securities will be reduced, other things being equal. Investors
should also note that the value of securities purchased at a market
discount will increase in value faster than securities purchased at a
market premium if interest rates decrease. Conversely, if interest
rates increase, the value of securities purchased at a market discount
will decrease faster than securities purchased at a market premium.
In addition, if interest rates rise, the prepayment risk of higher
yielding, premium securities and the prepayment benefit for lower
yielding, discount securities will be reduced. See "Tax Status."
Market discount attributable to interest changes does not indicate a
lack of market confidence in the issue. Neither the Sponsor nor the
Trustee shall be liable in any way for any default, failure or defect
in any of the Securities.
Certain of the Securities in the Trusts may have been acquired at a
market premium from par value at maturity. The coupon interest rates
on premium securities at the time they were purchased and deposited in
the Trusts were higher than the current market interest rates for
newly issued securities of comparable rating and type. If such
interest rates for newly issued and otherwise comparable securities
decrease, the market premium of previously issued securities will be
increased, and if such interest rates for newly issued comparable
securities increase, the market premium of previously issued
securities will be reduced, other things being equal. The current
returns of securities trading at a market premium are initially higher
than the current returns of comparable securities of a similar type
issued at currently prevailing interest rates because premium
securities tend to decrease in market value as they approach maturity.
Because part of the purchase price is thus returned not at maturity
but through current income payments, early redemption of a premium
bond at par or early prepayments of principal will result in a
reduction in yield. Redemption pursuant to call provisions generally
will, and redemption pursuant to sinking fund provisions may, occur at
times when the redeemed Securities have an offering side valuation
which represents a premium over par or, for original issue discount
Securities, a premium over the accreted value. To the extent that the
Securities were deposited in the Trusts at a price higher than the
price at which they are redeemed, this will represent a loss of
capital when compared to the original Public Offering Price of the
Units. Because premium securities generally pay a higher rate of
interest than securities priced at or below par, the effect of the
redemption of premium securities would be to reduce Estimated Net
Annual Unit Income by a greater percentage than the par amount of such
securities bears to the total par amount of Securities in a Trust.
Although the actual impact of any such redemptions that may occur will
depend upon the specific Securities that are redeemed, it can be
anticipated that the Estimated Net Annual Interest Income will be
significantly reduced after the dates on which such Securities are
eligible for redemption. See "Portfolio" in Part I of this Prospectus
for each Trust for the earliest scheduled call date and the initial
redemption price for each Security.
Certain of the Securities in certain of the Trusts may be "zero
coupon" bonds, I.E., an original issue discount bond that does not
provide for the payment of current interest. Zero coupon bonds are
purchased at a deep discount because the buyer receives only the right
to receive a final payment at the maturity of the bond and does not
receive any periodic interest payments. The effect of owning deep
discount bonds which do not make current interest payments (such as
the zero coupon bonds) 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 such 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 on
the discount obligation, but at the same time 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 which pay interest currently. A
Trust may be required to sell zero coupon bonds prior to maturity (at
their current market price which is likely to be less than their par
value) in the event that all the Securities in the portfolio other
than the zero coupon bonds are called or redeemed in order to pay
expenses of a Trust or in case a Trust is terminated. For the Federal
tax consequences of original issue discount securities such as the
zero coupon bonds, see "Tax Status."
LITIGATION. To the best of the Sponsor's knowledge, there is no
litigation pending as of the date of Part I of this Prospectus in
respect of any Security which might reasonably be expected to have a
material adverse effect on the Trusts. At any time after the date of
Part I of this Prospectus, litigation may be instituted on a variety
of grounds with respect to the Securities. The Sponsor is unable to
predict whether any such litigation may be instituted, or if
instituted, whether such litigation might have a material adverse
effect on the Trusts.
Rating of Units
At the Initial Date of Deposit for each Laddered Trust, Rolling Trust
and Insured Corporate Trust, Standard & Poor's rated the Units of such
Trusts "AAA." Although each of these Trusts have elected not to renew
this rating, in the opinion of the Sponsor there has been no
significant structural change to any of these Trusts which would
warrant a different rating than was originally obtained. This is the
highest rating assigned by Standard & Poor's. Capacity to pay
interest and repay principal is very strong.
A Standard & Poor's rating (as described by Standard & Poor's) on the
units of an investment trust (hereinafter referred to collectively as
"UNITS" or "TRUST") was, at the time it was given, a current
assessment of creditworthiness with respect to the investments held by
such trust. This assessment takes into consideration the financial
capacity of the issuers and of any guarantors, insurers, lessees, or
mortgagors with respect to such investments. The assessment, however,
does not take into account the extent to which trust expenses or
portfolio asset sales for less than the trust's purchase price will
reduce payment to the 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. Trusts rated "AAA" are
composed exclusively of assets that are rated "AAA" by Standard &
Poor's or have, in the opinion of Standard & Poor's, credit
characteristics comparable to assets rated "AAA," or certain
short-term investments. Standard & Poor's defines its "AAA" rating
for such assets as the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is
very strong.
Securities in an Insured Corporate Trust for which insurance has been
obtained by the issuer or the Sponsor (all of which were rated "AAA"
by Standard & Poor's and/or "Aaa" by Moody's Investors Service, Inc.
("MOODY'S")) may or may not have a higher yield than uninsured
Securities rated "AAA" by Standard & Poor's or "Aaa" by Moody's. In
selecting Securities for an Insured Corporate Trust, the Sponsor has
applied the criteria hereinbefore described.
Insurance on the Corporate Bonds
All Corporate Bonds in an insured Corporate Trust ("INSURED CORPORATE
TRUST") (as set forth in Part I of this Prospectus) except for any
U.S. Treasury obligations are insured as to the scheduled payment of
interest and principal either by the issuer of the Corporate Bonds or
by the Sponsor under a financial guaranty insurance policy obtained
from MBIA Insurance Corporation ("MBIA"). The premium for each such
insurance policy has been paid in advance by such issuer or the
Sponsor and each such policy is non-cancellable and will remain in
force so long as such Corporate Bonds are outstanding and MBIA remains
in business. No premiums for such insurance are paid by an Insured
Corporate Trust. If MBIA is unable to meet its obligations under its
policy or if the rating assigned to the claims-paying ability of MBIA
deteriorates, no other insurer has any obligation to insure any issue
adversely affected by either of these events.
The aforementioned insurance guarantees the scheduled payment of
principal and interest on all of such Corporate Bonds in an Insured
Corporate Trust except for any U.S. Treasury obligations. It does not
guarantee the market value of the Bonds or the value of the Units of
such Corporate Trust. This insurance is effective so long as the
Corporate Bond is outstanding, whether or not held by an Insured
Corporate Trust. Therefore, any such insurance may be considered to
represent an element of market value in regard to the Corporate Bonds,
but the exact effect, if any, of this insurance on such market value
cannot be predicted.
MBIA 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 MBIA. MBIA is domiciled in the State of
New York and licensed to do business in and subject to regulation
under the laws of 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. MBIA has two European branches, one in the Republic of France
and the other in the Kingdom of Spain. New York has laws prescribing
minimum capital requirements, limiting classes and concentrations of
investments and requiring the approval of policy rates and forms.
State laws also regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by the
insurer, changes in control and transactions among affiliates.
Additionally, MBIA is required to maintain contingency reserves on its
liabilities in certain amounts and for certain periods of time.
As of December 31, 1996, MBIA had admitted assets of $4.4 billion
(audited), total liabilities of $3.0 billion (audited), and total
capital and surplus of $1.4 billion (audited) determined in accordance
with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. As of March 31, 1997, MBIA had
admitted assets of $4.5 billion (unaudited), total liabilities of $3.0
billion (unaudited), and total capital and surplus of $1.5 billion
(unaudited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities.
Copies of MBIA Corporation's financial statements prepared in
accordance with statutory accounting practices are available from MBIA
Corporation. The address of MBIA Corporation is 113 King Street,
Armonk, New York 10504.
Moody's rates all bond issues insured by MBIA "Aaa" and short-term
loans "MIG-1," both designated to be of the highest quality. Standard
& Poor's rates all new issues by MBIA "AAA."
Because the Corporate Bonds in an Insured Corporate Trust (other than
U.S. Treasury Obligations) are insured as to the scheduled payment of
principal and interest and on the basis of the financial condition and
the method of operation of MBIA, at the Initial Date of Deposit for
each Insured Corporate Trust, Standard & Poor's assigned to Units in
an Insured Corporate Trust its "AAA" investment rating. While the
sponsor has elected not to renew this "AAA" rating on Insured
Corporate Trust Units, in the opinion of the Sponsor there has been no
significant structural change to any of these Trusts which would
warrant a different rating than that originally obtained. This is the
highest rating assigned to securities by such rating agency. These
ratings should not be construed as an approval of the offering of the
Units by Standard & Poor's or as a guarantee of the market value of an
Insured Corporate Trust or the Units thereof.
Bonds in an Insured Corporate Trust for which insurance has been
obtained by the issuer thereof or by the Sponsor from MBIA (all of
which were rated "Aaa" by Moody's) may or may not have a higher yield
than uninsured bonds rated "Aaa" by Moody's. In selecting Corporate
Bonds for the portfolio of an Insured Corporate Trust, the Sponsor has
applied the criteria hereinbefore described.
Retirement Plans
Units of the Trusts may be suitable for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other qualified
retirement plans. Generally, capital gains and income received under
each of the foregoing plans are deferred from federal taxation. All
distributions from such plans are generally treated as ordinary income
but may, in some cases, be eligible for special income averaging or
tax-deferred rollover treatment. Investors considering placing an
investment in a Trust on account of any such plan should review
specific tax laws related thereto and should consult their attorneys
or tax advisor. The Trusts will waive the $5,000 minimum investment
requirement for qualified retirement plans. The minimum investment is
$250 for tax-deferred plans such as IRA accounts. Fees and charges
with respect to such plans may vary. Consult your financial adviser
regarding eligibility requirements.
Tax Status
GRANTOR TRUST
The following discussion applies only to those Trusts classified as
Grantor Trusts under "Tax Status" in Part I of this Prospectus, which
are organized as grantor trusts for federal tax purposes. For
purposes of the following discussion and opinion, it is assumed that
the Securities are debt for federal income tax purposes. In the
opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trusts are not associations taxable as corporations for
federal income tax purposes.
2. Each Unitholder will be considered the owner of a PRO RATA portion
of each of a Trust's assets for federal income tax purposes under
Subpart E, Subchapter J of Chapter 1 of the Internal Revenue Code of
1986 (the "CODE"). Each Unitholder will be considered to have
received his PRO RATA share of income derived from each Trust asset
when such income is considered to be received by a Trust.
3. Each Unitholder will have a taxable event when a Security is
disposed of (whether by sale, exchange, liquidation, redemption, or
payment at maturity) or when the Unitholder redeems or sells his
Units. A Unitholder's tax basis in his Units will equal his tax basis
in his pro rata portion of all the assets of the Trust. Such basis is
determined (before adjustments described below) by apportioning the
tax basis for the Units among each of the Trusts' assets, according to
value as of the valuation date nearest the date of acquisition of the
Units. Unitholders must reduce the tax basis of their Units for their
share of accrued interest received, if any, on Securities delivered
after the date on which the Unitholders pay for their Units to the
extent that such interest accrued on such Securities before the date
the Trust acquired ownership of the Securities (and the amount of this
reduction may exceed the amount of accrued interest paid to the
sellers) and, consequently, such Unitholders may have an increase in
taxable gain or reduction in capital loss upon the disposition of such
Units. It should be noted that certain legislative proposals have
been made which could effect the calculation of basis for Unitholders
holding Securities that are substantially identical to the Securities.
Unitholders should consult their own tax advisors with regard to
calculation of basis. 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
Securities (whether by sale, exchange, payment on maturity, redemption
or otherwise), gain or loss is recognized to the Unitholder (subject
to various non-recognition provisions of the Code). The amount of any
such gain or loss is measured by comparing the Unitholders PRO RATA
share of the total proceeds from such disposition with his basis for
his fractional interest in the asset disposed of. The basis of each
Unit and of each Security which was issued with original issue
discount (including the U.S. Treasury obligations) (or which has
market discount) must be increased by the amount of accrued original
issue discount (and market discount if the Unitholder elects to
include market discount in income as it accrues) and the basis of each
Unit and of each Security which was purchased by a Trust at a premium
must be reduced by the annual amortization of bond premium which the
Unitholder has properly elected to amortize under Section 171 of the
Code. The tax basis reduction requirements of the Code relating to
amortization of bond premium may, under some circumstances, result in
the Unitholder realizing a taxable gain when his Units are sold or
redeemed for an amount equal to or less than his original cost. A
Trust may contain certain "zero coupon" Securities (the "STRIPPED
TREASURY SECURITIES") that are treated as bonds that were originally
issued at an original issue discount provided, pursuant to a Treasury
Regulation (the "REGULATION") issued on December 28, 1992, that the
amount of original issue discount determined under Section 1286 of the
Code is not less than a DE MINIMIS amount as determined thereunder.
Because the Stripped Treasury Securities represent interests in
"stripped" U.S. Treasury bonds, a Unitholder's initial cost for his
pro rata portion of each Stripped Treasury Security held by a Trust
(determined at the time he acquires his Units, in the manner described
above) shall be treated as its "purchase price" by the Unitholder.
Original issue discount is effectively treated as interest for federal
income tax purposes, and the amount of original issue discount in this
case is generally the difference between the bond's purchase price and
its stated redemption price at maturity. A Unitholder will be
required to include in gross income for each taxable year the sum of
his daily portions of original issue discount attributable to the
Stripped Treasury Securities held by a Trust as such original issue
discount accrues and will, in general, be subject to federal income
tax with respect to the total amount of such original issue discount
that accrues for such year even though the income is not distributed
to the Unitholders during such year to the extent it is not less than
a DE MINIMIS amount as determined under the Regulation. To the extent
that the amount of such discount is less than the respective DE
MINIMIS amount, such discount shall be treated as zero. In general,
original issue discount accrues daily under a constant interest rate
method which takes into account the semi-annual compounding of accrued
interest. In the case of the Stripped Treasury Securities, this
method will generally result in an increasing amount of income to the
Unitholders each year. Unitholders should consult their tax advisors
regarding the Federal income tax consequences and accretion of
original issue discounts.
LIMITATIONS ON DEDUCTIBILITY OF TRUST EXPENSES BY UNITHOLDERS - Each
Unitholders PRO RATA share of each expense paid by a Trust is
deductible by the Unitholder to the same extent as though the expense
had been paid directly by him. It should be noted that as a result of
the Tax Reform Act of 1986, certain miscellaneous itemized deductions,
such as investment expenses, tax return preparation fees and employee
business expenses, may be deductible by an individual only to the
extent they exceed 2% of such individual's adjusted gross income
(similar limitations also apply to estates and trusts). Unitholders
may be required to treat some or all of the expenses paid by each
Trust as miscellaneous itemized deductions subject to this limitation.
PREMIUM - If a Unitholder's tax basis of his PRO RATA portion in any
Securities held by a Trust exceeds the amount payable by the issuer of
the Security with respect to such PRO RATA interest upon the maturity
of the Security, such excess would be considered "premium" which may
be amortized by the Unitholder at the Unitholder's election as
provided in Section 171 of the Code. Unitholders should consult their
tax advisors regarding whether such election should be made and the
manner of amortizing premium.
ORIGINAL ISSUE DISCOUNT - Certain of the Securities in a Trust may
have been acquired with "original issue discount." In the case of any
Securities in a Trust acquired with "original issue discount" that
exceeds a "DE MINIMIS" amount as specified in the Code or in the case
of the Stripped Treasury Securities as specified in the Regulation,
such discount is includable in taxable income of the Unitholders on an
accrual basis computed daily, without regard to when payments of
interest on such Securities are received. The Code provides a complex
set of rules regarding the accrual of original issue discount. These
rules provide that original issue discount generally accrues on the
basis of a constant compound interest rate over the term of the
Securities. Unitholders should consult their tax advisers as to the
amount of original issue discount as it accrues.
Special original issue discount rules apply if the purchase price of
the Security by a Trust exceeds its original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "ADJUSTED ISSUE PRICE"). Similarly,
these special rules would apply to a Unitholder if the tax basis of
his PRO RATA portion of a Security issued with original issue discount
exceeds his PRO RATA portion of its adjusted issue price. Unitholders
should also consult their tax advisers regarding these special rules.
It is possible that a Corporate Bond that has been issued at an
original issue discount may be characterized as a "high-yield discount
obligation" within the meaning of Section 163(e)(5) of the Code. To
the extent that such an obligation is issued at a yield in excess of
six percentage points over the applicable Federal rate, a portion of
the original issue discount on such obligation will be characterized
as a distribution of stock (e.g., dividends) for purposes of the
dividends received deduction which is available to certain
corporations with respect to certain dividends received by such
corporation.
MARKET DISCOUNT - If a Unitholder's tax basis in his PRO RATA portion
of Securities is less than the allocable portion of such Security's
stated redemption price at maturity (or, if issued with original issue
discount, the allocable portion of its "revised issue price"), such
difference will constitute market discount unless the amount of market
discount is "DE MINIMIS" as specified in the Code. Market discount
accrues daily computed on a straight-line basis, unless the Unitholder
elects to calculate accrued market discount under a constant-yield
method. The market discount rules do not apply to Stripped Treasury
Securities because they are stripped debt instruments subject to
special original issue discount rules discussed above. Unitholders
should consult their own tax advisers regarding whether an election
should be made and as to the amount of market discount which accrues.
Accrued market discount is generally includible in taxable income to
the Unitholders as ordinary income for Federal tax purposes upon the
receipt of serial principal payments on the Securities, on the sale,
maturity or disposition of such Securities by a Trust, and on the sale
by a Unitholder of Units, unless a Unitholder elects to include the
accrued market discount in taxable income as such discount accrues.
If a Unitholder does not elect to annually include accrued market
discount in taxable income as it accrues, deductions for any interest
expense incurred by the Unitholder which is incurred to purchase or
carry his Units will be reduced by such accrued market discount. In
general, the portion of any interest expense which was not currently
deductible would ultimately be deductible when the accrued market
discount is included in income. Unitholders should consult their tax
advisors regarding whether an election should be made to include
market discount in income as it accrues and as to the amount of
interest expense which may not be currently deductible.
COMPUTATION OF THE UNITHOLDER'S TAX BASIS - The tax basis of a
Unitholder with respect to his interest in a Security is increased by
the amount of original issue discount (and market discount, if the
Unitholder elects to include market discount, if any, on the
Securities held by a Trust in income as it accrues) thereon properly
included in the Unitholder's gross income as determined for Federal
income tax purposes and reduced by the amount of any amortized premium
which the Unitholder has properly elected to amortize under Section
171 of the Code. A Unitholder's tax basis in his Units will equal his
tax basis in his PRO RATA portion of all of the assets of a Trust.
RECOGNITION OF TAXABLE GAIN OR LOSS UPON DISPOSITION OF OBLIGATIONS BY
A TRUST OR DISPOSITION OF UNIT - A Unitholder will recognize taxable
capital gain (or loss) when all or part of his PRO RATA interest in a
Security is disposed of in a taxable transaction for an amount greater
(or less) than his tax basis therefor (subject to various
non-recognition provisions of the Code). (Any gain recognized on a
sale or exchange and not constituting a realization of accrued "market
discount," and any loss, will generally be capital gain or loss except
in the case of a dealer or financial institution.) As previously
discussed, gain realized on the disposition of the interest of a
Unitholder in any Security deemed to have been acquired with market
discount will be treated as ordinary income to the extent the gain
does not exceed the amount of accrued market discount not previously
taken into income. Any capital gain or loss arising from the
disposition of a Security by a Trust or the disposition of Units by a
Unitholder will be determined by the period of time the Unitholder
held his Unit and the period of time the Trust held the Security. For
taxpayers other than corporations, net capital gains (which is defined
as net long-term capital gain over net short-term capital loss for the
taxable year) are subject to a maximum marginal stated tax rate of
either 28% or 20%, depending upon the holding period of the capital
assets. In particular, net capital gain, excluding net gain from
property held more than one year but not more than 18 months and gain
on certain other assets, is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Net capital gain that is not taxed at the maximum marginal
stated tax rate of 20% (or 10%) as described in the preceding
sentence, is generally subject to a maximum marginal stated tax rate
of 28%. The date on which a Unit is acquired (I.E., the "trade date")
is excluded for purposes of determining the holding period of the
Unit. It should be noted that legislative proposals are introduced
from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions
entered into after April 30, 1993. Unitholders and prospective
investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units. The
tax basis reduction requirements of the Code relating to amortization
of bond premium may, under some circumstances, result in the
Unitholder's realizing taxable gain when his Units are sold or
redeemed for an amount equal to or less than his original cost.
If the Unitholder disposes of a Unit, he is deemed thereby to have
disposed of his entire PRO RATA interest in all Trust assets,
including his PRO RATA portion of all of the Securities represented by
the Unit. This may result in a portion of the gain, if any, on such
sale being taxable as ordinary income under the market discount rules
(assuming no election was made by the Unitholder to include market
discount in income as it accrues) as previously discussed.
FOREIGN INVESTORS - A Unitholder who is a foreign investor (I.E., an
investor other than a U.S. citizen or resident of a U.S. corporation,
partnership, estate or trust) will not be subject to United States
federal income taxes, including withholding taxes, on interest income
(including any original issue discount) on, or any gain from the sale
or other disposition of, his PRO RATA interest in any Security or the
sale of his Units PROVIDED that (i) the interest income or gain is not
effectively connected to the conduct by the foreign investor of a
trade or business within the United States, (ii) with respect to any
gain, the foreign investor (if an individual) is not present in the
United States for 183 days or more during his taxable year, (iii) the
foreign investor provides all certification which may be required of
his or her status (foreign investors may contact the Sponsor to obtain
a Form W-8 which must be filed with the Trustee and refiled every
three calendar years thereafter) and (iv) if the income is United
States source income (which is the case for most securities issued by
United States issuers) and the Security is issued after July 18, 1984,
then the foreign investor does not own, directly or indirectly, 10% or
more of the total combined voting power of all classes of voting stock
of the issuer of the Security and the foreign investor is not a
controlled foreign corporation related (within the meaning of Section
864(d)(4) of the Code) to the issuer of the Security. Foreign
investors should consult their tax advisers with respect to United
States tax consequences of ownership of Units.
It should be noted that the Tax Act included a provision which
eliminates the exemption from United States taxation, including
withholding taxes, for certain "contingent interest." The provision
applies to interest received after December 31, 1993. No opinion is
expressed herein regarding the potential applicability of this
provision and whether United States taxation or withholding taxes
could be imposed with respect to income derived from the Units as a
result thereof. Unitholders and prospective investors should consult
with their tax advisors regarding the potential effect of this
provision on their investment in Units.
In the opinion of Carter, Ledyard & Milburn, special counsel to the
Trusts for New York tax matters the Trusts are not associations
taxable as corporations and the income of a Trust will be treated as
the income of the Unitholders under the existing income tax laws of
the State and City of New York.
GENERAL - Each Unitholder (other than a foreign investor who has
properly provided the certifications described above) will be
requested to provide the Unitholder's taxpayer identification number
to the Trustee and to certify that the Unitholder has not been
notified that payments to the Unitholder are subject to back-up
withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested,
distributions by a Trust to such Unitholder, including amounts
received upon redemption of the Units, will be subject to back-up
withholding.
The foregoing discussion relates only to United States federal income
taxes. Unitholders may be subject to state and local taxation in
other jurisdictions (including a foreign investor's country of
residence). Unitholders should consult their tax advisers regarding
potential state, local, or foreign taxation with respect to the Units.
REGULATED INVESTMENT COMPANY
The following discussion applies only to those Trusts classified as
regulated investment companies under "Tax Status" in Part I of this
Prospectus, which are structured to qualify as a regulated investment
company for federal tax purposes. In the opinion of Chapman and
Cutler, counsel or the Sponsor, under existing law:
Each Trust is an association taxable as a corporation under the Code
and intends to qualify on a continuing basis for and elect tax
treatment as a "regulated investment company" under the Code. If a
Trust so qualifies and timely distributes to Unitholders 90% or more
of its taxable income (without regard to its net capital gain, I.E.,
the excess of its net long-term capital gain over its net short-term
capital loss), it will not be subject to federal income tax on the
portion of its taxable income (including any net capital gain) that it
distributes to Unitholders. In addition, to the extent a Trust timely
distributes to Unitholders at least 98% of its taxable income
(including any net capital gain), it will not be subject to the 4%
excise tax on certain undistributed income of "regulated investment
companies." Each Trust intends to timely distribute its taxable
income (including any net capital gain) to avoid the imposition of
federal income tax or the excise tax. Distributions of the entire net
investment income of a Trust is required by the Indenture.
Each Trust intends to file its federal income tax return on a calendar
year basis. In any taxable year of a Trust, distributions of its
income, other than distributions which are designated as capital gains
dividends, will, to the extent of the earnings and profits of such
Trust, constitute dividends for federal income tax purposes which are
taxable as ordinary income to Unitholders. To the extent that
distributions to a Unitholder in any year exceed a Trust's current and
accumulated earnings and profits, they will be treated as a return of
capital and will reduce the Unitholder's basis in his or her Units
and, to the extent that they exceed his or her basis, will be treated
as a gain from the sale of his or her Units as discussed below.
Distributions from a Trust will not be eligible for the 70%
dividends-received deduction for corporations. It should be noted
that legislative proposals have been made which could affect the
calculation of basis for Unitholders holding securities that are
substantially identical to the Securities. Unitholders should consult
their own tax advisors with regard to the calculation of basis.
Although distributions generally will be treated as distributed when
paid, distributions declared in October, November or December, payable
to Unitholders of record on a specified date in one of those months
and paid during January of the following year will be treated as
having been distributed by a Trust (and received by the Unitholders)
on December 31 of the year such distributions are declared.
Distributions of a Trust's net capital gain which a Trust properly
designates as capital gain dividends will be taxable to Unitholders
thereof as long-term capital gains, regardless of the length of time
the Units have been held by a Unitholder. However, if a Unitholder
receives a long-term capital gain dividend (or is allocated to a
portion of a Trust's undistributed long-term capital gain) and sells
his Units at a loss prior to holding them for 6 months, such loss will
be characterized as long-term capital loss to the extent of such
long-term capital gain received as a dividend or allocated to a
Unitholder. Distributions in partial liquidation, reflecting the
proceeds of prepayments, redemptions, maturities (including monthly
mortgage payments of principal) or sales of Securities from a Trust
(exclusive of net capital gain) will not be taxable to Unitholders of
such Trust to the extent that they represent a return of capital for
tax purposes. The portion of distributions which represents a return
of capital will, however, reduce a Unitholder's basis in his Units,
and to the extent they exceed the basis of his Units will be taxable
as a capital gain. A Unitholder may recognize a taxable gain (or
loss) when his or her Units are sold or redeemed. Such gain or loss
generally will constitute either a long-term or short-term capital
gain or loss depending upon the length of time the Unitholder has held
his Units. Any loss of Units held six months or less will be treated
as long-term capital loss to the extent of any long-term capital gains
dividends received (or deemed to have been received) by the Unitholder
with respect to such Units during the six-month period or less that
the Unitholder owns the Units. For taxpayers other than corporations,
net capital gains (which is defined as net long-term capital gain over
net short-term capital loss for the taxable year) are subject to a
maximum marginal stated tax rate of either 28% or 20%, depending upon
the holding period of the capital assets. In particular, net capital
gain, excluding net gain from property held more than one year but not
more than 18 months and gain on certain other assets, is subject to a
maximum marginal stated tax rate of 20% (10% in the case of certain
taxpayers in the lowest tax bracket). Net capital gain that is not
taxed at the maximum marginal stated tax rate of 20% (or 10%) as
described in the preceding sentence, is generally subject to a maximum
marginal stated tax rate of 28%. The date on which a share is
acquired (I.E., the "trade date") is excluded for purposes of
determining the holding period of the Unit. It should be noted that
legislative proposals are introduced from time to time that affect tax
rates and could affect relative differences at which ordinary income
and capital gains are taxed.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions
entered into after April 30, 1993. Unitholders and prospective
investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
The Taxpayer Relief Act of 1997 (the "1997 ACT") includes provisions
that treat certain transactions designed to reduce or eliminate risk
of loss and opportunities for gain (e.g., short sales, offsetting
notional principal contracts, futures or forward contracts or similar
transactions) as constructive sales for purposes of recognition of
gain (but not loss) and for purposes of determining the holding
period.
Under the Code, certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee business
expenses, will be deductible by individuals only to the extent they
exceed 2% of adjusted gross income. Miscellaneous itemized deductions
subject to this limitation under present law do not include expenses
incurred by a Trust as long as the Units of such Trust are held by or
for 500 or more persons at all times during the taxable year or
another exception is met. In the event the Units of a Trust are held
by fewer than 500 persons, additional taxable income may be realized
by the individual Unitholders in excess of the distributions received
from a Trust.
If a Ginnie Mae has been purchased by a Trust at a market discount
(I.E., for a purchase price less than its stated redemption price at
maturity (or if issued with original issue discount, its "revised
issue price")) unless the amount of market discount is "DE MINIMIS" as
specified in the Code, each payment of principal on the Ginnie Mae
will generally constitute ordinary income to a Trust to the extent of
any accrued market discount unless a Trust elects to include the
accrued market discount in taxable income as it accrues. The amount
of market discount that is deemed to accrue each month shall generally
be the amount of discount that bears the same ratio to the total
amount of remaining market discount that the amount of interest paid
during the accrual period bears to the total amount of interest
remaining to be paid on the Ginnie Mae as of the beginning of the
accrual period.
The market discount rules do not apply to Stripped U.S. Treasury
Obligations because they are stripped debt instruments subject to
special original issue discount rules.
Additional Units of a Trust may be issued after the Initial Date of
Deposit in respect of additional Securities deposited in a Trust by
the Sponsor. Because of possible market interest rate fluctuations,
the purchase price to a Trust of the additional Securities may differ
from the purchase price of the Securities in a Trust on the Initial
Date of Deposit. If interest rates decline and such additional
Securities are purchased at a higher price than the Securities
originally deposited, then the amounts includible in the taxable
income of a Trust in proportion to the asset value of a Trust will be
reduced for all Unitholders thereof, not just the Unitholders of such
additional Units. Conversely, if interest rates rise and such
additional Securities are purchased at a lower price than the
Securities originally deposited, then the amounts includible in the
taxable income of the Trust in proportion to the asset value of a
Trust will be increased for all Unitholders thereof, not just the
Unitholders of such additional Units.
Each Unitholder will be requested to provide the Unitholder's taxpayer
identification number to the Trustee and to certify that the
Unitholder has not been notified that payments to the Unitholder are
subject to back-up withholding. If the proper taxpayer identification
number and appropriate certification are not provided when requested,
distributions by a Trust to such Unitholder (including amounts
received upon the redemption of Units) will be subject to back-up
withholding.
Each Unitholder of a Trust shall receive an annual statement
describing the tax status of the distributions paid by such Trust.
The foregoing discussion relates only to the federal income tax status
of a Trust and to the tax treatment of distributions by such Trust to
United States Unitholders.
FOREIGN INVESTORS - A Unitholder who is a foreign investor (I.E., an
investor other than a United States citizen or resident or a United
States corporation, partnership, estate or trust) should be aware
that, generally, subject to applicable tax treaties, distributions
from a Trust, which constitute dividends for Federal income tax
purposes (other than dividends which a Trust designates as capital
gain dividends) will be subject to United States income taxes,
including withholding taxes. However, distributions received by a
foreign investor from a Trust that are designated by such Trust as
capital gain dividends should not be subject to United States Federal
income taxes, including withholding taxes, if all of the following
conditions are met (i) the capital gain dividend is not effectively
connected with the conduct by the foreign investor in a trade or
business within the United States, (ii) the foreign investor (if an
individual) is not present in the United States for 183 days or more
during his or her taxable year, and (iii) the foreign investor
provides all certification which may be required of his status
(foreign investors may contact the Sponsor to obtain a Form W-8 which
must be filed with the Trustee and refiled every three calendar years
thereafter). Foreign investors should consult their tax advisors with
respect to United States tax consequences of ownership of Units.
Units in a Trust and Trust distributions may also be subject to state
and local taxation and Unitholders should consult their tax advisors
in this regard.
Distributions reinvested into additional Units of a Trust will be
taxed to a Unitholder in the manner described above (I.E., as ordinary
income, long-term capital gain or as a return of capital).
Distribution Reinvestment
Certain Unitholders of the Trusts may elect to have distributions of
principal (including capital gains, if any) or interest or both
automatically invested without charge in shares of certain mutual
funds which are registered in such Unitholder's state of residence and
are advised by Fidelity Management & Research Company, an affiliate of
the Sponsor (the "FIDELITY FUNDS"). Ask your financial consultant
regarding the availability of distribution reinvestment.
If individuals indicate they wish to participate in the Reinvestment
Program but do not designate a reinvestment fund, the Trustee will
contact such individuals to determine which reinvestment fund they
wish to elect. Since the portfolio securities and investment
objectives of the Fidelity Funds generally will differ significantly
from that of the Trusts, Unitholders should carefully consider the
consequences before selecting such Fidelity Funds for reinvestment.
Detailed information with respect to the investment objectives and the
management of the Fidelity Funds is contained in their respective
prospectuses, which can be obtained from the Sponsor upon request. An
investor should read the prospectus of the reinvestment fund selected
prior to making the election to reinvest. Unitholders who desire to
have such distributions automatically reinvested should inform their
investment professional at the time of purchase or should file with
the Trustee a written notice of election.
Unitholders who are receiving distributions in cash may elect to
participate in distribution reinvestment by filing with the Trustee an
election to have such distributions reinvested without charge. Such
election, and any changes thereof, must be received by the Trustee at
least ten days prior to the Record Date applicable to any distribution
in order to be in effect for such Record Date. Any such election
shall remain in effect until a subsequent notice is received by the
Trustee. See "Unitholders-Distributions to Unitholders."
Interest, Estimated Long-Term Return and Estimated Current Return
As of the date of Part I of this Prospectus, the Estimated Long-Term
Return and the Estimated Current Return, if applicable, for each Trust
were as set forth in "Essential Information" in Part I of this
Prospectus. Estimated Current Return is calculated by dividing the
estimated net annual interest income per Unit by the Public Offering
Price. The estimated net annual interest income per Unit will vary
with changes in fees and expenses of the Trustee, the Sponsor and the
Evaluator and with principal payments and prepayments and with
reinvestment (in the case of a Rolling Trust), principal prepayment,
redemption, maturity, exchange or sale of the Securities while the
Public Offering Price will vary with changes in the offering price of
the underlying Securities and accrued interest; therefore, there is no
assurance that the present Estimated Current Return will be realized
in the future. Estimated Long-Term Return is calculated using a
formula which (i) takes into consideration, and determines and factors
in the relative weightings of, the market values, yields (which takes
into account the amortization of premiums and the accretion of
discounts) and estimated retirements or average lives of all of the
Securities in a Trust, which includes the reinvestment of Securities
in a Rolling Trust, and (ii) takes into account a compounding factor
and the expenses and sales charge associated with each Trust Unit.
Since the market values and estimated retirements of the Securities
and the expenses of a Trust will change, there is no assurance that
the present Estimated Long-Term Return will be realized in the future.
Estimated Current Return and Estimated Long-Term Return are expected
to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while
Estimated Current Return calculations include only net annual interest
income and Public Offering Price.
Payments received in respect of mortgages underlying Ginnie Mae, if
any, in a Rolling Trust will consist of a portion representing
interest and a portion representing principal. Although the aggregate
monthly payment made by the obligor on each mortgage remains constant
(aside from optional prepayments of principal), in the early years
most of each such payment will represent interest, while in later
years, the proportion representing interest will decline and the
proportion representing principal will increase. However, by reason
of optional prepayments, principal payments in the earlier years on
mortgages underling Ginnie Maes may be substantially in excess of
those required by the amortization schedules of such mortgages.
Therefore, principal payments in later years may be substantially less
since the aggregate unpaid principal balances of such underlying
mortgages may have been greatly reduced. To the extent that the
underling mortgages bearing higher interest rates in a Rolling Trust
are prepaid faster than the other underlying mortgages, the net annual
interest rate per Unit and the Estimated Current Return of the Units
of a Rolling Trust can be expected to decline. Monthly payments to
the Unitholders of a Rolling Trust will reflect all of these factors.
Public Offering of Units
PUBLIC OFFERING PRICE. Units of a Trust are offered at the Public
Offering Price thereof. The Public Offering Price for secondary
market transactions is based on the aggregate bid side evaluations of
the Securities in a Trust, plus or minus cash, if any, in the
Principal Account held or owned by such Trust, plus accrued interest
plus a sales charge based upon the dollar weighted average maturity of
such Trust determined in accordance with the tables set forth below
(which includes a deferred sales charge for each Corporate Trust,
Insured Corporate Trust and Rolling Trust which contains GNMA
securities). For purposes of this computation, Securities will be
deemed to mature on their expressed maturity dates unless: (a) the
Securities have been called for redemption or funds or securities have
been placed in escrow to redeem them on an earlier call date, in which
case such call date will be deemed to be the date upon which they
mature; or (b) such Securities are subject to a "mandatory tender," in
which case such mandatory tender will be deemed to be the date upon
which they mature. The effect of this method of sales charge
computation will be that different sales charge rates will be applied
to a Trust based upon the dollar weighted average maturity of such
Trust's portfolio, in accordance with the following schedules.
The sales charge per Unit for each Laddered Trust and each Rolling
Trust which contains U.S. Treasury Obligations will be set forth in
the following table:
Amount Invested
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Less than $500,000 $500,000 to $999,999 $1,000,000 and up
Percent Percent Percent Percent Percent Percent
Weighted of of Net of of Net of of Net
Average Offering Amount Offering Amount Offering Amount
Maturity Price Invested Price Invested Price Invested
Less than 2 1.250% 1.266% 1.000% 1.010% 0.750% 0.756%
years
2 to 3 years 1.500% 1.523% 1.250% 1.266% 1.000% 1.010%
3 to 5 years 1.750% 1.781% 1.500% 1.523% 1.250% 1.266%
</TABLE>
The sales charge per Unit for each Corporate Trust, Insured Corporate
Trust and Rolling Trust which contains GNMA Securities will be set
forth in the following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Dollar Weighted Average Dollar Weighted Average
Maturity Less than 5 Years Maturity Greater than 5 Years
Percent of Percent of Percent of Percent of
Offering Net Amount Offering Net Amount
Amount Invested Price* Invested* Price* Invested*
Less than $100,000 2.500% 2.564% 3.500% 3.627%
$100,000 to $249,999 2.250% 2.302% 3.250% 3.359%
$250,000 to $499,999 2.000% 2.041% 3.000% 3.093%
$500,000 to $999,999 1.750% 1.781% 2.750% 2.828%
$1,000,000 and up 1.500% 1.523% 2.500% 2.564%
</TABLE>
____________________
* In addition, a deferred sales charge of $.167 will be assessed per
100 Units per month on a Trust's respective Record Date, through
December of 1999.
The reduced sales charges resulting from quantity discounts as shown
on the tables above will apply to all purchases of Units on any one
day by the same purchaser from the same broker or dealer and for this
purpose purchases of Units of a Trust will be aggregated with
concurrent purchases of Units of any other unit investment trust that
may be offered by the Sponsor. Additionally, Units purchased in the
name of a spouse or child (under 21) of such purchaser will be deemed
to be additional purchases by such purchaser. The reduced sales
charges will also be applicable to a trust or other fiduciary
purchasing for a single trust estate or single fiduciary account. The
Sponsor intends to permit officers, directors and employees of the
Sponsor and at the discretion of the Sponsor registered
representatives of selling firms to purchase Units of a Trust without
a sales charge, although a transaction processing fee may be imposed
on such trades. In addition, investors who purchase Units through
registered brokers or dealers who 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 may
purchase Units in the secondary market at the Public Offering Price
less the concession the Sponsor typically would allow such
broker-dealer. See "Public Offering of Units-Public Distribution of
Units" below. In addition, investors who purchase Units of a Trust
for deposit in a Fidelity-sponsored 401k or other retirement plan may
purchase such Units at the Public Offering Price less the concession
the sponsor allows dealers and other selling agents.
Had Units of a Trust been available for sale at the opening of
business on the date set forth in Part I of this Prospectus, the
Public Offering Price would have been as shown under "Essential
Information" in Part I of this Prospectus. The Public Offering Price
per Unit of a Trust on the date of Part I of this Prospectus or on any
subsequent date will vary from the amount stated under "Essential
Information" in Part I of this Prospectus in accordance with
fluctuations in the prices of the underlying Securities and the amount
of accrued interest on the Units. The aggregate bid side evaluations
of the Securities shall be determined (i) on the basis of current bid
prices of the Securities, (ii) if bid prices are not available for any
particular Security, on the basis of current bid prices for comparable
securities, (iii) by determining the value of Securities on the bid
side of the market by appraisal, or (iv) by any combination of the
above.
The foregoing evaluations and computations shall be made as of the
evaluation time stated under "Essential Information" in Part I of this
Prospectus on each business day commencing with the date of Part I of
this Prospectus, effective for all sales made during the preceding
24-hour period.
The interest on the Securities deposited in a Trust, less the related
estimated fees and expenses, is estimated to accrue in the annual
amounts per Unit set forth under "Essential Information" in Part I of
this Prospectus. The amount of net interest income which accrues per
Unit may change as Securities mature or are redeemed, exchanged or
sold, or as the expenses of a Trust change or the number of
outstanding Units of a Trust changes.
Although payment is normally made three business days following the
order for purchase, payments may be made prior thereto. A person will
become the owner of Units on the date of settlement provided payment
has been received. Cash, if any, made available to the Sponsor prior
to the date of settlement for the purchase of Units may be used in the
Sponsor's business and maybe deemed to be a benefit to the Sponsor,
subject to the limitations of the Securities Exchange Act of 1934. If
a Unitholder desires to have certificates representing Units
purchased, such certificates (if available) will be delivered as soon
as possible following his written request therefor. For information
with respect to redemption of Units purchased, but as to which
certificates requested have not been received, see "Redemption" below.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid
interest on a security from the last day on which interest thereon was
paid. Interest on Securities generally is paid semi-annually (monthly
in the case of Ginnie Maes), although a Trust accrues such interest
daily. Because of this, a Trust always has an amount of interest
earned but not yet collected by the Trustee. For this reason, the
Public Offering Price of Units will have added to it the proportionate
share of accrued interest to the date of settlement. Unitholders will
receive on the next distribution date of a Trust the amount, if any,
of accrued interest paid on their Units.
Because of the varying interest payment dates of the Securities,
accrued interest at any point in time will be greater than the amount
of interest actually received by the Trusts and distributed to
Unitholders. Therefore, there will always remain an item of accrued
interest that is added to the value of the Units. If a Unitholder
sells or redeems all or a portion of his or her Units, he or she will
be entitled to receive his proportionate share of the accrued interest
from the purchaser of his Units. Since the Trustee has the use of the
funds held in the Interest Account for distributions to Unitholders
and since such Account is non-interest-bearing to Unitholders, the
Trustee benefits thereby.
PUBLIC DISTRIBUTION OF UNITS. Units repurchased in the secondary
market may be offered by this Prospectus at the secondary market
public offering price determined in the manner described above. Units
will be sold through dealers who are members of the National
Association of Securities Dealers, Inc. and through others. Sales may
be made to or through dealers and others at prices which represent
discounts or agency commissions from the Public Offering Price as set
forth below. 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 their customers is retained by or remitted to the
banks in the amount shown in the tables below. Under the
Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency
transactions and the banking regulators have indicated that these
particular agency transactions are permitted under such Act. In
addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant
to state law. The Sponsor reserves the right to change the discounts
and agency commissions set forth below from time to time. In addition
to such discounts and agency commissions, the Sponsor may, from time
to time, pay or allow an additional discount or agency commission, in
the form of cash or other compensation, to dealers and others
employing registered representatives who sell, during a specified time
period, a minimum dollar amount of Units of a Trust and other unit
investment trusts created by the Sponsor. The difference between the
discount or agency commission and the sales charge will be retained by
the Sponsor.
The secondary market concessions and agency commissions for each
Laddered Trust and each Rolling Trust which contains U.S. Treasury
Obligations as a percentage of the Public Offering Price are as
follows:
Less than $500,000 to $1,000,000
Average Maturity $500,000 $999,999 and up
Less than 2 years .750% .500% .400%
2 to 3 years 1.00% .750% .600%
3 to 5 years 1.10% 1.00% .750%
The secondary market concessions and agency commissions for each
Corporate Trust, Insured Corporate Trust and Rolling Trust which
contains GNMA Securities as a percentage of the Public Offering Price
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Dollar Amount Dollar Weighted Average Dollar Weighted Average
of Transaction Maturity Less than 5 Years Maturity Greater than 5 Years
Less than $100,000 1.750% 3.000%
$100,000 to $249,999 1.500% 2.750%
$250,000 to $499,999 1.350% 2.600%
$500,000 to $999,999 1.150% 2.400%
$1,000,000 and up 0.950% 2.200%
</TABLE>
The Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units.
From time to time, the Sponsor may implement programs under which
dealers of a Trust may receive nominal awards from the Sponsor for
each of their registered representatives who have sold a minimum
number of Fidelity-sponsored unit investment trust units during a
specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales force of a dealer may
be eligible to win other nominal awards for certain sales efforts, or
under which the Sponsor will reallow to any such dealer that sponsors
sales contest or recognition programs conforming to the criteria
established by the Sponsor, or participates in sales programs
sponsored by the Sponsor, an amount not exceeding the total applicable
sales charges on the sales generated by such person at the public
offering price during such programs. Also, the Sponsor in its
discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying dealers or others
for certain services or activities which are primarily intended to
result in sales of Units of the Trusts. Such payments are made by the
Sponsor out of its own assets, and not out of the assets of a Trust.
These programs will not change the price Unitholders pay for their
Unit or the amount that a Trust will receive from the Units sold.
PROFITS OF SPONSOR. In maintaining a market for the Units, the
Sponsor will realize profits or sustain losses in the amount of any
difference between the price at which Units are purchased and the
price at which Units are resold (which price included a sales charge
as indicated in Part I for each Trust) or redeemed. The secondary
market public offering price of Units may be greater or less than the
cost of such Units to the Sponsor.
Market for Units
The Sponsor intends to, and certain of the dealers may, maintain a
market for Units of the Trusts offered hereby and to continuously
offer to purchase said Units at prices, determined by the Evaluator,
based on the aggregate bid prices of the underlying Securities in such
Trusts, together with accrued interest to the expected dates of
settlement. Unitholders who wish to dispose of their Units should
inquire of their bank or broker as to current market prices in order
to determine whether there is in existence any price in excess of the
Redemption Price and, if so, the amount thereof. Any profit or loss
resulting from the resale of such Units will belong to the Sponsor.
The Sponsor may suspend or discontinue purchases of Units of any Trust
if the supply of Units exceeds demand, or for other business reasons.
Redemption
A Unitholder who does not dispose of Units in the secondary market
described above may cause Units to be redeemed by the Trustee by
making a written request to the Trustee, and, in the case of Units
evidenced by a certificate, by tendering such certificate to the
Trustee, properly endorsed or accompanied by a written instrument or
instruments of transfer in a form satisfactory to the Trustee.
Unitholders must sign the request, and such certificate or transfer
instrument, exactly as their names appear on the records of the
Trustee and on any certificate representing the Units to be redeemed.
If the amount of the redemption is $25,000 or less and the proceeds
are payable to the Unitholder(s) of record at the address of record,
no signature guarantee is necessary for redemptions by individual
account owners (including joint owners). Additional documentation may
be requested, and a signature guarantee is always required, from
corporations, executors, administrators, trustees, guardians or
associations. The signatures must be guaranteed by a participant in
the Securities Transfer Agents Medallion Program ("STAMP") or such
other guarantee program in addition to, or in substitution for, STAMP,
as may be accepted by the Trustee. A certificate should only be sent
by registered or certified mail for the protection of the Unitholder.
Since tender of the certificate is required for redemption when one
has been issued, Units represented by a certificate cannot be redeemed
until the certificate representing such Units has been received by the
purchasers.
Redemption shall be made by the Trustee on the third business day
following the day on which a tender for redemption is received (the
"REDEMPTION DATE") by payment of cash equivalent to the Redemption
Price for such Trust, determined as set forth below under "Computation
of Redemption Price," as of the evaluation time stated under
"Essential Information" in Part I of this Prospectus, next following
such tender, multiplied by the number of Units being redeemed. Any
Units redeemed shall be cancelled and any undivided fractional
interest in the Trust extinguished. The price received upon
redemption might be more or less than the amount paid by the
Unitholder depending on the value of the Securities in the Trust at
the time of redemption.
Under regulations issued by the Internal Revenue Service, the Trustee
is required to withhold a certain 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 a tax return. Under normal circumstances, the
Trustee obtains the Unitholder's tax identification number from the
selling broker. However, any time a Unitholder elects to tender Units
for redemption, such Unitholder should make sure that the Trustee has
been provided a certified tax identification number in order to avoid
this possible "back-up withholding." In the event the Trustee has not
been previously provided such number, one must be provided at the time
redemption is requested.
Any amounts paid on redemption representing interest shall be
withdrawn from the Interest Account for such Trust, to the extent that
funds are available for such purpose, then from the Principal Account.
All other amounts paid on redemption shall be withdrawn from the
Principal Account for such Trust. The Trustee is empowered to sell
Securities for a Trust in order to make funds available for the
redemption of Units of such trust.
Securities will be sold by the Trustee so as to maintain, as closely
as practicable, the original percentage relationship between the
principal amounts of the Securities in such Trusts. The Securities to
be sold for purposes of redeeming Units will be selected from a list
supplied by the Sponsor. The Securities will be chosen for this list
by the Sponsor on the basis of such market and credit factors as it
may determine are in the best interests of such Trusts. Provision is
made under the related Trust Agreement for the Sponsor to specify
minimum face amounts in which blocks of Securities are to be sold in
order to obtain the best price available. Sales may be required at a
time when the Securities would not otherwise be sold and might result
in lower prices than might otherwise be realized. Moreover, due to
the minimum principal amount in which certain Securities may be
required to be sold, the proceeds of such sales may exceed the amount
necessary for payment of Units redeemed. To the extent not used to
meet other redemption requests in such Trusts, such excess proceeds
will be distributed pro rata to all remaining Unitholders of record of
such Trusts, unless reinvested in substitute Securities. To the
extent Securities are sold, the size and diversity of a Trust will be
reduced. See "Investment Supervision."
If the Sponsor elects not to purchase Units tendered for redemption,
the Trustee is irrevocably authorized in its discretion, in lieu of
redeeming such Units, to sell such Units in the over-the-counter
market for the account of tendering Unitholders at prices which will
return to the Unitholders amounts in cash, net after brokerage
commissions, transfer taxes and other charges, equal to or in excess
of the Redemption Price for such Units. In the event of any such
sale, the Trustee shall pay the net proceeds thereof to the
Unitholders on the day they would otherwise be entitled to receive
payment of the Redemption Price.
The right of redemption may be suspended and payment postponed (1) for
any period during which the New York Stock Exchange is closed, other
than customary weekend and holiday closings, or during which (as
determined by the Securities and Exchange Commission) trading on the
New York Stock Exchange is restricted; (2) for any period during which
an emergency exists as a result of which disposal by the Trustee of
Securities is not reasonably practicable or it is not reasonably
practicable to fairly determine the value of the underlying Securities
in accordance with the Trust Agreements; or (3) for such other period
as the Securities and Exchange Commission may by order permit. The
Trustee is not liable to any person in any way for any loss or damage
which may result from any such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The Redemption Price for Units of
each Trust is computed by the Evaluator as of the evaluation time
stated under "Essential Information" in Part I of this Prospectus next
occurring after the tendering of a Unit for redemption and on any
other business day desired by it, by:
A. adding: (1) the cash on hand in the Trust other than cash
deposited in the Trust to purchase Securities not applied to the
purchase of such Securities; (2) the aggregate value of each issue of
the Securities held in the Trust as determined by the Evaluator on the
basis of bid prices therefor; (3) interest accrued and unpaid on the
Securities in the Trust as of the date of computation; and (4)
unamortized organization expenses;
B. deducting therefrom (1) amounts representing any applicable taxes
or governmental charges payable out of the Trust and for which no
deductions have been previously made for the purpose of additions to
the Reserve Account described under "Trust Expenses"; (2) an amount
representing estimated accrued expenses of the Trust, including but
not limited to fees and expenses of the Trustee (including legal and
auditing fees and any insurance costs), the Evaluator, the Sponsor and
bond counsel, if any; (3) cash held for distribution to Unitholders of
record, or required for redemption of Units tendered, as of the
business day prior to the evaluation being made; and (4) other
liabilities incurred by the Trust; and
C. finally dividing the results of such computation by the number of
Units of the Trust outstanding as of the date thereof.
Unitholders
OWNERSHIP OF UNITS. Ownership of Units of a Trust will not be
evidenced by certificates unless a Unitholder, the Unitholder's
registered broker/dealer or the clearing agent for such broker/dealer
makes a written request to the Trustee. Certificates, if issued, will
be so noted on the confirmation statement sent to the broker.
Units are transferable by making a written request to the Trustee and,
in the case of Units evidenced by a certificate, by presenting and
surrendering such certificate to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer. Such
requests should be sent by registered or certified mail for the
protection of the Unitholder. Unitholders must sign such written
request, and such certificate or transfer instrument, exactly as their
names appear on the records of the Trustee and on any certificate
representing the Units to be transferred. Such signatures must be
guaranteed as provided in "Redemption."
Units may be purchased and certificates, if requested, will be issued
in denominations of one Unit subject to each Trust's minimum
investment requirement and any minimum requirement established by the
Sponsor from time to time. Any certificate issued will be numbered
serially for identification, issued in fully registered form and will
be transferable only on the books of the Trustee. The Trustee may
require a Unitholder to pay a reasonable fee, to be determined in the
sole discretion of the Trustee, for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. The Trustee at the
present time does not intend to charge for the normal transfer or
interchange of certificates. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of
satisfactory indemnity (generally amounting to 3% of the market value
of the Units), affidavit of loss, evidence of ownership and payment of
expenses incurred.
DISTRIBUTIONS TO UNITHOLDERS. Interest received by each Trust,
including any portion of the proceeds from a disposition of Securities
which represents accrued interest, is credited by the Trustee to the
Interest Account for such Trust. All other receipts are credited by
the Trustee to a separate Principal Account for the Trust. On the
dates set forth under "Essential Information" in Part I of this
Prospectus for each Trust, after deduction of the fees and expenses of
the Trustee, the Sponsor and Evaluator and reimbursements (without
interest) to the Trustee for any amounts advanced to a Trust, the
Trustee will normally distribute on each Interest Distribution Date
(the twentieth of the month) or shortly thereafter to Unitholders of
record of such Trust on the preceding Record Date (which is the tenth
day of each month).
Unitholders of the Trusts will receive an amount substantially equal
to one-twelfth of such holders' pro rata share of the estimated net
annual interest income to the Interest Account of such Trust. Since
interest on Securities in the Trusts is payable at varying intervals,
usually in semi-annual installments (monthly in the case of GNMA
Securities) and distributions of income are made to Unitholders at
different intervals from receipt of interest, the interest accruing to
a Trust may not be equal to the amount of money received and available
for distribution from the Interest Account. Therefore, on each
Distribution Date the amount of interest actually deposited in the
Interest Account of a Trust and available for distribution maybe more
or less than the interest distribution made. In order to eliminate
fluctuations in interest distributions resulting from such variances,
the Trustee is authorized by the Trust Agreements to advance such
amounts as may be necessary to provide interest distributions of
approximately equal amounts. The Trustee will be reimbursed, without
interest, for any such advances from funds available in the Interest
Account for such Trust. However, interest earned at any point in time
will be greater than the amount actually received by the Trustee and
distributed to the Unitholders. Therefore, there will always remain
an item of accrued interest that is added to the daily value of the
Units. If Unitholders of a Trust sell or redeem all or a portion of
their Units, they will be paid their proportionate share of the
accrued interest of such Trust to, but not including, the third
business day after the date of a sale or to the date of tender in the
case of a redemption.
Unitholders of a Trust which contains Stripped Treasury Securities
should note that Stripped Treasury Securities are sold at a deep
discount because the buyer of those securities obtains only the right
to receive a future fixed payment on the security and not any rights
to periodic interest payments thereon. Purchasers of these Securities
acquire, in effect, discount obligations that are economically
identical to the "zero-coupon bonds" that have been issued by
corporations. Zero coupon bonds are debt obligations which do not
make any periodic payments of interest prior to maturity and
accordingly are issued at a deep discount. Under generally accepted
accounting principles, a holder of a security purchased at a discount
normally must report as an item of income for financial accounting
purposes the portion of the discount attributable to the applicable
reporting period. The calculation of this attributable income would
be made on the "interest" method which generally will result in a
lesser amount of includible income in earlier periods and a
corresponding larger amount in later periods. For federal income tax
purposes, the inclusion will be on a basis that reflects the effective
compounding of accrued but unpaid interest effectively represented by
the discount. Although this treatment is similar to the "interest"
method described above, the "interest" method may differ to the extent
that generally accepted accounting principles permit or require the
inclusion of interest on the basis of a compounding period other than
the semi-annual period. See "Tax Status."
Persons who purchase Units between a Record Date and a Distribution
Date will receive their first distribution on the second Distribution
Date following their purchase of Units.
With the exception of principal amounts to be reinvested in the
Rolling Trust during the Reinvestment Period, the Trustee will
distribute on each Distribution Date or shortly thereafter, to each
Unitholder of record of a Trust on the preceding Record Date, an
amount substantially equal to such Unitholder's pro rata share of the
cash balance, if any, in the Principal Account of such Trust computed
as of the close of business on the preceding Record Date. However, no
distribution will be required if the balance in the Principal Account
is less than $1.00 per 100 Units. The Trustee will make a
distribution to Unitholders of all principal relating to maturing
Securities in a Trust, as set forth above, unless such principal is to
be reinvested in connection with a Rolling Trust.
STATEMENTS TO UNITHOLDERS. With each distribution, the Trustee will
furnish or cause to be furnished to each Unitholder a statement of the
amount of interest and the amount of other receipts, if any, which are
being distributed, expressed in each case as a dollar amount per Unit.
The accounts of each Trust are required to be audited annually, at the
Trust's expense, by independent auditors designated by the Sponsor,
unless the Sponsor determines that such an audit would not be in the
best interest of the Unitholders of such Trust. The accountants'
report will be furnished by the Trustee to any Unitholder of such
Trust upon written request. 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 Unitholder of a
Trust a statement, covering the calendar year, setting forth for the
applicable Trust:
A. As to the Interest Account:
1. The amount of interest received on the Securities;
2. The amount paid for purchases of New Securities;
3. The amount paid from the Interest Account representing accrued
interest of any Units redeemed;
4. The deductions from the Interest Account for applicable taxes, if
any, fees and expenses (including auditing fees) of the Trustee, the
Sponsor, the Evaluator, and, if any, of bond counsel;
5. Any amounts credited by the Trustee to the Reserve Account; and
6. The net amount remaining after such payments and deductions,
expressed both as a total dollar amount and a dollar amount per Unit
outstanding on the last business day of such calendar year; and
B. As to the Principal Account:
1. The dates of the sale, maturity, liquidation or redemption of any
of the Securities and the net proceeds received therefrom excluding
any portion credited to the Interest Account;
2. The amount paid from the Principal Account representing the
principal of any Units redeemed;
3. The amount paid for purchases of New Securities, Replacement
Securities or Reinvestment Securities;
4. The deductions from the Principal Account for payment of
applicable taxes, if any, fees and expenses (including auditing fees)
of the Trustee, the Sponsor, the Evaluator, and, if any, of bond
counsel;
5. Any amounts credited by the Trustee to the Reserve Account; and
6. The net amount remaining after distributions of principal and
deductions, expressed both as a dollar amount and as a dollar amount
per Unit outstanding on the last business day of the calendar year;
and
C. The following information:
1. A list of the Securities as of the last business day of such
calendar year;
2. The number of Units outstanding on the last business day of such
calendar year;
3. The Redemption Price based on the last evaluation made during such
calendar year; and
4. The amount actually distributed during such calendar year from the
Interest and Principal Accounts separately stated, expressed both as
total dollar amounts and as dollar amounts per Unit outstanding on the
Record Dates for each such distribution.
RIGHTS OF UNITHOLDERS. A Unitholder may at any time prior to the
termination of a Trust tender Units to the Trustee for redemption.
The death or incapacity of any Unitholder will not operate to
terminate a Trust or entitle legal representatives or heirs to claim
an accounting or to bring any action or proceeding in any court for
partition or winding up of a Trust. No Unitholder shall have the
right to control the operation and management of any Trust in any
manner, except to vote with respect to the amendment of the Trust
Agreement or termination of any Trust.
Investment Supervision
The Sponsor may not alter the portfolios of the Trusts by the
purchase, sale or substitution of Securities, except in the
circumstances noted herein. Thus, with the exception of the
redemption or maturity of Securities in accordance with their terms
(and reinvestments made in connection with a Rolling Trust), the
assets of the Trusts will remain unchanged under normal circumstances.
The Sponsor may direct the Trustee to dispose of Securities the value
of which has been affected by certain adverse events, including
institution of certain legal proceedings or the occurrence of other
market factors, including advance refunding, so that in the opinion of
the Sponsor, the retention of such Securities in a Trust would be
detrimental to the interest of the Unitholders. In addition, the
Sponsor will instruct the Trustee to dispose of certain Securities and
to take such further action as maybe needed from time to time to
ensure that a Rolling Trust continues to satisfy the qualifications of
a regulated investment company, including the requirements with
respect to diversification under Section 851 of the Internal Revenue
Code. The proceeds from any such sales, exclusive of any portion
which represents accrued interest, will be credited to the Principal
Account of such Trust for distribution to the Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer
made by an issuer of Securities to issue new obligations in exchange
or substitution for any of such Securities pursuant to a refunding
financing plan, except that the Sponsor may instruct the Trustee to
accept or reject such an offer or to take any other action with
respect thereto as the Sponsor may deem proper if (i) the issuer is in
default with respect to such Securities or (ii) in the written opinion
of the Sponsor, the issuer will probably default with respect to such
Securities in the reasonably foreseeable future. Any obligation so
received in exchange or substitution will be held by the Trustee
subject to the terms and conditions of the Trust Agreement to the same
extent as Securities originally deposited thereunder. Within five
days after deposit of obligations in exchange or substitution for
underlying Securities, the Trustee is required to give notice thereof
to each Unitholder, identifying the Securities eliminated and the
Securities substituted therefor. The Trustee may sell Securities,
designated by the Sponsor, from a Trust for the purpose of redeeming
Units of such Trust tendered for redemption and the payment of
expenses.
Trust Administration
THE TRUSTEE. The Trustee is The Chase Manhattan Bank whose principal
executive office is located at 270 Park Avenue, New York, New York
10017, and its unit investment trust office is located at 4 New York
Plaza, New York, New York 10004-2413. Unitholders who have questions
regarding the Trusts may call the Customer Service Help Line at
1-800-887-6926. The Trustee is subject to supervision by the
Superintendent of Banks of the State of New York, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal
Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in selecting the portfolio of any Trust. For information
relating to the responsibilities of the Trust under the Trust
Agreement, reference is made to the material set forth under
"Unitholders."
In accordance with the Trust Agreement, the Trustee shall keep records
of all transactions at its office. Such records shall include the
name and address of, and the number of Units held by, every Unitholder
of each Trust. Such books and records shall be open to inspection by
any Unitholder of such Trust at all reasonable times during usual
business hours. The Trustee shall make such annual or other reports
as may from time to time be required under any applicable state or
federal statute, rule or regulation. The Trustee shall keep a
certified copy or duplicate original of the Trust Agreement on file in
its office available for inspection at all reasonable times during
usual business hours by any Unitholder, together with a current list
of the Securities held in each Trust. Pursuant to the Trust
Agreement, the Trustee may employ one or more agents for the purpose
of custody and safeguarding of Securities comprising the Trusts.
Under the Trust Agreement, the Trustee or any successor trustee may
resign and be discharged of its duties created by the Trust Agreement
by executing an instrument in writing and filing the same with the
Sponsor.
The Trustee or successor trustee must mail a copy of the notice of
resignation to all Unitholders then of record, not less than 60 days
before the date specified in such notice when such resignation is to
take effect. The Sponsor upon receiving notice of such resignation is
obligated to appoint a successor trustee promptly. If, upon such
resignation, no successor trustee 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. If the Trustee becomes incapable of
acting or becomes bankrupt or its affairs are taken over by public
authorities or shall fail to meet standards for its performance
established by the Sponsor, the Sponsor may remove the Trustee and
appoint a successor trustee as provided in the Trust Agreements.
Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of
such appointment by such successor trustee, all the rights, powers,
duties and obligations of the original Trustee shall vest in the
successor. The Trustee shall be a corporation organized under the
laws of the United States, or any state thereof, which is authorized
under such laws to exercise trust powers. The Trustee shall have at
all times an aggregate capital, surplus and undivided profits of not
less than $5,000,000.
THE EVALUATOR. The Evaluator for each Trust is set forth in Part I of
this Prospectus. The Evaluator may resign or be removed by the
Trustee in which event the Trustee is to use its best efforts to
appoint a satisfactory successor. Such resignation or removal shall
become effective upon acceptance of appointment by the successor
evaluator. If upon resignation of the Evaluator no successor has
accepted appointment within 30 days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor. Notice of such resignation or removal and
appointment shall be mailed by the Trustee to each Unitholder.
AMENDMENT AND TERMINATION. The Trust Agreement may be amended by the
Trustee and the Sponsor without the consent of any of the Unitholders:
(i) to cure any ambiguity or to correct or supplement any provision
which maybe defective or inconsistent; (ii) to change any provision
thereof as may be required by the Securities and Exchange Commission
or any successor governmental agency; or (iii) to make such provisions
as shall not adversely affect the interests of the Unitholders. The
Trust Agreement with respect to the Trusts may also be amended in any
respect by the Sponsor and the Trustee, or any of the provisions
thereof may be waived, with the consent of the holders of Units
representing 66-2/3% of the Units then outstanding of such Trust,
PROVIDED that no such amendment or waiver will reduce the interest of
any Unitholder thereof without the consent of such Unitholder or
reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of all Unitholders of such
Trust. In no event shall the Trust Agreement be amended to increase
the number of Units of a Trust issuable thereunder or to permit,
except in accordance with the provisions of such Trust Agreement, the
acquisition of any Securities in addition to or in substitution for
those initially deposited in a Trust. The Trustee shall promptly
notify Unitholders of the substance of any such amendment.
The Trust Agreement provides that the Trusts shall terminate upon the
maturity, redemption or other disposition of the last of the
Securities held in a Trust. If the value of a Trust shall be less
than the applicable minimum value stated under "Essential Information"
in Part I of this Prospectus, the Trustee may, in its discretion, and
shall, when so directed by the Sponsor, terminate the Trust. A Trust
may be terminated at any time by the Unitholders representing 66-2/3%
of the Units thereof then outstanding. In the event of termination of
a Trust, written notice thereof will be sent by the Trustee to all
Unitholders of such Trust. Within a reasonable period after
termination, the Trustee will sell any Securities remaining in such
Trust and, after paying all expenses and charges incurred by the
Trust, will distribute to Unitholders thereof (upon surrender for
cancellation of certificates for Units, if issued) their pro rata
share of the balances remaining in the Interest and Principal Accounts
of such Trust.
LIMITATIONS ON LIABILITY. THE SPONSOR: The Sponsor is liable for the
performance of its obligations arising from its responsibilities under
the Trust Agreement, but will be under no liability to the Unitholders
for taking any action or refraining from any action in good faith
pursuant to the Trust Agreement or for errors in judgment, except in
cases of its own gross negligence, bad faith or willful misconduct.
The Sponsor shall not be liable or responsible in any way for
depreciation or loss incurred by reason of the sale of any Securities.
THE TRUSTEE: The Trust Agreement provides that the Trustee shall be
under no liability for any action taken in good faith in reliance upon
prima facie properly executed documents or for the disposition of
monies, Securities or certificates except by reason of its own gross
negligence, bad faith or willful misconduct, nor shall the Trustee be
liable or responsible in any way for depreciation or loss incurred by
reason of the sale by the Trustee of any Securities. In the event
that the Sponsor shall fail to act, the Trustee may act and shall not
be liable for any such action taken by it in good faith. The Trustee
shall not be personally liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon. In addition, the Trust Agreement contains other
customary provisions limiting the liability of the Trustee.
THE EVALUATOR: The Trustee and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. The Trust Agreement provides that the
determinations made by the Evaluator shall be made in good faith upon
the basis of the best information available to it, PROVIDED, HOWEVER,
that the Evaluator shall be under no liability to the Trustee or
Unitholders for errors in judgment, but shall be liable only for its
gross negligence, lack of good faith or willful misconduct.
Trust Expenses
The Sponsor will charge the Trusts a surveillance fee for services
performed for the Trusts in an amount not to exceed that amount set
forth in "Essential Information" in Part I of this Prospectus, but in
no event will such compensation, when combined with all compensation
received from other unit investment trusts for which the Sponsor both
acts as sponsor and provides portfolio surveillance, exceed the
aggregate cost to the Sponsor for providing such services. Such fee
shall be based on the total number of Units of the related Trust
outstanding as of the December Record Date preceding any annual
period. The Sponsor will receive a portion of the sales commissions
paid in connection with the purchase of Units.
The Trustee receives for its services fees set forth under "Essential
Information" in Part I of this Prospectus. The Trustee fee which is
calculated monthly is based on the largest aggregate principal amount
of Securities in a Trust at any time during the period. In no event
shall the Trustee be paid less than $2,000 per Trust in any one year.
Funds that 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 trust procedures; however, the Trustee is also
authorized by the Trust Agreements to make from time to time certain
non-interest bearing advances to the Trusts.
The Trustee's fee is payable on or before each Distribution Date. The
Trustee has agreed to pay the Sponsor that portion of the Trustee's
annual fee as set forth under "Essential Information" in Part I of
this Prospectus in return for the Sponsor providing certain
bookkeeping and administrative services to its own customers.
For evaluation of Securities in each Trust, the Evaluator shall
receive a fee, payable monthly, calculated on the basis of that annual
rate set forth under "Essential Information" in Part I of this
Prospectus, based upon the largest aggregate principal amount of
Securities in such Trust at any time during such monthly period.
The Trustee's and Evaluator's fees are deducted first from the
Interest Account of a Trust to the extent funds are available and then
from the Principal Account. Such fees maybe increased without
approval of Unitholders by amounts not exceeding a proportionate
increase in the Consumer Price Index entitled "All Services Less Rent
of Shelter," published by the United States Department of Labor, or
any equivalent index substituted therefor. In addition, 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).
Expenses incurred in establishing the Trusts, including the cost of
the initial preparation of documents relating to the Trusts, federal
and state registration fees, the initial fees and expenses of the
Trustee, legal expenses and any other non-material out-of-pocket
expenses, will be paid by the Trusts and amortized over the lesser of
five years or the life of the Trusts. The following additional
charges are or may be incurred by the Trusts: (i) fees for the
Trustee's extraordinary services; (ii) expenses of the Trustee
(including legal and auditing expenses (not to exceed $.50 per 100
Units), but not including any fees and expenses charged by any agent
for custody and safeguarding of Securities) and of bond counsel, if
any; (iii) various governmental charges; (iv) expenses and costs of
any action taken by the trustee to protect a Trust or the rights and
interests of the Unitholders; (v) indemnification of the Trustee for
any loss, liability or expense incurred by it in the administration of
a Trust not resulting from gross negligence, bad faith or willful
misconduct on its part; (vi) indemnification of the Sponsor for any
loss, liability or expense incurred in acting in that capacity without
gross negligence, bad faith or willful misconduct; and (vii)
expenditures incurred in contacting Unitholders upon termination of
the Trusts. The fees and expenses set forth herein are payable out of
the appropriate Trust and, when owing to the Trustee, are secured by a
lien on such Trust. Fees or charges relating to a Trust shall be
allocated to each Trust in the same ratio as the principal amount of
such Trust bears to the total principal amount of all Trusts. Fees or
charges relating solely to a particular Trust shall be charged only to
such trust.
Fees and expenses of the Trusts shall be deducted from the Interest
Account thereof, or, to the extent funds are not available in such
Account, from the Principal Accounts. The Trustee may withdraw from
the Principal Account or the Interest Account of any Trust such
amounts, if any, as it deems necessary to establish a reserve for any
taxes or other governmental charges or other extraordinary expenses
payable out of a Trust. Amounts so withdrawn shall be credited to a
separate account maintained for a trust known as the Reserve Account
and shall not be considered a part of the Trust when determining the
value of the Units until such time as the Trustee shall return all or
any part of such amounts to the appropriate account.
The Sponsor
NFSC is a registered broker and dealer and a member of The New York
Stock Exchange, Inc., and various other national and regional
exchanges. As a securities broker and dealer, NFSC is engaged in
various securities trading, brokerage and clearing activities serving
a diverse group of domestic corporations, institutional and individual
investors, and brokers and dealers.
NFSC is a wholly owned subsidiary of Fidelity Global Brokerage Group,
Inc. NFSC was incorporated in Massachusetts, June 3, 1981. Fidelity
Global Brokerage Group, Inc. is a wholly owned subsidiary of FMR Corp.
("FMR"), Edward C. Johnson III owns approximately 12% and Abigail P.
Johnson owns approximately 24.5% of the issued and outstanding shares
of the Voting Common Stock of FMR. Members of the Edward C. Johnson
III family and trusts for their benefit control up to 49% of the
voting shares of FMR.
Fidelity Management & Research Company, a subsidiary of FMR, is the
management arm of Fidelity Investments, which was established in 1946.
It provides a number of mutual funds and other clients with investment
research and portfolio management services. It maintains a large
staff of experienced investment personnel and a full complement of
related support facilities. It is now America's largest mutual fund
manager and as of November 30, 1996, it manages more than $415 billion
in assets in over 27 million individual shareholder accounts.
If at any time the Sponsor shall fail to perform any of its duties
under a Trust Agreement or shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or shall have its affairs taken
over by public authorities, then the Trustee may (a) appoint a
successor sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding such reasonable amounts as may be
prescribed by the Securities and Exchange Commission, or (b) terminate
the Trust Agreement and liquidate the Trusts as provided therein, or
(c) continue to act as Trustee without terminating the Trust
Agreement.
The foregoing information with regard to the Sponsor relates to the
Sponsor only and not to the Trusts. Such information is included in
this Prospectus only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out
its contractual obligations with respect to the Trusts. More
comprehensive information can be obtained upon request from the
Sponsor.
Legal Opinions
The legality of the Units offered hereby and certain matters relating
to federal tax law have been passed upon by Chapman and Cutler, 111
West Monroe Street, Chicago, Illinois 60603, as special counsel to the
Sponsor. Carter, Ledyard & Milburn has acted as special counsel to
the Trusts with respect to certain New York State and City tax matters
affecting all Trusts but Rolling Trusts.
Independent Certified Public Accountants
The statements of condition and the related portfolios at the date of
Part I of this Prospectus as included in Part I of this Prospectus
have been audited by Deloitte & Touche LLP, independent certified
public accountants, as set forth in their report in Part I of the
Prospectus, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing.
The investor is advised to read and retain this Prospectus for future
reference.
UNITS OF THE TRUSTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE
PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE
INVESTMENT RISK INCLUDING LOSS OF PRINCIPAL.
Sponsor: National Financial
Services Corporation
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.
FIDELITY
DEFINED TRUSTS SERIES 2
PROSPECTUS - PART I
OCTOBER 1, 1997
ROLLING GOVERNMENT SERIES 2, GNMA PORTFOLIO
INVESTMENT GRADE SERIES 1, INTERMEDIATE INSURED UTILITY PORTFOLIO
INVESTMENT GRADE SERIES 2, CORPORATE PORTFOLIO
This Part I of the Prospectus may not be distributed unless
accompanied by Part II of the Prospectus. Both Parts I and II of the
Prospectus should be retained for future reference.
FIDELITY
INVESTMENTS(Registered trademark)
82 Devonshire Street, Boston, MA 02109
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 the Investment Company Act of 1940, and to
which reference is made.
_______________
No person is authorized to give any information or to make any
representations not contained in this Prospectus and any information
or representation not contained herein must not be relied upon as
having been authorized by the Trusts, the Trustee, or the Sponsor.
The Trusts are registered as unit investment trusts under the
Investment Company Act of 1940. Such registration does not imply that
the Trusts or the Units have been guaranteed, sponsored, recommended
or approved by the United States or any state or any agency or officer
thereof.
_______________
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.
FIDELITY DEFINED TRUSTS, SERIES 2
Prospectus
Part I
October 1, 1997
The Trusts
Fidelity Defined Trusts, Series 2 consists of three underlying unit
investment trusts: Rolling Government Series 2, GNMA Portfolio;
Investment Grade Series 1, Intermediate Insured Utility Portfolio and
Investment Grade Series 2, Corporate Portfolio. Each underlying unit
investment trust may be referred to herein as a "Trust," or
collectively as the "Trusts."
ROLLING GOVERNMENT SERIES 2, GNMA PORTFOLIO
Rolling Government Series 2, GNMA Portfolio ("Rolling Government
Series 2") was formed for the purpose of providing safety of capital
as is consistent with current income and current monthly distributions
of interest income through an investment in a portfolio consisting of
taxable mortgage-backed securities of the fully modified pass-through
type, the payments of principal and interest on which are fully
guaranteed by the Government National Mortgage Association ("GNMA").
Rolling Government Series 2 has been designed to minimize the effect
of principal payments and prepayments by providing for the
reinvestment of all distributions of principal into additional GNMA
securities which have similar maturities and interest rates as the
GNMA securities upon which the principal was received. The Sponsor
will direct the Trustee to reinvest such distributions during the
period when, in the opinion of the Sponsor, such reinvestment is
practical (the "Reinvestment Period").
During the Reinvestment Period, the Sponsor will direct the trustee to
reinvest all payments and prepayments of principal from the underlying
Ginnie Maes into additional Ginnie Mae securities which have similar
maturities and interest rates as the Securities upon which the
principal was received. Reinvestment of principal into additional
Ginnie Maes during periods when interest rates are at a level
different from those prevailing at the Initial Date of Deposit of the
Trust will have the effect of increasing or decreasing monthly
distributions of interest income from the Trust. Reinvestment of
principal into the Ginnie Maes eligible for inclusion in the Trust
will also have the effect of increasing the par value of the Units for
reinvestment during periods of increasing interest rates from those
prevailing at the Trust's Initial Date of Deposit and during periods
of declining interest rates the par value of the Units will decrease.
There may be times when the Principal Account of the Trust has cash
which cannot be reinvested because additional Ginnie Maes are not
available or the amount of cash in the Principal Account is
insufficient to buy additional Ginnie Maes without the Trust incurring
disproportionate expenses. During these periods, the amounts in the
Principal Account will remain uninvested, thus reducing the return to
Unitholders. Amounts, if any, which cannot be reinvested during the
Reinvestment Period will be distributed to Unitholders semiannually
unless the amount available for distribution is less than $0.01 per
Unit. In such circumstance, Unitholders should be aware that at the
time of the receipt of such principal they may not be able to reinvest
such principal in other securities at a yield equal to or in excess of
the yield which such principal would have earned to Unitholders had
the principal been reinvested. In addition, principal will not be
reinvested and will be distributed to Unitholders if required to
maintain the status of the Trust as a "regulated investment company."
See "Trust Information - Tax Status - Regulated Investment Company" in
Part II of this Prospectus. The costs of acquiring the additional
Ginnie Maes will be borne by the Trust and hence, the Unitholders.
Although it is currently anticipated that the Trustee will purchase
Ginnie Maes directly from market makers, the Trustee may retain the
Sponsor to purchase the additional Ginnie Maes and pay them usual and
customary brokerage commissions. There will be no attempt to time or
delay the purchase of additional Ginnie Maes for reinvestment to take
advantage of market movements.
Tax Status - Rolling Government Series 2 may be an appropriate
investment for investors who desire to participate in a portfolio of
taxable, mortgage-backed securities of the fully modified pass-through
type, the payment of principal and interest on which is fully
guaranteed by GNMA. Rolling Government Series 2 has been created as a
regulated investment company for federal tax reasons. See "Tax
Status" in Part II of this Prospectus.
INVESTMENT GRADE SERIES 1, INTERMEDIATE INSURED UTILITY PORTFOLIO
Investment Grade Series 1, Intermediate Insured Utility Portfolio
("Investment Grade Series 1") was formed for the purpose of providing
a high level of current income through an investment in a fixed
portfolio consisting of corporate debt obligations ("Bonds") issued
after July 18, 1984 by utility companies. The Trust's portfolio has
been laddered so that approximately 20% of the securities included in
the portfolio will mature and the proceeds thereof will be distributed
to Unitholders annually commencing in 2003. Insurance guaranteeing
the scheduled payment of principal and interest on all of the Bonds in
the Trust has been obtained directly by the issuer of such Bonds or by
the Sponsor from MBIA Insurance Corporation or other insurers. The
insurance does not relate to the Units offered hereby or to their
market value. As of the Trust's Initial Date of Deposit, all of the
Bonds in the Trust's portfolio were rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's") and "AAA" by Standard & Poor's, a Division
of The McGraw-Hill Companies ("Standard & Poor's"). For foreign
investors who are not United States citizens or residents, interest
income from Investment Grade Series 2 may not be subject to federal
withholding taxes if certain conditions are met. See "Trust
Information - Tax Status - Grantor Trust" in Part II of this
Prospectus.
Tax Status - Investment Grade Series 1 may be an appropriate
investment for investors who desire to participate in a portfolio of
taxable, fixed income securities offering a high level of current
income Investment Grade Series 1 has been created as a grantor trust
for federal tax reasons. See "Tax Status" in Part II of this
Prospectus.
INVESTMENT GRADE SERIES 2, CORPORATE PORTFOLIO
Investment Grade Series 2, Corporate Portfolio ("Investment Grade
Series 2") was formed for the purpose of providing a high level of
current income through an investment in a fixed portfolio consisting
of intermediate-term investment grade corporate debt obligations
("Bonds") issued after July 18, 1984. For foreign investors who are
not United States citizens or residents, interest income from
Investment Grade Series 2 may not be subject to federal withholding
taxes if certain conditions are met. See "Trust Information - Tax
Status - Grantor Trust" in Part II of this Prospectus. As of the
Trust's Initial Date of Deposit, all of the Bonds in the Trust's
portfolio were rated "A" or better by Moody's, Standard & Poor's or
Duff & Phelps. See "Trust Information - Description of Ratings" in
Part II of this Prospectus.
Tax Status - Investment Grade Series 2 may be an appropriate
investment vehicle for investors who desire to participate in a
portfolio of intermediate term taxable fixed income securities issued
by corporate obligors with greater diversification than investors
might be able to acquire individually. Investment Grade Series 2 has
been created as a grantor trust for federal tax reasons. See "Tax
Status" in Part II of this Prospectus.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Fidelity Defined Trusts, Series 2, certifies that it meets
all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in
the City of Boston and State of Massachusetts on the 1st day of
October, 1997.
Fidelity Defined Trusts, Series 2
(Registrant)
By National Financial Services Corporation
(Depositor)
By /s/David J. Pearlman
Assistant Clerk
(Seal)
Pursuant to the requirements of the Securities Act of 1933, this Post
Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities on October 1, 1997:
James H. Messenger
James H. Messenger President and Director
Timothy M. McKenna
Timothy M. McKenna Director
Robert P. Mazzarella
Robert P. Mazzarella Director
Sherif A. Nada
Sherif A. Nada Director
Shaugn Stanley
Shaugn Stanley Senior Vice President, Finance
and Chief Financial Officer
David J. Pearlman
(Attorney-in-fact)*
* An executed copy of the related powers of attorney were filed as
Exhibit 7.1 to the initial Registration Statement on Form S-6 for
Fidelity Defined Trusts, Series 1 as filed on August 29, 1995 (File
No. 33-62243) and the same is hereby incorporated herein by this
reference.
SUMMARY OF ESSENTIAL INFORMATION
FIDELITY DEFINED TRUSTS SERIES 2
AS OF MAY 31, 1997
SPONSOR: NATIONAL FINANCIAL SERVICES CORPORATION
TRUSTEE: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
EVALUATOR: MULLER DATA CORPORATION
The income, expense and distribution data set forth below has been
calculated for Unitholders purchasing less than 50,000 Units of a
Trust. Unitholders purchasing 50,000 Units or more of a Trust will
receive a slightly higher return because of the reduced sales charge
for larger purchases.
ROLLING INVESTMENT INVESTMENT
GOVERNMENT GRADE GRADE
SERIES 2 SERIES 1 SERIES 2
Public Offering Price per Units (1) $10.3820 $10.0882 $10.2542
Principal Amount of Securities per Units $10.00 $10.06 $10.06
Estimated Current Return based on Public Offering Price (2)(4)(5)
7.12% 6.12% 6.65%
Estimated Long-Term Return (2)(3)(4)(5)(6) 7.002% 6.070% 6.527%
Estimated Normal Annual Distribution per Unit(6) $0.73945 $0.61819
$0.68247
Principal Amount of Securities $19,441,606 $13,750,000 $11,250,000
Number of Units 1,943,316 1,366,794 1,118,288
Fractional Undivided Interest per Units 1/1,943,316 1/1,366,774
1/1,118,288
Calculation of Public Offering Price:
Aggregate Offering Price of Securities including receivables
from Broker $19,461,248 $13,316,711 $11,074,853
Aggregate Offering Price of Securities per Unit $10.0144 $9.7430
$9.9034
Plus Sales Charge per Units (2) $0.3632 $.3534 $0.3592
Principal Cash per Unit $0.0044 $(0.0082) $(0.0084)
Public Offering Price per Unit (1) $10.3820 $10.0882 $10.2542
Calculation of Estimated Net Annual Interest Income per Unit: (10)
Estimated Annual Interest $0.75343 $0.63881 $0.70370
Less: Estimated Annual Expense $0.01398 $0.02062 $0.02123
Estimated Net Annual Interest $0.73945 $0.61819 $0.68247
Estimated Daily Rate of Net Interest $0.002054 $0.001717 $0.001876
Estimated Average Life of Securities 11.99 7.68 9.48
Minimum Principal Value of the Trust under which Trust Agreement
may be terminated (6) 40% 20% 20%
Evaluations for purposes of sale, purchase or redemption of Units are
made as of the close of business of the Sponsor (currently 4:15pm
Eastern Time) next following receipt of an order for a sale or
purchase of Units or receipt by the Trustee of Units tendered for
redemption.
ROLLING INVESTMENT INVESTMENT
GOVERNMENT GRADE GRADE
SERIES 2 SERIES 1 SERIES 2
Trustee's Annual Fee per $1,000 principal amount of Securities
(7) $0.88 $1.43 $1.50
Estimated net annual interest income per Unit $ 0.73945 $ 0.61819
$0.68247
Estimated Normal Monthly Distribution per Unit (8) $ 0.06162 $
0.05151 $0.05687
Sales Charge (2):
As a percentage of Public Offering Price per Unit 4.101% 4.101%
4.101%
As a percentage of net amount invested 4.276% 4.276% 4.276%
Date Trusts Established 06/07/96 06/07/96 06/07/96
Mandatory Termination Date 12/31/27 01/01/08 08/15/09
Maximum Evaluator's Annual Evaluation Fee per Evaluation $6.00 $8.00
$8.00
Maximum Sponsor's Annual Surveillance Fee per $1,000 Principal
Amount of Securities $0.10 $0.10 $0.10
Estimated Annual Organizational Expenses per Unit (9) $0.20 $0.30
$0.29
(1) Anyone ordering Units will pay accrued interest from the preceding
record date to the date of settlement (normally three business days
after order).
(2) The Maximum Sales Charge per Unit consists of an initial sales
charge and a deferred sales charge. See "Fee Table" contained herein
and "Trust Information - Public Offering of Units" for additional
information regarding these charges. The Estimated Current Return and
Estimated Long-Term Return are increased for transactions entitled to
a reduced sales charge. See "Trust Information - Public Offering of
Units - Public Offering Price." The sales charge as a percentage of
the net amount invested in earning assets will increase as accrued
interest increases. Transactions subject to quantity discounts (see
"Trust Information - Public Offering of Units - Public Offering
Price") will have reduced sales charges, thereby reducing all
percentages in the table. Units tendered for redemption or sold prior
to the collection of the entire deferred sales charge will be assessed
the amount of the remaining sales charge at the time of redemption or
sale.
(3) Estimated Long Term Returns for the Trusts are calculated using a
formula which takes into consideration the market values, yield and
the expected retirement dates (estimated average life of the
Securities in Rolling Government Series 2) of all of the Securities in
the applicable Trust, a compounding factor and the expenses and sales
charge associated with each Trust Unit. Estimated Current Returns are
calculated by dividing the estimated 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 of accretion
of discount, if any. For additional information see "Interest,
Estimated Long-Term Return and Estimated Current Return."
(4) This figure is based on estimated per Unit cash flows. Estimated
cash flows will vary with changes in fees and expenses, with changes
in current interest rates and with the principal prepayment,
redemption, maturity, call, exchange or sale of the underlying
Securities. The estimated cash flows to Unitholders for the Trusts
are available upon request at no charge from the Sponsor.
(5) The actual net annual interest income per Unit will vary with
changes in fees and expenses and principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Securities. See
"The Trusts" and "Trust Information - Interest, Estimated Long-Term
Return and Estimated Current Return."
(6) The minimum principal value of each Trust under which the Trust
Agreement may be terminated is 20% (40% for Rolling Government Series
2) of the total aggregate principal amount of securities deposited in
each Portfolio during the initial offering period.
(7) The Trustee's annual fee includes $.07 per Unit which is paid to
the Sponsor in return for its providing certain bookkeeping and
administrative services to its customers. See "Trust Information -
Trust Expenses".
(8) Unitholders will receive interest distributions monthly. The
Record Date is the 10th day of the month, and the Distribution Date is
the 20th day of the month for the Investment Grade Series 1 and 2.
The Record Date is the 1st day of the month and the Distribution Date
is the 20th of the month for the Rolling Government Series 2.
(9) Each Trust (and therefore the Unitholders of the respective Trust)
will bear all or a portion of its organizational costs (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 the Trust
portfolios, legal fees and the initial fees and expenses of the
Trustee but not including the expenses incurred in the preparation and
printing of brochures and other advertising materials and other
selling expenses) as is common for mutual funds. Total organizational
expenses will be amortized over a five-year period or over the life of
a Trust if the term of such Trust is less than five years. See "Trust
Information - Trust Expenses" and "Statements of Financial Condition".
Historically, the Sponsors of unit investment trusts have paid all of
the costs of establishing such trusts.
STATEMENT OF FINANCIAL CONDITION
FIDELITY DEFINED TRUSTS SERIES 2
ROLLING GOVERNMENT SERIES 2
MAY 31, 1997
TRUST PROPERTY
Investments in municipal bonds at market value (cost
$19,370,556) (Note (a) and Schedule of Portfolio
Securities Notes (4) and (5)) $19,380,948
Accrued interest receivable 121,510
Receivable from Broker 80,300
Deferred organizational cost 25,805
Cash 8,034
Total 19,616,597
LIABILITIES AND NET ASSETS
Less Liabilities:
Deferred Sales Charge payable 102,609
Deferred organizational costs payable 25,805
Accrued Trustee fees and expenses 3,054
Accrued Sponsor fees 413
Total liabilities 131,881
Net assets:
Balance applicable to 1,943,316 Units of
fractional undivided interest outstanding
(Note (c)):
Capital, plus unrealized market
appreciation of $10,392 $19,366,993
Undistributed net investment income
(Note (b)) 117,723
Net assets $19,484,716
Net asset value per Unit ($19,484,716 divided
by 1,943,316 Units) $ 10.0265
See notes to financial statements
STATEMENT OF OPERATIONS
FIDELITY DEFINED TRUSTS SERIES 2
ROLLING GOVERNMENT SERIES 2
FOR THE PERIOD FROM
JUNE 7, 1996
(DATE OF DEPOSIT)
TO MAY 31, 1997
Investment income - interest $564,110
Less Expenses:
Trustee fees and expenses 11,944
Sponsor fees 859
Amortization of organizational costs 4,554
Total expenses 17,357
Investment income - net 546,753
Net gain on investments:
Realized gain on securities sold 923
Unrealized market appreciation 10,392
Net gain on investments 11,315
Net increase in net assets resulting from operations $558,068
See notes to financial statements
STATEMENT OF CHANGES IN NET ASSETS
FIDELITY DEFINED TRUSTS SERIES 2
ROLLING GOVERNMENT SERIES 2
FOR THE PERIOD FROM
JUNE 7, 1996
(DATE OF DEPOSIT)
TO MAY 31, 1997
Operations:
Investment income - net $ 546,753
Realized gain on securities sold 923
Unrealized market appreciation 10,392
Net increase in net assets resulting from
operations 558,068
Capital Share Transactions:
Creation on 1,893,935 Units 19,065,072
Redemption of 321 Units (3,213)
Deferred sales charge (113,806)
Total capital share transactions 18,948,053
Net investment income distributions (510,918)
Net increase in net assets 18,995,203
Net assets:
Beginning of period (Note (c)) 489,513
End of period (including undistributed net investment
income of $117,423) $19,484,716
See notes to financial statements
NOTES TO FINANCIAL STATEMENTS
FIDELITY DEFINED TRUSTS SERIES 2
ROLLING GOVERNMENT SERIES 2
MAY 31, 1997
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of the
Trust and is responsible for establishing and maintaining a system of
internal controls directly related to, and designed to provide
reasonable assurance as to the integrity and reliability of, financial
reporting of the Trust. The Trustee is also responsible for all
estimates and accruals reflected in the Trust's financial statements.
The Evaluator determines the price for each underlying Security
included in the Trust's Portfolio of Securities on the basis set forth
in Part II of this Prospectus, "Public Offering of Units - Public
Offering Price". Under the Securities Act of 1933 ("the Act"), as
amended, the Sponsor is deemed to be an issuer of the Trust Units. As
such, the Sponsor has the responsibility of an issuer under the Act
with respect to financial statements of the Trust included in the
Trust's Registration Statement under the Act and amendments thereto.
(2) Investments
Investments are stated at market value as determined by the Evaluator
based on the offering side evaluations on the last day of trading
during the period. The offering side values on the dates of deposit
represents the cost of investments to the Trust.
(3) Income Taxes
The Trust is not an association taxable as a corporation for Federal
income tax purposes; accordingly, no provision is required for such
taxes.
(4) Expenses
The Trust pays annual Trustee's fees, estimated expenses, Sponsor's
fees and Evaluator's fees, and may incur additional charges as
explained and under "Trust Expenses" in Part II of this Prospectus.
(b) DISTRIBUTIONS
Interest received by the Trust is distributed to the Unitholders on
or shortly after the twentieth day of each month after deducting
applicable expenses. Receipts other than interest are distributed as
explained in "Unitholders - Distributions to Unitholders in Part II of
this Prospectus.
NOTES TO FINANCIAL STATEMENTS
FIDELITY DEFINED TRUSTS SERIES 2
ROLLING GOVERNMENT SERIES 2
MAY 31, 1997
(c) ORIGINAL COST TO INVESTORS
The original cost to investors represents the aggregate initial
public offering price as of the date of deposit (June 7, 1996)
exclusive of accrued interest, computed on the basis set forth under
"Public Offering of Units - Public Offering Price" in Part II of this
Prospectus.
A reconciliation of the original cost of Units to investors to the
net amount applicable to investors as of May 31, 1997 follows:
Original cost to investors $ 510,363
Less: Gross underwriting commissions (sales charge) 20,850
Net cost to investors 489,513
Cost of supplemental creations of units 18,983,181
Realized gain on securities sold 923
Deferred sales charge (113,806)
Unrealized market appreciation 10,392
Redemption of Units (3,210)
Net amount applicable to investors $19,366,993
(d) OTHER INFORMATION
Selected data for a Unit of the Trust during the period:
Income distributions during period $ .6550
Net asset value at end of period $10.0265
Trust Units outstanding at end of period 1,943,316
SCHEDULE OF PORTFOLIO SECURITIES
FIDELITY DEFINED TRUSTS SERIES 2
ROLLING GOVERNMENT SERIES 2
MAY 31, 1997
PORT- YEARS OF
FOLIO FACE COUPON STATED MARKET
NO. TITLE OF SECURITIES AMOUNT RATE MATURITY VALUE(1)(2)
1. GNMA, Modified Pass-Through
Mortgage-Backed Securities $19,441,606 7.500% 2026-2027 $19,380,948
See notes to schedule of portfolio securities
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
FIDELITY DEFINED TRUSTS SERIES 2
ROLLING GOVERNMENT SERIES 2
MAY 31, 1997
(1) The market value of the Securities as of May 31, 1997 was
determined by the Evaluator on the basis of offering side evaluations
for the securities on the last trading date of the period (May 30,
1997).
(2) At May 31, 1997, the unrealized market appreciation of all
Securities was comprised of the following:
Gross unrealized market appreciation $10,392
Gross unrealized market depreciation -
Unrealized market appreciation $10,392
The aggregate cost of the Securities for Federal income tax purposes
was $19,370,556 at May 31, 1997.
STATEMENT OF FINANCIAL CONDITION
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 1
MAY 31, 1997
TRUST PROPERTY
Investments in municipal bonds at market value (cost
$13,276,678) (Note (a) and Schedule of Portfolio
Securities Notes (4) and (5)) $13,316,711
Accrued interest receivable 312,297
Deferred organizational cost 38,011
Total 13,667,019
LIABILITIES AND NET ASSETS
Less Liabilities:
Advance from Trustee 276,469
Accrued Trustee fees and expenses 4,876
Accrued Sponsor fees 794
Deferred Sales Charges payable 70,939
Deferred Organizational Cost payable 38,011
Total liabilities 391,089
Net assets:
Balance applicable to 1,366,794 Units of
fractional undivided interest outstanding
(Note (c)):
Capital, plus unrealized market
appreciation of $40,033 $13,234,567
Undistributed net investment income
(Note (b)) 41,363
Net assets $13,275,930
Net asset value per Unit ($13,275,930 divided
by 1,366,794 Units) $ 9.7132
See notes to financial statements
STATEMENT OF OPERATIONS
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 1
FOR THE PERIOD FROM
JUNE 7, 1996
(DATE OF DEPOSIT)
TO MAY 31, 1997
Investment income - interest $480,176
Less Expenses:
Trustee fees and expenses 16,351
Sponsor fees 794
Amortization of organizational costs 6,708
Total expenses 23,853
Investment income - net 456,323
Unrealized market appreciation 40,033
Net increase in net assets resulting from operations $496,356
See notes to financial statements
STATEMENT OF CHANGES IN NET ASSETS
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 1
FOR THE PERIOD FROM
JUNE 7, 1996
(DATE OF DEPOSIT)
TO MAY 31, 1997
Operations:
Investment income - net $ 456,323
Unrealized market appreciation 40,033
Net increase in net assets resulting from
operations 496,356
Capital Share Transactions:
Creation on 1,242,540 Units 12,121,119
Deferred sales charge (74,677)
Total capital share transactions 12,046,442
Net investment income distributions (447,596)
Net increase in net assets 12,095,202
Net assets:
Beginning of period (Note (c)) 1,180,728
End of period (including undistributed net investment
income of $41,363) $13,275,930
See notes to financial statements
NOTES TO FINANCIAL STATEMENTS
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 1
MAY 31, 1997
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of the
Trust and is responsible for establishing and maintaining a system of
internal controls directly related to, and designed to provide
reasonable assurance as to the integrity and reliability of, financial
reporting of the Trust. The Trustee is also responsible for all
estimates and accruals reflected in the Trust's financial statements.
The Evaluator determines the price for each underlying Security
included in the Trust's Portfolio of Securities on the basis set forth
in Part II of this Prospectus, "Public Offering of Units - Public
Offering Price". Under the Securities Act of 1933 ("the Act"), as
amended, the Sponsor is deemed to be an issuer of the Trust Units. As
such, the Sponsor has the responsibility of an issuer under the Act
with respect to financial statements of the Trust included in the
Trust's Registration Statement under the Act and amendments thereto.
(2) Investments
Investments are stated at market value as determined by the Evaluator
based on the offering side evaluations on the last day of trading
during the period. The offering side values on the dates of deposit
represents the cost of investments to the Trust.
(3) Income Taxes
The Trust is not an association taxable as a corporation for Federal
income tax purposes; accordingly, no provision is required for such
taxes.
(4) Expenses
The Trust pays annual Trustee's fees, estimated expenses, Sponsor's
fees and Evaluator's fees, and may incur additional charges as
explained and under "Trust Expenses" in Part II of this Prospectus.
(b) DISTRIBUTIONS
Interest received by the Trust is distributed to the Unitholders on
or shortly after the twentieth day of each month after deducting
applicable expenses. Receipts other than interest are distributed as
explained in "Unitholders - Distributions to Unitholders" in Part II
of this Prospectus.
NOTES TO FINANCIAL STATEMENTS
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 1
MAY 31, 1997
(c) ORIGINAL COST TO INVESTORS
The original cost to investors represents the aggregate initial
public offering price as of the date of deposit (June 7, 1996)
exclusive of accrued interest, computed on the basis set forth under
"Public Offering of Units - Public Offering Price" in Part II of this
Prospectus.
A reconciliation of the original cost of Units to investors to the
net amount applicable to investors as of May 31, 1997 follows:
Original cost to investors $ 1,231,291
Less: Gross underwriting commissions (sales charge) 50,563
Net cost to investors 1,180,728
Cost of supplemental creations of units 12,088,483
Deferred sales charge (74,677)
Unrealized market appreciation 40,033
Net amount applicable to investors $13,234,567
(d) OTHER INFORMATION
Selected data for a Unit of the Trust during the period:
Income distributions during period $ .5632
Net asset value at end of period $9.7132
Trust Units outstanding at end of period 1,366,794
SCHEDULE OF PORTFOLIO SECURITIES
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 1
MAY 31, 1997
PORT- RATINGS(3)
FOLIO FACE COUPON MATURITY STANDARD & REDEMPTIONS MARKET
NO. TITLE OF SECURITIES AMOUNT RATE DATE MOODY'S POOR'S PROVISIONS
(4) VALUE(1)(2)
1. Pacific Bell Company $ 2,750,000 6.250% 03/01/05 Aaa AAA
Non-callable $ 2,650,038
2. Pacific Gas and Electric
Company 2,750,000 6.250 03/01/04 Aaa AAA Non-callable 2,672,615
3. PECO Energy Company 2,750,000 6.625 03/01/03 Aaa AAA Non-callable
2,740,155
4. Public Service Electric
and Gas Company 2,750,000 6.250 01/01/07 Aaa AAA Non-callable
2,608,513
5. Southern California Edison
Company 2,750,000 6.375 01/15/06 Aaa AAA Non-callable 2,645,390
$13,750,000 $13,316,711
See notes to schedule of portfolio securities
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 1
MAY 31, 1997
(1) The market value of the Securities as of May 31, 1997 was
determined by the Evaluator on the basis of offering side evaluations
for the securities on the last trading date of the period (May 30,
1997).
(2) At May 31, 1997, the unrealized market appreciation of all
Securities was comprised of the following:
Gross unrealized market appreciation $40,033
Gross unrealized market depreciation -
Unrealized market appreciation $40,033
The aggregate cost of the Securities for Federal income tax purposes
was $13,276,678 at May 31, 1997.
(3) All Bonds in the Trust are insured by MBIA. See "Trust
Information - Insurance of the Bonds" in this Prospectus.
(4) There is shown under this heading the year in which each issue of
Bonds is initially or currently redeemable and the redemption price
for that year, unless otherwise indicated. Each issue continues to be
redeemable at declining prices thereafter, but not below par value.
The prices at which the Bonds may be redeemed or called prior to
maturity may or may not include a premium and, in certain cases, may
be less than the cost of the Bonds to the Trust. In addition, certain
Bonds in the portfolio may be redeemed in whole or in part other than
by operation of the stated redemption provisions under certain unusual
or extraordinary circumstances specified in the instruments setting
forth the terms and provisions of such bonds. "S.F." indicates that a
sinking fund is established with respect to that issue of Bonds.
STATEMENT OF FINANCIAL CONDITION
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 2
MAY 31, 1997
TRUST PROPERTY
Investments in municipal bonds at market value (cost
$11,073,930) (Note (a) and Schedule of Portfolio
Securities Notes (4) and (5)) $11,074,853
Accrued interest receivable 137,490
Deferred organizational cost 37,161
Total 11,249,504
LIABILITIES AND NET ASSETS
Less Liabilities:
Accrued organizational costs 37,161
Advance from Trustee 105,533
Accrued Trustee fees and expenses 3,735
Accrued Sponsor fees 688
Deferred sales charges payable 57,871
Total liabilities 204,988
Net assets:
Balance applicable to 1,118,288 Units of
fractional undivided interest outstanding
(Note (c)):
Capital, plus net unrealized market
appreciation of $923 $11,007,647
Undistributed net investment income
(Note (b)) 36,869
Net assets $11,044,516
Net asset value per Unit ($11,044,516 divided
by 1,118,288 Units) $ 9.8763
See notes to financial statements
STATEMENT OF OPERATIONS
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 2
FOR THE PERIOD FROM
JUNE 7, 1996
(DATE OF DEPOSIT)
TO MAY 31, 1997
Investment income - interest $459,319
Less Expenses:
Trustee fees and expenses 14,575
Sponsor fees 688
Amortization of organizational costs 6,558
Total expenses 21,821
Investment income - net 437,498
Net unrealized market appreciation 923
Net increase in net assets resulting from operations $438,421
See notes to financial statements
STATEMENT OF CHANGES IN NET ASSETS
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 2
FOR THE PERIOD FROM
JUNE 7, 1996
(DATE OF DEPOSIT)
TO MAY 31, 1997
Operations:
Investment income - net $ 437,498
Net unrealized market appreciation 923
Net increase in net assets resulting from
operations 438,421
Capital Share Transactions:
Creation on 745,525 Units 7,465,225
Deferred sales charge (44,806)
Total capital share transactions 7,420,419
Net investment income distributions (426,807)
Net increase in net assets 7,432,033
Net assets:
Beginning of period (Note (c)) 3,612,483
End of period (including undistributed net investment
income of $36,869) $11,044,516
See notes to financial statements
NOTES TO FINANCIAL STATEMENTS
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 2
MAY 31, 1997
(a) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of the significant
accounting policies of the Trust:
(1) Basis of Presentation
The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of the
Trust and is responsible for establishing and maintaining a system of
internal controls directly related to, and designed to provide
reasonable assurance as to the integrity and reliability of, financial
reporting of the Trust. The Trustee is also responsible for all
estimates and accruals reflected in the Trust's financial statements.
The Evaluator determines the price for each underlying Security
included in the Trust's Portfolio of Securities on the basis set forth
in Part II of this Prospectus, "Public Offering of Units - Public
Offering Price". Under the Securities Act of 1933 ("the Act"), as
amended, the Sponsor is deemed to be an issuer of the Trust Units. As
such, the Sponsor has the responsibility of an issuer under the Act
with respect to financial statements of the Trust included in the
Trust's Registration Statement under the Act and amendments thereto.
(2) Investments
Investments are stated at market value as determined by the Evaluator
based on the offering side evaluations on the last day of trading
during the period. The offering side values on the dates of deposit
represents the cost of investments to the Trust.
(3) Income Taxes
The Trust is not an association taxable as a corporation for Federal
income tax purposes; accordingly, no provision is required for such
taxes.
(4) Expenses
The Trust pays annual Trustee's fees, estimated expenses and
Evaluator's fees, and may incur additional charges as explained and
under "Trust Expenses" in Part II of this Prospectus.
(b) DISTRIBUTIONS
Interest received by the Trust is distributed to the Unitholders on
or shortly after the twentieth day of each month after deducting
applicable expenses. Receipts other than interest are distributed as
explained in "Unitholders - Distributions to Unitholders" in Part II
of this Prospectus.
NOTES TO FINANCIAL STATEMENTS
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 2
MAY 31, 1997
(c) ORIGINAL COST TO INVESTORS
The original cost to investors represents the aggregate initial
public offering price as of the date of deposit (June 7, 1996)
exclusive of accrued interest, computed on the basis set forth under
"Public Offering of Units - Public Offering Price" in Part II of this
Prospectus.
A reconciliation of the original cost of Units to investors to the
net amount applicable to investors as of May 31, 1997 follows:
Original cost to investors $ 3,766,721
Less: Gross underwriting commissions (sales charge) 154,238
Net cost to investors 3,612,483
Cost of supplemental creations of units 7,439,047
Deferred sales charge (44,806)
Unrealized market appreciation 923
Net amount applicable to investors $11,007,647
(d) OTHER INFORMATION
Selected data for a Unit of the Trust during the period:
Income distributions during period $ .6217
Net asset value at end of period $9.8763
Trust Units outstanding at end of period 1,118,288
SCHEDULE OF PORTFOLIO SECURITIES
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 2
MAY 31, 1997
PORT- RATINGS(2)
FOLIO FACE COUPON MATURITY STANDARD & REDEMPTIONS MARKET
NO. TITLE OF SECURITIES AMOUNT RATE DATE MOODY'S POOR'S PROVISIONS
(3) VALUE(1)(4)
1. BankAmerica $ 750,000 6.200% 02/15/06 A2 A Non-callable $
704,340
2. Bankers Trust 750,000 7.375 05/01/08 A3 A- Non-callable 749,647
3. Chase Manhattan 750,000 6.750 08/15/08 A2 A- Non-callable 720,360
4. Citicorp 750,000 6.750 08/15/05 A2 A Non-callable 731,528
5. Walt Disney Corp. 750,000 6.750 03/30/06 A2 A Non-callable 734,340
6. First Union Corp. 750,000 7.000 03/15/06 A2 A- Non-callable
741,683
7. Fleet Financial 750,000 7.125 04/15/06 A3 BBB+ Non-callable
743,850
8. Ford Motor Credit 750,000 6.750 08/15/08 A1 A+ Non-callable
719,257
9. General Motors 750,000 6.625 10/15/05 A3 A- Non-callable 726,360
10. Household Financial 750,000 7.650 05/15/07 A2 A Non-callable
769,350
11. Lehman Brothers 750,000 8.500 05/01/07 Baa1 A Non-callable
801,698
12. Mellon Financial 750,000 6.700 03/01/08 A3 A- Non-callable
717,315
13. Merrill Lynch 750,000 7.375 05/15/06 A1 A+ Non-callable 761,955
14. NationsBank Corp. 750,000 6.500 03/15/06 A3 A- Non-callable
718,035
15. Wells Fargo 750,000 6.875 04/01/06 A2 BBB+ Non-callable
735,135
$11,250,000 $11,074,853
See notes to schedule of portfolio securities
NOTES TO SCHEDULE OF PORTFOLIO SECURITIES
FIDELITY DEFINED TRUSTS SERIES 2
INVESTMENT GRADE SERIES 2
MAY 31, 1997
(1) The market value of the Securities as of May 31, 1997 was
determined by the Evaluator on the basis of offering side evaluations
for the securities on the last trading date of the period (May 30,
1997).
(2) A brief description of the applicable Standard & Poor's, Moody's
and Duff & Phelps rating symbols and their meanings is set forth under
"Trust Information - Description of Ratings" in this Prospectus.
"N.R." indicates that the issue has not been rated by that rating
agency.
(3) There is shown under this heading the year in which each issue of
Bonds is initially or currently redeemable and the redemption price
for that year. Unless otherwise indicated, each issue continues to be
redeemable at declining prices thereafter but not below par value.
The prices at which the Bonds may redeemed or called prior to maturity
may or may not include a premium and, in certain cases, may be less
than the cost of the Bonds to Trust. In addition, certain bonds in
the portfolio may be redeemed in whole or in part other than by
operation of the stated redemption provisions under certain unusual or
extraordinary circumstances specified in the instruments setting forth
the terms and provisions of such Bonds.
(4) At May 31, 1997, the net unrealized market appreciation of all
Securities was comprised of the following:
Gross unrealized market appreciation $ 13,717
Gross unrealized market depreciation (12,794)
Net unrealized market appreciation $ 923
The aggregate cost of the Securities for Federal income tax purposes
was $11,073,930 at May 31, 1997.
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report, dated September 9, 1997,
accompanying the financial statements of the Fidelity Defined Trusts
Series 2 (Rolling Government Series 2, GNMA Portfolio; Investment
Grade Series 1, Intermediate Insured Utility Portfolio; and Investment
Grade Series 2, Corporate Portfolio)included herein and to the
reference to our Firm as experts under the heading "Auditors" in the
prospectus which is a part of this registration statement.
DELOITTE & TOUCHE LLP
September 30, 1997
New York, New York
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report, dated September 9, 1997,
accompanying the financial statements of the Fidelity Defined Trusts
Series 2 (Rolling Government Series 2, GNMA Portfolio; Investment
Grade Series 1, Intermediate Insured Utility Portfolio; and Investment
Grade Series 2, Corporate Portfolio)included herein and to the
reference to our Firm as experts under the heading "Auditors" in the
prospectus which is a part of this registration statement.
DELOITTE & TOUCHE LLP
September 30, 1997
New York, New York
INDEPENDENT AUDITORS' REPORT
THE UNITHOLDERS, SPONSOR AND TRUSTEE FIDELITY DEFINED TRUSTS SERIES 2
(Rolling Government Series 2, GNMA Portfolio; Investment Grade Series
1, Intermediate Insured Utility Portfolio; and Investment Grade Series
2, Corporate Portfolio)
We have audited the statements of financial condition and schedules of
portfolio securities of Fidelity Defined Trusts Series 2 (Rolling
Government Series 2, GNMA Portfolio; Investment Grade Series 1,
Intermediate Insured Utility Portfolio; and Investment Grade Series 2,
Corporate Portfolio)as of May 31, 1997, and the related statements of
operations and changes in net assets for the period from June 7, 1996
(date of deposit) to May 31, 1997. These financial statements are the
responsibility of the Trustee (see Footnote (a)(1)). Our
responsibility is to express an opinion on these financial statements
based on our audits.We conducted our audits 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 securities owned as of May 31, 1997 as
shown in the statements of financial condition and schedules of
portfolio securities by correspondence with The Chase Manhattan Bank,
the Trustee. An audit also includes assessing the accounting
principles used and the significant estimates made by the Trustee, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.In
our opinion, the financial statements referred to above present
fairly, in all material respects, the financial positions of Fidelity
Defined Trusts Series 2 (Rolling Government Series 2, GNMA Portfolio;
Investment Grade Series 1, Intermediate Insured Utility Portfolio; and
Investment Grade Series 2, Corporate Portfolio) as of May 31, 1997,
and the results of their operations and the changes in their net
assets for the period from June 7, 1996 (date of deposit) to May 31,
1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
September 9, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR FIDELITY DEFINED TRUST
SERIES 2, INVESTMENT GRADE SERIES 2,
CORPORATE PORTFOLIO
AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<CIK> 0001012679
<NAME> Fidelity Defined Trusts Series II
<SERIES>
<NUMBER> 1
<NAME> INVESTMENT GRADE SERIES 2
CORPORATE PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-07-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 11,073,930
<INVESTMENTS-AT-VALUE> 11,074,853
<RECEIVABLES> 137,490
<ASSETS-OTHER> 37,161
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11,249,504
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 204,988
<TOTAL-LIABILITIES> 204,988
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,006,724
<SHARES-COMMON-STOCK> 1,118,288
<SHARES-COMMON-PRIOR> 372,763
<ACCUMULATED-NII-CURRENT> 36,869
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 923
<NET-ASSETS> 11,044,516
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 459,319
<OTHER-INCOME> 0
<EXPENSES-NET> 21,821
<NET-INVESTMENT-INCOME> 437,498
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 923
<NET-CHANGE-FROM-OPS> 438,421
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 426,807
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 745,525
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,432,033
<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> 0
<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> <S> <C>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR FIDELITY DEFINED TRUST
SERIES 2,
GNMA PORTFIOL AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL
STATEMENTS
</LEGEND>
<RESTATED>
<CIK> 0001012679
<NAME> Fidelity Defined Trusts Series II
<SERIES>
<NUMBER> 2
<NAME> ROLLING GOVERNMENT SERIES 2, GNMA
PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-07-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 19,370,556
<INVESTMENTS-AT-VALUE> 19,380,948
<RECEIVABLES> 201,810
<ASSETS-OTHER> 25,805
<OTHER-ITEMS-ASSETS> 8,034
<TOTAL-ASSETS> 19,616,597
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 131,881
<TOTAL-LIABILITIES> 131,881
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,356,601
<SHARES-COMMON-STOCK> 1,943,316
<SHARES-COMMON-PRIOR> 49,702
<ACCUMULATED-NII-CURRENT> 117,723
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,392
<NET-ASSETS> 19,484,716
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 564,110
<OTHER-INCOME> 0
<EXPENSES-NET> 17,357
<NET-INVESTMENT-INCOME> 546,753
<REALIZED-GAINS-CURRENT> 923
<APPREC-INCREASE-CURRENT> 10,392
<NET-CHANGE-FROM-OPS> 558,068
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 510,918
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,893,935
<NUMBER-OF-SHARES-REDEEMED> 321
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 18,995,203
<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> 0
<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> <S> <C>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR FIDELITY DEFINED TRUST
SERIES 2, INVESTMENT GRADE SERIES 1,
INTERMEDIATE INSURED UTILITY PORTFOLIO
AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<CIK> 0001012679
<NAME> Fidelity Defined Trusts Series II
<SERIES>
<NUMBER> 3
<NAME> INVESTMENT GRADE SERIES 1
INTERMEDIATE INSURED UTILITY PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-07-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 13,276,678
<INVESTMENTS-AT-VALUE> 13,316,711
<RECEIVABLES> 312,297
<ASSETS-OTHER> 38,011
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,667,019
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 391,089
<TOTAL-LIABILITIES> 391,089
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,194,534
<SHARES-COMMON-STOCK> 1,366,794
<SHARES-COMMON-PRIOR> 124,254
<ACCUMULATED-NII-CURRENT> 41,363
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 40,033
<NET-ASSETS> 13,275,930
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 480,176
<OTHER-INCOME> 0
<EXPENSES-NET> 23,853
<NET-INVESTMENT-INCOME> 456,323
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 40,033
<NET-CHANGE-FROM-OPS> 496,356
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 447,596
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,242,540
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,095,202
<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> 0
<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
