FILE NO. 333-16711
Securities and Exchange Commission
Washington, D.C. 20549-1004
to
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: Fidelity Defined Trusts
Series 3
B. Name of Depositor: National Financial Services Corporation
C. Complete address of Depositor's principal executive offices:
82 Devonshire Street N7A
Boston, MA 02109-3614
D. Name and complete address of agents for service:
National Financial Services Corporation Chapman And Cutler
Attention: David J. Pearlman Attention: Mark J. Kneedy
82 Devonshire Street N7A 111 West Monroe Street
Boston, MA 02109-3614 Chicago, Illinois 60603
E. Title and amount of securities being registered: An indefinite number
of Units pursuant to Rule 24f-2 promulgated under the Investment Company
Act of 1940, as amended
F. Proposed maximum offering price to the public of the securities being
registered: Indefinite
G. Amount of registration fee: $0.00
H. Approximate date of proposed sale to the public:
As Soon As Practicable After The Effective Date Of
The Registration Statement
/X/ Check box if it is proposed that this filing will become effective on
December 17, 1996
pursuant to Rule 487.
______________________________________________________________________
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a) may determine.
FIDELITY DEFINED TRUSTS
SERIES 3
CROSS REFERENCE SHEET
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Essential Information
) The Sponsor
3. Name and address of Trustee ) Essential Information
) Trust Administration
4. Name and address of principal ) Public Offering of Units
underwriter
5. Organization of trust ) The Trusts
6. Execution and termination of ) The Trusts
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Trusts
trust's securities and ) Tax Status
rights of security holders ) Public Offering of Units
) Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trusts
) Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and expenses ) Prospectus Front Cover Page
) Essential Information
) Portfolio
)
) Trust Expenses
) Public Offering of Units
) Unitholders and Sponsor
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Essential Information
)
(d) Variations in fees among certain ) Public Offering of Units
classes of holders ) Unitholders
(e) Certain other fees, expenses or ) Trust Expenses
charges payable by holders ) Unitholders
(f) Certain profits to be received ) Public Offering of Units
by depositor, principal ) Public Offering of Units
underwriter, trustee or any ) Portfolio
affiliated persons )
(g) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Unitholders
15. Receipt and handling of payments ) Public Offering of Units
from purchasers )
16. Acquisition and disposition of ) The Trusts
underlying securities ) Unitholders
) Trust Administration
17. Withdrawal or redemption ) Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Unitholders
(b) Reinvestment of distributions ) Distribution Reinvestment
(c) Reserves or special funds ) Trust Expenses
) Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Portfolio
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) The Sponsor
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) The Sponsor
of Depositor )
30. Controlling persons of Depositor ) The Sponsor
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering of Units
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering of Units
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices of principal ) *
underwriter )
(c) Salesmen of principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Essential Information
) Trust Expenses
) Public Offering of Units
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
45. Suspension of Redemption Rights ) *
46. (a) Redemption valuation ) Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering of Units
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Essential Information
) Trust Expenses
50. Trustee's lien ) Trust Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's ) Trust Expenses
securities )
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Tax Status
VII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent Certified
1(c) to Form S-6) ) Public Accountants
Statements of Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
The investor is advised to read and retain this Prospectus for future
reference.
FIDELITY
DEFINED TRUSTS
SERIES 3
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.
(large solid bullet) Laddered Government
Series 3, Short Treasury
Portfolio
(large solid bullet) Laddered Government
Series 4, Short/Intermediate Treasury Portfolio
(large solid bullet) Rolling Government
Series 3, Short Treasury
Portfolio
PROSPECTUS
DECEMBER 17, 1996(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109
TABLE OF CONTENTS PAGE
SUMMARY
ESSENTIAL INFORMATION
THE TRUSTS
LADDERED GOVERNMENT SERIES 3, SHORT TREASURY
PORTFOLIO AND
LADDERED GOVERNMENT SERIES 4,
SHORT/INTERMEDIATE
TREASURY PORTFOLIO
ROLLING GOVERNMENT SERIES 3, SHORT TREASURY
PORTFOLIO
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
STATEMENTS OF CONDITION
TRUST INFORMATION
General Information
Risk Factors
Rating of Units
Retirement Plans
Tax Status
Distribution Reinvestment
Interest, Estimated Long-Term Return and Estimated Current
Return
Public Offering of Units
Market for Units
Redemption
Unitholders
Investment Supervision
Trust Administration
Trust Expenses
The Sponsor
Legal Opinions
Independent Certified Public Accountants
ESTIMATED CASH FLOWS TO UNITHOLDERS
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.
LADDERED GOVERNMENT SERIES - Laddered Government Series 3, Short Treasury
Portfolio and Laddered Government Series 4, Short/Intermediate Treasury
Portfolio (the "Laddered Trusts") were each formed for the purpose of
providing safety of capital as is consistent with current income and
investment flexibility through an investment in a portfolio of U.S.
Treasury Obligations with laddered maturities that are backed by the full
faith and credit of the United States Government. Interest Income
distributed by each Treasury Portfolio is exempt from state personal income
taxes in all states. Each Treasury Portfolio is available to non-resident
aliens and the income from such Trusts, provided certain conditions are
met, will be exempt from withholding for U.S. federal income tax for such
foreign investors. A FOREIGN INVESTOR MUST PROVIDE A COMPLETED W-8 FORM TO
HIS/HER FINANCIAL REPRESENTATIVE OR THE TRUSTEE TO AVOID WITHHOLDING ON
HIS/HER ACCOUNT. Units of the Laddered Trusts are rated "AAA" by Standard &
Poor's, a Division of The McGraw-Hill Companies ("Standard & Poor's").
ROLLING GOVERNMENT SERIES - Rolling Government Series 3, Short Treasury
Portfolio (the "Rolling Trust") was formed to obtain safety of capital as
is consistent with current income and current monthly distributions of
interest through an investment in a portfolio of U.S. Treasury Obligations
that are backed by the full faith and credit of the United States
Government. The Trust has been designed to maintain a short dollar-weighted
average maturity, no greater than 10 months. This Trust seeks to reduce
Unit price fluctuations due to changing interest rates by reinvesting
approximately four times a year until February, 2000 the proceeds of
maturing U.S. Treasury Obligations into additional U.S. Treasury
Obligations with maturities of approximately one year so that the Trust
will maintain a portfolio with a dollar-weighted average maturity of
approximately 0.80 years for most of the Trust's life. Units of the Rolling
Trust are rated "AAA" by Standard & Poor's.
SUMMARY
PUBLIC OFFERING PRICE. The Public Offering Price per Unit of a Trust during
the initial offering period is equal to a pro rata share of the offering
prices of the Securities in such Trust plus or minus a pro rata share of
cash, if any, in the Principal Account held or owned by such Trust, plus
accrued interest and the respective sales charge for a Trust, as indicated
under "Essential Information." The secondary market Public Offering Price
per Unit will be based upon a pro rata share of the bid prices of the
Securities in each Trust plus or minus a pro rata share of cash, if any, in
the Principal Account held or owned by such Trust, plus accrued interest
plus the applicable sales charge indicated under "Trust Information -
Public Offering of Units - Public Offering Price." The sales charge is
reduced on a graduated scale for sales involving at least $500,000 or
50,000 Units and will be applied on whichever basis is more favorable to
the investor. The minimum initial amount which an investor may purchase of
a Trust is $5,000.
REINVESTMENT. Certain eligible Unitholders may elect for distributions of
principal and/or interest on their Units to be automatically invested,
without a sales charge, in shares of certain mutual funds managed by
Fidelity Management & Research Company, an affiliate of the Sponsor. Please
ask your financial consultant regarding the availability of distribution
reinvestment.
ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of the opening
of business on the Initial Date of Deposit, the Estimated Long-Term Return
and the Estimated Current Return, if applicable, for each Trust were as set
forth in "Essential Information." There is no assurance that either the
present Estimated Current Return or the present Estimated Long-Term Return
will be realized in the future. See "Trust Information - Interest,
Estimated Long-Term Return and Estimated Current Return" for information
regarding the calculation of each figure.
MARKET FOR UNITS. After the initial offering period, the Sponsor, while
under no obligation to do so, intends to maintain a market for the Units
and to offer to repurchase such Units at prices which are based on the
aggregate bid side evaluation of the Securities in a Trust plus accrued
interest.
RISK FACTORS. An investment in the Trusts should be made with an
understanding of the risks associated therewith, including, among other
factors, the inability of the issuer or an insurer to pay the principal of
or interest on a security when due, the general condition of the relevant
securities market, economic recession, volatile interest rates, early call
provisions and changes to the tax status of the Securities. The value of
the underlying Securities will fluctuate inversely with changes in interest
rates. The uncertain economic conditions of recent years, together with the
monetary policies and fiscal measures adopted to attempt to deal with them,
have resulted in wide fluctuations in interest rates and, thus, in the
value of fixed rate debt obligations generally and long-term obligations in
particular. The Sponsor cannot predict the degree to which such
fluctuations will continue in the future. See "Risk Factors" in each Trust
section and "Trust Information - Risk Factors."
FIDELITY DEFINED TRUSTS SERIES 3
ESSENTIAL INFORMATION
AT THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT:
DECEMBER 17, 1996
SPONSOR: NATIONAL FINANCIAL SERVICES CORPORATION
EVALUATOR: MULLER DATA CORPORATION
TRUSTEE: THE CHASE MANHATTAN BANK
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
LADDERED LADDERED ROLLING
GOVERNMENT GOVERNMENT GOVERNMENT
SERIES 3 SERIES 4 SERIES 3
Public Offering Price per Unit (1)(2) $ 10.105 $ 10.104 $ 10.193
Principal Amount of Securities per Unit $ 10.000 $ 10.000 $ 10.000
Estimated Current Return based on
Public Offering Price (3)(4)(5) 5.23% 5.57% 5.45%
Estimated Long-Term Return (3)(4)(5) 4.94% 5.37% 4.64%
Estimated Normal Annual Distribution per Unit $ 0.52848 $ 0.56304 $ 0.55548
Principal Amount of Securities $ 500,000 $ 500,000 $ 500,000
Number of Units 50,000 50,000 50,000
Fractional Undivided Interest per Unit 1/50,000 1/50,000 1/50,000
Calculation of Public Offering Price:
Aggregate Offering Price of Securities $ 496,391 $ 496,358 $ 500,721
Aggregate Offering Price of Securities per Unit $ 9.928 $ 9.927 $ 10.014
Plus Sales Charge per Unit (6) $ 0.177 $ 0.177 $ 0.179
Public Offering Price per Unit (1)(2) $ 10.105 $ 10.104 $ 10.193
Redemption Price per Unit $ 9.924 $ 9.923 $ 10.012
Sponsor's Initial Repurchase Price per Unit $ 9.928 $ 9.927 $ 10.014
Excess of Public Offering Price per
Unit over Redemption Price per Unit $ 0.181 $ 0.181 $ 0.181
Excess of Public Offering Price per Unit
over Sponsor's Initial Repurchase Price per $ 0.177 $ 0.177 $ 0.179
Unit
Calculation of Estimated Net Annual
Interest Income per Unit :
Estimated Annual Interest Income $ 0.54813 $ 0.58175 $ 0.57500
Less: Estimated Annual Expense $ 0.01970 $ 0.01860 $ 0.01970
Estimated Net Annual Interest Income $ 0.52843 $ 0.56315 $ 0.55530
Estimated Daily Rate of Net Interest
Accrual per Unit (if applicable) $ 0.00146 $ 0.00156 $ 0.00154
8 4 3
Estimated Average Life of Securities 2.44 yrs 3.67 yrs 0.65 yrs
Estimated Average Life of Trust 2.44 yrs 3.67 yrs 3.65 yrs
Minimum Principal Value of the Trust
under which Trust Agreement may be terminated 20% 20% 20%
(7)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
LADDERED LADDERED ROLLING
GOVERNMENT GOVERNME GOVERNMEN
SERIES 3 NT T
SERIES 4 SERIES 3
Trustee's Annual Fee and Estimated Expenses $ 1.36 $ 1.39 $ 1.38
per $1,000 principal amount of Securities (8)
Estimated net annual interest income
per Unit during the first year $ 0.5284 $ 0.5631 $ 0.55530
3 5
Interest Payments (9):
First Payment per Unit, $ .02935 $ .03128 $ .030850
representing 20 days 7 6
Estimated Normal Monthly $ 0.0440 $ 0.0469 $ 0.04628
Distribution per Unit 4 2
Estimated Normal Annual $ 0.5284 $ 0.5630 $ 0.55548
Distribution per Unit 8 4
Sales Charge (3):
As a percentage of Public Offering 1.750% 1.750% 1.750%
Price per Unit
As a percentage of net amount 1.781% 1.781% 1.781%
invested
As a percentage of net amount 1.781% 1.781% 1.781%
invested in earning assets
Date of Trust Agreements 12/17/96 12/17/96 12/17/96
First Settlement Date 12/20/96 12/20/96 12/20/96
Mandatory Termination Date 6/30/01 8/15/03 2/28/02
Maximum Evaluator's Annual $ 0.05 $ 0.10 $ 0.05
Evaluation Fee per $1,000 Principal
Amount of Securities
Maximum Sponsor's Annual $ 0.10 $ 0.10 $ 0.10
Surveillance Fee per $1,000 Principal
Amount of Securities
Estimated Annual Organizational $ 0.46 $ 0.27 $ 0.44
Expenses per Unit (10)
</TABLE>
Evaluations for purposes of sale, purchase or redemption of Units are made
as of the close of business of the Sponsor (currently 4:15 p.m. 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.
__________
(1) Anyone ordering Units for settlement after the First Settlement Date
will pay accrued interest from such date to the date of settlement
(normally three business days after order) less distributions from the
Interest Account subsequent to the First Settlement Date. For purchases
settling on the First Settlement Date, no accrued interest will be added to
the Public Offering Price.
(2) Many unit investment trusts issue a number of units such that each unit
represents approximately $1,000 principal amount of underlying securities.
The Sponsor, on the other hand, in determining the number of Units for each
Trust has elected not to follow this format but rather to provide that
number of Units which will establish as close as possible as of the Initial
Date of Deposit a Principal Amount of Securities per Unit of $10.
(3) 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."
(4) The Estimated Current Returns are calculated by dividing the estimated
net annual interest income per Unit by the Public Offering Price. The
Estimated Long-Term Returns are calculated using a formula which (1) takes
into consideration, and determines and factors in the relative weightings
of, the market values, yield (which take into account the amortization of
premiums and the accretion of discounts) and the expected retirement dates
of all of the Securities in the applicable Trust and (2) takes into account
a compounding factor and the expenses and sales charge associated with each
Trust Unit. Since the market values and estimated retirement dates of the
Securities and expenses of each Trust will change, there is no assurance
that the present Estimated Current Returns or present Estimated Long-Term
Returns as indicated above will be realized in the future. For more
information see "Trust Information - Interest, Estimated Long-Term and
Estimated Current Return."
(5) 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 any reinvestment (in the case of a Rolling
Government Series), principal prepayment, redemption, maturity, call,
exchange or sale of the underlying Securities. The estimated cash flows to
Unitholders for the Laddered Trusts are set forth under "Estimated Cash
Flows to Unitholders" or are available upon request at no charge from the
Sponsor.
(6) 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.
(7) The minimum principal value of each Trust under which the Trust
Agreement may be terminated is 20% of the total aggregate principal amount
of securities deposited in each Portfolio during the initial offering
period.
(8) The Trustee's annual fee includes $0.07 per $1,000 principal amount of
securities which is paid to the Sponsor in return for its providing certain
bookkeeping and administrative services to its customers. See "Trust
Information - Trust Expenses."
(9) Unitholders will receive interest distributions monthly. The Record
Date is the 10th day of the month, commencing January, 1997 and the
distribution date is the 20th day of the month, commencing January,
1997.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.
(10) 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."
THE TRUSTS
Fidelity Defined Trusts Series 3 consists of the underlying separate unit
investment trusts set forth above. 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. Laddered
Government Series 3, Short Treasury Portfolio and Laddered Government
Series 4, Short/Intermediate Treasury Portfolio are sometimes referred to
herein as the "Laddered Trusts" and Rolling Government Series 3, Short
Treasury Portfolio is sometimes referred to herein as the "Rolling Trust."
Collectively, all of the Trusts are referred to herein as the "Treasury
Portfolios." 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") and The Chase Manhattan Bank (the
"Trustee").<F1>
As used herein, the terms defined below shall have the following meanings:
"Securities," "Bonds" and "U.S. Treasury Obligations" shall mean the
obligations initially deposited in the Trusts described under "Portfolio"
for each Trust (including all contracts to purchase such obligations
accompanied by an irrevocable letter of credit sufficient to perform such
contracts initially deposited in the Trusts) and any additional obligations
deposited in the Trusts following the Initial Date of Deposit.
On the Initial Date of Deposit, the Sponsor delivered to the Trustee that
aggregate principal amount of Securities or contracts for the purchase
thereof for deposit in each Trust as set forth under "Essential
Information." In exchange for the Securities so deposited, the Trustee
delivered to the Sponsor documentation evidencing the ownership of that
number of Units for each Trust as indicated in "Essential Information."
Each Trust initially consists of delivery statements (i.e., contracts) to
purchase obligations. The Sponsor has a limited right of substitution for
such Securities in the event of a failed contract. See "Trust Information -
General Information."
Reference is made to the Trust Agreement, and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreement.
<F1>
Additional Units of each Trust may be issued from time to time following
the Initial Date of Deposit by depositing in such Trust additional
Securities or contracts for the purchase thereof together with irrevocable
letters of credit or cash. As additional Units are issued by a Trust as a
result of the deposit of additional Securities by the Sponsor, the
aggregate value of the Securities in a Trust will be increased and the
fractional undivided interest in such Trust represented by each Unit will
be decreased. The Sponsor may continue to make additional deposits of
Securities into a Trust following the Initial Date of Deposit, provided
that such additional deposits will be in principal amounts which will
maintain the same original percentage relationship among the principal
amounts of the Securities in such Trust established on the Initial Date of
Deposit. Thus, although additional Units will be issued, each Unit will
continue to represent the same principal amount of each Security, and the
percentage relationship among the principal amount of each Security in the
respective Trust will remain the same. To the extent that any Units are
redeemed by the Trustee or additional Units are issued as a result of
additional Securities being deposited by the Sponsor, the fractional
undivided interest in a Trust represented by each unredeemed Unit will
increase or decrease accordingly, although the actual interest in such
Trust represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which
may include the Sponsor, or until the termination of the Trust Agreement.
LADDERED GOVERNMENT SERIES 3, SHORT TREASURY PORTFOLIO AND LADDERED
GOVERNMENT SERIES 4, SHORT/INTERMEDIATE TREASURY PORTFOLIO
THE TRUST PORTFOLIO
Laddered Government Series 3, Short Treasury Portfolio and Laddered
Government Series 4, Short/Intermediate Treasury Portfolio were each formed
for the purpose of providing safety of capital as is consistent with
current income and investment flexibility by staggering the return of
principal over a predetermined period of time (a strategy referred to as
"laddered maturities"). The portfolio for each Trust consists of U.S.
Treasury Obligations that are backed by the full faith and credit of the
United States government. Each Trust Portfolio was also formed for the
purpose of providing protection against changes in interest rates and also
passing through to Unitholders in all states the exemption from state
personal income taxes afforded to direct owners of U.S. Treasury
Obligations. The value of the Units, the estimated current return and
estimated long-term return to new purchasers will fluctuate with the value
of the Securities included in a portfolio which will generally increase or
decrease inversely with changes in interest rates.
In selecting U.S. Treasury Obligations for deposit in the Trusts the
following factors, among others, were considered by the Sponsor: (a) the
types of such obligations available; (b) the prices and yields of such
obligations relative to other comparable obligations, including the extent
to which such obligations are traded at a premium or at a discount from
par; and (c) the maturities of such obligations.
Laddered Government Series 3, Short Treasury Portfolio consists of a
portfolio of U.S. Treasury Obligations with differing maturities, designed
to return approximately 20% of the principal amount of the Trust
semi-annually, commencing in 1998. Laddered Government Series 3, Short
Treasury Portfolio has a dollar weighted average maturity of 2.4 years.
Laddered Government Series 4, Short/Intermediate Treasury Portfolio
consists of a portfolio of U.S. Treasury Obligations with differing
maturities, designed to return approximately 20% of the principal amount of
the Trust annually, commencing in 1998. Laddered Government Series 4,
Short/Intermediate Treasury Portfolio has a dollar weighted average
maturity of 3.7 years.
TAX STATUS
The Laddered Trusts may be appropriate investments for investors who desire
to participate in a portfolio of taxable, fixed income securities offering
the safety of capital provided by a portfolio backed by the full faith and
credit of the United States. In addition, many investors may benefit from
the exemption from state and local personal income taxes that will pass
through each Laddered Trust to Unitholders in all states. Each Laddered
Trust has been created as a grantor trust for federal tax reasons: For
additional information concerning each Laddered Trust's status as a grantor
trust see "Trust Information - Tax Status - Grantor Trust."
RISK FACTORS
The Securities are direct obligations of the United States and are backed
by its full faith and credit although the Units of the Laddered Trusts are
not so backed. The Securities 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 Laddered Trust 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. For a discussion of other considerations associated with an
investment in Units, see "Trust Information - General Information" and
"Trust Information - Risk Factors - General."
LADDERED GOVERNMENT SERIES 3, SHORT TERM TREASURY PORTFOLIO
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT:
DECEMBER 17, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FACE AMOUNT DESCRIPTION COUPO MATURIT COST OF BONDS TO
N Y TRUST (1)
$ 100,000 U.S. Treasury Note 5.375 of 5/31/98 $ 99,617
%
100,000 U.S. Treasury Note 5.500 of 11/15/9 99,539
% 8
75,000 U.S. Treasury Note 6.375 of 5/15/99 75,879
%
25,000 U.S. Treasury STRIPs 0.000 of 5/15/99 21,762
(2) %
100,000 U.S. Treasury Note 5.875 of 11/15/9 99,922
% 9
100,000 U.S. Treasury Note 5.875 of 6/30/00 99,672
%
$ 500,000 $ 496,391
</TABLE>
LADDERED GOVERNMENT SERIES 4, SHORT/INTERMEDIATE TREASURY PORTFOLIO AS OF
THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: DECEMBER 17, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AGGREGATE DESCRIPTION COUPO MATURIT COST OF BONDS TO
PRINCIPAL N Y TRUST (1)
$ 100,000 U.S. Treasury Note 5.875 of 8/15/9 $ 100,234
% 8
100,000 U.S. Treasury Note 6.000 of 8/15/9 100,305
% 9
90,000 U.S. Treasury Note 6.250 of 8/31/0 90,682
% 0
10,000 U.S. Treasury STRIPs (2) 0.000 of 8/15/0 8,061
% 0
90,000 U.S. Treasury Note 6.500 of 8/31/0 91,413
% 1
10,000 U.S. Treasury STRIPs (2) 0.000 of 8/15/0 7,573
% 1
90,000 U.S. Treasury Note 6.375 of 8/15/0 90,985
% 2
10,000 U.S. Treasury STRIPs (2) 0.000 of 8/15/0 7,105
% 2
$ 500,000 $ 496,358
</TABLE>
________
(1) Some Securities may be represented by contracts to purchase such
Securities. During the initial offering period, evaluations of Securities
are made on the basis of current offering side evaluations of the
Securities. The aggregate offering price is greater than the aggregate bid
price of the Securities, which is the basis on which Redemption Prices will
be determined for purposes of redemption of Units after the initial
offering period. Other information regarding the Securities in the Trusts,
at the opening of business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
TRUST COST OF PROFIT OR ANNUAL BID SIDE
SECURITIES (LOSS) TO INTEREST VALUE OF
TO SPONSOR INCOME SECURITIES
SPONSOR TO TRUST
Laddered Government Series $ 496,225 $ 167 $ 27,406 $ 496,196
3
Laddered Government Series $ 496,285 $ 72 $ 29,088 $ 496,154
4
</TABLE>
(2) This Security has been purchased at a deep discount from the par value
because there is no stated interest income thereon. Securities which pay no
interest are normally described as "zero coupon" bonds. Over the life of
Securities purchased at a deep discount the value of such Securities will
increase such that upon maturity the holders of such securities will
receive 100% of the principal amount thereof.
ROLLING GOVERNMENT SERIES 3, SHORT
TREASURY PORTFOLIO
THE TRUST PORTFOLIO
Rolling Government Series 3, Short Treasury Portfolio was formed for the
purpose of providing safety of capital as is consistent with current income
and current monthly distributions of interest through an investment in a
portfolio of U.S. Treasury Obligations that are backed by the full faith
and credit of the United States government. Rolling Government Series 3,
Short Treasury Portfolio was also formed for the purpose of passing through
to Unitholders in all states the exemption from state personal income taxes
afforded to direct owners of U.S. Treasury Obligations. The Rolling Trust
also seeks to provide an extendible investment by quarterly reinvesting,
until approximately February 2000 (the "Extension Period"), the proceeds of
maturing Securities into new U.S. Treasury Obligations ("Extension
Securities") with maturities of approximately one year. This reinvestment
strategy is designed to produce a higher overall yield than shorter-term
investments with less price volatility than longer-term investments. The
Rolling Trust has been designed to maintain a short dollar-weighted average
maturity, no greater than 10 months. The value of the Units, the estimated
current return and estimated long-term return to new purchasers will
fluctuate with the value of the Securities included in a portfolio which
will generally increase or decrease inversely with changes in interest
rates.
In selecting U.S. Treasury Obligations for deposit in the Rolling Trust,
the following factors, among others, were considered by the Sponsor: (a)
the types of such obligations available; (b) the prices and yields of such
obligations relative to other comparable obligations, including the extent
to which such obligations are traded at a premium or at a discount from
par; and (c) the maturities of such obligations.
EXTENSIONS. The initial portfolio consists of U.S. Treasury Obligations
with "laddered" maturities of approximately four months to 13 months.
Therefore, approximately 25% of the initial portfolio matures every three
months. The Sponsor is authorized to direct the reinvestment of the
proceeds of each maturing Security into Extension Securities (an
"Extension"). Extensions of approximately 25% of the portfolio at each
maturity of Securities will continue through the Extension Period and,
assuming the Rolling Trust does not terminate prior thereto, it is
anticipated that there will be twelve Extensions until principal
distributions commence in 2000.
Extension Securities are Securities (i) issued by the U.S. Treasury; (ii)
with a fixed maturity date that is within two months of the first
anniversary of the maturity date of the Security the proceeds of which are
being reinvested in the Extension Security; (iii) purchased at par or, in
order of preference, at a discount to, or premium over par, as close to par
as practicable; (iv) that would not cause Units of the Rolling Trust to
cease to be rated in the category AAA by Standard & Poor's; and (v) that
are not when, as and if issued obligations. The purchase of Extension
Securities shall not disqualify the Rolling Trust as a "regulated
investment company" under the Internal Revenue Code.
The guidelines under which the Rolling Trust will purchase Extension
Securities take into account price and maturity date. Whenever a U.S.
Treasury Obligation in the Rolling Trust's portfolio matures, the Sponsor
will direct the Trustee to purchase the most currently available 1-year
U.S. Treasury obligation at par. If no obligations are available at par,
the Sponsor will select obligations with a price as close as possible to
par. To preserve the Rolling Trust's par values, there will be a bias
favoring discounts, when available. Therefore, discounted obligations will
be selected so long as the discount is not more than three times the
smaller premium obligation available. That is, assuming no maturity date
differences, if there is an obligation available at a price of $100.125, no
alternative obligation will be selected at less than $99.625. If
obligations mature at different dates within the two-month permissible, in
determining which obligation to purchase the Sponsor will increase the
premium or discount of the bond by 25 cents for every month away from the
precise one-year maturity date of the original obligation being extended.
There will be no attempt to delay the purchase of the Extension Securities
to take advantage of market movements.
During the Extension Period, the pro rata share of cash in the Principal
Account which has not been reinvested or committed for reinvestment will be
computed as of the 10th day of the month and distributions to the
Unitholders as of the related Record Date will be made on the 20th day of
such month. After the Extension Period, the pro rata share of cash in the
Principal Account will also be computed as described above. Proceeds from
the disposition of any of the Securities or amounts representing principal
on the Securities received after such Record Date and prior to the
following Distribution Date will be held in the Principal Account and not
distributed until the next Distribution Date. The Trustee is not required
to pay interest on funds held in the Principal or Interest Account (but may
itself earn interest thereon and therefore benefits from the use of such
funds) nor to make a distribution from the Principal Account unless the
amount available for distribution shall equal at least $1.00 per 100 Units.
See "Trust Information - Unitholders - Distributions to Unitholders."
TAX STATUS
Rolling Government Series 3, Short Treasury Portfolio may be an appropriate
investment vehicle for investors who desire to participate in a portfolio
of taxable, fixed income securities offering the safety of capital as is
consistent with current income and current monthly distributions of
interest provided by an investment backed by the full faith and credit of
the United States. In addition, investors will benefit from the exemption
from state and local personal income taxes that will pass through the
Rolling Trust to Unitholders in all states. Rolling Government Series 3,
Short Treasury Portfolio has been created as a regulated investment company
for federal tax reasons. For additional information concerning the Rolling
Trust's status as a regulated investment company. See "Trust Information -
Tax Status - Regulated Investment Company."
RISK FACTORS
The Securities are direct obligations of the United States and are backed
by its full faith and credit although the Units of the Rolling Trust are
not so backed. The Securities 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 the Rolling Trust 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 monetary policies and 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. For a discussion of other considerations
associated with an investment in Units, see "Trust Information - General
Information" and "Trust Information - Risk Factors."
The reinvestment of the proceeds of maturing Securities into Extension
Securities may result in Extension Securities being acquired at a market
discount or a market premium. See "Trust Information - Risk Factors -
General" for a discussion of market discounts and premiums.
ROLLING GOVERNMENT SERIES 3, SHORT TREASURY PORTFOLIOS AS OF THE OPENING OF
BUSINESS ON THE INITIAL DATE OF DEPOSIT:
DECEMBER 17, 1996
AGGREGATE DESCRIPTION COUPO MATURIT COST OF BONDS TO
PRINCIPAL N Y TRUST (1)
$ 125,000 U.S. Treasury Note 6.625 of 3/31/97 $ 125,605
%
125,000 U.S. Treasury Note 5.625 of 6/30/97 125,297
%
125,000 U.S. Treasury Note 5.500 of 9/30/97 125,103
%
125,000 U.S. Treasury Note 5.250 of 12/31/9 124,716
% 7
$ 500,000 $ 500,721
____________________
(1) Some Securities may be represented by contracts to purchase such
Securities. During the initial offering period, evaluations of Securities
are made on the basis of current offering side evaluations of the
Securities. The aggregate offering price is greater than the aggregate bid
price of the Securities, which is the basis on which Redemption Prices will
be determined for purposes of redemption of Units after the initial
offering period.
Other information regarding the Securities in the Rolling Trust, at the
opening of business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
TRUST COST OF PROFIT OR ANNUAL BID SIDE
SECURITIES (LOSS) TO INTEREST VALUE OF
TO SPONSOR INCOME SECURITIES
SPONSOR TO TRUST
Rolling Government Series 3 $ 500,479 $ 243 $ 28,750 $ 500,615
</TABLE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
UNITHOLDERS
FIDELITY DEFINED TRUSTS SERIES 3
We have audited the accompanying statements of condition and the related
portfolios of Fidelity Defined Trusts Series 3 (Laddered Government Series
3, Short Treasury Portfolio, Laddered Government Series 4,
Short/Intermediate Treasury Portfolio and Rolling Government Series 3,
Short Treasury Portfolio) as of the opening of business, December 17, 1996.
The statements of condition and portfolios are the responsibility of the
Trustee and the Sponsor. Our responsibility is to express an opinion on
such 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 Securities owned at
December 17, 1996 and a letter of credit deposited to purchase Securities
by correspondence with The Chase Manhattan Bank, the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by that the Trustee and the Sponsor, as well as evaluating the overall
financial statement presentation. We believe 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 position of Fidelity Defined Trusts
Series 3 (Laddered Government Series 3, Short Treasury Portfolio, Laddered
Government Series 4, Short/Intermediate Treasury Portfolio, and Rolling
Government Series 3, Short Treasury Portfolio) as of the opening of
business, December 17, 1996, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
New York, New York
December 17, 1996
FIDELITY DEFINED TRUSTS SERIES 3
STATEMENTS OF CONDITION AT THE OPENING OF BUSINESS ON
DECEMBER 17, 1996, THE INITIAL DATE OF DEPOSIT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
LADDERED LADDERED ROLLING
GOVERNMENT GOVERNMENT GOVERNME
SERIES 3 SERIES 4 NT
SERIES 3
INVESTMENT IN SECURITIES
Contracts to purchase $ 496,391 $ 496,358 $ 500,721
Securities (1)
Organizational Costs (3) 41,403 40,528 40,003
Accrued interest to Initial Date of Deposit on 4,393 9,310 9,527
underlying Securities (1)(3)
Total $ 542,187 $ 546,196 $ 550,251
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Number of Units 50,000 50,000 50,000
LIABILITIES AND INTEREST OF
UNITHOLDERS
Liabilities -
Accrued Organizational Costs (2) 41,403 40,528 40,003
Accrued interest payable to 4,393 9,310 9,527
Sponsor (1)(3)
Interest of Unitholders -
Cost to investors (4) $ 505,233 $ 505,199 $ 509,640
Less: Gross underwriting (8,842) (8,841) (8,919)
commission (4)
Net interest to $ 496,391 $ 496,358 $ 500,721
Unitholders (1)(3)(4)
Total $ 542,187 $ 546,196 $ 550,251
</TABLE>
__________
NOTES:
(1) The aggregate value of the Securities listed in each "Portfolio" and
their cost to such Trust are the same. The value of the Securities is
determined by Muller Data Corporation on the bases set forth under "Trust
Information - Public Offering of Units - Public Offering Price" based on
prices as of the opening of business on December 17, 1996. The contracts to
purchase Securities are collateralized by an irrevocable letter of credit
of $1,500,000 which has been deposited with the Trustee. Of this amount,
$1,493,470 relates to the offering price of Securities to be purchased.
(2) Each Trust (and therefore Unitholders) will bear all or a portion of
its organizational costs which will be deferred and amortized over five
years or over the life of the Trust if the term of such Trust is less than
five years. Organizational costs have been estimated based on a projected
size of $30,000,000 for each Trust. To the extent a Trust is larger or
smaller, the estimate will vary.
(3) The Trustee will advance to each Trust the amount of net interest
accrued to the First Settlement Date for distribution to the Sponsor as the
Unitholder of Record.
(4) The aggregate public offering price includes a sales charge for each
Trust as set forth under "Essential Information," assuming all single
transactions involve less than 50,000 Units. For single transactions
involving 50,000 or more Units, the sales charge is reduced (see "Trust
Information - Public Offering of Units - Public Offering Price"), resulting
in an equal reduction in both the Cost to investors and the Gross
underwriting commission while the Net interest to Unitholders remains
unchanged.
TRUST INFORMATION
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 any
way for any default, failure or defect in any Security. In the event of a
failure to deliver any Security that has been purchased for a Trust under a
contract, including those securities purchased on a "when, as and if
issued" basis ("Failed Securities"), the Sponsor is authorized under the
Trust Agreement to direct the Trustee to acquire other securities
("Replacement Securities") to make up the original corpus of such Trust.
Securities in certain of the Trusts may have been purchased on a "when, as
and if issued" or delayed delivery basis with delivery expected to take
place after the First Settlement Date. See "Notes to Portfolios" for each
Trust. Accordingly, the delivery of such Securities may be delayed or may
not occur. Interest on these Securities begins accruing to the benefit of
Unitholders on their respective dates of delivery. Unitholders of a Trust
will be "at risk" with respect to any "when, as and if issued" or "delayed
delivery" Securities included in their respective Trust portfolio (i.e.,
may derive either gain or loss from fluctuations in the evaluation of such
Securities) from the date they commit for Units.
The Replacement Securities must be purchased within 20 days after delivery
of the notice that a contract to deliver a Security will not be honored and
the purchase price may not exceed the amount of funds reserved for the
purchase of the Failed Securities. The Replacement Securities (i) must be
payable in United States currency, (ii) must be purchased at a price that
results in a yield to maturity and a current return at least equal to that
of the Failed Securities as of the Initial Date of Deposit, (iii) shall not
be "when, as and if issued" or restricted securities, (iv) must satisfy any
rating criteria for Securities originally included in such Trust, and (v)
must not cause the Units of such Trust to cease to be rated AAA by the
appropriate rating agency if the Units were so rated on the Initial Date of
Deposit. Whenever a Replacement Security is acquired for a Trust, the
Trustee shall, within five days thereafter, notify all Unitholders of the
Trust of the acquisition of the Replacement Security and shall, on the next
monthly distribution date which is more than 30 days thereafter, make a pro
rata distribution of the amount, if any, by which the cost to the Trust of
the Failed Security exceeded the cost of the Replacement Security. With the
exception of a Rolling Trust, once all of the Securities in a Trust are
acquired, the Trustee will have no power to vary the investments of such
Trust, i.e., the Trustee will have no managerial power to take advantage of
market variations to improve a Unitholder's investment.
If the right of limited substitution described in the preceding paragraphs
is not utilized to acquire Replacement Securities, the Sponsor will refund
the sales charge attributable to such Failed Securities to all Unitholders
of the applicable Trust and the Trustee will distribute the principal and
accrued interest attributable to such Failed Securities not more than 30
days after the date on which the Trustee would have been required to
purchase a Replacement Security. Unitholders should be aware that, at the
time of receipt of such principal, they may not be able to reinvest such
proceeds in other securities at a yield equal to or in excess of the yield
which such proceeds would have earned for Unitholders of such Trusts.
Whether or not a Replacement Security is acquired, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) will be paid
to Unitholders of a Trust to the date the Sponsor removes the Failed
Securities from such Trust if the Sponsor determines not to purchase a
Replacement Security or to the date of substitution if a Replacement
Security is purchased. All such interest paid to Unitholders which accrued
after the date of settlement for a purchase of Units will be paid by the
Sponsor. In the event a Replacement Security could not be acquired by a
Trust, the net annual interest income per Unit for such Trust would be
reduced and the Estimated Current Return and Estimated Long-Term Return
might be lowered.
Subsequent to the Initial Date of Deposit, a Security may cease to be rated
or its rating may be reduced below any minimum required as of the 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 "Trust Information -
Investment Supervision."
The Sponsor may not alter the portfolio of a Trust except upon the
occurrence of certain extraordinary circumstances or, in the case of the
Rolling Trust, in connection with a reinvestment of principal. See "Trust
Information - 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" 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 "Trust Information - 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 "Trust Information - Tax Status." Information with
respect to the call provisions and maturity dates of the Securities is
contained under "Portfolio" 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." 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
"Trust Information - 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.
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 "Trust Information - 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" 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 "Trust
Information - Tax Status."
LITIGATION. To the best of the Sponsor's knowledge, there is no litigation
pending as of the Initial Date of Deposit in respect of any Security which
might reasonably be expected to have a material adverse effect on the
Trusts. At any time after the Initial Date of Deposit, 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
Standard & Poor's has rated the Units of the Treasury Portfolios "AAA."
This is the highest rating assigned by Standard & Poor's. Capacity to pay
interest and repay principal is very strong. Standard & Poor's has been
compensated by the Sponsor for its services in rating Units of the Trusts.
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") is a current assessment of creditworthiness with respect to the
investments held by such trust. This assessment takes into consideration
the financial capacity of the issuers and of any guarantors, insurers,
lessees, or mortgagors with respect to such investments. The assessment,
however, does not take into account the extent to which trust expenses or
portfolio asset sales for less than the trust's purchase price will reduce
payment to the 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.
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 Laddered Government Series 3 and
Laddered Government Series 4, each of which are organized as grantor trusts
for federal tax purposes. In the opinion of Chapman and Cutler, special
counsel for the Sponsor, under existing law:
1. Each Trust is not an association taxable as a corporation for federal
income tax purposes.
2. Each Unitholder will be considered the owner of a pro rata portion of
each of the Trust 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
conisidered 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. The cost of
the Units to a Unitholder on the date such Units are purchased is allocated
among the Securities held in a Trust (in accordance with the proportion of
the fair market values of such Securities) in order to determine his tax
basis for his pro rata portion in each Security. 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 and, consequently, such Unitholders may have an increase in
taxable gain or reduction in capital loss upon the disposition of such
Units. Gain or loss upon the sale or redemption of Units is measured by
comparing the proceeds of such sale or redemption with the adjusted basis
of the Units. If the Trustee disposes of Securities, 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 Unitholder's 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 must be increased by the amount of accrued original issue
discount 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.
Limitations on Deductibility of Trust Expenses by Unitholders - Each
Unitholder's 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. Unitholders may be required to treat
certain expenses of a 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.
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, 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.
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.
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. 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 short-term capital gain (or loss) unless the Unitholder
has held his Units for more than one year in which case such capital gain
or loss will be long-term. For taxpayers other than corporations, net
capital gains are subject to a maximum marginal stated tax rate of 28
percent. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect
relative differences at which ordinary income and capital gains are taxed.
The tax cost 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.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates
on ordinary income while capital gains remain subject to a 28 percent
maximum stated rate for taxpayers other than corporations. Because some or
all capital gains are taxed at a comparatively lower rate under the Tax
Act, the Tax Act includes a provision that recharacterizes capital gains as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after
April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on
their investment in Units.
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) further provided that the exemption from withholding for U.S. federal
income taxes for interest on any U.S. Securities shall apply to the extent
the Securities were issued after July 18, 1984. Foreign investors should
consult their tax advisers with respect to United States tax consequences
of ownership of Units. On December 7, 1995 the U.S. Treasury Department
released proposed legislation that, if adopted, could affect the United
States federal income taxation of such non-United States Unitholders and
the portion of the Trust's income allocable to non-United States
Unitholders.
In the opinion of Carter, Ledyard & Milburn, special counsel to the Trusts
for New York tax matters each Trust is not an association taxable as a
corporation and the income of each Trust will be treated as the income of
the Unitholders 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 will be subject to
back-up withholding.
The foregoing discussion relates only to United States federal income taxes
and applies only to the Laddered Government Series which are described in
this Prospectus; 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 and the tax treatment
of Securities acquired at an original issue discount or market discount and
premium, if any.
REGULATED INVESTMENT COMPANY
The following discussion applies only to Rolling Government Series 3, which
is 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:
Rolling Government Series 3 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 the
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 the 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." The 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 the Trust is required by the Indenture.
Distributions from the Trust (other than its net capital gain), to the
extent of the earnings and profits of such Trust, will be taxable as
ordinary income to Unitholders. To the extent that distributions to a
Unitholder in any year exceed the 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 the Trust will not be
eligible for the 70% dividends-received deduction for corporations.
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 the Trust (and received by the Unitholders) on December 31
of the year such distributions are declared.
Distributions of the Trust's net capital gain which the 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. Distributions in partial liquidation, reflecting
the proceeds of prepayments, redemptions, maturities or sales of Securities
from the 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 are presently subject to a
maximum stated marginal rate of 28%. However, it should be noted that
legislative proposals are introduced from time to time that affect tax
rates and could affect relative differences at which ordinary income and
capital gains are taxed. A capital loss is long-term if the asset is held
for more than one year and short-term if held for one year or less.
The Tax Act raised tax rates on ordinary income while capital gains remain
subject to a 28% maximum stated rate for taxpayers other than corporations.
Because some or all capital gains are taxed at a comparatively lower rate
under the Act, the Act includes a provision that recharacterizes capital
gains as ordinary income in the case of certain financial transactions that
are "conversion transactions" effective for transactions entered into after
April 30, 1993. Unitholders and prospective investors should consult with
their tax advisors regarding the potential effect of this provision on
their investment in Units.
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 the
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 the Trust are held by fewer than 500 persons,
additional taxable income may be realized by the individual (and other
noncorporate) Unitholders in excess of the distributions received from the
Trust.
If a Security has been purchased by the 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 Security will generally constitute
ordinary income to the Trust to the extent of any accrued market discount
unless the 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 amount of remaining market discount that the amount of
interest paid during the accrual period (each month) bears to the total
amount of interest remaining to be paid on the Securities as of the
beginning of the accrual period.
Additional Units of the Trust may be issued after the Initial Date of
Deposit in respect of additional Securities deposited in the Trust by the
Sponsor. Because of possible market interest rate fluctuations, the
purchase price to the Trust of the additional Securities may differ from
the purchase price of the Securities in the 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 the Trust in proportion to
the asset value of the 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 the
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 the Trust
to such Unitholder (including amounts received upon the redemption of
Units) will be subject to back-up withholding.
Each Unitholder of the Trust shall receive an annual statement describing
the tax status of the distributions paid by the Trust. The foregoing
discussion relates only to the federal income tax status of the Trust and
to the tax treatment of distributions by the 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 the Trust, which
constitute dividends for Federal income tax purposes (other than dividends
which the 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 the Trust that are
designated by the 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 the 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 the 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 "Trust
Information - Unitholders - Distributions to Unitholders."
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Long-Term Return and the Estimated Current Return, if applicable, for each
Trust were as set forth in "Essential Information." 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 reinvestment (in the case of the
Rolling Government Series), 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 the Rolling Government Series, 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.
In order to acquire certain of the Securities contracted for by a Trust, it
may be necessary for the Sponsor or Trustee to pay on the dates for
delivery of such Securities amounts covering accrued interest on such
Securities which exceed the amount which will be made available in the
letter of credit furnished by the Sponsor on the Initial Date of Deposit.
The Trustee has agreed to pay any amounts necessary to cover any such
excess and will be reimbursed therefor, without interest, when funds become
available from interest payments on the Securities deposited in that Trust.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. Units of a Trust are offered at the Public Offering
Price thereof. During the initial offering period, the Public Offering
Price per Unit is equal to the aggregate of the offering side evaluations
of the Securities in such Trust, plus or minus a pro rata share of cash, if
any, in the Principal Account held or owned by such Trust plus accrued
interest and the applicable sales charge referred to in the tables below
divided by the number of outstanding Units of such Trust. Such price
determination as of the close of business on the day before the Initial
Date of Deposit was made on the basis of an evaluation of the Securities in
each Trust prepared by Muller Data Corporation, a firm regularly engaged in
the business of evaluating, quoting or appraising comparable securities.
The Public Offering Price for secondary market transactions, on the other
hand, 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.
The applicable sales charge per Unit for each Trust will be as set forth in
the following table:
LESS THAN $500,000 $500,000 TO $999,999 $1,000,000 AND UP
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT
PRICE INVESTED PRICE INVESTED PRICE INVESTED
1.750% 1.781% 1.500% 1.523% 1.250% 1.266%
</TABLE>
As indicated above, in connection with secondary market transactions, the
sales charge is based upon the dollar weighted average maturity of a Trust
and is determined in accordance with the tables set forth below. 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.
In connection with secondary market transactions, the sales charge per Unit
for each Trust will be set forth in the following table:
LESS THAN $500,000 $500,000 TO $1,000,000 AND UP
$999,999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT INVESTED PERCENT PERCENT PERCENT PERCENT PERCENT PERCENT
OF OF OF OF OF OF
OFFERING NET OFFERING NET OFFERING NET
PRICE AMOUNT PRICE AMOUNT PRICE AMOUNT
INVESTED INVESTED INVESTED
Less than 2 years 1.250% 1.266% 1.000% 1.010% 0.750% 0.756%
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 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
primary or secondary market at the Public Offering Price less the
concession the Sponsor typically would allow such broker-dealer. See "Trust
Information - 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 Initial Date of Deposit, the Public Offering Price would have been as
shown under "Essential Information." The Public Offering Price per Unit of
a Trust on the date of this Prospectus or on any subsequent date will vary
from the amount stated under "Essential Information" in accordance with
fluctuations in the prices of the underlying Securities and the amount of
accrued interest on the Units. The aggregate bid and offering side
evaluations of the Securities shall be determined (i) on the basis of
current bid or offering prices of the Securities, (ii) if bid or offering
prices are not available for any particular Security, on the basis of
current bid or offering prices for comparable bonds, (iii) by determining
the value of Securities on the bid or offer 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," on each business day
commencing with the Initial Date of Deposit of the Securities, 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." 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 First Settlement Date or any date of settlement
thereafter 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 on the Sponsor's business and may be deemed to be a benefit to
the Sponsor, subject to the limitations of the Securities Exchange Act of
1934. 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 "Trust Information - 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, 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,
with respect to sales settling subsequent to the First Settlement Date, 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.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the Public Offering Price in the sale of
Units to the public, the Trustee will advance the amount of accrued
interest as of the First Settlement Date and the same will be distributed
to the Sponsor as the Unitholder of record as of the First Settlement Date.
Consequently, the amount of accrued interest to be added to the Public
Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date.
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.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. While the Initial
Public Offering Price of Units will be determined on the basis of the
current offering prices of the Securities in a Trust, the redemption price
per Unit (as well as the secondary market price per Unit) at which Units
may be redeemed (see "Trust Information - Redemption") will be determined
on the basis of the current bid prices of the Securities. As of the opening
of business on the Initial Date of Deposit, the Public Offering Price per
Unit (based on the offering prices of the Securities in a Trust and
including the sales charge) exceeded the redemption price at which Units
could have been redeemed (based upon the current bid prices of the
Securities in a Trust) by the amount shown under "Essential Information."
Under current market conditions, the bid prices for U.S. Treasury
Obligations are expected to be approximately 1/8 to 1/4 of 1% lower than
the offer price of such obligations. In the past, bid prices on securities
similar to those in the Trusts have been lower than the offering prices
thereof by as much as 1% or more of principal amount in the case of
inactively traded bonds or as little as 1/2 of 1% in the case of actively
traded bonds, but the difference between such offering and bid prices may
be expected to average approximately 1/2 of 1% of principal amount. For
this reason, among others (including fluctuations in the market prices of
the Securities and the fact that the Public Offering Price includes a sales
charge), the amount realized by a Unitholder upon any redemption of Units
may be less than the price paid for such Units.
PUBLIC DISTRIBUTION OF UNITS. The Sponsor intends to qualify the Units for
sale in a number of states. 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 primary market concessions and agency commissions for each Trust are as
follows:
SERIES LESS THAN $500,000 TO $1,000,000
$500,000 $999,999 AND UP
Laddered Government Series .95% .75% .50%
3,
Short Treasury Portfolio
Laddered Government Series .95% .75% .50%
4,
Short/Intermediate
Treasury Portfolio
Rolling Government Series 3, .95% .75% .50%
Short
Treasury Portfolio
The secondary market concessions and agency commissions for each Trust are
as follows:
AVERAGE MATURITY LESS THAN $500,000 TO $1,000,000
$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 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. The Sponsor will receive gross sales charges equal to
the percentage of the Public Offering Price of the Units as stated under
"Public Offering Price" and will pay a fixed portion of such sales charges
to dealers and agents. In addition, the Sponsor may realize a profit or a
loss resulting from the difference between the purchase prices of the
Securities to the Sponsor and the cost of such Securities to a Trust, which
is based on the offering side evaluation of the Securities. See "Portfolio"
for each Trust. The Sponsor may also realize profits or losses with respect
to Securities deposited in a Trust which were acquired from underwriting
syndicates of which the Sponsor was a member. An underwriter or
underwriting syndicate purchases securities from the issuer on a negotiated
or competitive bid basis, as principal, with the motive of marketing such
securities to investors at a profit. The Sponsor may realize additional
profits or losses during the initial offering period on unsold Units as a
result of changes in the daily evaluation of the Securities in a Trust.
MARKET FOR UNITS
After the initial offering period, while not obligated to do so, 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. To the extent that a
market is maintained during the initial offering period, the prices at
which Units will be repurchased will be based upon the aggregate offering
side evaluation of the Securities in the Trusts. The aggregate bid prices
of the underlying Securities in each Trust are expected to be less than the
related aggregate offering prices (which is the evaluation method used
during the initial public offering period). Accordingly, 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.
The offering price of any Units resold by the Sponsor will be in accord
with that described in the currently effective Prospectus describing such
Units. 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,"
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.
While such minimum amounts may vary from time to time in accordance with
market conditions, it is anticipated that the minimum face amounts which
would be specified would range from $25,000 to $100,000. 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 U.S. Treasury Obligations 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 "Trust
Information - 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" 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
(including "when issued" contracts, if any) 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 Information - 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 Underwriter and 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 "Trust
Information - 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. The Trustee normally has no cash
for distribution to Unitholders until it receives interest payments on the
Securities in the Trust. Since interest usually is paid semi-annually,
during the initial months of the Trusts the Interest Account of each Trust,
consisting of accrued but uncollected interest and collected interest
(cash), will be predominantly the uncollected accrued interest that is not
available for distribution. On the dates set forth under "Essential
Information" for each Trust, the Trustee will commence distributions, in
part from funds advanced by the Trustee.
Thereafter, assuming the Trust retains its original size and composition,
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, 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 may be 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.
Because the period of time between the First Settlement Date and the first
Interest Distribution Date may be longer or shorter than a full period, the
first distribution may be a partial distribution.
Unitholders of a Treasury Portfolio 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 "Trust Information - 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.
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 U.S. Treasury Obligations
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;
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;
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;
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 the 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
may be needed from time to time to ensure that the 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 "Trust Information - 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. Muller Data Corporation serves as Evaluator. 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 may
be 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," 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," 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 and will share in profits, if
any, related to the deposit of Securities in the Trusts.
The Trustee receives for its services fees set forth under "Essential
Information." 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.
During the first year the Trustee has agreed to lower its fees and absorb
expenses by the amount set forth under "Essential Information." The
Trustee's fee will not be increased in future years in order to make up
this reduction in the Trustee's fee. 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 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," 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 may be 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 the 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 3d 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 3d 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
the 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 financial information with regard to the Sponsor relates to
the Sponsor only and not to these 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
financial 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 the
Laddered Government Series 3, Laddered Government Series 4 and Laddered
Government Series 5.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The statements of condition and the related portfolios at the Initial Date
of Deposit included in this Prospectus have been audited by Deloitte &
Touche LLP, independent certified public accountants, as set forth in their
report in the Prospectus, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the estimated distributions per 100 Units of
interest and principal to Unitholders. The tables assume no changes in
Trust expenses, no redemptions or sales of the underlying Securities prior
to maturity and the receipt of all principal due upon maturity. To the
extent the foregoing assumptions change, actual distributions will vary.
FIDELITY DEFINED TRUSTS
LADDERED GOVERNMENT SERIES 3
DATES ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DISTRIBUTION DISTRIBUTION DISTRIBUTION
Jan-97 $ 2.9357 $ 2.9357
Feb-97 to May-98 4.4035 4.4035
Jun-98 4.1122 $ 200.00 204.1122
Jul-98 to Oct-98 3.5294 3.5294
Nov-98 3.5294 200.00 203.5294
Dec-98 3.2310 3.2310
Jan-99 to Apr-99 2.6344 2.6344
May-99 2.6344 200.00 202.6344
Jun-99 2.3760 2.3760
Jul-99 to Oct-99 1.8592 1.8592
Nov-99 1.8592 200.00 201.8592
Dec-99 1.5528 1.5528
Jan-00 to Jun-00 0.9400 0.9400
Jul-00 0.4139 200.00 200.4139
FIDELITY DEFINED TRUSTS
LADDERED GOVERNMENT SERIES 4
DATES ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DISTRIBUTION DISTRIBUTION DISTRIBUTION
Jan-97 $ 3.1286 $ 3.1286
Feb-97 to Jul-98 4.6929 4.6929
Aug-98 4.6929 $ 200.00 204.6929
Sep-98 4.3739 4.3739
Oct-98 to Jul-99 3.7359 3.7359
Aug-99 3.7359 200.00 203.7359
Sep-99 3.4100 3.4100
Oct-99 to Jul-00 2.7581 2.7581
Aug-00 2.7581 20.00 22.7581
Sep-00 2.4530 180.00 182.4530
Oct-00 to Jul-01 1.8428 1.8428
Aug-01 1.8428 20.00 21.8428
Sep-01 1.5251 180.00 181.5251
Oct-01 to Jul-02 0.8899 0.8899
Aug-02 1.0382 200.00 201.0382
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, rating services
and legal counsel
The following exhibits:
1.1 Form of Trust Agreement for Fidelity Defined Trusts, Series 3 among
National Financial Services Corporation as Depositor and Portfolio
Supervisor, Muller Data Corporation as Evaluator and The Chase Manhattan
Bank as Trustee.
1.1.1 Form of Standard Terms and Conditions of Trust for Fidelity Defined
Trusts, Series 1 and certain subsequent series among National Financial
Services Corporation as Depositor, Evaluator and Portfolio Supervisor and
The Chase Manhattan Bank as Trustee (incorporated by reference to Amendment
No. 2 to the Registration on Form S-6 (File No. 33-62243) filed on behalf
of Fidelity Defined Trusts, Series 1).
1.4 Copy of Articles of Incorporation of National Financial Services
Corporation, Depositor (incorporated by reference to Amendment No. 2 to the
Registration on Form S-6 (File No. 33-62243) filed on behalf of Fidelity
Defined Trusts, Series 1).
1.5 Copy of By-Laws of National Financial Services Corporation, Depositor
(incorporated by reference to Amendment No. 2 to the Registration on Form
S-6 (File No. 33-62243) filed on behalf of Fidelity Defined Trusts, Series
1).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1.1 filed
herewith on page 2 and incorporated herein by reference).
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of securities being
registered.
3.3 Opinion of Counsel as to New York income tax status of securities being
registered.
3.4 Opinion of Counsel as to advancement of funds by Trustee.
4.1 Consent of Rating Agency.
4.2 Consent of Independent Certified Public Accountants.
4.3 Consent of Evaluator
6.1 List of Directors and Officers of National Financial Services
Corporation, Depositor (incorporated by reference to Amendment No. 2 to the
Registration on Form S-6 (File No. 33-62243) filed on behalf of Fidelity
Defined Trusts, Series 1).
7.1 Powers of Attorney executed by the Directors and Officers of National
Financial Services Corporation, Sponsor, listed on page S-3 of this
Registration Statement (incorporated by reference to the initial
Registration Statement on Form S-6 [File No. 33-62243] filed on behalf of
Fidelity Defined Trusts, Series 1).
Ex-27 Financial Data Schedules.
SIGNATURES
The Registrant, Fidelity Defined Trusts, Series 3, hereby identifies
Fidelity Defined Trusts, Series 1 and Fidelity Defined Trusts, Series 2,
for purposes of the representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series as to the
securities of which this Registration Statement is being filed do not
differ materially in type or quality from those deposited in such previous
series;
(2) that, except to the extent necessary to identify the specific
portfolio securities deposited in, and to provide essential financial
information for, the series with respect to the securities of which this
Registration Statement is being filed, this Registration Statement does not
contain disclosures that differ in any material respect from those
contained in the registration statements for such previous series as to
which the effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Fidelity Defined Trusts, Series 3 has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston and State of Massachusetts
on the 17th day of December, 1996.
Fidelity Defined Trusts, Series 3
(Registrant)
By: National Financial Services Corporation
(Depositor)
/s/ David J. Pearlman Assistant Clerk
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on
December 17, 1996.
Signature Title
James H. Messenger President and Director
Timothy M. McKenna Director
Robert P. Mazzarella Director
Sherif A. Nada Director
Shaugn Stanley Senior Vice President, Finance
and Chief Financial Officer
/s/ 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 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.
Exhibit 1.1
Fidelity Defined Trusts, Series 3
Trust Agreement
Dated: December 17, 1996
This Trust Agreement among National Financial Services Corporation, as
Depositor and Portfolio Supervisor, Muller Data Corporation as Evaluator,
and The Chase Manhattan Bank, as Trustee, sets forth certain provisions in
full and incorporates other provisions by reference to the document
entitled "Standard Terms and Conditions of Trust for Fidelity Defined
Trusts Series 1 effective January 3, 1996" (herein called the "Standard
Terms and Conditions of Trust"), and such provisions as are set forth in
full and such provisions as are incorporated by reference constitute a
single instrument. All references herein to Articles and Sections are to
Articles and Sections of the Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, the Evaluator and Portfolio
Supervisor agree as follows:
Part I
Standard Terms And Conditions Of Trust
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had
been set forth in full in this instrument.
Part II
Special Terms And Conditions Of Trust
The following special terms and conditions are hereby agreed to:
(a) The Securities defined in Section 1.01(5) listed in Schedule A hereto
have been deposited in trust under this Trust Agreement.
(b) The fractional undivided interest in and ownership of the Trust Fund
represented by each Unit for a Trust is the amount set forth under the
caption "Essential Information - Fractional Undivided Interest per Unit" in
the Prospectus.
(c) The number of units in a Trust referred to in Section 2.03 is set
forth under the caption "Essential Information - Number of Units" in the
Prospectus.
(d) The "First Settlement Date" for each Trust is the date set forth under
"Essential Information-First Settlement Date" in the Prospectus.
(e) The Trustee's compensation shall be computed according to the
following schedule, determined on the basis of the largest principal amount
of Securities held by the Trust during the period for which the
compensation is computed; provided , however, that until the Depositor
informs the Trustee that no further deposits of additional Securities will
be made pursuant to Section 2.01(b), such compensation shall be computed on
the basis of the principal amount of Securities held as of the Record Date
preceding the date on which the compensation is paid (or the Initial Date
of Deposit, as appropriate):
Rate per $1,000 principal amount of Securities
Laddered Gov't Laddered Gov't Rolling Gov't
Series 3, Series 4, Series 3,
Short Treasury Short/Inter- Short Treasury
Portfolio mediate Portfolio
Portfolio
$1.20 $1.23 $1.22
(f) Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust, Muller Data Corporation shall replace National
Financial Services Corporation as Evaluator.
(g) The second and third sentences of Section 4.03 of the Standard Terms
and Conditions of Trust are hereby deleted.
(h) Section 1.01.(2) of the Standard Terms and Conditions of Trust shall
be amended to read as follows:
"(2) "TRUSTEE" shall mean The Chase Manhattan Bank, or any successor
trustee appointed as hereinafter provided."
All references to The Chase Manhattan Bank, N.A. in the Standard Terms and
Conditions of Trust shall be amended to refer to The Chase Manhattan Bank.
(i) The fourth sentence of Section 2.01(b) of the Standard Terms and
Conditions of Trust shall be amended to read:
The Depositor, in each case, shall ensure that each deposit of additional
Securities pursuant to this Section shall be, as nearly as is practicable,
in the identical ratio as the percentage ratio for such Securities as is
specified in the Prospectus for the Trust (PROVIDED, HOWEVER, than any
deposit of additional Securities into a Trust which has not nor will elect
to be taxed as a Regulated Investment Company made after the 90th day
following the Date of Deposit shall be in identical ratio as the percentage
ratio for such Trust) and the Depositor shall ensure that such Securities
are identical to those deposited on the Date of Deposit.
(j) A new clause (viii) shall be added to subparagraph (1) of Section
3.14(a) of the Standard Terms and Conditions of Trust as follows:
"and (viii) if the Trust has not nor will elect to be taxed as a Regulated
Investment Company, be deposited within 110 days following the Date of
Deposit."
(k) The second paragraph of Section 5.02 of the Standard Terms and
Conditions of Trust shall be deleted and the following sentence shall be
added at the end of Section 4.01:
"The Evaluator shall make an evaluation of the Securities deposited in each
Trust as of the evaluation time specified in the Prospectus on the Date of
Deposit (or on the preceding business day if so specified in the
Prospectus). Such evaluation shall be made on the same basis as set forth
in this Section 4.01 and shall be based on the offering prices of said
Securities."
(l) The Trustee shall reimburse the Depositor from the Trustee's
commission the Depositor's cost of providing to its customers who are
Unitholders bookkeeping and administrative services with respect to such
Unitholders' Units of a kind customarily performed by the Trustee, not to
exceed that annual amount per $1,000 principal amount of Securities
specified in the prospectus (such maximum annual amount to be pro rated for
any calendar year in which the Depositor provides services during less than
the whole of such year). Such reimbursement shall be computed in the same
manner as the Trustee's compensation and shall be paid at or shortly after
the end of each calendar year against a statement submitted to Trustee,
which shall constitute the Depositor's certification that the amounts
claimed as due do not exceed the amount payable in accordance with this
paragraph, and the Trustee shall have no liability for payments made in
reliance upon such certification.
In Witness Whereof, National Financial Services Corporation, Muller Data
Corporation and The Chase Manhattan Bank have each caused this Trust
Agreement to be executed and the respective corporate seal to be hereto
affixed and attested by authorized officers; all as of the day, month and
year first above written.
National Financial Services Corporation, Depositor
By
The Chase Manhattan Bank, Trustee
By
Muller Data Corporation, Evaluator
By
National Financial Services Corporation, Portfolio Supervisor
By
Schedule A To The Trust Agreement
Securities Initially Deposited
In
Fidelity Defined Trusts, Series 3
(Note: Incorporated herein and made a part hereof is the "Portfolio" as set
forth for each Trust in the Prospectus.)
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
December 17, 1996
National Financial Services Corporation
82 Devonshire Street N7A
Boston, Massachusetts 02109-3614
Re: Fidelity Defined Trusts, Series 3
Gentlemen:
We have served as counsel for National Financial Services Corporation, as
Sponsor and Depositor (the "Depositor") of Fidelity Defined Trusts, Series
3 (the "Fund") in connection with the preparation, execution and delivery
of a Trust Agreement dated December 17, 1996 and a Standard Terms and
Conditions of Trust dated January 3, 1996 (collectively, the "Indenture")
each of which are between National Financial Services Corporation, as
Depositor and Portfolio Supervisor, Muller Data Corporation, as Evaluator
and The Chase Manhattan Bank, as Trustee, pursuant to which the Depositor
has delivered to and deposited the Securities listed in Schedule A to the
Trust Agreement with the Trustee and pursuant to which the Trustee has
issued to or on the order of the Depositor a certificate or certificates
representing units of fractional undivided interest in and ownership of the
Fund created under said Trust Agreement.
In connection therewith, we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable
us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Indenture and the execution and
issuance of certificates evidencing the Units in the Fund have been duly
authorized; and
2. the certificates evidencing the Units in the Fund when duly executed
and delivered by the Depositor and the Trustee in accordance with the
aforementioned Indenture, will constitute valid and binding obligations of
the Fund and the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-16711) relating to the Units referred
to above, to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
Chapman and Cutler
MJK/cjw
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
December 17, 1996
National Financial Services Corporation
82 Devonshire Street N7A
Boston, Massachusetts 02109-3614
The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004-2413
Re: Fidelity Defined Trusts, Series 3
Gentlemen:
We have acted as counsel for National Financial Services Corporation,
Depositor of Fidelity Defined Trusts, Series 3 (the "Fund"), in connection
with the issuance of units of fractional undivided interests in Laddered
Government Series 3, Short Treasury Portfolio and Laddered Government
Series 4, Short/Intermediate Treasury Portfolio (the "Trusts") of said
Fund, under a Trust Agreement dated December 17, 1996 and a Standard Terms
and Conditions of Trust dated January 3, 1996 (collectively, the
"Indenture") between National Financial Services Corporation, as Depositor
and Portfolio Supervisor, Muller Data Corporation, as Evaluator and The
Chase Manhattan Bank, as Trustee.
In this connection, we have examined the Registration Statement, the form
of Prospectus proposed to be filed with the Securities and Exchange
Commission, the Indenture and such other instruments and documents as we
have deemed pertinent. The opinions expressed herein assume that each
Trust will be administered, and investments by a Trust from proceeds of
subsequent deposits, if any, will be made, in accordance with the terms of
the Indenture. Each Trust holds Treasury Obligations and may include
"stripped" U.S. Treasury bonds (the "Stripped Treasury Securities")
(collectively "the Securities") as such term is defined in the Prospectus.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
(i) Each Trust is not an association taxable as a corporation but will be
governed by the provisions of Subchapter J (relating to Trusts) of Chapter
1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered the owner of a pro rata portion of
each Security in each Trust and will be considered to have received the
interest on his pro rata portion of each Security when interest on such
Security is received by the respective Trust. Each Unitholder will also be
required to include in taxable income for federal income tax purposes,
original issue discount with respect to his interest in any Security held
by each Trust which was issued with original issue discount at the same
time and in the same manner as though the Unitholder were the direct owner
of such interest. Original issue discount will be treated as zero with
respect to the Securities if it is "de minimis" within the meaning of
Section 1273 of the Code and, based upon a Treasury Regulation (the
"Regulation") which was issued on December 28, 1992 regarding the stripped
bond rules of the Code, original issue discount with respect to a Stripped
Treasury Security will be treated as zero if it is "de minimis" as
determined thereunder.
(iii) Each Unitholder will be considered the owner of a pro rata portion
of each asset in each Trust. The total cost to a Unitholder of his Units,
including sales charges, is allocated among his pro rata portion of each
asset held by each Trust (in proportion to the fair market values thereof
on the valuation date closest to the date the Unitholder purchases Units)
in order to determine his initial tax basis for his pro rata portion of
each asset held by each Trust. The Stripped Treasury Securities are
treated as bonds that were originally issued at an original issue discount.
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 the Trust (determined at the
time he acquires his Units, in the manner described above) shall be treated
as its "purchase price" by the Unitholder. Under the special rules
relating to stripped bonds, original issue discount applicable to the
Stripped Treasury Securities 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
greater than or equal to the "de minimis" amount described below. To the
extent 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 Stripped Treasury Securities this method will generally result in an
increasing amount of income to the Unitholders each year. A Unitholder's
tax basis for his pro rata portion of each asset held by a Trust may be
subject to adjustment as discussed in paragraph (v) hereof.
(iv) The Unitholder's aliquot share of the total proceeds received on the
disposition of, or principal paid with respect to, a Security held by a
Trust will constitute ordinary income (which will be treated as interest
income for most purposes) to the extent it does not exceed the accrued
market discount on such Security that has not previously been included in
taxable income by such Unitholder. A Unitholder may generally elect to
include market discount in income as such discount accrues. In general,
market discount is the excess, if any, of the Unitholder's pro rata portion
of the outstanding principal balance of a Security over the Unitholder's
initial tax cost for such pro rata portion, determined at the time such
Unitholder acquires his Units. However, market discount with respect to
any Security will generally be considered zero if it amounts to less than
0.25% of the obligation's stated redemption price at maturity times the
number of years to maturity. The market discount rules do not apply to
Stripped Treasury Securities because they are stripped debt instruments
subject to special original issue discount rules as discussed above. If a
Unitholder sells his Units, gain, if any, will constitute ordinary income
to the extent of the aggregate of the accrued market discount on the
Unitholder's pro rata portion of each Security that is held by a Trust that
has not previously been included in taxable income by such Unitholder. In
general, market discount accrues on a ratable basis unless the Unitholder
elects to accrue such discount on a constant interest rate basis. However,
no opinion is expressed herein regarding the precise manner in which market
discount accrues. The deduction by a Unitholder for any interest expense
incurred to purchase or carry Units will be reduced by the amount of any
accrued market discount that has not yet been included in taxable income by
such Unitholder. In general, the portion of any interest expense which is
not currently deducible would be ultimately deductible when the accrued
market discount is included in income.
(v) As discussed in paragraph (iv) hereof, if a Unitholder sells his
Units, gain, if any, will constitute ordinary income to the extent of the
aggregate of the accrued market discount (which has not previously been
included in such Unitholder' taxable income) with respect to a Unitholder's
pro rata portion of each Security held by a Trust. Any other gains (or
losses) will be capital gains (or losses) except in the case of a dealer or
a financial institution, and will be long-term if the Unitholder has held
his Units for more than one year. A Unitholder will recognize taxable
gains ( or losses) (a) upon redemption or sale of his Units, (b) if the
Trustee disposes of an asset or (c) upon receipt by the Trustee of payments
of principal on the Securities. The amount of any such gain (or loss) is
measured by comparing the Unitholder's pro rata share of the total proceeds
from the transaction with his adjusted tax basis in his Units or his pro
rata interest in the asset as the case may be, and then reducing such gain,
if any, to the extent characterized as ordinary income resulting from
accrued market discount as discussed above. A Unitholder's tax basis in
his Units and his pro rata portion of each of the underlying assets of a
Trust may be adjusted to reflect the accrual of market discount (if the
Unitholder has elected to include such discount in income as it accrues),
original issue discount and amortized bond premium, if any. The tax cost
reduction requirements of said Code relating to amortization of bond
premium may, under some circumstances, result in the Unitholder realizing a
taxable gain when his Units are sold or redeemed for an amount equal to his
original cost. In addition, Unitholders must reduce the tax basis of their
Units and their pro rata portion of the underlying assets of each Trust for
their share of accrued interest received by such Trust, if any, on
Securities delivered after the Unitholders pay for their Units to the
extent that such interest accrued on such Securities during the period from
the Unitholder's settlement date to the date such Securities are delivered
to such Trust and, consequently, such Unitholders may have an increase in
taxable gain or reduction in capital loss upon the disposition of such
Units or such Securities.
(vi) The Code provides that "miscellaneous itemized deductions" are
allowable only to the extent that they exceed two percent of an individual
taxpayer's adjusted gross income. Miscellaneous itemized deductions
subject to this limitation under present law include fees of the Trustee
and the Evaluator but does not include amortizable bond premium on
Securities held by a Trust.
The Code provides a complex set of rules governing the accrual of original
issue discount, including special rules relating to "stripped" debt
instruments such as the Stripped Treasury Securities. These rules provide
that original issue discount generally accrues on the basis of a constant
compound interest rate over the term of the security. Special rules apply
if the purchase price of a Treasury Obligation exceeds its original issue
price plus the amount of original issued 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 Treasury Obligation issued with
original issue discount exceeds his pro rata portion of its adjusted issue
price. In addition, as discussed above, the Regulation provides that the
amount of original issue discount on a stripped bond is considered zero if
the actual amount of original issue discount on such stripped bond as
determined under Section 1286 of the Code is less that a "de minimis"
amount, which, the Regulation provides, is the product of (i) 0.25 percent
of the stated redemption price at maturity and (ii) the number of full
years from the date the stripped bond is purchased (determined separately
for each new purchaser thereof) to the final maturity date of the bond.
For taxable years beginning after December 31, 1986 and before January 1,
1996, certain corporations may be subject to the environmental tax (the
"Superfund Tax") imposed by Section 59A of the Code. Interest received
from, and gains recognized from the disposition of, a Security by a Trust
or the sale of Units by a Unitholder will be included by such corporations
in the computation of the Superfund Tax.
The "Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates
on ordinary income while capital gains remain subject to a 28 percent
maximum stated rate for taxpayers other than corporations. Because some or
all capital gain are taxed at a comparatively lower rate under the Tax Act,
the Tax Act includes a provision that recharacterizes capital gains a
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after
April 30, 1993.
A Unitholder who is a foreign investor (i.e., an investor other than a U.S.
citizen or resident or 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 held by a Trust or the sale of his Units
provided that all of the following conditions are met:
(i) the interest income or gain is not effectively connected with the
conduct by the foreign investor of a trade or business within the United
States;
(ii) with respect to any gain, the foreign investor (if an individual) is
not present in the United States for 183 days or more during his or her
taxable year;
(iii) the Security was issued after July 18, 1984; and
(iv) the foreign investor provides all certification which may be required
of his status and of the matters contained in clauses (i) and (ii) above.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion
with respect to any other taxes, including foreign, state of local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-16711) relating to the Units referred
to above and to the use of our name and to the reference to our firm in
said Registration Statement and in the related Prospectus.
Very truly yours,
Chapman and Cutler
MJK/cjw
Exhibit 3.3
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
December 17, 1996
The Chase Manhattan Bank,
as Trustee of
Fidelity Defined Trusts, Series 3
4 New York Plaza
New York, New York 10004-2413
Attention: Mr. Paul J. Holland
Vice President
Re: Fidelity Defined Trusts, Series 3:
Laddered Government Series 3, Short Treasury Portfolio and
Laddered Government Series 4, Short/IntermediateTreasury Portfolio
Dear Sirs:
We are acting as special counsel with respect to New York tax matters for
Fidelity Defined Trusts, Series 3, with respect to three trusts thereunder,
Laddered Government Series 3, Short Treasury Portfolio and Laddered
Government Series 4, Short/Intermediate Treasury Portfolio (each, a
"TRUST"), which will be established under a certain Standard Terms and
Conditions of Trust and a related Trust Agreement each dated as of today
(collectively, the "INDENTURE") between National Financial Services
Corporation, as Depositor and Portfolio Supervisor (the "DEPOSITOR"),
Muller Data Corporation, as Evaluator (the "EVALUATOR") and The Chase
Manhattan Bank, as Trustee (the "TRUSTEE"). Pursuant to the terms of the
Indenture, units of fractional undivided interest in the Trust (the
"UNITS") will be issued in the aggregate number set forth in the Indenture.
We have examined and are familiar with originals or certified copies, or
copies otherwise identified to our satisfaction, of such documents as we
have deemed necessary or appropriate for the purpose of this opinion. In
giving this opinion, we have relied upon the two opinions, each dated today
and addressed to the Trustee, of Chapman and Cutler, counsel for the
Depositor , with respect to the matters of law set forth therein.
Based upon the foregoing, we are of the opinion that:
1. The Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the New York
State franchise tax of the New York general corporation tax.
2. Under the income tax laws of the State and City of New York, the income
of the Trust will be considered the income of the holders of the Units.
We consent to the filing of this opinion as an exhibit to the Registration
Statement (No. 333-16711) filed with the Securities and Exchange Commission
with respect to the registration of the sale of the Units and to the
references to our name under the captions "Tax Status" and "Legal Opinions"
in such Registration Statement and the preliminary prospectus included
therein.
Very truly yours,
Carter, Ledyard & Milburn
SFl:tbm
Exhibit 3.4
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
December 17, 1996
The Chase Manhattan Bank,
as Trustee of
Fidelity Defined Trusts, Series 3
4 New York Plaza
New York, New York 10004-2413
Attention: Mr. Paul J. Holland
Vice President
Re: Fidelity Defined Trusts, Series 3:
Laddered Government Series 3, Short Treasury Portfolio and
Laddered Government Series 4, Short/Intermediate Treasury Portfolio
Dear Sirs:
We are acting as counsel for The Chase Manhatten Bank ("Chase") in
connection with the execution and delivery of a Standard Terms and
Conditions of Trust and a related Trust Agreement each dated as of today
(collectively, the "Indenture") and between National Financial Services
Corporation, as Depositor and Portfolio Supervisor (the "Depositor"),
Muller Data Corporation, as Evaluator (the "Evaluator") and Chase, as
Trustee (the "Trustee"), establishing Fidelity Defined Trusts, Series 3,
which comprises Laddered Government Series 3, Short Treasury Portfolio,
Laddered Government Series 4, Short/Intermediate Treasury Portfolio and
Rolling Government Series 3, Short Treasury Portfolio (each, a "Trust"),
and the execution by Chase, as Trustee under the Indenture, of a
certificate or certificates evidencing ownership of a number of units
constituting the entire interest in the respective Trust (such certificate
or certificates and such aggregate units being herein called "Certificates"
and "Units"), each of which Units represents an undivided interest in the
Trust, which consists of United States Treasury Obligations (including
confirmations of contracts for the purchase of certain obligations not yet
delivered and cash, cash equivalents or an irrevocable letter of credit in
the amount required for such purchase upon the receipt of such
obligations), such obligations being defined in the Indenture as Securities
and referenced in the schedules to the Indenture.
We have examined the Indenture, the Closing Memorandum delivered today by
the parties to the Indenture (the "Closing Memorandum"), the form of
Certificate and such other documents as we have deemed necessary in order
to render this opinion. Based on the foregoing, we are of the opinion
that:
1. Chase is a duly organized and corporation having the powers of a trust
company under the laws of the state of New York.
2. The Indenture has been duly executed and delivered by Chase and,
assuming due execution and delivery by the Depositor, constitutes the valid
and legally binding obligation of Chase.
3. The Certificates are in proper form for execution and delivery by
Chase, as Trustee.
4. Chase, as Trustee, has duly executed and delivered to or upon the order
of the Depositor a Certificate or Certificates evidencing ownership of the
Units, registered in the name of the Depositor. Upon receipt of
confirmation of the effectiveness of the registration statement for the
sale of the Units filed with the Securities and Exchange Commission under
the Securities Act of 1993, the Trustee may deliver such other
Certificates, in such names and denominations as the Depositor may request,
to or upon the order of the Depositor as provided in the Closing
Memorandum.
5. Chase, as Trustee, may lawfully advance to the Trust amounts as may be
necessary to provide periodic interest distributions of approximately equal
amounts, and may be reimbursed, without interest, for any such advances
form funds in the interest account, as provided in the Indenture.
In rendering the foregoing opinion, we have not considered, among other
things, whether the Securities have been duly authorized and delivered.
Very truly yours,
Carter, Ledyard & Milburn
SFl:dbc
Exhibit 4.1
Standard & Poor's
25 Broadway
New York, NY 10004-1064
December 17, 1996
Chapman & Cutler
111 West Monroe Street
Chicago, IL 60603
Re: Fidelity Defined Trusts Series 3 consisting of Laddered Government
Series 3, Short Treasury Portfolio; Laddered Government Series 4,
Short/Intermediate Treasury Portfolio and
Rolling Government Series 3, Short Treasury Portfolio
Pursuant to your request for a Standard & Poor's rating on the units of the
above-captioned Trust, SEC 333-16711, we have reviewed the information
presented to us and have assigned a "AAA" rating to the units of the Trust
and a "AAA" rating to the securities contained in the Trust. The ratings
are direct reflections of the portfolios of the Trust, which will be
composed solely of U. S. Treasury Debt Obligations fully guaranteed as to
principal and interest by the full faith and credit of the United States.
You have permission to use the name of Standard & Poor's and the
above-assigned ratings in connection with your dissemination of information
relating to these units, provided that it is understood that the ratings
are not "market" ratings nor recommendations to buy, hold, or sell the
units of the trusts or the securities contained in the Trust. Further, it
should be understood the rating on the units does not take into account the
extent to which Trust expenses or portfolio asset sales for less than the
Trust's purchase price will reduce payment to the unit holders of the
interest and principal required to be paid on the portfolio assets.
Standard & Poor's reserves the right to advise its own clients,
subscribers, and the public of the ratings. Standard & Poor's relies on
the sponsor and its counsel, accountants, and other experts for the
accuracy and completeness of the information submitted in connection with
the ratings. Standard & Poor's does not independently verify the truth or
accuracy of any such information.
This letter evidences our consent to the use of the name of Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. in
connection with the rating assigned to the units in the registration
statement or prospectus relating to the units or the Trust. However, this
letter should not be construed as a consent by us, within the meaning of
Section 7 of the Securities Act of 1933, to the use of the name of Standard
& Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc. in
connection with the ratings assigned to the securities contained in the
Trust. You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Please be certain to send us a copy of your final prospectus as soon as it
becomes available. Should we not receive it within a reasonable time after
the closing or should it not conform to the representations made to us, we
reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
Exhibit 4.2
Consent of Independent Auditors
We consent to the use of our report dated December 17, 1996, accompanying
the financial statements of the Fidelity Defined Trusts Series 3 (Laddered
Government Series 3, Short Treasury Portfolio, Laddered Government Series
4, Short/Intermediate Treasury Portfolio and Rolling Government Series 3,
Short Treasury Portfolio) included herein and to the reference to our Firm
as experts under the heading "Independent Certified Public Accountants" in
the prospectus which is a part of this registration statement.
Deloitte & Touche LLP
December 17, 1996
New York, New York
MULLER DATA CORPORATION
395 Hudson Street
New York, New York 10014-3622
December 17, 1996
Fidelity Capital Markets
164 Northern Avenue
Boston, MA 02110
Re: Fidelity Defined Trusts, Series 3
Gentlemen:
We have examined Registration Statement File No. 333-16711 for the above
captioned trusts. We hereby acknowledge that Muller Data Corporation is
currently acting as the evaluator for the trust. We hereby consent to the
use in the Registration Statement of the reference to Muller Data
Corporation as evaluator.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.
Sincerely
Mario S. Buscemi
Chief Operating Officer
MSB:tg
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DEFINED TRUSTS SERIES 3 Laddered Government
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR FIDELITY
DEFINED TRUSTS SERIES 3 Fidelity Rolling
Government Series 3, Short Treasury Portfolio AND
IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
<RESTATED>
<CIK> 0001027384
<NAME> FIDELITY DEFINED TRUSTS, SERIES 3
<MULTIPLIER> 1
<SERIES>
<NUMBER> 2
<NAME> Fidelity Rolling Government Series 3, Short Treasury Portfolio
<S>
<C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-17-1996
<PERIOD-START> DEC-17-1996
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 500,721
<INVESTMENTS-AT-VALUE> 500,721
<RECEIVABLES> 9,527
<ASSETS-OTHER> 40,003
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 550,252
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,530
<TOTAL-LIABILITIES> 49,530
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 500,721
<SHARES-COMMON-STOCK> 50,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 500,721
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 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 TRUSTS SERIES 3 Fidelity Laddered
Government Series 3 (Short) AND
IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
<RESTATED>
<CIK> 0001027384
<NAME> FIDELITY DEFINED TRUSTS, SERIES 3
<MULTIPLIER> 1
<SERIES>
<NUMBER> 3
<NAME> Fidelity Laddered Government Series 3 (Short)
<S>
<C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-17-1996
<PERIOD-START> DEC-17-1996
<PERIOD-END> DEC-17-1996
<INVESTMENTS-AT-COST> 496,391
<INVESTMENTS-AT-VALUE> 496,391
<RECEIVABLES> 4,393
<ASSETS-OTHER> 41,403
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 542,187
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,796
<TOTAL-LIABILITIES> 45,796
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 496,391
<SHARES-COMMON-STOCK> 50,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 496,391
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 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
Memorandum
File No. 333-16711
The Prospectus and the Indenture filed with Amendment No. 1 to the
Registration Statement on Form S-6 have been revised to reflect information
regarding the execution of the Indenture and the deposit of securities on
December 17, 1996 and to set forth certain statistical data based thereon.
In addition, there are a number of other changes described below.
The Prospectus
Pages 4-6 The following information for each Trust appears:
The total number of units of each Trust.
The Public Offering Price at the opening of business on the Initial Date
of Deposit.
The initial annual fee of the Trustee.
The first and second distributions and record dates.
The estimated long-term returns and estimated current returns (if
applicable) to Unitholders as of the opening of business on the Initial
Date of Deposit.
Estimated net annual unit income.
Pages 9-14 The following information for each Trust appears on the pages
indicated:
Summary data regarding the composition of the portfolio of each Trust.
The portfolio for each Trust.
Page 15 The Report of Independent Certified Public Accountants has been
completed.
Page 16 The Statements of Condition have been completed.
Page 49 Estimated Cash Flows to Unit holders have been completed.
The Trust Agreement and Standard Terms and Conditions of Trust
The Trust Agreement has been conformed to reflect the execution thereof.
Chapman and Cutler
December 17, 1996
