The investor is advised to read and retain this Prospectus for future
reference.
FIDELITY
DEFINED TRUSTS
MUNICIPAL INCOME
TRUST, SERIES 1
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) Insured Massachusetts Trust Series 1
(large solid bullet) Insured Pennsylvania Trust Series 1
PROSPECTUS
MARCH 5, 1997(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA
02109(FIDELITY_LOGO_GRAPHIC) 82 DEVONSHIRE STREET, BOSTON, MA 02109
Table of Contents Pag
e
Insured Massachusetts Trust, Series 1
Insured Pennsylvania Trust, Series 1
Report of Independent Auditors
Part B
The Fidelity Defined Trusts - Municipal Income Trust Series
Objectives of the Trusts
Summary of Portfolios
Risk Factors
Composition of Trusts
Insurance on the Bonds
Public Offering of Units
Market for Units
Accrued Interest
Public Distributions of Units
Estimated Long Term Return and Estimated Current Return
Tax Status
Trust Expenses
Distributions to Unitholders
Distribution Reinvestment
Reports to Unitholders
Unit Value and Evaluation
Ownership and Transfer of Units
Redemption
Purchase of Units by the Sponsor
Trust Administration
The Trustee
The Sponsor
Other Information
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.
PROSPECTUS - PART A
SUMMARY
INSURED MASSACHUSETTS TRUST, SERIES 1 (the "Insured Massachusetts Trust")
consists of a portfolio of interest-bearing obligations issued by or on
behalf of the State of Massachusetts or certain United States Territories
or authorities or political subdivisions thereof which, in the opinion of
recognized bond counsel to the issuing authorities, provide income which is
exempt from Federal income tax and Massachusetts income tax, as detailed
herein.
INSURED PENNSYLVANIA TRUST, SERIES 1 (the "Insured Pennsylvania Trust")
consists of a portfolio of interest-bearing obligations issued by or on
behalf of the State of Pennsylvania or certain United States Territories or
authorities or political subdivisions thereof which, in the opinion of
recognized bond counsel to the issuing authorities, provide income which is
exempt from Federal income tax and Pennsylvania income tax, as detailed
herein.
INSURED MASSACHUSETTS TRUST, SERIES 1
Insured Massachusetts Trust, Series 1 (the "INSURED MASSACHUSETTS TRUST"),
consists of a portfolio of interest-bearing obligations issued by or on
behalf of the State of Massachusetts or certain United States Territories
or authorities or political subdivisions thereof which, in the opinion of
recognized bond counsel to the issuing authorities, provide income which is
exempt from Federal income tax, and Massachusetts income tax, as detailed
below.
The objectives of the Insured Massachusetts Trust are conservation of
capital and income exempt from Federal and applicable state and local
income taxes. The objectives are, of course, dependent upon the continuing
ability of the issuers, obligors and/or insurers to meet their respective
obligations.
The Insured Massachusetts Trust consists of seven obligations of issuers
located in the State of Massachusetts. The Bond issues in the Insured
Massachusetts Trust are either general obligations of governmental entities
or are revenue bonds payable from the income of a specific project or
authority. The Bonds in the Insured Massachusetts Trust are divided by
purpose of issue and represent the percentage of aggregate principal amount
of the Bonds as indicated by the following table:
NUMBER OF ISSUES PURPOSE OF ISSUE PORTFOLIO PERCENTAGE
1 Health Care 16.7%
1 Transportation 16.7%
3 University and School 46.7%
2 Water & Sewer 20.0%
The Insured Massachusetts Trust is considered to be concentrated in Bonds
of University and School Issuers, which involves additional risks not
present in a trust not so concentrated. Such risks include declining
numbers of "college age" individuals and the possible inability to raise
tuition and fees. See "Risk Factors' in Part B of this Prospectus for a
discussion of the risks associated with investments in the bonds of various
issuers.
Each of five Bond issues represents 16.7% or more of the aggregate
principal amount of the Bonds in the Insured Massachusetts Trust or a total
of approximately 83.3%. The largest such issue represents approximately
16.7%. None of the Bonds in the Trust are subject to call within seven
years of the Initial Date of Deposit, although certain bonds may be subject
to an extraordinary call.
All of the Bonds included in the Insured Massachusetts Trust are insured by
MBIA Insurance Corporation or other insurers. The insurance guarantees the
timely payment of principal and interest of the Bonds, but does not
guarantee the value of the Bonds or the Units. As a result of the
insurance, the Bonds and the Units in the Insured Massachusetts Trust have
received a rating of "AAA" by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("STANDARD & POOR'S").
INSURED MASSACHUSETTS TRUST, SERIES 1
ESSENTIAL INFORMATION
AT THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT OF THE BONDS -
MARCH 5, 1997
SPONSOR: NATIONAL FINANCIAL SERVICES CORPORATION
TRUSTEE: THE CHASE MANHATTAN BANK
EVALUATOR: MULLER DATA CORPORATION
<TABLE>
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General Information
Principal Amount of Bonds in the Trust $ 3,000,000
Number of Units 300,000
Fractional Undivided Interest in the Trust per Unit 1/300,000
Principal Amount (Par Value) of Bonds per Unit $ 10.00
Public Offering Price:
Aggregate Offering Price Evaluation of Bonds in the Portfolio $ 2,870,791
Aggregate Offering Price Evaluation per Unit $ 9.569
Sales Charge 4.75% (4.987% of the Aggregate Offering Price Evaluation per Unit) (1) $ 0.477
Public Offering Price per Unit (2) $ 10.046
Sponsor's Initial Repurchase Price per Unit (2) $ 9.567
Redemption Price per Unit (3) $ 9.526
Excess of Public Offering Price per Unit Over Redemption Price per Unit $ 0.520
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit $ 0.043
</TABLE>
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First Settlement Date March 10, 1997
Discretionary Liquidation Amount The Insured Massachusetts Trust may be terminated if
the value of such Trust is less than 20% of the aggregate
principal amount of the Bonds deposited in such Trust
during the primary offering period.
Mandatory Termination Date December 31, 2045
</TABLE>
Evaluations for purposes of sale, purchase or redemption of Units are made
as of the close of trading (generally 4:00 p.m. Eastern time) on the New
York Stock Exchange on each day on which it is open.
(1) The sales charge is reduced for purchases of $50,000 or greater. See
"Public Offering of Units" in Part B of this Prospectus.
(2) 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. After the initial offering period, the Sponsor's
Repurchase Price per Unit will be determined as described under the caption
"Market for Units" in Part B of this Prospectus.
(3) See "Redemption" in Part B of this Prospectus.
UNDERWRITING*
NAME ADDRESS NUMBER OF UNITS
<TABLE>
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Fidelity Capital Markets World Trade Center, 164 Northern 290,000
Avenue, Suite 630, Boston, MA 02210
Oppenheimer & Company, Incorporated One World Financial Center, 200 Liberty 10,000
Street, 8th Floor, New York, NY 10281
</TABLE>
* See "Public Distribution of Units - Underwriting concessions" in Part B
of this Prospectus.
SPECIAL TRUST INFORMATION
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ 0.53583
Estimated Annual Trust Expense per Unit:
Trustee's Fees (1) $ 0.01390
Evaluator's Fees $ 0.00520
Organizational Expenses (2) $ 0.00400
Other Estimated Expenses $ 0.00230
Less: Estimated Annual Expense per Unit $ 0.02540
Estimated Net Annual Interest Income per Unit $ 0.51043
Estimated Daily Rate of Net Interest Accrual per Unit $ 0.001418
Initial Distribution- April 20, 1997 (3) $ 0.04253
Estimated Regular Distribution (3) (Commencing May 20, 1997) $ 0.04253
Estimated Current Return Based on Public Offering Price (4) 5.08%
Estimated Long-Term Return Based on Public Offering Price (4) 5.12%
Estimated Average Maturity of Bonds 25.9 years
CUSIP 316094 101
____________________
(1) The Trustee's annual fee includes up to $0.07per $1,000 principal
amount of securities which is paid to the Sponsor in reimbursement of the
Sponsor's cost of providing certain bookkeeping and administrative services
to its own customers.
(2) The Insured Massachusetts Trust (and therefore the Unitholders) will
bear 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 portfolio, 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. See
"Trust Expenses" and "Statement of Net Assets."
(3) Additional information concerning distributions of interest and
principal can be found in "Distributions to Unitholders" in Part B of this
Prospectus.
(4) See "Estimated Long Term Return and Estimated Current Return" in Part B
of this Prospectus for a description of how these returns are calculated.
The above figures are based on estimated per Unit cash flows. Estimated
cash flows will vary with changes in fees and expenses, with changes in
current interest rates, and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Bonds. The estimated
cash flows for this Trust are set forth under "Estimated Cash Flows to
Unitholders."
MASSACHUSETTS RISK FACTORS
The financial condition of the Commonwealth of Massachusetts is affected by
various national, economic, social and environmental policies and
conditions. Additionally, limitations imposed by statute and voter
initiative upon the Commonwealth and its local governments concerning
taxes, bond indebtedness and other matters may constrain the
revenue-generating capacity of the Commonwealth and its local governments
and, therefore, the ability of the issuers of the Bonds to satisfy their
obligations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds,
are affected by numerous factors. The employment in the Commonwealth has
been and continues to be significantly and adversely affected by reductions
in federal government spending on defense-related industries. The
Commonwealth has many material future liabilities, including an underfunded
retirement system and Medicaid expenditures.
The Commonwealth is a party to numerous lawsuits in which an adverse final
decision could materially affect the Commonwealth's governmental operations
and consequently its ability to pay debt service on its obligations.
In recent years, the Commonwealth of Massachusetts and certain of its
public bodies and municipalities, particularly the City of Boston have
faced serious financial difficulties which have affected the credit
standing and borrowing abilities of Massachusetts and its respective
entities and may have contributed to higher interest rates on debt
obligations. Standard and Poor's currently rates the Commonwealth's
uninsured general obligation bonds at A+, while Moody's rates these
obligations at A1.
Further information concerning Massachusetts risk factors may be obtained
upon written or telephonic request to the Trustee as described in "Other
Information" appearing in Part B of this Prospectus.
TAX STATUS
In the opinion of Goodwin, Procter & Hoar LLP, special Massachusetts
counsel to the Trust, under existing law:
For Massachusetts income tax purposes, if the Trust is an "investment"
trust within the meaning of 26 CFR (sub-section)301.7701-4(c) and is
classified as a trust under that regulation, it will be treated as a fixed
investment trust as that term is defined in Section 62.8.1 of Title 830 of
the Code of Massachusetts Regulations, and, therefore, will not be subject
as an entity to Massachusetts income taxation under Chapter 62 of the
Massachusetts General Laws.
Unitholders who are subject to Massachusetts income taxation under M.G.L.
Chapter 62 will not be required to include their respective shares of the
earnings of or distribution from the Trust in their Massachusetts gross
income to the extent that such earnings or distributions represent
tax-exempt interest excludable from gross income for federal income tax
purposes received by the Trust on insured interest bearing obligations
issued by Massachusetts, its counties, municipalities, authorities,
political subdivisions or instrumentalities or by Puerto Rico, the Virgin
Islands, Guam, or the Northern Mariana Islands ("Obligations")
Unitholders who are subject to Massachusetts income taxation under M.G.L.
Chapter 62 will not be required to include their respective shares of the
earnings of or distributions from such Trust in their Massachusetts gross
income to the extent that such earnings or distributions are derived from
the proceeds of insurance on the Obligations that represent maturing
interest on defaulted Obligations held by the Trustee, if and to the same
extent that such earnings or distributions would have been excludable from
the gross income of such Unitholders if derived from interest paid by the
issuer of the defaulted Obligation and if and to the extent that such
earnings or distributions represent tax-exempt interest excludable from
gross incomes for federal tax purposes, PROVIDED that, at the time such
policies are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectations that the issuer
of the Obligations, rather than the insurer, will pay debt service on the
bonds.
Unitholders which are corporations subject to taxation under M.G.L. Chapter
63 will be required to include their respective shares of the earnings of
or distributions from the Trust in their Massachusetts gross income to the
extent that such earnings or distributions represent interest from bonds,
notes or indebtedness of any state, including Massachusetts, except for
interest which is specifically exempted from such tax by the acts
authorizing issuance of said Obligations.
Each Trust's capital gains and/or capital losses which are includable in
the federal gross income of Unitholders who are subject to Massachusetts
income taxation under M.G.L. Chapter 62 or Unitholders which are
corporations subject to Massachusetts taxation under M.G.L. Chapter 63,
will be included as capital gains and/or losses in the Unitholders'
Massachusetts gross income, except for capital gain which is specifically
exempted from taxation under such Chapters by the acts authorizing issuance
of said Obligations.
Unitholders which are corporations subject to tax under M.G.L. Chapter 63
and which are tangible property corporations will not be required to
include the Units when determining the value of their tangible property;
such Unitholders which are intangible property corporations will be
required to include the Units when determining their net worth.
Gains or losses realized on sales or redemptions of Units by Unitholders
who are subject to Massachusetts income taxation under M.G.L. Chapter 62
or Unitholders which are corporations subject to Massachusetts taxation
under M.G.L. Chapter 63 will be includable in their Massachusetts gross
income. In determining such gain or loss Unitholders will, to the same
extent required for federal tax purposes, have to adjust their tax bases
for their Units for accrued interest received, if any, on Obligations
delivered to the Trustee after the Unitholders pay for their Units, for
accrued original issue discount with respect to each Obligation which, at
the time the Obligation was issued, had original issue discount.
The Units of the Trust(s) are not subject to any property tax levied by
Massachusetts or any political subdivision thereof, nor to any income tax
levied by any such political subdivision. The Massachusetts estate tax for
a deceased Unitholder who is a resident of Massachusetts is a so-called
"sponge tax," a tax that will not exceed the allowable federal credit, and
therefore the holding of Units does not directly affect the amount of
Massachusetts estate tax due.
FOR INFORMATION WITH RESPECT TO THE FEDERAL INCOME TAX STATUS AND OTHER TAX
MATTERS, SEE "TAX STATUS" IN PART B OF THIS PROSPECTUS.
FEDERAL AND MASSACHUSETTS TAX-FREE INCOME
The following table shows the approximate marginal taxable yields for
individuals that are equivalent to tax-exempt yields under published
Federal tax rates scheduled to be in effect in 1997. The table incorporates
increased tax rates for higher-income taxpayers that were included in the
Revenue Reconciliation Act of 1993. The table illustrates what you would
have to earn on taxable investments to equal the tax-exempt yield for your
income tax bracket. The taxable equivalent yields may be somewhat higher
than the equivalent yields indicated in the following table for those
individuals who have adjusted gross incomes in excess of $121,200. The
table does not reflect the effect of the limitations (if any) on the amount
of allowable itemized deductions and the deduction for personal or
dependent exemptions or any other credits. These limitations were designed
to phase out certain benefits of these deductions for higher income
taxpayers. These limitations, in effect, raise the maximum marginal Federal
tax rate to approximately 44% for taxpayers filing a joint return and
entitled to four personal exemptions and to approximately 41% for taxpayers
filing a single return entitled to only one personal exemption. These
limitations are subject to certain maximums, which depend on the number of
exemptions claimed and the total amount of the taxpayer's itemized
deductions. For example, the limitation on itemized deductions will not
cause a taxpayer to lose more than 80% of his allowable itemized
deductions, with certain exceptions.
TAXABLE EQUIVALENT YIELD
TAXABLE INCOME ($1,000'S) TAX-EXEMPT YIELD
<TABLE>
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SINGLE RETURN JOINT RETURN TAX RATE 5.00% 5.50% 6.00%
TAXABLE EQUIVALENT YIELD
$0 - 24.65 $0 - 41.2 25.2% 6.68% 7.35% 8.02%
24.65 - 59.75 41.2 - 99.6 36.6 7.89 8.68 9.47
59.75 - 124.65 99.6 - 151.75 39.3 8.23 9.06 9.88
124.65 - 271.05 151.75 - 271.05 43.7 8.88 9.77 10.65
Over 271.05 Over 271.05 46.9 9.41 10.35 11.29
</TABLE>
INSURED MASSACHUSETTS TRUST, SERIES 1
PORTFOLIO
UNITS RATED "AAA" (hollow bullet) AT THE OPENING OF BUSINESS
ON THE INITIAL DATE OF DEPOSIT OF THE BONDS - MARCH 5, 1997
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<S> <C> <C> <C> <C>
AGGREGAT DESCRIPTION (1) ORIGINAL COST
E REDEMPTIO RATING
PRINCIPAL N (2)
PROVISION
(3)
$ 500,000 Massachusetts State Water Resources Authority, 2004 @ AAA $ 472,120
General Revenue Bonds, 1993 Series C, 5.25% Due 102
12/01/2020
400,000 Massachusetts State Industrial Finance Agency, Revenue 2006 @ AAA 391,320
Bonds, College of the Holy Cross, 1996 Issue, 5.50% 102
Due 3/01/2020
500,000 Massachusetts Health and Educational Facilities Authority, 2004 @ AAA 474,940
Revenue Bonds, New England Medical Center Hospitals 102
Issue, Series G, 5.375% Due 7/01/2024
500,000 Massachusetts State Industrial Finance Agency, Revenue 2007 @ AAA 490,510
Bonds, Dexter School Project Issue, Series 1997, 5.45% 102
Due 5/01/2019
500,000 Massachusetts State Industrial Finance Agency, Revenue 2007 @ AAA 468,960
Bonds, Babson College Issue, Series 1997 A, 5.25% 102
Due 10/01/2027
500,000 Massachusetts Bay Transit Authority, General 2005 @ AAA 478,745
Transportation System Bonds, 1995 Series B, 5.375% 101
Due 3/01/2025
100,000 South Essex Massachusetts Sewerage District 2006 @ AAA 94,196
(Massachusetts), General Obligation Sewer Bonds, 1996 102
Series A, 5.25% Due 6/15/2024
$ 3,000,00 $2,870,7
0 91
</TABLE>
(hollow bullet) Units are rated "AAA" as a result of insurance. Such
rating, as issued by Standard & Poor's, will be in effect for a period of
thirteen months from the Initial Date of Deposit and will, unless renewed,
terminate at the end of the period. See "Insurance on the Bonds" in Part B
of this Prospectus.
NOTES TO PORTFOLIO
(1) Sponsor's contracts to purchase Bonds were entered into during the
period from February 26, 1997 to March 3, 1997. All contracts to purchase
Bonds are expected to be settled on or prior to March 10, 1997 unless
otherwise indicated.
Other information regarding the Bonds in the Trust on the Initial Date of
Deposit is as follows:
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TRUST AGGREGATE ANNUAL
OFFERING COST OF PROFIT OR INTEREST
PRICE OF BONDS TO (LOSS) TO BID PRICE INCOME
BONDS SPONSOR SPONSOR OF BONDS TO TRUST
Insured Massachusetts Trust, $ 2,870,791 $ 2,871,177 $ (386) $ 2,857,936 $ 160,750
Series 1
</TABLE>
Neither Cost of Bonds to Sponsor nor Profit or (Loss) to Sponsor reflects
underwriting profits or losses received or incurred by the Sponsor through
its participation in underwriting syndicates but such amounts reflect the
cost of insurance obtained by the Sponsor prior to the Initial Date of
Deposit for individual Bonds. The Offering and Bid Prices of Bonds were
determined by Muller Data Corporation.
All of the Bonds in the Trust were issued at an original issue discount for
industry concentrations of the Bonds in the Insured Massachusetts Trust,
see page 1.
(2) All ratings are by Standard & Poor's unless otherwise indicated. Such
ratings were obtained from a municipal bond information reporting service.
The "AAA" rating on each Bond is a result of insurance. Insurance, however,
does not cover certain market risks associated with fixed income securities
such as accelerated payments of principal, mandatory redemptions prior to
maturity or interest rate risks. See "Insurance on the Bonds" in Part B of
this Prospectus and "Description of Bond Ratings" in the Information
Supplement.
(3) There is shown under this heading the year in which each issue of Bonds
initially is redeemable and the redemption price for that year or, if
currently redeemable, the redemption price in effect on the Initial Date of
Deposit. Issues of Bonds are redeemable at declining prices (but not below
par value) in subsequent years except for original issue discount Bonds
which are redeemable at prices based on the issue price plus the amount of
original issue discount accreted to the redemption date plus, if
applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. In addition, certain Bonds in the portfolio may be redeemed
in whole or in part other than by operation of the stated redemption or
sinking fund provisions under certain unusual or extraordinary
circumstances specified in the instruments setting forth the terms and
provisions of such Bonds. See "Risk Factors" in Part B of this Prospectus
for a discussion of Bond redemptions and a description of certain of such
unusual or extraordinary circumstances under which Bonds may be redeemed.
Distributions will generally be reduced by the amount of the income which
would otherwise have been paid with respect to redeemed Bonds and there
will be distributed to Unit holders the principal amount and any premium
received on such redemption (except to the extent the proceeds of the
redeemed Bonds are used to pay for Unit redemptions). The estimated current
return and the estimated long-term return in this event may be affected by
such redemptions. For the Federal and state tax effect on Unit holders of
such redemptions and resultant distributions, see "Tax Status" in Part B of
this Prospectus.
INSURED MASSACHUSETTS TRUST, SERIES 1
STATEMENT OF NET ASSETS
AT THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT
MARCH 5, 1997
<TABLE>
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<S> <C>
Net Assets
Delivery statements relating to Sponsor's contracts to purchase $ 2,870,791
tax-exempt municipal bonds (1)(2)(3)
Accrued interest on underlying bonds (2)(3)(4) 21,793
Organizational Costs (5) 6,000
$ 2,898,584
Less distributions payable (4) $ 21,793
Accrued Organizational Costs (5) 6,000
Net assets $ 2,870,791
Outstanding units 300,000
Analysis of Net Assets
Cost to investors (6) $ 3,013,954
Less gross underwriting commissions (6) (143,163)
Net assets $ 2,870,791
</TABLE>
(1) The aggregate offering price of the bonds for the Trust at the opening
of business on the Initial Date of Deposit and the cost to the Trust are
the same. The offering price is determined by the Evaluator.
(2) Pursuant to delivery statements relating to contracts to purchase
bonds, an irrevocable letter of credit has been allocated among each Trust
included in the Fidelity Defined Trusts - Municipal Income Trust Series 1
as collateral. The amount of available letter of credit and the amount
expected to be utilized as collateral for the Insured Massachusetts Trust
is shown below. The amount expected to be utilized is (a) the cost to the
Insured Massachusetts Trust of the principal amount of the bonds to be
purchased, (b) accrued interest on those Bonds to the Initial Date of
Deposit, and (c) accrued interest on those Bonds from the Initial Date of
Deposit to the expected dates of delivery of the Bonds.
<TABLE>
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ACCRUED
AGGREGATE INTEREST TO
LETTER OF CREDIT OFFERING EXPECTED
TO BE PRICE OF DATES OF
TRUST AVAILABLE UTILIZED BONDS DELIVERY
Insured Massachusetts Trust, Series 1 $ 3,100,000 $ 2,894,817 $ 2,870,791 $ 24,026
</TABLE>
(3) Insurance coverage providing for the scheduled payment of principal and
interest on all Bonds deposited in the Trust and delivered to the Trustee
has been obtained directly by the Bond issuer, the underwriters, the
Sponsor or others prior to the Initial Date of Deposit.
(4) The Trustee will advance to the Insured Massachusetts Trust the amount
of net interest accrued to March 10, 1997, the First Settlement Date, for
distribution to the Sponsor as the Unit holder of record.
(5) The Insured Massachusetts Trust (and therefore Unitholders) will bear a
portion of its organizational costs ($6,000) which will be deferred and
amortized over five years.
(6) The aggregate cost to investors and the aggregate gross underwriting
commissions of 4.75% are computed assuming no reduction of sales charge for
quantity purchases.
FIDELITY DEFINED TRUSTS - MUNICIPAL INCOME TRUST SERIES 1
INSURED MASSACHUSETTS TRUST, SERIES 1
DATE OF DEPOSIT MARCH 5, 1997
ESTIMATED CASH FLOWS TO UNITHOLDERS
The table below sets forth the estimated distributions per 100 Units of
interest and principal to Unitholders. The table assumes no changes in
Trust expenses with the exception of the amortization of organizational
expenses, which are being amortized over five years, 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.
DATES ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DISTRIBUTION DISTRIBUTION DISTRIBUTION
April 1997 - March 2002 $ 4.253 $ 4.253
April 2002 - April 2019 4.286 4.286
May 2019 4.034 $ 166.666 170.700
June 2019 - Feb 2020 3.549 3.549
Mar 2020 3.345 133.333 136.678
April 2020 - Nov 2020 2.953 2.953
Dec 2020 2,710 166.666 169.376
Jan 2021 - May 2024 2.243 2.243
June 2024 2.243 33.333 35.576
July 2024 1.877 166.666 168.543
Aug 2024 - Feb 2025 1.374 1.374
Mar 2025 1.125 166.666 167.791
April 2025 - Sept 2027 0.647 0.647
Oct 2027 0.404 166.666 167.070
INSURED PENNSYLVANIA TRUST, SERIES 1
THIS PART A OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY
THE PART B OF THE PROSPECTUS DATED MARCH 5, 1997. BOTH PARTS A AND B OF THE
PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
Insured Pennsylvania Trust, Series 1 (the "INSURED PENNSYLVANIA TRUST"),
consists of a portfolio of interest-bearing obligations issued by or on
behalf of the State of Pennsylvania or certain United States Territories or
authorities or political subdivisions thereof which, in the opinion of
recognized bond counsel to the issuing authorities, provide income which is
exempt from Federal income tax, and Pennsylvania state and local income
tax, as detailed below.
The objectives of the Insured Pennsylvania Trust are conservation of
capital and income exempt from Federal and applicable state and local
income taxes. The objectives are, of course, dependent upon the continuing
ability of the issuers, obligors and/or insurers to meet their respective
obligations.
The Insured Pennsylvania Trust consists of seven obligations of issuers
located in the State of Pennsylvania. The Bond issues in the Insured
Pennsylvania Trust are either general obligations of governmental entities
or are revenue bonds payable from the income of a specific project or
authority. The Bonds in the Insured Pennsylvania Trust are divided by
purpose of issue and represent the percentage of aggregate principal amount
of the Bonds as indicated by the following table:
NUMBER OF ISSUES PURPOSE OF ISSUE PORTFOLIO PERCENTAGE
3 General Obligation 50.0%
2 Health Care 30.0%
1 Recreation 3.3%
1 Lease Revenue 16.7%
The Insured Pennsylvania Trust is considered to be concentrated in Bonds of
Health Care Issuers, which involves additional risks not present in a trust
not so concentrated. Such risks include increased governmental regulation
on such Issuers, fluctuating occupancy levels and increased competition.
See "Risk Factors" in Part B of this Prospectus for a discussion of the
risks associated with investments in the bonds of various issuers.
Each of five Bond issues represents 16.7% or more of the aggregate
principal amount of the Bonds in the Insured Pennsylvania Trust or a total
of approximately 83.3%. The largest such issue represents approximately
16.7%. None of the Bonds in the Trust are subject to call within eight
years of the Initial Date of Deposit, although certain bonds may be subject
to an extraordinary call.
Approximately 33.3% of the aggregate principal amount of the Bonds in the
Insured Pennsylvania Trust were purchased at a premium over par value.
Certain of these Bonds are subject to redemption pursuant to call
provisions in approximately nine years after the Initial Date of Deposit.
See "Insured Pennsylvania Trust, Series 1-Portfolio" contained herein and
"Description of Bond Ratings" in the Information Supplement.
All of the Bonds included in the Insured Pennsylvania Trust are insured by
MBIA Insurance Corporation or other insurers. The insurance guarantees the
timely payment of principal and interest of the Bonds, but does not
guarantee the value of the Bonds or the Units. As a result of the
insurance, the Bonds in the Insured Pennsylvania Trust have received a
rating of "Aaa" by Moody's Investors Service, Inc. ("MOODY'S") and the
Bonds and the Units in the Insured Pennsylvania Trust have received a
rating of "AAA" by Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("STANDARD & POOR'S").
INSURED PENNSYLVANIA TRUST, SERIES 1
ESSENTIAL INFORMATION
AT THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT OF THE MARCH 5,
1997
SPONSOR: NATIONAL FINANCIAL SERVICES CORPORATION
TRUSTEE: THE CHASE MANHATTAN BANK
EVALUATOR: MULLER DATA CORPORATION
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General Information
Principal Amount of Bonds in the Trust $ 3,000,000
Number of Units 300,000
Fractional Undivided Interest in the Trust per Unit 1/300,000
Principal Amount (Par Value) of Bonds per Unit $ 10.000
Public Offering Price:
Aggregate Offering Price Evaluation of Bonds in the Portfolio $ 2,878,967
Aggregate Offering Price Evaluation per Unit $ 9.597
Sales Charge 4.75% (4.987% of the Aggregate Offering Price Evaluation per Unit) (1) $ 0.478
Public Offering Price per Unit (2) $ 10.075
Sponsor's Initial Repurchase Price per Unit (2) $ 9.597
Redemption Price per Unit (3) $ 9.554
Excess of Public Offering Price per Unit Over Redemption Price per Unit $ 0.521
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit $ 0.043
</TABLE>
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First Settlement Date March 10, 1997
Discretionary Liquidation Amount The Insured Pennsylvania Trust may be terminated if the
value of such Trust is less than 20% of the aggregate
principal amount of the Bonds deposited in such Trust
during the primary offering period.
Mandatory Termination Date December 31, 2045
</TABLE>
Evaluations for purposes of sale, purchase or redemption of Units are made
as of the close of trading (generally 4:00 p.m. Eastern time) on the New
York Stock Exchange on each day on which it is open.
(1) The sales charge is reduced for purchases of $50,000 or greater. See
"Public Offering of Units" in Part B of this Prospectus.
(2) 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. After the initial offering period, the Sponsor's
Repurchase Price per Unit will be determined as described under the caption
"Market for Units" in Part B of this Prospectus.
(3) See "Redemption" in Part B of this Prospectus.
UNDERWRITING*
NAME ADDRESS NUMBER OF UNITS
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Fidelity Capital Markets World Trade Center, 164 Northern 280,000
Avenue, Suite 630, Boston, MA 02210
Fahnestock & Company, Incorporated 1500 Walnut Street, Philadelphia, PA 10,000
19102
Advest Incorporated 90 State House Square, 6th Floor, 10,000
Hartford, CT 06103
</TABLE>
* See "Public Distribution of Units - Underwriting concessions" in Part B
of this Prospectus.
SPECIAL TRUST INFORMATION
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ 0.54042
Estimated Annual Trust Expense per Unit:
Trustee's Fees $ 0.01360
Evaluator's Fees 0.00520
Organizational Expenses (2) $ 0.00400
Other Estimated Expenses $ 0.00230
Less: Estimated Annual Expense per Unit $ 0.02510
Estimated Net Annual Interest Income per Unit $ 0.51532
Estimated Daily Rate of Net Interest Accrual per Unit $ 0.001431
Initial Distribution- April 20,1997 (3) $ 0.04294
Estimated Regular Distribution (3) $ 0.04294
Estimated Current Return Based on Public Offering Price (4) 5.11%
Estimated Long-Term Return Based on Public Offering Price (4) 5.15%
Estimated Average Maturity of Bonds 28.1 years
CUSIP 316094
119
(1) The Trustee's annual fee includes up to $0.07 per $1,000 principal
amount of securities which is paid to the Sponsor in reimbursement of the
Sponsor's cost of providing certain bookkeeping and administrative services
to its own customers.
(2) The Insured Pennsylvania Trust (and therefore the Unitholders) will
bear 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 portfolio, 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. See
"Trust Expenses" and "Statement of Net Assets."
(3) Additional information concerning distributions of interest and
principal can be found in "Distributions to Unitholders" in Part B of this
Prospectus.
(4) See "Estimated Long Term Return and Estimated Current Return" in Part B
of this Prospectus for a description of how these returns are calculated.
The above figures are based on estimated per Unit cash flows. Estimated
cash flows will vary with changes in fees and expenses, with changes in
current interest rates, and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Bonds. The estimated
cash flows for this Trust are set forth under "Estimated Cash Flows to
Unitholders".
PENNSYLVANIA RISK FACTORS
The financial condition of the State of Pennsylvania is affected by various
national, economic, social and environmental policies and conditions.
Additionally, Constitutional and statutory limitations imposed on the State
and its local governments concerning taxes, bond indebtedness and other
matters may constrain the revenue-generating capacity of the State and its
local governments and, therefore, the ability of the issuers of the Bonds
to satisfy their obligations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the Bonds,
are affected by numerous factors. Pennsylvania historically has been
identified as a heavy industry state, although that reputation has changed
recently as the industrial composition of the Commonwealth diversified when
the coal, steel and railroad industries began to decline. The major sources
of growth in Pennsylvania are in the service sector, including trade,
medical and health services, education and financial institutions. The
Commonwealth's agricultural industries are also an important component of
its economic structure.
All outstanding general obligation bonds of the State are rated "AA-" by
Standard and Poor's and "A1" by Moody's.
Further information concerning Pennsylvania risk factors may be obtained
upon written or telephone request to the Trustee as described in "Other
Information" appearing in Part B of this Prospectus.
TAX STATUS
In the opinion of Chapman and Cutler, special counsel for the Trust for
Pennsylvania tax matters, under existing law:
We have examined certain laws of the State of Pennsylvania (the "STATE")
to determine their applicability to the Pennsylvania Trust (the "TRUST")
and to the holders of Units in the Trust who are residents of the State of
Pennsylvania (the "UNITHOLDERS"). The assets of the Trust will consist of
interest-bearing obligations issued by or on behalf of the State, any
public authority, commission, board or other agency created by the State or
a political subdivision of the State, or political subdivisions thereof
(the "BONDS"). Distributions of income with respect to the Bonds received
by the Trust will be made monthly.
Although we express no opinion with respect thereto, in rendering the
opinion expressed herein, we have assumed that: (i) the Bonds were validly
issued by the State or its municipalities, as the case may be, (ii) the
interest thereon is excludable from gross income for federal income tax
purposes, (iii) the interest thereon is exempt from Pennsylvania State and
local taxes and (iv) the Bonds are exempt from county personal property
taxes. This opinion does not address the taxation of persons other than
full-time residents of Pennsylvania.
Based on the foregoing, and review and consideration of existing State laws
as of this date, it is our opinion, and we herewith advise you, as follows:
(1) The Trust will have no tax liability for purposes of the personal
income tax (the "PERSONAL INCOME TAX"), the corporate income tax (the
"CORPORATE INCOME TAX") and the capital stock-franchise tax (the
`"FRANCHISE TAX"), all of which are imposed under the Pennsylvania Tax
Reform Code of 1971, or the Philadelphia School District Investment Net
Income Tax (the "PHILADELPHIA SCHOOL TAX") imposed under Section 19-1804 of
the Philadelphia Code of Ordinances.
(2) Interest on the Bonds, net of Trust expenses, which is exempt from the
Personal Income Tax when received by the Trust and which would be exempt
from such tax if received directly by a Unitholder, will retain its status
as exempt from such tax when received by the Trust and distributed to such
Unitholder. Interest on the Bonds which is exempt from the Corporate
Income Tax and the Philadelphia School Tax when received by the Trust and
which would be exempt from such taxes if received directly by a Unitholder,
will retain its status as exempt from such taxes when received by the Trust
and distributed to such Unitholder.
(3) Distributions from the Trust attributable to capital gains recognized
by the Trust upon its disposition of a Bond issued on or after February 1,
1994, will be taxable for purposes of the Personal Income Tax and the
Corporate Income Tax. No opinion is expressed with respect to the taxation
of distributions from the Trust attributable to capital gains recognized by
the Trust upon its disposition of a Bond issued before February 1, 1994.
(4) Distributions from the Trust attributable to capital gains recognized
by the Trust upon its disposition of a Bond will be exempt from the
Philadelphia School Tax if the Bond was held by the Trust for a period of
more than six months and the Unitholder held his Unit for more than six
months before the disposition of the Bond. If, however, the Bond was held
by the Trust or the Unit was held by the Unitholder for a period of less
than six months, then distributions from the Trust attributable to capital
gains recognized by the Trust upon its disposition of a Bond issued on or
after February 1, 1994 will be taxable for purposes of the Philadelphia
School Tax; no opinion is expressed with respect to the taxation of any
such gains attributable to Bonds issued before February 1, 1994.
(5) Insurance proceeds paid under policies which represent maturing
interest on defaulted obligations will be exempt from the Corporate Income
Tax to the same extent as such amounts are excluded from gross income for
federal income tax purposes. No opinion is expressed with respect to
whether such insurance proceeds are exempt from the Personal Income Tax or
the Philadelphia School Tax.
(6) Each Unitholder will recognize gain for purposes of the Corporate
Income Tax if the Unitholder redeems or sells Units of the Trust to the
extent that such a transaction results in a recognized gain to such
Unitholder for federal income tax purposes and such gain is attributable to
Bonds issued on or after February 1, 1994. No opinion is expressed with
respect to the taxation of gains realized by a Unitholder on the sale or
redemption of a Unit to the extent such gain is attributable to Bonds
issued prior to February 1, 1994.
(7) A Unitholder's gain on the sale or redemption of a Unit will be subject
to the Personal Income Tax, except that no opinion is expressed with
respect to the taxation of any such gain to the extent it is attributable
to Bonds issued prior to February 1, 1994.
(8) A Unitholder's gain upon a redemption or sale of Units will be exempt
from the Philadelphia School Tax if the Unitholder held his Unit for more
than six months and the gain is attributable to Bonds held by the Trust for
a period of more than six months. If, however, the Unit was held by the
Unitholder for less than six months or the gain is attributable to Bonds
held by the Trust for a period of less than six months, then the gains will
be subject to the Philadelphia School Tax; except that no opinion is
expressed with respect to the taxation of any such gains attributable to
Bonds issued before February 1, 1994.
(9) The Bonds will not be subject to taxation under the County Personal
Property Tax Act of June 17, 1913 (the "PERSONAL PROPERTY TAX"). Personal
property taxes in Pennsylvania are imposed and administered locally, and
thus no assurance can be given as to whether Units will be subject to the
Personal Property Tax in a particular jurisdiction. However, in our
opinion, Units should not be subject to the Personal Property Tax.
Unitholders should be aware that, generally, interest on indebtedness
incurred or continued to purchase or carry Units is not deductible for
purposes of the Personal Income Tax, the Corporate Income Tax or the
Philadelphia School Tax.
We have not examined any of the Bonds to be deposited and held in the Trust
or the proceedings for the issuance thereof or the opinions of bond counsel
with respect thereto, and therefore express no opinion as to the exemption
from federal or state income taxation of interest on the Bonds if interest
thereon had been received directly by a Unitholder.
Chapman and Cutler has expressed no opinion with respect to taxation under
any other provision of Pennsylvania law. Ownership of the Units may result
in collateral Pennsylvania tax consequences to certain taxpayers.
Prospective investors should consult their tax advisors as to the
applicability of any such collateral consequences.
FOR INFORMATION WITH RESPECT TO THE FEDERAL INCOME TAX STATUS AND OTHER TAX
MATTERS, SEE "TAX STATUS" IN PART B OF THIS PROSPECTUS.
FEDERAL AND PENNSYLVANIA TAX-FREE INCOME
The following table shows the approximate marginal taxable yields for
individuals that are equivalent to tax-exempt yields under published
Federal tax rates scheduled to be in effect in 1997. The table incorporates
increased tax rates for higher-income taxpayers that were included in the
Revenue Reconciliation Act of 1993. The table illustrates what you would
have to earn on taxable investments to equal the tax-exempt yield for your
income tax bracket. The taxable equivalent yields may be somewhat higher
than the equivalent yields indicated in the following table for those
individuals who have adjusted gross incomes in excess of $121,200. The
table does not reflect the effect of the limitations (if any) on the amount
of allowable itemized deductions and the deduction for personal or
dependent exemptions or any other credits. These limitations were designed
to phase out certain benefits of these deductions for higher income
taxpayers. These limitations, in effect, raise the maximum marginal Federal
tax rate to approximately 44% for taxpayers filing a joint return and
entitled to four personal exemptions and to approximately 41% for taxpayers
filing a single return entitled to only one personal exemption. These
limitations are subject to certain maximums, which depend on the number of
exemptions claimed and the total amount of the taxpayer's itemized
deductions. For example, the limitation on itemized deductions will not
cause a taxpayer to lose more than 80% of his allowable itemized
deductions, with certain exceptions.
TAXABLE EQUIVALENT YIELD
TAXABLE INCOME ($1,000'S) TAX-EXEMPT YIELD
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SINGLE RETURN JOINT RETURN TAX RATE 5.00% 5.50% 6.00%
TAXABLE EQUIVALENT YIELD
$0 - 24.65 $0 - 41.20 17.4% 6.05% 6.66% 7.26%
24.65 - 59.75 41.20- 99.60 30.0 7.14 7.86 8.57
59.75- 124.65 99.60- 151.75 32.9 7.46 8.20 8.95
124.65 - 271.05 151.75 - 271.05 37.8 8.04 8.84 9.65
Over 271.05 Over 271.05 41.3 8.52 9.37 10.22
</TABLE>
INSURED PENNSYLVANIA TRUST, SERIES 1
PORTFOLIO
UNITS RATED "AAA" (hollow bullet) AT THE OPENING OF BUSINESS
ON THE INITIAL DATE OF DEPOSIT OF THE BONDS - MARCH 5, 1997
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AGGREGAT DESCRIPTION (1) ORIGINAL COST
E REDEMPTIO RATING(
PRINCIPAL N 2)
PROVISION(
3)
$ 500,000 Lehigh County (Pennsylvania), General Purpose 2005 @ AAA $ 493,330
Authority, Hospital Revenue Bonds (Lehigh Valley 102
Hospital), Series B of 1995, 5.625% Due 7/1/2025
400,000 Allegheny County Hospital Development Authority 2005 @ AAA 378,456
(Pennsylvania), Health Care Revenue Bonds, Series of 102
1995 (University of Pittsburgh Medical Center System),
5.375% Due 12/1/2025
100,000 Dauphin County General Authority (Commonwealth of Non-Callab AAA 25,931
Pennsylvania), County Guaranteed Revenue Bonds, le
Series of 1993, 0.00% Due 10/01/2020
500,000 Philadelphia Authority for Industrial Development, Lease 2007 @ AAA 477,460
Revenue Bonds, 1996 Series A, (City of Philadelphia 102
Project), 5.375% Due 2/15/2027
500,000 County of Luzerne (Pennsylvania), General Obligation 2007 @ AAA 501,355
Bonds, Series of 1997, 5.625% Due 12/15/2021 100
500,000 Bellefonte Area School District (Centre County, 2006 @ AAA 489,290
Pennsylvania), General Obligation Bonds, Series of 1996, 100
5.50% Due 5/15/2026
500,000 McKeesport Area School District (Allegheny County, 2006 @ AAA 513,145
Pennsylvania), General Obligation Bonds, Series of 1996, 100
6.00% Due 10/01/2025
$ 3,000,00 $ 2,878,9
0 67
</TABLE>
(hollow bullet) Units are rated "AAA" as a result of insurance. Such
rating, as issued by Standard & Poor's, will be in effect for a period of
thirteen months from the Initial Date of Deposit and will, unless renewed,
terminate at the end of the period. See "Insurance on the Bonds" in Part B
of this Prospectus.
NOTES TO PORTFOLIO
(1) Sponsor's contracts to purchase Bonds were entered into during the
period from February 26, 1997 to March 3, 1997. All contracts to purchase
Bonds are expected to be settled on or prior to March 10, 1997.
Other information regarding the Bonds in the Trust on the Initial Date of
Deposit is as follows:
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TRUST AGGREGATE ANNUAL
OFFERING COST OF PROFIT OR INTEREST
PRICE OF BONDS TO (LOSS) TO BID PRICE INCOME
BONDS SPONSOR SPONSOR OF BONDS TO TRUST
Insured Pennsylvania Trust, $ 2,878,967 $ 2,873,756 $ 5,211 $ 2,866,228 $ 162,125
Series 1
</TABLE>
Neither Cost of Bonds to Sponsor nor Profit or (Loss) to Sponsor reflects
underwriting profits or losses received or incurred by the Sponsor through
its participation in underwriting syndicates but such amounts reflect the
cost of insurance obtained by the Sponsor prior to the Initial Date of
Deposit for individual Bonds. The Offering and Bid Prices of Bonds were
determined by Muller Data Corporation.
All of the Bonds in the Trust were issued at an original issue discount.
For industry concentrations of the Bonds in the Insured Pennsylvania Trust,
see page 10.
(2) All ratings are by Standard & Poor's unless otherwise indicated.
Ratings were obtained from a municipal bond information reporting service.
The "AAA" rating on each Bond is a result of insurance. Insurance, however,
does not cover certain market risks associated with fixed income securities
such as accelerated payments of principal, mandatory redemptions prior to
maturity or interest rate risks. See "Insurance on the Bonds" in Part B of
this Prospectus and "Description of Bond Ratings" in the Information
Supplement.
(3) There is shown under this heading the year in which each issue of Bonds
initially is redeemable and the redemption price for that year or, if
currently redeemable, the redemption price in effect on the Initial Date of
Deposit. Issues of Bonds are redeemable at declining prices (but not below
par value) in subsequent years except for original issue discount Bonds
which are redeemable at prices based on the issue price plus the amount of
original issue discount accreted to the redemption date plus, if
applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of Bonds. In addition, certain Bonds in the portfolio may be redeemed
in whole or in part other than by operation of the stated redemption or
sinking fund provisions under certain unusual or extraordinary
circumstances specified in the instruments setting forth the terms and
provisions of such Bonds. See "Risk Factors" in Part B of this Prospectus
for a discussion of Bond redemptions and a description of certain of such
unusual or extraordinary circumstances under which Bonds may be redeemed.
Distributions will generally be reduced by the amount of the income which
would otherwise have been paid with respect to redeemed Bonds and there
will be distributed to Unit holders the principal amount and any premium
received on such redemption (except to the extent the proceeds of the
redeemed Bonds are used to pay for Unit redemptions). The estimated current
return and the estimated long-term return in this event may be affected by
such redemptions. For the Federal and state tax effect on Unit holders of
such redemptions and resultant distributions, see "Tax Status" in Part B of
this Prospectus.
INSURED PENNSYLVANIA TRUST, SERIES 1
STATEMENT OF NET ASSETS
AT THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT
MARCH 5, 1997
Net Assets
Delivery statements relating to Sponsor's contracts to
purchase tax-exempt municipal bonds (1)(2)(3) $ 2,878,967
Accrued interest on underlying bonds (2)(3)(4) 43,763
Organizational Costs (5) 6,000
2,928,730
Less distributions payable (4) 43,763
Accrued Organizational Costs (5) 6,000
Net assets $ 2,878,967
Outstanding units 300,000
Analysis of Net Assets
Cost to investors (6) $ 3,022,538
Less gross underwriting commissions (6) (143,571)
Net assets $ 2,878,967
(1) The aggregate offering price of the bonds for the Trust at the opening
of business on the Initial Date of Deposit and the cost to the Trust are
the same. The offering price is determined by the Evaluator.
(2) Pursuant to delivery statements relating to contracts to purchase
bonds, an irrevocable letter of credit has been allocated among each Trust
included in the Fidelity Defined Trusts - Municipal Income Trust Series 1
as collateral. The amount of available letter of credit and the amount
expected to be utilized as collateral for the Insured Pennsylvania Trust is
shown below. The amount expected to be utilized is (a) the cost to the
Insured Pennsylvania Trust of the principal amount of the bonds to be
purchased, (b) accrued interest on those Bonds to the Initial Date of
Deposit, and (c) accrued interest on those Bonds from the Initial Date of
Deposit to the expected dates of delivery of the Bonds.
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ACCRUED
AGGREGATE INTEREST TO
LETTER OF CREDIT OFFERING EXPECTED
TO BE PRICE OF DATES OF
TRUST AVAILABLE UTILIZED BONDS DELIVERY
Insured Pennsylvania Trust, Series 1 $ 3,100,000 $ 2,924,982 $ 2,878,967 $ 46,015
</TABLE>
(3) Insurance coverage providing for the scheduled payment of principal and
interest on all Bonds deposited in the Insured Pennsylvania Trust and
delivered to the Trustee has been obtained directly by the Bond issuer, the
underwriters, the Sponsor or others prior to the Initial Date of Deposit.
(4) The Trustee will advance to the Insured Pennsylvania Trust the amount
of net interest accrued to March 10, 1997, the First Settlement Date, for
distribution to the Sponsor as the Unit holder of record.
(5) The Insured Pennsylvania Trust (and therefore Unitholders) will bear a
portion of its organizational costs ($6,000) which will be deferred and
amortized over five years.
(6) The aggregate cost to investors and the aggregate gross underwriting
commissions of 4.75% are computed assuming no reduction of sales charge for
quantity purchases.
FIDELITY DEFINED TRUSTS - MUNICIPAL INCOME TRUST SERIES 1
INSURED PENNSYLVANIA TRUST, SERIES 1
DATE OF DEPOSIT MARCH 5, 1997
ESTIMATED CASH FLOWS TO UNITHOLDERS
The table below sets forth the estimated distributions per 100 Units of
interest and principal to Unitholders. The table assumes no changes in
Trust expenses with the exception of the amortization of Organizational
Expenses, which are being amortized over five years, no redemptions or
sales of the underlying Securities prior to maturity and the receipt of all
principal due upon maturity or first par date if earlier. To the extent the
foregoing assumptions change, actual distributions will vary.
DATES ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DISTRIBUTION DISTRIBUTION DISTRIBUTION
April 1997 - March 2002 $ 4.294 $ 4.294
April 2002 - Sept 2006 4.327 4.327
Oct 2006 4.049 $ 166.666 170.715
Nov 2006 - Nov 2007 3.513 3.513
Dec 2007 3.513 166.666 170.179
Jan 2008 2.862 2.862
Feb 2008 - Sept 2020 2.750 2.750
Oct 2020 2.750 33.333 36.083
Nov 2020 - June 2025 2.754 2.754
July 2025 2.494 166.666 169.160
Aug 2025 - Nov 2025 1.992 1.992
Dec 2025 1.793 133.333 135.126
Jan 2026 - April 2026 1.410 1.410
May 2026 1.410 166.666 168.076
June 2026 0.773 0.773
July 2026 - Feb 2027 0.665 166.666 167.331
Mar 2027 0.043 0.043
REPORT OF INDEPENDENT AUDITORS
THE SPONSOR, NATIONAL FINANCIAL SERVICES CORPORATION, AND UNITHOLDERS
FIDELITY DEFINED TRUSTS - MUNICIPAL INCOME TRUST SERIES 1
We have audited the accompanying statements of net assets, including the
portfolios, of Fidelity Defined Trusts - Municipal Income Trust, Series 1
(the "Trust") (consisting of Insured Massachusetts Trust, Series 1 and
Insured Pennsylvania Trust, Series 1), as of the opening of business on
March 5, 1997. The statements of net assets 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 at December
5, 1997 and an irrevocable 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 the Trustee and the Sponsor, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fidelity Defined Trusts
- - Municipal Income Trust Series, 1 (consisting of Insured Massachusetts
Trust, Series 1 and Insured Pennsylvania Trust, Series 1), as of the
opening of business on March 5, 1997 in conformity with generally accepted
accounting principles.
Deloitte & Touche, LLP
New York, New York
March 5, 1997
PROSPECTUS - PART B
(GENERAL TERMS)
MARCH 5, 1997
FURTHER DETAIL REGARDING CERTAIN OF THE INFORMATION PROVIDED IN THE
PROSPECTUS MAY BE OBTAINED WITHIN FIVE BUSINESS DAYS OF WRITTEN OR
TELEPHONIC REQUEST TO THE TRUSTEE AT 4 NEW YORK PLAZA, NEW YORK, NY
10004-2413 OR (800) 257-8787.
INTEREST INCOME TO A TRUST AND TO UNITHOLDERS, IN THE OPINION OF COUNSEL,
UNDER EXISTING LAW IS EXEMPT FROM FEDERAL INCOME TAX. CAPITAL GAINS, IF
ANY, ARE SUBJECT TO TAX. IN ADDITION, INTEREST INCOME OF STATE TRUSTS IS,
IN THE OPINION OF COUNSEL, EXEMPT, TO THE EXTENT INDICATED, FROM STATE AND
LOCAL TAXES. INTEREST INCOME OF ANY TRUST OTHER THAN A STATE TRUST MAY BE
SUBJECT TO STATE AND LOCAL TAXES.
CURRENTLY OFFERED AT PUBLIC OFFERING PRICE PLUS INTEREST ACCRUED TO THE
DATE OF SETTLEMENT. THE MINIMUM AMOUNT WHICH AN INVESTOR MAY INITIALLY
PURCHASE OF A TRUST IS $5,000.
This Fidelity Defined Trusts - Municipal Income Trust Series consists of
the underlying separate unit investment trust set forth in Part A of this
Prospectus. The various trusts are collectively referred to herein as the
"Fidelity Defined Trusts," the "Fidelity Advisor Defined Trusts", the "MITs
Trusts" or the "Trusts." Each Trust initially consists of delivery
statements relating to contracts to purchase Bonds and, thereafter, will
consist of a diversified portfolio of obligations issued by or on behalf of
states and territories of the United States and authorities and political
subdivisions thereof (see "Portfolio" appearing in Part A of this
Prospectus). Trusts which consist of obligations from several states are
referred to herein as "National Trusts" and Trusts which consist of
obligations from a single state are referred to herein as "State Trusts."
Except in specific instances as noted in Part A of this Prospectus, the
information contained in this Part B shall apply to each Trust in its
entirety. All obligations in each Trust are covered by policies of
insurance obtained from the MBIA Insurance Corporation guaranteeing payment
of principal and interest when due. All such policies of insurance remain
effective so long as the obligations are outstanding. As a result of such
insurance, the Bonds in each portfolio of the Trusts have received a rating
of "Aaa" by Moody's Investors Service, Inc. ("MOODY'S") and the Bonds in
the Trusts and the Units of each such Trust have received a rating of "AAA"
by Standard & Poor's, a division of the McGraw Hill Companies ("STANDARD &
POOR'S"). INSURANCE RELATES ONLY TO THE BONDS IN THE TRUSTS AND NOT TO THE
UNITS OFFERED HEREBY OR TO THEIR MARKET VALUE. (See "Insurance on the
Bonds.")
THE FIDELITY DEFINED TRUSTS - MUNICIPAL INCOME TRUST SERIES
This Fidelity Defined Trusts - Municipal Income Trust Series is one of a
series of separate but similar investment companies created by the Sponsor,
each of which is designated by a different Series number. The underlying
unit investment trusts contained in this Series are combined under one
Trust Agreement. Specific information regarding this Trust is set forth in
Part A of this Prospectus. The various Fidelity Defined Trusts - Municipal
Income Trust Series are collectively referred to herein as the "TRUSTS."
This Series was created under the laws of the State of New York pursuant to
a Trust Agreement dated the Date of Deposit (the "INDENTURE") between
National Financial Services Corporation (the "SPONSOR") and The Chase
Manhattan Bank (the "TRUSTEE").<F1>
The Sponsor has deposited with the Trustee delivery statements relating to
contracts for the purchase of municipal debt obligations together with
funds represented by an irrevocable letter of credit issued by a major
commercial bank in the amount, including accrued interest, required for
their purchase (or the obligations themselves) (the "BONDS"). See
"Portfolio" for each Trust in Part A of this Prospectus, for a description
of the Bonds deposited in a Trust. Some of the delivery statements may
relate to contracts for the purchase of "when issued" or other Bonds with
delivery dates after the date of settlement for a purchase made on the
Initial Date of Deposit. See the "Portfolio" for each Trust in Part A of
this Prospectus and "Composition of Trusts" for a discussion of the
Sponsor's obligations in the event of a failure of any contract for the
purchase of any of the Bonds and its limited right to substitute other
bonds to replace any failed contract.
Payment of interest on the Bonds in each Trust, and of principal at
maturity, is guaranteed under policies of insurance obtained by the Sponsor
or by the issuers of the Bonds. (See "Insurance on the Bonds.")
The Trustee has delivered to the Sponsor registered Units which represent
the entire ownership of each Trust, and which are offered for sale by this
Prospectus. Each Unit of a Trust represents a fractional undivided interest
in the principal and net income of such Trust in the ratio set forth in
"Essential Information" for each Trust in Part A of this Prospectus. Units
may only be sold in states in which they are registered. To the extent that
Units of any Trust are redeemed by the Trustee, the aggregate value of such
Trust's assets will decrease by the amount paid to the redeeming
Unitholder, but the fractional undivided interest of each unredeemed Unit
in such Trust will increase proportionately. The Sponsor will initially,
and from time to time thereafter, hold Units in connection with their
offering.
OBJECTIVES OF THE TRUSTS
The objectives of the Trusts are income exempt from Federal income tax and,
in the case of State Trusts, state income taxes, and where applicable,
local and/or intangibles taxes, and conservation of capital, through an
investment in obligations issued by or on behalf of states and territories
of the United States and authorities and political subdivisions thereof,
the interest on which is, in the opinion of recognized bond counsel to the
issuing governmental authorities, exempt from Federal income tax under
existing law and certain state income tax and intangibles taxes, if any,
for purchasers who qualify as residents of that State in which Bonds are
issued. Insurance guaranteeing the timely payment, when due, of all
principal and interest on the Bonds in each Trust has been obtained by the
Sponsor or by the issuers of such Bonds from MBIA Insurance Corporation,
and as a result of such insurance the Bonds in the Trusts are rated "Aaa"
by Moody's and both the Bonds in the Trusts and the Units of the Trusts are
rated "AAA" by Standard & Poor's. (See "Insurance on the Bonds" herein and
"Description of Ratings" in the Information Supplement.) There is, of
course, no guarantee that the Trusts' objectives will be achieved. For a
comparison of net after-tax return for various tax brackets see the
"Taxable Equivalent Estimated Current Return Tables" for each Trust
included in Part A of this Prospectus.
SUMMARY OF PORTFOLIOS
In selecting Bonds for the respective Trusts, the following factors, among
others, were considered: (i) the Standard & Poor's rating of the Bonds or
the Moody's rating of the Bonds (see "Objectives of the Trusts" herein and
"Description of Ratings" in the Information Supplement for a description of
minimum rating standards), (ii) the prices of the Bonds relative to other
bonds of comparable quality and maturity, (iii) the diversification of
Bonds as to purpose of issue and location of issuer, (iv) the maturity
dates of the Bonds, and (v) the availability of MBIA Insurance Corporation
insurance on such Bonds. (See "Insurance on the Bonds.")
RISK FACTORS
An investment in Units of any Trust should be made with an understanding of
the risks that such an investment may entail. Each Trust consists of
fixed-rate municipal debt obligations. As such, the value of the debt
obligations and therefore of the Units will decline with increases in
interest rates. In general, the longer the period until the maturity of a
Bond, the more sensitive its value will be to fluctuations in interest
rates. The Sponsor cannot predict the extent or timing of such fluctuations
and, accordingly, their effect upon the value of the debt obligations.
Additional risk factors include the ability of the issuer, or, if
applicable, an insurer, to make payments of interest and principal when
due, "mandatory put" features, early call provisions and the potential for
changes in the tax status of the Bonds. As set forth in Part A of this
Prospectus, the Trusts may contain or be concentrated in one or more of the
types of bonds discussed below. The following paragraphs briefly discuss
certain circumstances which may adversely affect the ability of issuers of
Bonds held in the portfolio of a Trust to make payment of principal and
interest thereon, and which also therefore may adversely affect the ratings
of such Bonds. Because of the insurance obtained by the Sponsor or by the
issuers of the Bonds, such changes should not adversely affect a Trust's
receipt of principal and interest, the Standard & Poor's AAA or Moody's Aaa
ratings of the Bonds in the Trust portfolio, or the Standard & Poor's AAA
rating of the Units of each such Trust. The Bonds described below may be
subject to special or extraordinary redemption provisions. For economic
risks specific to the individual Trusts, see Part A of this Prospectus and
the Appendices to the Information Supplement of this Prospectus.
HEALTH FACILITY OBLIGATIONS are obligations of issuers whose revenues are
derived from services provided by hospitals or other health care
facilities, including nursing homes. The ability of such issuers to make
debt service payments on these obligations is dependent on various factors,
including occupancy levels of the facility, demand for services, wages of
employees, overhead expenses, competition from other similar providers,
government regulation, the cost of malpractice insurance, and the degree of
governmental financial assistance, including Medicare and Medicaid.
HOUSING OBLIGATIONS are obligations of issuers whose revenues are primarily
derived from mortgage loans on single family residences or housing projects
for low to moderate income families. Housing obligations are generally
prepayable at any time and therefore their average life will ordinarily be
less than their stated maturities. The ability of such issuers to make debt
service payments on these obligations is dependent on various factors,
including occupancy levels, rental income, mortgage default rates, taxes,
operating expenses, governmental regulations and the appropriation of
subsidies.
INDUSTRIAL REVENUE OBLIGATIONS are industrial revenue bonds ("IRBS"),
including pollution control revenue bonds, which are tax-exempt securities
issued by states, municipalities, public authorities or similar entities to
finance the cost of acquiring, constructing or improving various industrial
projects. Debt service payment on IRBs is dependent upon various factors,
including the creditworthiness of the corporate operator of the project
and, if applicable, corporate guarantor, revenues generated from the
project, expenses associated with the project and regulatory and
environmental restrictions.
ELECTRIC UTILITY OBLIGATIONS are obligations of issuers whose revenues are
primarily derived from the sale of electric energy. The ability of such
issuers to make debt service payments on these obligations is dependent on
various factors, including the rates for electricity, the demand for
electricity, the degree of competition, governmental regulation, overhead
expenses and variable costs, such as fuel.
TRANSPORTATION FACILITY REVENUE OBLIGATIONS are obligations of issuers
which are payable from and secured by revenues derived from the ownership
and operation of airports, public transit systems and ports. The ability of
issuers to make debt service payments on airport obligations is dependent
on the capability of airlines to meet their obligations under use
agreements. Due to increased competition, deregulation, increased fuel
costs and other factors, many airlines may have difficulty meeting their
obligations under these use agreements. Bonds that are secured primarily by
the revenue collected by a public transit system typically are additionally
secured by a pledge of sales tax receipts collected at the state or local
level, or of other governmental financial assistance. The revenue of
issuers of transit system obligations will be affected by variations in
utilization, which in turn may, be affected by the degree of local
governmental subsidization, competition from other forms of transportation,
and increased costs. Port authorities derive their revenues primarily from
fees imposed on ships using the facilities which may fluctuate depending on
the local economy and on competition from competing forms of transportation
such as air, rail and trucks. The revenues of issuers which derive their
payments from bridge, road or tunnel toll revenues could be adversely
affected by, increases in fuel costs, competition from toll-free vehicular
bridges and roads and alternative modes of transportation.
<F1>1 Reference is made to the Trust Agreement and any statements
contained herein are qualified in their entirety by the provisions ofthe
Trust Agreement.
WATER AND/OR SEWERAGE OBLIGATIONS are obligations of issuers whose revenues
are payable from user fees from the sale of water and/or sewerage services.
The problems of such issuers include the ability, to obtain rate increases,
population declines, the limitations on operations and increased costs and
delays attributable to environmental considerations, the difficulties
obtaining new supplies of fresh water, the effect of conservation programs
and in "no-growth" zoning ordinances.
UNIVERSITY AND COLLEGE REVENUE OBLIGATIONS are obligations of issuers whose
revenues are derived mainly from tuition, dormitory revenues, grants and
endowments. General problems faced by such issuers include declines in the
number of "college" age individuals, possible inability to raise tuitions
and fees, the uncertainty of continued receipt of Federal grants and state
funding, and government legislation or regulations which may adversely
affect the revenues or costs of such issuers.
DEDICATED-TAX SUPPORTED OBLIGATIONS are obligations of issuers which are
payable from and secured by tax revenues from a designated source, which
revenues are pledged to secure the bonds. The various types of Bonds
described below differ in structure and with respect to the rights of the
bondholders to the underlying property. Each type of dedicated-tax
supported Bond has distinct risks, only some of which are set forth below.
One type of dedicated-tax supported Bond is secured by the incremental tax
received on either real property or on sales within a specifically defined
geographical area; such tax generally will not provide bondholders with a
lien on the underlying property or revenues. Another type of dedicated-tax
supported Bond is secured by a special tax levied on real property within a
defined geographical area in such a manner that the tax is levied on those
who benefit from the project; such bonds typically provide for a statutory
lien on the underlying property for unpaid taxes. A third type of
dedicated-tax supported Bond may be secured by a tax levied upon the
manufacture, sale or consumption of commodities or upon the license to
pursue certain occupations or upon corporate privileges within a taxing
jurisdiction. As to any of these types of Bonds, the ability of the
designated revenues to satisfy the interest and principal payments on such
bonds may be affected by changes in the local economy, the financial
success of the enterprise responsible for the payment of the taxes, the
value of any property on which taxes may be assessed and the ability to
collect such taxes in a timely fashion. Each of these factors will have a
different affect on each distinct type of dedicated-tax supported bonds.
MUNICIPAL LEASE OBLIGATIONS are obligations that are secured by lease
payments of a governmental entity and are normally subject to annual budget
appropriations of the leasing governmental entity. A governmental entity
that enters into such a lease agreement cannot obligate future governments
to appropriate for and make lease payments but covenants to take such
action as is necessary to include any lease payments due in its budgets and
to make the appropriations therefor. A governmental entity's failure to
appropriate for and to make payments under its lease obligation could
result in insufficient funds available for payment of the obligations
secured thereby.
ORIGINAL ISSUE DISCOUNT OBLIGATIONS AND STRIPPED OBLIGATIONS are bonds
which were issued with nominal interest rates less than the rates then
offered by comparable securities and as a consequence were originally sold
at a discount from their face, or par, values. In a stable interest rate
environment, the market value of an original issue discount bond would tend
to increase more slowly in early years and in greater increments as the
bond approached maturity.
Certain of the original issue discount obligations in a Trust may be zero
coupon bonds. Zero coupon bonds do not provide for the payment of any
current interest; the buyer receives only the right to receive a final
payment of the face amount of the bond at its maturity. Zero coupon bonds
are subject to substantially greater price fluctuations during periods of
changing market interest rates than are securities of comparable quality
that pay interest currently.
Original issue discount obligations, including zero coupon bonds, may be
subject to redemption at prices based on the issue price plus the amount of
original issue discount accreted to redemption (the "ACCRETED VALUE") plus,
if applicable, some premium. Pursuant to such call provisions, an original
issue discount bond may be called prior to its maturity date at a price
less than its face value. See the "Portfolio" appearing in Part A of this
Prospectus for more information about the call provisions of portfolio
Bonds.
Certain of the Bonds in a Trust may be stripped obligations, which
represent evidences of ownership with respect to either the principal
amount of or a payment of interest on a tax-exempt obligation ("STRIPPED
OBLIGATIONS"). Each Stripped Obligation has been purchased at a discount
from the amount payable at maturity. A Stripped Obligation therefore has
economic characteristics similar to zero coupon bonds, as described above.
Unitholders should consult their own tax advisers with respect to the state
and local tax consequences of owning original issue discount bonds or
Stripped Obligations. Under applicable provisions governing determination
of state and local taxes, interest on original issue discount obligations
or Stripped Obligations may be deemed to be received in the year of accrual
even though there is no corresponding cash payment.
Certain bonds may carry a "MANDATORY PUT" (also referred to as a "MANDATORY
TENDER" or "MANDATORY REPURCHASE") feature pursuant to which the holder of
such bonds will receive payment of the full principal amount thereof on a
stated date prior to the maturity date unless such holder affirmatively
acts to retain the bond. The Trustee does not have the authority to act to
retain Bonds with such features; accordingly, it will receive payment of
the full principal amount of any such Bonds on the stated put date and such
date is therefore treated as the maturity date of such Bonds in selecting
Bonds for the respective Trusts and for purposes of calculating the average
maturity of the Bonds in any Trust.
COMPOSITION OF TRUSTS
Each Trust initially consists of delivery statements relating to contracts
to purchase Bonds (or of such Bonds) as are listed under "Portfolio" for
each Trust in Part A of this Prospectus and, thereafter, of such Bonds as
may continue to be held from time to time (including certain securities
deposited in a Trust in substitution for Bonds not delivered to a Trust or
in exchange or substitution for Bonds upon certain refundings), together
with accrued and undistributed interest thereon and undistributed cash
realized from the disposition of Bonds. Because certain of the Bonds in
certain 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 Bonds. In the event of a failure to deliver any Bond that has been
purchased for a Trust under a contract, including those securities
purchased on a "when, as and if issued" basis ("FAILED BONDS"), the Sponsor
is authorized under the Trust Agreement to direct the Trustee to acquire
other securities ("REPLACEMENT BONDS") to make up the original corpus of
such Trust.
"WHEN-ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The contracts to
purchase Bonds delivered to the Trustee represent an obligation by issuers
or dealers to deliver Bonds to the Sponsor for deposit in the Trusts.
Certain of the contracts relate to Bonds which have not been issued as of
the Initial Date of Deposit and which are commonly referred to as "WHEN
ISSUED" or "WHEN, AS AND IF ISSUED" Bonds. Although the Sponsor believes it
unlikely, if such Bonds, or replacement bonds described below, are not
acquired by a Trust or if their delivery is delayed, the Estimated Current
Returns and Estimated Long Term Returns shown in Part A of this Prospectus
may be reduced. Certain of the contracts for the purchase of Bonds provide
for delivery dates after the date of settlement for purchases made on the
Initial Date of Deposit. Interest on such "WHEN ISSUED" and "DELAYED
DELIVERY" Bonds begins accruing to the benefit of Unitholders on their
dates of delivery. Because "when, as and if issued" Bonds have not yet been
issued, as of the Initial Date of Deposit each Trust is subject to the risk
that the issuers thereof might decide not to proceed with the offering of
such Bonds or that the delivery of such Bonds or the delayed delivery Bonds
may be delayed. If such Bonds, or replacement bonds described below, are
not acquired by a Trust or if their delivery is delayed, the estimated
Long-Term Return and Estimated current Return set forth under "Essential
Information" for each Trust in Part A of this Prospectus may be reduced.
Those Bonds in each Trust purchased with delivery dates after the date of
settlement for purchases made on the Date of Deposit are so noted in the
"Portfolio" for each Trust in Part A of this Prospectus.
LIMITED REPLACEMENT OF CERTAIN BONDS. Neither the Sponsor nor the Trustee
shall be liable in any way for any default, failure or defect in any Bond.
In the event of a failure to deliver any Bond that has been purchased for a
Trust under a contract, including those Bonds purchased on and when, as and
if issued basis ("FAILED BONDS"), the Sponsor is authorized under the
Indenture to direct the Trustee to acquire other specified Bonds
("REPLACEMENT BONDS") to make up the original corpus of a Trust within 20
days after delivery of notice of the failed contract and the cost to such
Trust (exclusive of accrued interest) may not exceed the amount of funds
reserved for the purchase of the Failed Bonds. The Replacement Bonds must
satisfy the criteria previously described for the Trusts and shall be
substantially identical to the Failed Bonds they replace in terms of (i)
the exemption from federal and state taxation; (ii) maturity and; (iii)
cost to such Trust. In addition, Replacement Bonds shall not be "WHEN, AS
AND IF ISSUED" Bonds. Whenever a Replacement Bond has been acquired for a
Trust, the Trustee shall, within five days after the delivery thereof, mail
or deliver a notice of such acquisition to all Unitholders of the Trust
involved. Once the original corpus of a Trust is acquired, the Trustee will
have no power to vary the investment of such Trust.
To the extent Replacement Bonds are not acquired, the Sponsor shall refund
to all Unitholders of the Trust involved the sales charge attributable to
such Failed Bonds not replaced, and the principal and accrued interest
attributable to such Bonds shall be distributed not more than 30 days after
the determination of such failure or at such earlier time as the Trustee in
its sole discretion deems to be in the interest of the Unitholders. Any,
such accrued interest paid to Unitholders will be paid by the Sponsor and,
accordingly, will not be treated as tax-exempt income. In the event Failed
Bonds in a Trust could not be replaced, the Net Annual Interest Income per
Unit for such Trust would be reduced and the Estimated Current Return
thereon might be lowered.
SALE, MATURITY AND REDEMPTION OF BONDS. Certain of the Bonds may from time
to time under certain circumstances be sold or redeemed or will mature in
accordance with their terms. The proceeds from such events will be used to
pay for Units redeemed or distributed to Unitholders and not reinvested;
accordingly, no assurance can be given that a Trust will retain for any
length of time its present size and composition.
All of the Bonds in each Trust are subject to being called or redeemed in
whole or in part prior to their stated maturities pursuant to the optional
redemption provisions described in the "Portfolio" for each Trust in Part A
of this Prospectus and in most cases pursuant to sinking fund, special or
extraordinary redemption provisions. See the discussion of the various
types of bond issues, above, for information on the call provisions of such
bonds, particularly single family mortgage revenue bonds.
The exercise of redemption or call provisions on the Bonds will (except to
the extent the proceeds of the called Bonds are used to pay for Unit
redemptions) result in the distribution of principal and may result in a
reduction in the amount of subsequent interest distributions; it may also
affect the current return on Units of the Trust involved. The exercise of
redemption or call provisions on the Bonds is more likely to occur in
situations where when the Bonds have an offering side evaluation which
represents a premium over par (as opposed to a discount from par). (In the
case of original issue discount bonds, such redemption is generally to be
made at the issue price plus the amount of original issue discount accreted
to the date of redemption; such price is referred to herein as "ACCRETED
VALUE"). Because Bonds may have been valued at prices above or below par
value or the then current accreted value at the time Units were purchased,
Unitholders may realize gain or loss upon the redemption of portfolio
Bonds. (See "Tax Status" and "Distributions to Unitholders" herein and the
"Portfolio" in Part A of this Prospectus.)
CERTAIN TAX MATTERS, LITIGATION. Certain of the Bonds in a Trust's
portfolio may be subject to continuing requirements such as the actual use
of bond proceeds, manner of operation of the project financed from bond
proceeds or rebate of excess earnings on bond proceeds that may affect the
exemption of interest on such Bonds from Federal income taxation. Although
at the time of issuance of each of the Bonds in each Trust an opinion of
bond counsel was rendered as to the exemption of interest on such
obligations from Federal income taxation, and the issuers covenanted to
comply with all requirements necessary to retain the tax-exempt status of
the Bonds, there can be no assurance that the respective issuers or other
obligors on such obligations will fulfill the various continuing
requirements established upon issuance of the Bonds. A failure to comply
with such requirements may cause a determination that interest on such
obligations is subject to Federal income taxation, perhaps even
retroactively from the date of issuance of such Bonds, thereby reducing the
value of the Bonds and subjecting Unitholders to unanticipated tax
liabilities.
To the best knowledge of the Sponsor, there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be
expected to have a material adverse effect on any of the Trusts. It is
possible that after the Date of Deposit, litigation may be initiated with
respect to Bonds in any Trust. Any such litigation may affect the validity
of such Bonds or the tax-exempt nature of the interest thereon, but while
the outcome of litigation of such nature can never be entirely predicted,
the opinions of bond counsel to the issuer of each Bond on the date of
issuance state that such Bonds were validly issued and that the interest
thereon is, to the extent indicated, exempt from Federal income tax.
INSURANCE ON THE BONDS
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in each Trust has been obtained by the Sponsor or by
the issuers or underwriters of the Bonds from the MBIA Insurance
Corporation (the "INSURER"). Certain of the Bonds in a Trust may be covered
by a policy or policies of insurance obtained by the issuers or
underwriters of the Bonds from other insurers. The claims-paying ability of
the Insurer was rated "AAA Prime Grade" by Standard & Poor's. Moody's rates
all bond issuers insured by the Insurer "Aaa" and short-term loans "MIG l,"
both designated to be of the highest quality. The Insurer has issued a
policy or policies of insurance covering each of the Bonds in the Trusts,
each policy to remain in force until the payment in full of such Bonds and
whether or not the Bonds continue to be held by a Trust. By the terms of
each policy the Insurer will unconditionally guarantee to the holders or
owners of the Bonds the payment, when due, required of the issuer of the
Bonds of an amount equal to the principal of and interest on the Bonds as
such payments shall become due but not be paid (except that in the event of
any acceleration of the due date of principal by reason of mandatory or
optional redemption, default or otherwise, the payments guaranteed will be
made in such amounts and at such times as would have been due had there not
been an acceleration).
The Insurer is the principal operating subsidiary of MBIA, Inc., a New York
Stock Exchange listed company. MBIA, Inc. is not obligated to pay the debts
of or claims against the Insurer. The Insurer is a limited liability
corporation rather than a several liability association. The Insurer is
domiciled in the State of New York and licensed to do business in all 50
states, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of the
United States and the Territory of Guam. The Insurer has one European
branch in the Republic of France.
As of December 31, 1995 the Insurer had admitted assets of $3.8 billion
(audited), total liabilities of $2.5 billion (audited), and total capital
and surplus of $1.3 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance
regulatory authorities. As of September 30, 1996, the Insurer had admitted
assets of $4.3 billion (unaudited), total liabilities of $2.9 billion
(unaudited), and total capital and surplus of $1.4 billion (unaudited)
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities.
Insurance companies are subject to extensive regulation and supervision
where they do business by state insurance commissioners who regulate the
standards of solvency which must be maintained, the nature of and
limitations on investments, reports of financial condition, and
requirements regarding reserves for unearned premiums, losses and other
matters. A significant portion of the assets of insurance companies are
required by law to be held in reserve against potential claims on policies
and is not available to general creditors. Although the federal government
does not regulate the business of insurance, federal initiatives including
pension regulation, controls on medical care costs, minimum standards for
no-fault automobile insurance, national health insurance, tax law changes
affecting life insurance companies and repeal of the antitrust exemption
for the insurance business can significantly impact the insurance business.
The above ratings are not recommendations to buy, sell or hold the Bonds,
and such ratings may be subject to revision or withdrawal at any time by
the rating agencies. Any downward revision or withdrawal of either or both
ratings may have an adverse effect on the market price of the Bonds.
Because the insurance on the Bonds, if any, will be effective so long as
the Bonds are outstanding, such insurance will be taken into account in
determining the market value of the Bonds and therefore some value
attributable to such insurance will be included in the value of the Units
of the Trusts. The insurance does not, however, guarantee the market value
of the Bonds or of the Units.
PUBLIC OFFERING OF UNITS
The Public Offering Price of the Units of each Trust is equal to the
Trustee's determination of the aggregate offering prices of the Bonds
deposited therein (minus any advancement to the principal amount of a Trust
made by the Trustee) plus a sales charge set forth in "Essential
Information" for each Trust in Part A of this Prospectus, in each case
adding to the total thereof cash held by the Trust, if any, and dividing
the sum so obtained by the number of Units outstanding in the Trust. See
"Unit Value and Evaluation."
The sales charge applicable to quantity purchases is reduced on a graduated
scale for sales to any purchaser of at least $50,000. Sales charges during
the primary offering period are as follows:
DOLLAR AMOUNT OF TRANSACTION PERCENT PERCENT
OF OF NET
OFFERING AMOUNT
PRICE INVESTED
Less than $50,000 4.75% 4.987%
$50,000/5,000 Units but less than $100,000 4.50 4.712
$100,000/10,000 Units but less than $250,000 4.25 4.439
$250,000/25,000 Units but less than $500,000 4.00 4.167
$500,000/50,000 Units but less than $1,000,000 3.25 3.359
$1,000,000/100,000 Units or more 2.75 2.828
For "secondary market" sales the Public Offering Price per Unit of each
Trust is determined by adding to the Trustee's determination of the BID
price of each Bond in a Trust a sales charge determined in accordance with
the table set forth below based upon the dollar weighted average maturity
of a Trust. See "Unit Value and Evaluation." The effect of this method of
sales charge calculation will be that different sales charge rates will be
applied to the various Bonds in a Trust portfolio based upon the maturities
of such Bonds. As shown, the sales charge on Bonds in each maturity range
(and therefore the aggregate sales charge on the purchase) is reduced with
respect to purchases of at least $100,000:
SALES CHARGE (% OF PUBLIC OFFERING PRICE)
YEARS TO MATURITY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AMOUNT OF INVESTMENT LESS THAN 2 TO 4.99 5 TO 9.99 10 OR MORE
2
Less than $50,000 2.50% 3.50% 4.00% 4.90%
$50,000 but less than $100,00 2.25 3.25 3.75 4.75
$100,000 but less than $250,000 2.00 3.00 3.50 4.50
$250,000 but less than $500,000 1.75 2.75 3.25 4.25
$500,000 but less than $1,000,000 1.00 2.00 2.50 3.50
$1,000,000 or more 0.50 1.50 2.00 3.00
</TABLE>
At all times while Units are being offered for sale, the Evaluator will
appraise or cause to be appraised daily the value of the underlying Bonds
in each Trust as of 4:00 p.m. eastern time on each day on which the New
York Stock Exchange (the "EXCHANGE") is normally open or as of any earlier
closing time on a day on which the Exchange is scheduled in advance to
close at such earlier time and will adjust the Public Offering Price of the
Units commensurate with such appraisal. Such Public Offering Price will be
effective for all orders received by a dealer or the Sponsor at or prior to
4:00 p.m. eastern time on each such day or as of any earlier closing time
on a day on which the Exchange is scheduled in advance to close at such
earlier time. Orders received after that time, or on a day when the
Exchange is closed for a scheduled holiday or weekend, will be held until
the next determination of price.
Accrued interest from the preceding Record Date to, but not including, the
settlement date of the transaction (three business days after purchase)
will be added to the Public Offering Price to determine the purchase price
of Units. See "Accrued Interest."
The reduced sales charges resulting from quantity discounts as shown on the
table 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 market or during the secondary market at the Public Offering Price
less the concession the Sponsor typically would allow such broker-dealer.
See "Public Distribution of Units."
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" for each Trust in Part A of this
Prospectus. 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" for each Trust in Part A of this Prospectus
in accordance with fluctuations in the prices of the underlying Bonds and
the amount of accrued interest on the Units. The aggregate bid and offering
side evaluations of the Bonds shall be determined (i) on the basis of
current bid or offering prices of the Bonds, (ii) if bid or offering prices
are not available for any particular Bond, on the basis of current bid or
offering prices for comparable bonds, (iii) by determining the value of
Bonds on the bid or offer side of the market by appraisal, or (iv) by any
combination of the above.
The initial or primary Public Offering Price of the Units in each Trust is
based upon a pro rata share of the OFFERING prices per Unit of the Bonds in
such Trust plus the applicable sales charge. The secondary market Public
Offering Price of each Trust is based upon a pro rata share of the BID
prices per Unit of the Bonds in such Trust plus the applicable sales
charge. The OFFERING prices of Bonds in a Trust may be expected to average
between 1/2% to 2% more than the BID prices of such Bonds. The difference
between the bid side evaluation and the offering side evaluation of the
Bonds in each Trust on the business day prior to the Initial Date of
Deposit is shown in the discussion of each Trust portfolio.
The foregoing evaluations and computations shall be made as of the
evaluation time stated under "Essential Information" for each Trust in Part
A of this Prospectus, on each business day commencing with the Initial Date
of Deposit of the Bonds, effective for all sales made during the preceding
24-hour period.
Whether or not Units are being offered for sale, the Sponsor will determine
the aggregate value of each Trust as of 4:00 p.m. eastern time: (i) on each
June 30 or December 31 (or, if such date is not a business day, the last
business day prior thereto), (ii) on any day on which a Unit is tendered
for redemption (or the next succeeding business day if the date of tender
is a non-business day) and (iii) at such other times as may be necessary.
For this purpose, a "business day" shall be any day on which the Exchange
is normally open. (See "Unit Value and Evaluation.")
The prices at which the Bonds deposited in the Trusts would have been
offered to the public on the business day prior to the Initial Date of
Deposit were determined by the Trustee on the basis of an evaluation of
such Bonds prepared by Muller Data Corporation, a firm regularly engaged in
the business of evaluating, quoting or appraising comparable bonds. Muller
Data Corporation evaluated the Bonds as so insured. (See "Insurance on the
Bonds.")
The amount by which the Trustee's determination of the OFFERING PRICES of
the Bonds deposited in the Trusts was greater or less than the cost of such
Bonds to the Sponsor was PROFIT OR LOSS to the Sponsor exclusive of any
underwriting profit. (See Part A of this Prospectus.) The Sponsor also may
realize FURTHER PROFIT OR SUSTAIN FURTHER LOSS as a result of fluctuations
in the Public Offering Price of the Units.
The Interest on the Bonds deposited in a Trust, less the related estimated
fees and expenses, is estimated to accrue in the annual amounts per Unit
set forth under "Special Trust Information" for each Trust in Part A of
this Prospectus. The amount of net interest income which accrues per Unit
may change as Bonds 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 (the date of settlement), payments may be made prior thereto.
A person will become the owner of Units on the date of settlement provided
payment has been received. Cash, if any, made available to the Sponsor
prior to the date of settlement for the purchase of Units, or prior to the
acquisition of all Bonds by a Trust, may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934.
MARKET FOR UNITS
During the initial public offering period, the Sponsor intends to offer to
purchase Units of each Trust at a price equivalent to the pro rata share
per Unit of the OFFERING prices of the Bonds in such Trust (plus accrued
interest). Afterward, although it is not obligated to do so, the Sponsor
intends to maintain a secondary market for Units of each Trust at its own
expense and continuously to offer to purchase Units of each Trust at
prices, subject to change at any time, which are based upon the BID prices
of Bonds in the respective portfolios of the Trusts. Unitholders who wish
to dispose of their Units should inquire of the Trustee or their broker as
to the current Redemption Price. See "Redemption."
Certificates, if any, for Units are delivered to the purchaser as promptly
after the date of settlement (three business days after purchase) as the
Trustee can complete the mechanics of registration, normally within 48
hours after registration instructions are received. Purchasers of Units to
whom Certificates are issued will be unable to exercise any right of
redemption until they have received their Certificates as tender of the
Certificate, properly endorsed for transfer. See "Redemption."
ACCRUED INTEREST
Accrued interest is the accumulation of unpaid interest on a bond from the
last day on which interest thereon was paid. Interest on Bonds in each
Trust is accounted for daily on an accrual basis. For this reason, the
purchase price of Units of a Trust will include not only the Public
Offering Price but also the proportionate share of accrued interest to the
date of settlement. Accrued interest does not include accrual of original
issue discount on zero coupon bonds, Stripped Obligations or other original
issue discount bonds. Interest accrues to the benefit of Unitholders
commencing with the settlement date of their purchase transaction.
In an effort to reduce the amount of accrued interest that investors would
have to pay in addition to the Public Offering Price, the Trustee has
agreed to advance to each Trust the amount of accrued interest due on the
Bonds as of the First Settlement Date (which has been designated the first
Record Date ). This accrued interest will be paid to the Sponsor as the
holder of record of all Units on 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,
but not including, the date of settlement of the investor's purchase (three
business days after purchase), less any distributions from the related
Interest Account. The Trustee will recover its advancements (without
interest or other cost to the Trusts) from interest received on the Bonds
deposited in each Trust.
The Trustee has no cash for distribution to Unitholders until it receives
interest payments on the Bonds in the Trusts. Since municipal bond interest
is accrued daily but paid only semi-annually, during the initial months of
the Trusts, the Interest Accounts, consisting of accrued but uncollected
interest and collected interest (cash), will be predominantly the
uncollected accrued interest that is not available for distribution.
However, due to advances by the Trustee, the Trustee will provide a first
distribution between approximately 30 and 60 days after the Initial Date of
Deposit. Assuming each Trust retains its original size and composition and
expenses and fees remain the same, annual interest collected and
distributed will approximate the Estimated Net Annual Interest Income set
forth in Part A of this Prospectus for each Trust. However, the amount of
accrued interest at any point in time will be greater than the amount that
the Trustee will have actually received and distributed to the Unitholders.
Therefore, there will always remain an item of accrued interest that is
included in the Purchase Price and the redemption price of the Units.
Interest is accounted for daily and a proportionate share of accrued and
undistributed interest computed from the preceding Record Date is added to
the daily valuation of each Unit of each Trust. (See Part A of this
Prospectus and "Distributions to Unitholders.") As Bonds mature, or are
redeemed or sold, the accrued interest applicable to such bonds is
collected and subsequently distributed to Unitholders. Unitholders who sell
or redeem all or a portion of their Units will be paid their proportionate
share of the remaining accrued interest to, but not including, the third
business day following the date of sale or tender.
PUBLIC DISTRIBUTION OF UNITS
It is the intention of the Sponsor to qualify Units of National Trusts for
sale under the laws of substantially all of the states of the United States
of America, and Units of State Trusts only in the state for which the Trust
is named and selected other states.
To facilitate the handling of transactions, sales of Units shall be limited
to initial transactions involving a minimum of $5,000. The Sponsor reserves
the right to reject, in whole or in part, any order for the purchase of
Units.
The Sponsor plans to allow a discount to brokers and dealers in connection
with the primary distribution of Units and also in secondary market
transactions. The primary market discounts are as follows:
DOLLAR AMOUNT OF TRANSACTION DEALER
CONCESSION
(AS OF % OF
PUBLIC
OFFERING
PRICE) (1)
Less than $50,000 3.25%
$50,000 but less than $100,000 3.25
$100,000 but less than $250,000 3.25
$250,000 but less than $500,000 3.25
$500,000 but less than $1,000,000 2.50
$1,000,000 or more 2.00
(1) Dealers who sell on or before March 19, 1997 an aggregate of $100,000,
$250,000 or $500,000 of Units in a Trust will receive an additional dealer
concession of 0.1%, 0.2% or 0.25%, respectively, of the Public Offering
Price.
The Sponsor currently intends to maintain a secondary market for Units of
each Trust. See "Market for Units." The amount of the dealer concession on
secondary market purchases of Trust Units through the Sponsor will be
computed based upon the value of the Bonds in a Trust portfolio, including
the sales charge computed as described in "Public Offering of Units," and
adjusted to reflect the cash position of a Trust's principal account, and
will vary with the size of the purchase as shown in the following table:
SALES CHARGE (% OF PUBLIC OFFERING PRICE)
YEARS TO MATURITY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
2 TO 4.99 5 TO 9.99 10 OR MORE
LESS THAN
2
AMOUNT OF PURCHASE
Less than $50,000 1.75% 2.75% 3.25% 4.00%
$50,000 but less than $100,00 1.50 2.50 3.00 4.00
$100,000 but less than $250,000 1.25 2.25 2.75 3.75
$250,000 but less than $500,000 1.25 2.25 2.75 3.50
$500,000 but less than $1,000,000 0.50 1.50 2.00 2.75
$1,000,000 or more 0.25 1.25 1.75 2.25
</TABLE>
The Sponsor reserves the right to change the foregoing dealer concessions
from time to time.
Certain commercial banks are making Units of the Trusts available to their
customers on an agency basis. A portion of the sales charge paid by these
customers is retained by or remitted to the banks in the amounts shown in
the above table. The Glass-Steagall Act prohibits banks from underwriting
Trust Units; the Act does, however, permit certain agency transactions and
banking regulators have not indicated that these particular agency
transactions are not permitted under the Act. In Texas and in certain other
states, any bank making Units available must be registered as a
broker-dealer under state law.
From time to time the Sponsor may implement programs under which
underwriters and dealers of a Trust may receive nominal awards from the
Sponsor for each of their registered representatives who have sold a
minimum number of 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 an underwriter or 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
contests 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
underwriters and 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 Units or the amount that a Trust will receive from the Units
sold.
UNDERWRITING CONCESSIONS. The Sponsor will receive from the underwriters
set forth in Part A of this Prospectus the excess over the gross sales
commissions contained in the following table. In addition, the underwriter
shall be entitled to the rebate set forth below for sales made which were
eligible for a quantity discount in the amounts set forth below.
AMOUNT UNDERWRITTEN REBATE (AS A
UNDERWRITING % OF PUBLIC
CONCESSION OFFERING
(AS A % OF PRICE)
PUBLIC
OFFERING
PRICE)
Less than $50,000 3.60% %
$50,000 but less than $100,00 3.60 0.25
$100,000 but less than $250,000 3.60 0.50
$250,000 but less than $500,000 3.60 0.75
$500,000 but less than $1,000,000 2.80 0.70
$1,000,000 2.30 0.70
or more
PROFITS OF SPONSOR. In addition to receiving the difference between the
gross sales charge of Units of a Trust and the applicable dealer or
underwriter concessions, the Sponsor may also realize a profit or a loss
resulting from the difference between the purchase prices of the Bonds to
the Sponsor and the cost of such Bonds to a Trust, which is based on the
offering side evaluation of the Bonds. See "Portfolio" for each Trust in
Part A of this Prospectus. The Sponsor may also realize profits or losses
with respect to Bonds 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 Bonds 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 Bonds in a
Trust.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
The Estimated Long Term Return for each Trust is a measure of the return to
the investor expected to be earned over the estimated life of the Trust.
The Estimated Long Term Return represents an average of the yields to
maturity (or call) of the Bonds in a Trust's portfolio calculated in
accordance with accepted bond practice and adjusted to reflect expenses and
sales charges. Under accepted bond practice, tax-exempt bonds are
customarily offered to investors on a "yield price" basis, which involves
computation of yield to maturity or to an earlier call date (whichever
produces the lower yield), and which takes into account not only the
interest payable on the bonds but also the amortization or accretion of any
premium over, or discount from, the par (maturity) value inherent in the
bond's purchase price. In the calculation of Estimated Long Term Return,
the average yield for a Trust's portfolio is derived by weighting each
Bond's yield by the market value of the Bond and by the amount of time
remaining to the date to which the Bond is priced. This weighted average
yield is then adjusted to reflect estimated expenses, is compounded, and is
reduced by a factor which represents the amortization of the sales charge
over the expected average life of a Trust. The Estimated Long Term Return
calculation does not take into account the effect of a first distribution
which may be less than a regular distribution or may be paid at some point
after 30 days.
Estimated Current Return is computed by dividing the Net Annual Interest
Income per Unit by the Public Offering Price. In contrast to Estimated Long
Term Return, Estimated Current Return does not reflect the amortization of
premium or accretion of discount, if any, on the Bonds in a Trust's
portfolio. Net Annual Interest Income per Unit is calculated by dividing
the annual interest income to a Trust, less estimated expenses, by the
number of Units outstanding.
Net Annual Interest Income per Unit, used to calculate Estimated Current
Return, will vary with changes in fees and expenses of the Trustee and the
Evaluator and with the redemption, maturity, exchange or sale of Bonds. A
Unitholder's actual return may vary significantly from the Estimated
Long-Term Return, based on their holding period, market interest rate
changes, other factors affecting the prices of individual bonds in the
portfolio, and differences between the expected remaining life of portfolio
bonds and the actual length of time that they remain in a Trust; such
actual holding periods may be reduced by termination of a Trust, as
described in "Other Information." Since both the Estimated Current Return
and the Estimated Long Term Return quoted herein are based on the market
value of the underlying Bonds on the opening of business on the Initial
Date of Deposit, subsequent calculations of these performance measures will
reflect the then current market value of the underlying Bonds and may be
higher or lower. The Sponsor will provide estimated cash flow information
relating to a Trust without charge to each potential investor who receives
this prospectus and makes an oral or written request to the Sponsor for
such information.
A portion of the monies received by a Trust may be treated, in the first
year only, as a return of principal due to the inclusion in a Trust's
portfolio of "when-issued" or other Bonds having delivery dates after the
date of settlement for purchases made on the Initial Date of Deposit. A
consequence of this treatment is that in the computation of Estimated
Current Return for the first year, such monies are excluded from Net Annual
Interest Income and treated as an adjustment to the Public Offering Price.
(See "Essential Information" for each Trust appearing in Part A of this
Prospectus, "Composition of Trusts" and "Tax Status.")
A comparison of tax-free and equivalent taxable estimated current returns
with the returns on various taxable investments is one element to consider
in making an investment decision. The Sponsor may from time to time in its
advertising and sales materials compare the then current estimated returns
on a Trust and returns over specified periods on other similar Trusts with
returns on taxable investments such as corporate or U.S. Government bonds,
bank CD's and money market accounts or money market funds, each of which
has investment characteristics that may differ from those of a Trust. U.S.
Government bonds, for example, are backed by the full faith and credit of
the U.S. Government and bank CD's and money market accounts are insured by
an agency of the federal government. Money market accounts and money market
funds provide stability of principal, but pay interest at rates that vary
with the condition of the short-term debt market. The investment
characteristics of the Trusts are described more fully elsewhere in the
Prospectus.
TAX STATUS
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal
gross income were rendered by bond counsel to the respective issuing
authorities. In addition, with respect to State Trusts, where applicable,
bond counsel to the issuing authorities rendered opinions as to the
exemption of interest on such Bonds, when held by residents of the state in
which the issuers of such Bonds are located, from state income taxes and
certain state or local intangibles and local income taxes. For a discussion
of the tax status of State Trusts see Part A of this Prospectus. Neither
the Sponsor nor its counsel have made any special review for the Trusts of
the proceedings relating to the issuance of the Bonds or of the basis for
the opinions rendered in connection therewith. If the interest on a Bond
should be determined to be taxable, the Bond would generally have to be
sold at a substantial discount. In addition, investors could be required to
pay income tax on interest received prior to the date on which interest is
determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or of a
Unit by a Unitholder is includable in gross income for Federal income tax
purposes, and may be includable in gross income for state tax purposes. (It
should be noted in this connection that such gain does not include any
amounts received in respect of accrued interest or accrued original issue
discount, if any.)
In the opinion of Chapman and Cutler, Counsel to the Sponsor, under
existing law:
(1) The Trusts are not associations taxable as corporations for Federal
income tax purposes and interest and accrued original issue discount on
Bonds which are excludable from gross income under the Internal Revenue
Code of 1986 will retain its status when distributed to the Unitholders;
however, such interest may be taken into account is computing the
alternative minimum tax, an additional tax on branches of foreign
corporations and the environmental tax (the "Superfund Tax"). See "Certain
Tax Matters Applicable to Corporate Unitholders," below;
(2) Each Unitholder of a Trust is considered to be the owner of a pro rata
portion of each asset of such Trust under Subpart E, subchapter J of
Chapter 1 of the Internal Revenue Code of 1986 (the "CODE") and will have a
taxable event when a Trust disposes of a Bond or when the Unitholder
redeems or sells Units. If the Unitholder disposes of a Unit, he is deemed
thereby to have disposed of his entire pro rata interest in all assets of
the Trust involved including his pro rata portion of all the Bonds
represented by the Unit. Legislative proposals have been made that would
treat certain transactions designed to reduce or eliminate risk of loss and
opportunities for gain as constructive sales for purposes of recognition of
gain (but not loss). Unitholders should consult their own tax advisors
with regard to any such constructive sale rules. Unitholders must reduce
the tax basis of their Units for their share of accrued interest received
by a Trust, if any, on Bonds delivered after the date the Unitholders pay
for their Units to the extent that such interest accrued on such Bonds
before the date the Trust acquired ownership of the Bonds (and the amount
of this reduction may exceed the amount of accrued interest paid to the
seller) and, consequently, such Unitholders may have an increase in taxable
gain or reduction in capital loss upon the disposition of such Units. Gain
or loss upon the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis of the Units.
If the Trustee disposes of Bonds (whether by sale, payment at maturity,
redemption or otherwise), gain or loss is recognized to the Unitholder
(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 the Unitholder's
basis for his or her fractional interest in the asset disposed of. In the
case of a Unitholder who purchases Units, such basis (before adjustment for
earned original issue discount and amortized bond premium, if any) is
determined by apportioning the cost of the Units among each of the Trust
assets ratably according to value as of the valuation date nearest the date
of acquisition of the Units. It should be noted that certain legislative
proposals have been made which could affect the calculation of basis for
Unitholders holding securities that are substantially identical to the
Bonds. Unitholders should consult their own tax advisors with regard to
the calculation of basis. The tax basis reduction requirements of said Code
relating to amortization of bond premium may, under some circumstances,
result in the Unitholder realizing a taxable gain when his or her Units are
sold or redeemed for an amount equal to or less than their original cost;
and
(3) Any amounts paid on defaulted Bonds held by the Trustee under policies
of insurance issued with respect to such Bonds will be excludable from
Federal gross income if, and to the same extent as, such interest would
have been so excludable if paid in the normal course by the respective
issuer, PROVIDED that, at the time such policies are purchased, the amounts
paid for such policies are reasonable, customary and consistent with the
reasonable expectation that the issuer of the bonds, rather than the
insurer, will pay debt service on the bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules governing
the accrual of original issue discount. These rules provide that original
issue discount accrues either on the basis of a constant compound interest
rate or ratably over the term of the Bond, depending on the date the Bond
was issued. In addition, special rules apply if the purchase price of a
Bond exceeds the original issue price plus the amount of original issue
discount which would have previously accrued based on its issue price (its
"ADJUSTED ISSUE PRICE") to prior owners. If a Bond is acquired with
accrued interest, that portion of the price paid for the accrued interest
is added to the tax basis of the Bond. When this accrued interest is
received, it is treated as a return of capital and reduces the tax basis of
the Bond. If a Bond is purchased for a premium, the amount of the premium
is added to the tax basis of the Bond. Bond premium is amortized over the
remaining term of the Bond, and the tax basis of the Bond is reduced each
tax year by the amount of the premium amortized in that tax year. The
application of these rules will also vary depending on the value of the
Bond on the date a Unit holder acquires his Unit, and the price the Unit
holder pays for his Unit. Unit holders should consult their tax advisors
regarding these rules and their application. See "Portfolio" appearing in
Part A for each Trust for information relating to Bonds, if any, issued at
an original issue discount.
The Revenue Reconciliation Act of 1993 (the "TAX ACT") subjects tax-exempt
bonds to the market discount rules of the Code effective for bonds
purchased after April 30, 1993. In general, market discount is the amount
(if any) by which the stated redemption price at maturity exceeds an
investor's purchase price (except to the extent that such difference, if
any, is attributable to original issue discount not yet accrued), subject
to a statutory DE MINIMIS rule. Market discount can arise based on the
price a Trust pays for Bonds or the price a Unitholder pays for his or her
Units. Under the Tax Act, accretion of market discount is taxable as
ordinary income; under prior law the accretion had been treated as capital
gain. Market discount that accretes while a Trust holds a Bond would be
recognized as ordinary income by the Unitholders when principal payments
are received on the Bond, upon sale or at redemption (including early
redemption) or upon the sale or redemption of the Units, unless a
Unitholder elects to include market discount in taxable income as it
accrues. The market discount rules are complex and Unitholders should
consult their tax advisors regarding these rules and their application.
CERTAIN TAX MATTERS APPLICABLE TO CORPORATE UNITHOLDERS. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax for
taxable years beginning after December 31, 1986 depend upon the
corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the
adjustment items used in computing AMTI and the Superfund Tax of a
corporation (other than an S corporation, Regulated Investment Company,
Real Estate Investment Trust, or REMIC) is an amount equal to 75% of the
excess of such corporation's "adjusted current earnings" over an amount
equal to its AMTI (before such adjustment item and the alternative tax net
operating loss deduction). "Adjusted current earnings" includes all
tax-exempt interest, including interest on all of the Bonds in the Trusts.
Under current Code provisions, the Superfund Tax does not apply to tax
years beginning on or after January 1, 1996. Legislative proposals have
been introduced that would extend the Superfund Tax. Under the provisions
of Section 884 of the Code, a branch profits tax is levied on the
"effectively connected earnings and profits" of certain foreign
corporations which include tax-exempt interest such as interest on the
Bonds in the Trusts. Unitholders should consult their tax advisers with
respect to the particular tax consequences to them including the corporate
alternative minimum tax, the Superfund Tax and the branch profits tax
imposed by Section 884 of the Code.
Counsel for the Sponsor has also advised that under Section 265 of the Code
interest on indebtedness incurred or continued to purchase or carry Units
of a Trust is not deductible for Federal income tax purposes. The Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (however, these
rules generally do not apply to interest paid on indebtedness incurred to
purchase or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would not be
able to deduct any of the interest expense attributable to ownership of
Units. Legislative proposals have been made that would extend the financial
institution rules to most corporations. Investors with questions regarding
these issues should consult with their tax advisors.
In the case of certain of the Bonds in a Trust, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial
user" of the facilities being financed with the proceeds of these Bonds, or
persons related thereto, for periods while such Bonds are held by such a
user or related person, will not be excludable from Federal gross income,
although interest on such Bonds received by others would be excludable from
Federal gross income. "Substantial user" and "related person" are defined
under the Code and U.S. Treasury Regulations. Any person who believes he
or she may be a substantial user or related person as so defined should
contact his tax advisor.
In general, Section 86 of the Code provides that 50% of Social Security
benefits are includable in gross income to the extent that the sum of
"unmodified adjusted gross income" plus 50% of the Social Security benefits
received exceeds the "base amount." The base amount is $25,000 for
unmarried taxpayers, $32,000 for married taxpayers filing a joint return
and zero for married taxpayers who do not live apart at all times during
the taxable year and who file separate returns. Modified adjusted gross
income is adjusted gross income determined without regard to certain
otherwise allowable deductions and exclusions from gross income and by
including tax-exempt interest. To the extent that Social Security benefits
are includible in gross income, they will be treated as any other item of
gross income.
In addition, under the Tax Act, for taxable years beginning after December
31 1993, up to 85% of Social Security benefits are includible in gross
income to the extent that the sum of "modified adjusted gross income" plus
50% of Social Security benefits received exceeds an "adjusted base amount."
The adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for
married taxpayers filing a joint return, and zero for married taxpayers who
do not live apart at all times during the taxable year and who file
separate returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social
Security benefits will be included in gross income, no tax-exempt interest,
including that received from a Trust, will be subject to tax. A taxpayer
whose adjusted gross income already exceeds the base amount or the adjusted
base amount must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after inclusion
of tax-exempt interest) does not exceed the base amount need not include
any Social Security benefits in gross income.
For purposes of computing the alternative minimum tax applicable to all
taxpayers (including non-corporate taxpayers) subject to the alternative
minimum tax and the Superfund Tax for corporations, interest on certain
private activity bonds (which includes most industrial and housing revenue
bonds) issued on or after August 8, 1986 is included as an item of tax
preference. Except as otherwise noted in Part One for certain Trusts, the
Trusts do not include any such private activity bonds issued on or after
that date.
In the case of corporations, the alternative tax rate applicable to
long-term capital gains is 35%, effective for long-term capital gains
realized in taxable years beginning on or after January 1, 1993. For
taxpayers other than corporations, net capital gains (which are defined as
net long-term capital gain over net short-term capital loss for a taxable
year) are subject to a maximum stated marginal tax 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. Under the Code, taxpayers
must disclose to the Internal Revenue Service the amount of tax-exempt
interest earned during the year.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations subject to either the environmental tax or the branch profits
tax, financial institutions, certain insurance companies, certain S
corporations, individual recipients of Social Security or Railroad
Retirement benefits and taxpayers who may be deemed to have incurred or
continued indebtedness to purchase or carry tax-exempt obligations.
Prospective investors should consult their tax advisors as to the
applicability of any such collateral consequences.
In the opinion of Carter, Ledyard & Milburn, counsel to the Trustee, and,
in the absence of a New York Trust from the Series, special counsel for the
Series for New York tax matters, under existing law: Under the income tax
laws of the State and City of New York, each Trust is not an association
taxable as a corporation and the income of each Trust will be treated as
the income of the Unitholders.
For a summary of each opinion of special counsel to the respective State
Trusts for state tax matters, see Part A of this Prospectus.
ALL STATEMENTS IN THE PROSPECTUS CONCERNING EXEMPTION FROM FEDERAL, STATE
OR OTHER TAXES ARE THE OPINION OF COUNSEL AND ARE TO BE SO CONSTRUED.
EXCEPT AS NOTED ABOVE AND IN PART A OF THIS PROSPECTUS, THE EXEMPTION OF
INTEREST ON STATE AND LOCAL OBLIGATIONS FOR FEDERAL INCOME TAX PURPOSES
DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER THE INCOME OR OTHER TAX LAWS
OF ANY STATE OR CITY. THE LAWS OF THE SEVERAL STATES VARY WITH RESPECT TO
THE TAXATION OF SUCH OBLIGATIONS.
TRUST EXPENSES
The Sponsor may charge the Trusts a portfolio surveillance fee for services
performed for the Trusts in an amount not to exceed that amount set forth
in "Special Trust Information" for each Trust in Part A of this Prospectus
but in no event will such compensation, when combined with all compensation
received from other unit investment trusts for which the Sponsor both acts
as sponsor and provides portfolio surveillance, exceed the aggregate cost
to the Sponsor for providing such services. Such fee shall be based on the
total number of Units of the related Trust outstanding as of the December
Record Date preceding any annual period. The Sponsor will receive a portion
of the sales commissions paid in connection with the purchase of Units and
will share in profits, if any, related to the deposit of Bonds in the
Trusts.
The Trustee receives for its services fees set forth under "Special Trust
Information" for each Trust in Part A of this Prospectus. The Trustee fee
which is calculated monthly is based on the largest aggregate principal
amount of Bonds 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 Agreement 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 "Special Trust Information" for each
Trust in Part A of this Prospectus. 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 up to that portion of the Trustee's
annual fee as set forth under "Special Trust Information" for each Trust in
Part A of this Prospectus in reimbursement of the Sponsor's cost of
providing certain bookkeeping and administrative services to its own
customers.
For evaluation of Bonds in each Trust, the Evaluator shall receive a fee,
payable monthly, calculated on the basis of that annual rate set forth
under "Essential Information" for each Trust in Part A of this Prospectus,
based upon the largest aggregate principal amount of Bonds 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 insurance costs, but not including any
fees and expenses charged by any agent for custody and safeguarding of
Bonds) 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 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 all Trusts 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.
DISTRIBUTIONS TO UNITHOLDERS
Interest received by the Trustee on the Bonds in each Trust, including that
part of the proceeds of any disposition of Bonds which represents accrued
interest and including any insurance proceeds representing interest due on
defaulted Bonds, shall be credited to the "Interest Account" of such Trust
and all other moneys received by the Trustee shall be credited to the
"Principal Account" of such Trust.
The pro rata share of cash in the Principal Account in each Trust will be
computed as of each monthly Record Date and distributions to the
Unitholders as of such Record Date will be made on or shortly after the
fifteenth day of the month. Proceeds received from the disposition,
including sale, call or maturity, of any of the Bonds and all amounts paid
with respect to zero coupon bonds and Stripped Obligations will be held in
the Principal Account and either used to pay for Units redeemed or
distributed on the Distribution Date following the next monthly Record
Date. The Trustee is not required to make a distribution from the Principal
Account of any Trust unless the amount available for distribution in such
account equals at least ten cents per Unit.
The pro rata share of the Interest Account in each Trust will be computed
by the Trustee each month as of each Record Date and distributions will be
made on or shortly after the fifteenth day of the month to Unitholders of
such Trust as of the Record Date. Persons who purchase Units between a
Record Date and a Distribution Date will receive their first distribution
on the Distribution Date following the next Record Date under the
applicable plan of distribution.
See Part A of this Prospectus for details of distributions per Unit of each
Trust based upon estimated Net Annual Interest Income at the Date of
Deposit. The amount of the regular distributions will generally change when
Bonds are redeemed, mature or are sold or when fees and expenses increase
or decrease. For the purpose of minimizing fluctuations in the
distributions from the Interest Account of a Trust, the Trustee is
authorized to advance such amounts as may be necessary to provide for
interest distributions of approximately equal amounts. The Trustee shall be
reimbursed, without interest, for any such advances from funds in the
Interest Account of such Trust. The Trustee's fee takes into account the
costs attributable to the outlay of capital needed to make such advances.
As of the first day of each month the Trustee will deduct from the Interest
Account of a Trust or, to the extent funds are not sufficient therein, from
the Principal Account of a Trust, amounts needed for payment of expenses of
such Trust. The Trustee also may withdraw from said accounts such amount,
if any, as it deems necessary to establish a reserve for any governmental
charges payable out of such Trust. Amounts so withdrawn shall not be
considered a part of the Trust's assets until such time as the Trustee
shall return all or any part of such amounts to the appropriate account. In
addition, the Trustee shall withdraw from the Interest Account and the
Principal Account of a Trust such amounts as may be necessary to cover
redemptions of Units of such Trust by the Trustee. Funds which are
available for future distributions, redemptions and payment of expenses are
held in accounts which are non-interest bearing to Unitholders and are
available for use by the Trustee pursuant to normal banking procedures.
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. 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
"Distributions to Unitholders."
REPORTS TO UNITHOLDERS
The Trustee shall furnish Unitholders of a Trust in connection with each
distribution, a statement of the amount of interest, if any, and the amount
of other receipts (received since the preceding distribution) being
distributed, expressed in each case as a dollar amount representing the pro
rata share of each Unit of a Trust outstanding and a year to date summary
of all distributions paid on said Units. Within a reasonable period of time
after the end of each calendar year, the Trustee shall furnish to each
person who at any time during the calendar year was a registered Unitholder
of a Trust a statement with respect to such Trust (i) as to the Interest
Account: interest received (including amounts representing interest
received upon any disposition of Bonds), and, except for any State Trust,
the percentage of such interest by states in which the issuers of the Bonds
are located, deductions for fees and expenses of such Trust, redemption of
Units and the balance remaining after such distributions and deductions,
expressed in each case both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the last
business day of such calendar year; (ii) as to the Principal Account: the
dates of disposition of any Bonds and the net proceeds received therefrom
(excluding any portion representing accrued interest), the amount paid for
purchase of Replacement Bonds, the amount paid upon redemption of Units,
deductions for payment of applicable taxes and fees and expenses of the
Trustee, and the balance remaining after such distributions and deductions
expressed both as a total dollar amount and as a dollar amount representing
the pro rata share of each Unit outstanding on the last business day of
such calendar year; (iii) a list of the Bonds held and the number of Units
outstanding on the last business day of such calendar year; (iv) the Unit
Value based upon the last computation thereof made during such calendar
year; and (v) amounts actually distributed during such calendar year from
the Interest Account and from the Principal Account, separately stated,
expressed both as total dollar amounts and as dollar amounts representing
the pro rata share of each Unit outstanding.
UNIT VALUE AND EVALUATION
The value of each Trust is determined by the Trustee on the basis of (1)
the cash on hand in a Trust or moneys in the process of being collected,
(2) the value of the Bonds in a Trust as determined by the Evaluator based
on the BID prices of the Bonds and (3) interest accrued thereon not subject
to collection, LESS (1) amounts representing taxes or governmental charges
payable out of a Trust and (2) the accrued expenses of a Trust. The result
of such computation is divided by the number of Units of such Trust
outstanding as of the date thereof to determine the per Unit value ("UNIT
VALUE") of such Trust. The Evaluator may determine the value of the Bonds
in each Trust (1) on the basis of current BID prices of the Bonds obtained
from dealers or brokers who customarily deal in bonds comparable to those
held by the Trust, (2) if bid prices are not available for any of the
Bonds, on the basis of bid prices for comparable bonds, (3) by causing the
value of the Bonds to be determined by others engaged in the practice of
evaluating, quoting or appraising comparable bonds or (4) by any
combination of the above. Although the Unit Value of each Trust is based on
the BID prices of the Bonds, the Units are sold initially to the public at
the Public Offering Price based on the OFFERING prices of the Bonds.
Because the insurance obtained by the Sponsor or by the issuers of Bonds
with respect to the Bonds in the Trusts is effective so long as such Bonds
are outstanding, such insurance will be taken into account in determining
the bid and offering prices of such Bonds and therefore some value
attributable to such insurance will be included in the value of Units of
Trusts that include such Bonds.
OWNERSHIP AND TRANSFER OF UNITS
The ownership of Units is evidenced by book entry positions recorded on the
books and records of the Trustee unless the Unitholder expressly requests
that the purchased Units be evidenced in Certificate form. The Trustee is
authorized to treat as the owner of Units that person who at the time is
registered as such on the books of the Trustee. Any Unitholder who holds a
Certificate may change to book entry ownership by submitting to the Trustee
the Certificate along with a written request that the Units represented by
such Certificate be held in book entry form. Likewise, a Unitholder who
holds Units in book entry form may obtain a Certificate for such Units by
written request to the Trustee. Units may be held in denominations of one
Unit or any multiple or fraction thereof. Fractions of Units are computed
to three decimal places. Any Certificates issued will be numbered serially
for identification, and are issued in fully registered form, transferable
only on the books of the Trustee. Book entry Unitholders will receive a
Book Entry Position Confirmation reflecting their ownership.
Units are transferable by making a written request to the Trustee and, in
the case of Units evidenced by Certificate(s), by presenting and
surrendering such Certificate(s) to the Trustee, at its address listed on
the back cover of this Part B of the Prospectus, properly endorsed or
accompanied by a written instrument or instruments of transfer. The
Certificate(s) should be sent registered or certified mail for the
protection of the Unitholder. Each Unitholder must sign such written
request, and such Certificate(s) or transfer instrument, exactly as his
name appears on (a) the face of the Certificate (s) representing the Units
to be transferred, or (b) the Book Entry Position Confirmation(s) relating
to the Units to be transferred. Such signature(s) must be guaranteed by a
guarantor acceptable to the Trustee. In certain instances the Trustee may
require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority. Mutilated
Certificates must be surrendered to the Trustee in order for a replacement
Certificate to be issued. Although at the date hereof no charge is made and
none is contemplated, a Unitholder may be required to pay $2.00 to the
Trustee for each Certificate reissued or transfer of Units requested and to
pay any governmental charge which may be imposed in connection therewith.
REPLACEMENT OF LOST, STOLEN OR DESTROYED CERTIFICATES
To obtain a new Certificate replacing one that has been lost, stolen, or
destroyed, the Unitholder must furnish the Trustee with sufficient
indemnification and pay such expenses as the Trustee may incur. This
indemnification must be in the form of an Open Penalty Bond of
Indemnification. The premium for such an indemnity bond may vary, but
currently amounts to 1% of the market value of the Units represented by the
Certificate. In the case however, of a Trust as to which notice of
termination has been given, the premium currently amounts to 0.5% of the
market value of the Units represented by such Certificate.
REDEMPTION
A Unitholder may redeem all or a portion of his or her Units by tendering
to the Trustee certificates representing the Units to be redeemed, or in
the case of uncertificated Units, delivery of a request for redemption,
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. Certificates should 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.
On the third business day following the date of tender, the Unitholder will
be entitled to receive in cash for each Unit tendered an amount equal to
the Unit Value of such Trust determined by the Trustee, as of 4:00 p.m.
eastern time on the date of tender (or as of any earlier closing time on a
day on which the Exchange is scheduled in advance to close at such earlier
time) as defined hereafter, plus accrued interest to, but not including,
the third business day after the date of tender ("REDEMPTION PRICE"). The
price received upon redemption may be more or less than the amount paid by
the Unitholder depending on the value of the Bonds on the date of tender.
Unitholders should check with the Trustee or their broker to determine the
Redemption Price before tendering Units.
The "date of tender" is deemed to be the date on which the request for
redemption of Units is received in proper form by the Trustee, except that
as regards a redemption request received after 4:00 p.m. eastern time (or
as of any earlier closing time on a day on which the Exchange is scheduled
in advance to close at such earlier time) or on any day on which the New
York Stock Exchange (the "EXCHANGE") is normally closed, the date of tender
is the next day on which such Exchange is normally open for trading and
such request will be deemed to have been made on such day and the
redemption will be effected at the Redemption Price computed on that day.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account of the appropriate Trust or, if the balance therein is
insufficient, from the Principal Account of such Trust. All other amounts
paid on redemption shall be withdrawn from the Principal Account. The
Trustee is empowered to sell underlying Bonds of a Trust in order to make
funds available for redemption. (See "Trust Administration.") Units so
redeemed shall be cancelled. To the extent that Bonds are sold from a
Trust, the size and diversity of such Trust will be reduced. Such sales may
be required at a time when Bonds would not otherwise be sold and might
result in lower prices than might otherwise be realized.
The Redemption Price is determined on the basis of the BID prices of the
Bonds in each Trust, while the initial Public Offering Price of Units will
be determined on the basis of the OFFERING prices of the Bonds, as of 4:00
p.m. eastern time on any day on which the Exchange is normally open for
trading (or as of any earlier closing time on a day on which the Exchange
is scheduled in advance to close at such earlier time) and such
determination is made. As of any given time, the difference between the bid
and offering prices of such Bonds may be expected to average 1/2% to 2% of
principal amount. In the case of actively traded Bonds, the difference may
be as little as 1/4 to 1/2 of 1%, and in the case of inactively traded
Bonds such difference usually will not exceed 3%.
The right of redemption may be suspended and payment postponed for any
period during which the Securities and Exchange Commission determines that
trading in the municipal bond market is restricted or an emergency exists,
as a result of which disposal or evaluation of the Bonds is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit.
Under regulations issued by the Internal Revenue Service, the Trustee will
be required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming
Unitholder's tax identification number in the manner required by such
regulations. Any amount so withheld is transmitted to the Internal Revenue
Service and may be recovered by the Unitholder only when filing his or her
tax return. Under normal circumstances the Trustee obtains the Unitholder's
tax identification number from the selling broker at the time the
Certificate or Book Entry Return Confirmation is issued, and this number is
printed on the Certificate or Book Entry Return Confirmation and on
distribution statements. If a Unitholder's tax identification number does
not appear as described above, or if it is incorrect, the Unitholder should
contact the Trustee before redeeming Units to determine what action, if
any, is required to avoid this "back-up withholding."
PURCHASE OF UNITS BY THE SPONSOR
The Trustee will notify the Sponsor of any tender of Units for redemption.
If the Sponsor's bid in the secondary market at that time equals or exceeds
the Redemption Price it may purchase such Units by notifying the Trustee
before the close of business on the second succeeding business day and by
making payment therefor to the Unitholder not later than the day on which
payment would otherwise have been made by the Trustee. (See "Redemption.")
The Sponsor's current practice is to bid at the Redemption Price in the
secondary market. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units.
TRUST ADMINISTRATION
Bonds will be removed from a Trust as they mature or are redeemed by the
issuers thereof. See Part A of this Prospectus and "Risk Factors" for a
discussion of call provisions of portfolio Bonds.
The Indenture also empowers the Trustee to sell Bonds for the purpose of
redeeming Units tendered by any Unitholder, and for the payment of expenses
for which income may not be available. Under the Indenture, the Sponsor is
obligated to provide the Trustee with a current list of Bonds in each Trust
to be sold in such circumstances. In deciding which Bonds should be sold
the Sponsor intends to consider, among other things, such factors as: (1)
market conditions; (2) market prices of the Bonds; (3) the effect on income
distributions to Unitholders of the sale of various Bonds; (4) the effect
on principal amount of underlying Bonds per Unit of the sale of various
Bonds; (5) the financial condition of the issuers; and (6) the effect of
the sale of various Bonds on the investment character of a Trust. Such
sales, if required, could result in the sale of Bonds by the Trustee at
prices less than original cost to a Trust. To the extent Bonds are sold,
the size and diversity of such Trust will be reduced.
In addition, the Sponsor is empowered to direct the Trustee to liquidate
Bonds upon the happening of certain other events, such as default in the
payment of principal and/or interest, an action of the issuer that will
adversely affect its ability to continue payment of the principal of and
interest on its Bonds, or an adverse change in market, revenue or credit
factors affecting the investment character of the Bonds. If a default in
the payment of the principal of and/or interest on any of the Bonds occurs,
and if the Sponsor fails to instruct the Trustee whether to sell or
continue to hold such Bonds within 30 days after notification by the
Trustee to the Sponsor of such default, the Indenture provides that the
Trustee shall liquidate said Bonds forthwith and shall not be liable for
any loss so incurred. The Sponsor may also direct the Trustee to liquidate
Bonds in a Trust if the Bonds in such Trust are the subject of an advanced
refunding, generally considered to be when refunding bonds are issued and
the proceeds thereof are deposited in irrevocable trust to retire the
refunded Bonds on their redemption date.
Except as stated in "Composition of Trusts" regarding the limited right of
substitution of Replacement Bonds for Failed Bonds, and except for
refunding securities that may be exchanged for Bonds under certain
conditions specified in the Indenture, the Indenture does not permit either
the Sponsor or the Trustee to acquire or deposit bonds either in addition
to, or in substitution for, any of the Bonds initially deposited in a
Trust.
THE TRUSTEE
The Trustee and its address are stated on the back cover of this Part B of
the Prospectus. The Trustee is subject to supervision and examination by
the Federal Deposit Insurance Corporation, the Board of Governors of the
Federal Reserve System and either the Comptroller of the Currency or state
banking authorities.
LIMITATIONS ON LIABILITIES OF SPONSOR AND TRUSTEE
The Sponsor and the Trustee shall be under no liability to Unitholders for
taking any action or for refraining from any action in good faith pursuant
to the Indenture, or for errors in judgment, but shall be liable only for
their own negligence (gross negligence in the case of the Sponsor), lack of
good faith or willful misconduct. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any
of the Bonds. In the event of the failure of the Sponsor to act under the
Indenture, the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Bonds or upon the interest thereon or
upon it as Trustee under the Indenture or upon or in respect of any Trust
which the Trustee may be required to pay under any present or future law of
the United States of America or of any other taxing authority having
jurisdiction. In addition, the Indenture contains other customary
provisions limiting the liability of the Trustee.
SUCCESSOR TRUSTEES AND SPONSORS
The Trustee or any successor trustee may resign by executing an instrument
of resignation in writing and filing same with the Sponsor and mailing a
copy of a notice of resignation to all Unitholders then of record. Upon
receiving such notice, the Sponsor is required to promptly appoint a
successor trustee. If the Trustee becomes incapable of acting or is
adjudged a bankrupt or insolvent, or a receiver or other public officer
shall take charge of its property or affairs, the Sponsor may remove the
Trustee and appoint a successor by written instrument. The resignation or
removal of a trustee and the appointment of a successor trustee shall
become effective only when the successor trustee accepts its appointment as
such. Any successor trustee shall be a corporation authorized to exercise
corporate trust powers, having capital, surplus and undivided profits of
not less than $5,000,000. Any corporation into which a trustee may be
merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which a trustee shall be a party, shall
be the successor trustee.
If upon resignation of a trustee no successor has been appointed and has
accepted the appointment within 30 days after notification, the retiring
trustee may apply to a court of competent jurisdiction for the appointment
of a successor.
If the Sponsor fails to undertake any of its duties under the Indenture,
and no express provision is made for action by the Trustee in such event,
the Trustee may, in addition to its other powers under the Indenture (1)
appoint a successor sponsor or (2) terminate the Indenture and liquidate
the Trusts.
THE SPONSOR
National Financial Services Corporation (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
December 31, 1996, it manages more than $490 billion in assets in over 29
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 Agreements and
liquidate the Trusts as provided therein, or (c) continue to act as Trustee
without terminating the Trust Agreements.
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.
To help advisers and investors better understand and more efficiently use
an investment in the Trusts to reach their investment goals, the Sponsor
may advertise and create specific investment programs and systems. For
example, such activities may include presenting information on how to use
an investment in the Trusts, alone or in combination with an investment in
other mutual funds or unit investment trusts sponsored by NFSC, to
accumulate assets for future education needs or periodic payments such as
insurance premiums. The Trusts' sponsor may produce software or additional
sales literature to promote the advantages of using the Trusts to meet
these and other specific investor needs.
OTHER INFORMATION
AMENDMENT OF INDENTURE
The Indenture may be amended by the Trustee and the Sponsor without the
consent of any of the Unitholders (1) to cure any ambiguity or to correct
or supplement any provision thereof which may be defective or inconsistent,
or (2) to make such other provisions as shall not adversely affect the
Unitholders, PROVIDED, HOWEVER, that the Indenture may not be amended to
increase the number of Units in any Trust or to permit the deposit or
acquisition of bonds either in addition to, or in substitution for any of
the Bonds initially deposited in any Trust except as stated in "Composition
of Trusts" regarding the limited right of substitution of Replacement Bonds
and except for the substitution of refunding bonds under certain
circumstances. The Trustee shall advise the Unitholders of any amendment
promptly after execution thereof.
TERMINATION OF INDENTURE
Each Trust may be liquidated at any time by written consent of 66-2/3% of
the Unitholders or by the Trustee when the value of such Trust, as shown by
any evaluation, is less than 20% of the original principal amount of such
Trust and will be liquidated by the Trustee in the event that Units not yet
sold aggregating more than 60% of the Units originally created are tendered
for redemption by the Sponsor thereby reducing the net worth of such Trust
to less than 40% of the principal amount of the Bonds originally deposited
in the portfolio. (See "Essential Information" appearing in Part A of this
Prospectus.) The sale of Bonds from the Trusts upon termination may result
in realization of a lesser amount than might otherwise be realized if such
sale were not required at such time. For this reason, among others, the
amount realized by a Unitholder upon termination may be less than the
principal amount of Bonds originally represented by the Units held by such
Unitholder. The Indenture will terminate upon the redemption, sale or other
disposition of the last Bond held thereunder, but in no event shall it
continue beyond the end of the calendar year preceding the fiftieth
anniversary of its execution.
Written notice of any termination specifying the time or times at which
Unitholders may surrender their Certificates, if any, for cancellation
shall be given by the Trustee to each Unitholder at the address appearing
on the registration books of a Trust maintained by the Trustee. Within a
reasonable time thereafter, the Trustee shall liquidate any Bonds in a
Trust then held and shall deduct from the assets of such Trust any accrued
costs, expenses or indemnities provided by the Indenture which are
allocable to such Trust, including estimated compensation of the Trustee
and costs of liquidation and any amounts required as a reserve to provide
for payment of any applicable taxes or other governmental charges. The
Trustee shall then distribute to Unitholders of such Trust their pro rata
share of the balance of the Interest and Principal Accounts. With such
distribution the Unitholders shall be furnished a final distribution
statement, in substantially the same form as the annual distribution
statement, of the amount distributable. At such time as the Trustee in its
sole discretion shall determine that any amounts held in reserve are no
longer necessary, it shall make distribution thereof to Unitholders in the
same manner.
LEGAL OPINION
The legality of the Units offered hereby has been passed upon by Chapman
and Cutler, 111 West Monroe Street, Chicago, Illinois 60603. Special
counsel for the Trusts for respective state tax matters are named in "Tax
Status" for each Trust appearing in Part A of this Prospectus. Carter,
Ledyard & Milburn, 2 Wall Street, New York, New York 10005, has acted as
counsel for the Trustee with respect to the Series, and, in the absence of
a New York Trust from the Series, as special New York tax counsel for the
Series.
AUDITORS
The "Statements of Condition" and "Schedules of Investments" at the Initial
Date of Deposit included in Part A of this Prospectus have been audited by
Deloitte & Touche LLP, independent public accountants, as indicated in
their report in Part A of this Prospectus, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
SUPPLEMENTAL INFORMATION
Upon written or telephonic request to the Trustee, investors will receive
at no cost to the investor supplemental information about a Trust, which
has been filed with the Securities and Exchange Commission and is intended
to supplement information contained in Part A and Part B of this
Prospectus. The supplemental information includes more detailed information
concerning certain of the Bonds included in the Trusts contained in the
applicable Series and more specific risk information concerning the
individual State Trusts. This supplement also includes additional general
information about the Sponsor and the Trusts.
