<PAGE> 1
FILE NO. 333-27077
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
TO
AMENDMENT NO. 1
TO
FORM S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: FIDELITY DEFINED TRUSTS SERIES 4
B. Name of Depositor: NATIONAL FINANCIAL SERVICES CORPORATION
C. Complete address of Depositor's principal executive offices:
82 Devonshire Street N7A
Boston, Massachusetts 02109-3614
D. Name and complete address of agents for service:
NATIONAL FINANCIAL SERVICES CORPORATION CHAPMAN AND CUTLER
Attention: David J. Pearlman Attention: Mark J. Kneedy
82 Devonshire Street N7A 111 West Monroe Street
Boston, Massachusetts 02109-3614 Chicago, Illinois 60603
E. Title and amount of securities being registered: An indefinite number of
Units pursuant to Rule 24f-2 promulgated under the Investment Company Act
of 1940, as amended
F. Proposed maximum offering price to the public of the securities being
registered: Indefinite
G. Amount of registration fee (as required by Rule 24f-2): $500.00*
H. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT
[X] Check box if it is proposed that this filing will become effective on May
29, 1997 pursuant to Rule 487.
* previously paid
- --------------------------------------------------------------------------------
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
<PAGE> 2
FIDELITY DEFINED TRUSTS
SERIES 4
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(C) OF REGULATION C
UNDER THE SECURITIES ACT OF 1933
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTION
1 AS TO PROSPECTUS ON FORM S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
I. Organization and General Information
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Essential Information
) The Sponsor
3. Name and address of Trustee ) Essential Information
) Trust Administration
4. Name and address of principal ) Public Offering of Units
underwriter
5. Organization of trust ) The Trusts
6. Execution and termination of ) The Trusts
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
-I-
<PAGE> 3
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. General information regarding ) The Trusts
trust's securities and ) Tax Status
rights of security holders ) Public Offering of Units
) Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trusts
) Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and expenses ) Prospectus Front Cover Page
) Essential Information
) Portfolio
)
) Trust Expenses
) Public Offering of Units
) Unitholders and Sponsor
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Essential Information
(d) Variations in fees among certain ) Public Offering of Units
classes of holders ) Unitholders
(e) Certain other fees, expenses or ) Trust Expenses
charges payable by holders ) Unitholders
(f) Certain profits to be received ) Public Offering of Units
by depositor, principal ) Public Offering of Units
underwriter, trustee or any ) Portfolio
affiliated persons )
(g) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Unitholders
-II-
<PAGE> 4
15. Receipt and handling of payments ) Public Offering of Units
from purchasers )
16. Acquisition and disposition of ) The Trusts
underlying securities ) Unitholders
) Trust Administration
17. Withdrawal or redemption ) Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Unitholders
(b) Reinvestment of distributions ) Distribution Reinvestment
(c) Reserves or special funds ) Trust Expenses
) Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Portfolio
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. ORGANIZATION, PERSONNEL AND AFFILIATED
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
-III-
<PAGE> 5
28. Certain information as to ) The Sponsor
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) The Sponsor
of Depositor )
30. Controlling persons of Depositor ) The Sponsor
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35. Distribution of trust's securities ) Public Offering of Units
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
(b) Underwriting agreements ) Public Offering of Units
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
-IV-
<PAGE> 6
(b) Branch offices of principal ) *
underwriter )
(c) Salesmen of principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Essential Information
) Trust Expenses
) Public Offering of Units
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
45. Suspension of Redemption Rights ) *
46. (a) Redemption valuation ) Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering of Units
in underlying securities ) Trust Administration
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Essential Information
) Trust Expenses
50. Trustee's lien ) Trust Expenses
-V-
<PAGE> 7
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's ) Trust Expenses
securities )
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution ) Trust Administration
or elimination of underlying )
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Tax Status
VII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent
1(c) to Form S-6) ) Certified Public Accountants
Statements of Condition
- --------------------
* Inapplicable, omitted, answer negative or not required
-VI-
<PAGE> 8
FIDELITY
DEFINED TRUSTS
SERIES 4
-- Rolling Government Series 4,
GNMA Portfolio
-- Investment Grade Series 3,
Intermediate Insured Corporate
Portfolio
-- Investment Grade Series 4,
Corporate Portfolio
PROSPECTUS
MAY 29, 1997
LOGO
82 Devonshire Street, Boston, MA 02109
The investor is advised to read and
retain this
Prospectus for future reference.
Units of the Trusts are not deposits
or
obligations of, or guaranteed by,
any bank,
and Units are not federally insured
or
otherwise protected by the Federal
Deposit
Insurance Corporation and involve
investment
risk including loss of principal.
- --------------------------------------------------------------------------------
SPONSOR: NATIONAL FINANCIAL
SERVICES CORPORATION
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE> 9
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
SUMMARY................................................................................... 4
ESSENTIAL INFORMATION..................................................................... 5
THE TRUSTS................................................................................ 9
ROLLING GOVERNMENT SERIES 4, GNMA PORTFOLIO............................................... 10
INVESTMENT GRADE SERIES 3, INTERMEDIATE INSURED CORPORATE PORTFOLIO....................... 12
INVESTMENT GRADE SERIES 4, CORPORATE PORTFOLIO............................................ 15
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS........................................ 17
STATEMENTS OF CONDITION................................................................... 18
TRUST INFORMATION......................................................................... 19
General Information.................................................................. 19
Risk Factors......................................................................... 20
Rating of Units...................................................................... 25
Insurance on the Bonds............................................................... 25
Retirement Plans..................................................................... 26
Tax Status........................................................................... 26
Distribution Reinvestment............................................................ 33
Interest, Estimated Long-Term Return and Estimated Current Return.................... 33
Public Offering of Units............................................................. 34
Market For Units..................................................................... 38
Redemption........................................................................... 38
Unitholders.......................................................................... 40
Investment Supervision............................................................... 42
Trust Administration................................................................. 42
Trust Expenses....................................................................... 44
The Sponsor.......................................................................... 45
Legal Opinions....................................................................... 46
Independent Certified Public Accountants............................................. 46
DESCRIPTION OF RATINGS.................................................................... 46
ESTIMATED CASH FLOWS TO UNITHOLDERS....................................................... 50
</TABLE>
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.
2
<PAGE> 10
ROLLING GOVERNMENT SERIES -- Rolling Government Series 4, GNMA Portfolio was
formed to provide safety of capital as is consistent with current income and
current monthly distributions of interest through an investment in a portfolio
primarily consisting of taxable mortgage-backed securities of the fully modified
pass-through type, the payments of principal and interest on which are fully
guaranteed by the Government National Mortgage Association ("GNMA"). The Trust
has been designed to minimize the effect of principal payments and prepayments
by providing for the reinvestment of all distributions of principal into
additional GNMA securities which have similar maturities and interest rates as
the GNMA securities upon which the principal was received. The Sponsor will
direct the Trustee to reinvest such distributions during the period when, in the
opinion of the Sponsor, such reinvestment is practical (the "Reinvestment
Period"). The Sponsor currently expects the Reinvestment Period to last
approximately five years from the Initial Date of Deposit. Units of the Trust
are rated "AAA" by Standard & Poor's, a Division of The McGraw-Hill Companies
("Standard & Poor's").
INVESTMENT GRADE SERIES - Investment Grade Series 3, Intermediate Insured
Corporate Portfolio was created to provide a high level of current income
through an investment in a fixed portfolio primarily consisting of corporate
debt obligations ("Bonds") issued after July 18, 1984. The Trust has been
designed to maintain an intermediate dollar weighted maturity of approximately
7.22 years. The Trust's Portfolio has been laddered so that approximately 20% of
the securities included in the portfolio will mature and the proceeds thereof
will be distributed to the unitholders annually commencing in 2002. Insurance
guaranteeing the scheduled payment of principal and interest on all of the Bonds
in such Trust has been obtained directly by the issuer of such Bonds or by the
Sponsor from MBIA Insurance Corporation or other insurers. THE INSURANCE DOES
NOT RELATE TO THE UNITS OFFERED HEREBY OR TO THEIR MARKET VALUE. As a result of
such insurance, the Units of Investment Grade Series 3, Insured Corporate
Portfolio are rated "AAA" by Standard & Poor's.
Investment Grade Series 4, Corporate Portfolio was created to provide a high
level of current income through an investment in a fixed portfolio consisting
primarily of intermediate-term investment grade corporate debt obligations
issued after July 18, 1984. The Trust has been designed to maintain an
intermediate dollar weighted maturity of approximately 9.93 years.
3
<PAGE> 11
SUMMARY
PUBLIC OFFERING PRICE. The Public Offering Price per Unit of a Trust during the
initial offering period is equal to a pro rata share of the offering prices of
the Securities in such Trust plus or minus a pro rata share of cash, if any, in
the Principal Account held or owned by such Trust, plus accrued interest and the
applicable sales charge indicated under "Essential Information." The sales
charge applicable to Units purchased during the initial offering period consists
of an initial sales charge and a deferred sales charge. See "Trust Information
- -- Public Offering of Units -- Public Offering Price." The secondary market
Public Offering Price per Unit will be based upon a pro rata share of the bid
prices of the Securities in each Trust plus or minus a pro rata share of cash,
if any, in the Principal Account held or owned by such Trust, plus accrued
interest plus the applicable sales charge indicated under "Trust Information --
Public Offering of Units -- Public Offering Price." The sales charge is reduced
on a graduated scale for sales involving at least $100,000 or 10,000 Units and
will be applied on whichever basis is more favorable to the investor. The
minimum amount which an investor may purchase of a Trust is $5,000.
REINVESTMENT. Certain Unitholders may be eligible to elect for distributions of
principal and/or interest to be automatically invested, without a sales charge,
in shares of certain mutual funds managed by Fidelity Management & Research
Company, an affiliate of the Sponsor. Please ask your financial consultant
regarding the availability of distribution reinvestment.
ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of the opening of
business on the Initial Date of Deposit, the Estimated Long-Term Return and the
Estimated Current Return, if applicable, for each Trust were as set forth in
"Essential Information." There is no assurance that either the present Estimated
Current Return or the present Estimated Long-Term Return will be realized in the
future. See "Interest, Estimated Long-Term Return and Estimated Current Return"
for information regarding the calculation of each figure.
MARKET FOR UNITS. After the initial offering period, the Sponsor, while under no
obligation to do so, intends to maintain a market for the Units and to offer to
repurchase such Units at prices which are based on the aggregate bid side
evaluation of the Securities in a Trust plus accrued interest.
RISK FACTORS. An investment in the Trusts should be made with an understanding
of the risks associated therewith, including, among other factors, the inability
of the issuer or an insurer to pay the principal of or interest on a security
when due, the general condition of the relevant securities market, economic
recession, volatile interest rates, early call provisions and changes to the tax
status of the Securities. Rolling Government Series 4 is subject to the
additional risk that the GNMA securities included in the Trust may be prepaid
more quickly than expected and that, during the reinvestment period, the Trustee
may be unable to reinvest principal into additional Securities. See "Risk
Factors" in each Trust section and "Trust Information -- Risk Factors."
4
<PAGE> 12
FIDELITY DEFINED TRUSTS SERIES 4
ESSENTIAL INFORMATION
AT THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: MAY 29, 1997
<TABLE>
<S> <C>
SPONSOR: NATIONAL FINANCIAL SERVICES CORPORATION
EVALUATOR: MULLER DATA CORPORATION
TRUSTEE: THE CHASE MANHATTAN BANK
</TABLE>
The income, expense and distribution data set forth below has been calculated
for Unitholders purchasing less than 10,000 Units of a Trust. Unitholders
purchasing 10,000 Units or more of a Trust will receive a slightly higher return
because of the reduced sales charge for larger purchases.
<TABLE>
<CAPTION>
ROLLING INVESTMENT INVESTMENT
GOVERNMENT GRADE GRADE
SERIES 4 SERIES 3 SERIES 4
---------- ---------- ----------
<S> <C> <C> <C>
Public Offering Price per Unit (1) (2).................................... $ 10.3434 $ 10.0142 $ 10.0067
Principal Amount of Securities per Unit................................... $ 10.0600 $ 10.0600 $ 10.0600
Estimated Current Return based on Public Offering Price (3) (4) (5) (6)... 7.16% 6.08% 6.59%
Estimated Long-Term Return (3) (4) (5) (6)................................ 7.25% 6.14% 6.64%
Estimated Normal Annual Distribution per Unit (6)......................... $ 0.74050 $ 0.60895 $ 0.65960
Principal Amount of Securities............................................ $ 500,000 $ 500,000 $1,000,000
Number of Units........................................................... 49,702 49,702 99,404
Fractional Undivided Interest per Unit.................................... 1/49,702 1/49,702 1/99,404
Calculation of Public Offering Price:
Aggregate Offering Price of Securities................................ $ 496,095 $ 480,304 $ 959,887
Aggregate Offering Price of Securities per Unit....................... $ 9.9814 $ 9.6637 $ 9.6564
Plus Maximum Sales Charge per Unit (3)................................ $ 0.4221 $ 0.4106 $ 0.4104
Less Deferred Sales Charge per Unit (3)............................... $ (0.0601) $ (0.0601) $ (0.0601)
Public Offering Price per Unit (1) (2).................................... $ 10.3434 $ 10.0142 $ 10.0067
Redemption Price per Unit (3)............................................. $ 9.9150 $ 9.5784 $ 9.5712
Sponsor's Initial Repurchase Price per Unit............................... $ 9.9213 $ 9.6036 $ 9.5963
Excess of Public Offering Price per Unit over Redemption Price per Unit... $ 0.4284 $ 0.4358 $ 0.4355
Excess of Public Offering Price per Unit over Sponsor's Initial Repurchase
Price per Unit.......................................................... $ 0.4221 $ 0.4106 $ 0.4104
Calculation of Estimated Net Annual Interest Income per Unit (6):
Estimated Annual Interest............................................. $ 0.75450 $ 0.62875 $ 0.67980
Less: Estimated Annual Expense........................................ $ 0.01400 $ 0.01980 $ 0.02020
Estimated Net Annual Interest......................................... $ 0.74050 $ 0.60895 $ 0.65960
Estimated Daily Rate of Net Interest Accrual per Unit (if applicable)..... $0.002057 $0.001692 $0.001832
Estimated Average Life of Securities...................................... 13.50 yrs. 7.22 yrs. 9.93 yrs.
Minimum Principal Value of the Trust under which Trust Agreement may be
terminated (7).......................................................... 40% 20% 20%
</TABLE>
Evaluations for purposes of sale, purchase or redemption of Units are made as of
the close of business of the Sponsor (currently 4:15 p.m. Eastern Time) next
following receipt of an order for a sale or purchase of Units or receipt by the
Trustee of Units tendered for redemption.
5
<PAGE> 13
<TABLE>
<CAPTION>
ROLLING INVESTMENT INVESTMENT
GOVERNMENT GRADE GRADE
SERIES 4 SERIES 3 SERIES 4
----------- ----------- -----------
<S> <C> <C> <C>
Trustee's Annual Fee per $1,000 principal amount of Securities (8)...... $ 0.88 $ 1.37 $ 1.42
Estimated net annual interest income per Unit during the first year..... $ 0.74050 $ 0.60895 $ 0.65960
Interest Payments (9):
First Payment per Unit, representing 7 days (27 days in the case of
Rolling Government Series 4)...................................... $ 0.05554 $ 0.01184 $ 0.01283
Estimated Normal Monthly Distribution per Unit...................... $ 0.06171 $ 0.05075 $ 0.05497
Estimated Normal Annual Distribution per Unit....................... $ 0.74050 $ 0.60895 $ 0.65960
Maximum Sales Charge (3):
As a percentage of Public Offering Price per Unit................... 4.081% 4.100% 4.101%
As a percentage of net amount invested.............................. 4.229% 4.249% 4.250%
As a percentage of net amount invested in earning assets............ 4.229% 4.249% 4.250%
Date of Trust Agreements................................................ 5/29/97 5/29/97 5/29/97
First Settlement Date................................................... 6/3/97 6/3/97 6/3/97
Mandatory Termination Date.............................................. 12/15/30 11/15/07 1/15/10
Maximum Evaluator's Evaluation Fee per Evaluation....................... $ 6.00 $ 8.00 $ 8.00
Maximum Sponsor's Annual Surveillance Fee per $1,000 principal amount of
Securities............................................................ $ 0.10 $ 0.10 $ 0.10
Estimated Annual Organizational Expenses per $1,000 principal amount of
Securities (10)....................................................... $ 0.22 $ 0.29 $ 0.28
</TABLE>
- ---------------
(1) Anyone ordering Units for settlement after the First Settlement Date will
pay accrued interest from such date to the date of settlement (normally
three business days after order) less distributions from the Interest
Account subsequent to the First Settlement Date. For purchases settling on
the First Settlement Date, no accrued interest will be added to the Public
Offering Price.
(2) Many unit investment trusts issue a number of units such that each unit
represents approximately $1,000 principal amount of underlying securities.
The Sponsor, on the other hand, in determining the number of Units for each
Trust has elected not to follow this format but rather to provide that
number of Units which will establish as close as possible as of the Initial
Date of Deposit a Principal Amount of Securities per Unit of approximately
$10.
(3) The Maximum Sales Charge per Unit consists of an initial sales charge and a
deferred sales charge. See "Fee Table" contained herein and "Trust
Information -- Public Offering of Units" for additional information
regarding these charges. The Estimated Current Return and Estimated
Long-Term Return are increased for transactions entitled to a reduced sales
charge. See "Trust Information -- Public Offering of Units -- Public
Offering Price." The sales charge as a percentage of the net amount
invested in earning assets will increase as accrued interest increases.
Transactions subject to quantity discounts (see "Trust Information --
Public Offering of Units -- Public Offering Price") will have reduced sales
charges, thereby reducing all percentages in the table. Units tendered for
redemption or sold prior to the collection of the entire deferred sales
charges will be assessed the amount of the remaining sales charge at the
time of redemption or sale.
(4) Estimated Long-Term Returns for the Trusts are calculated using a formula
which takes into consideration the market values, yield and the expected
retirement dates (estimated average life of the Securities in Rolling
Government Series 4) of all of the Securities in the applicable Trust, a
compounding factor and the expenses and sales charge associated with each
Trust Unit. Estimated Current Returns are calculated by dividing the
estimated net annual interest income per Unit by the Public Offering Price,
and in contrast to Estimated Long-Term Return does not reflect the
amortization of premium or accretion of discount, if any. For additional
information see "Interest, Estimated Long-Term Return and Estimated Current
Return."
(5) This figure is based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current
interest rates and with the principal prepayment, redemption, maturity,
call, exchange or sale of
6
<PAGE> 14
the underlying Securities. The estimated cash flows to Unitholders for the
Trusts are either set forth under "Estimated Cash Flows to Unitholders" for
each Trust or are available upon request at no charge from the Sponsor.
(6) The actual net annual interest income per Unit will vary with changes in
fees and expenses and principal prepayment, redemption, maturity, call,
exchange or sale of the underlying Securities. See "The Trusts" and "Trust
Information -- Interest, Estimated Long-Term Return and Estimated Current
Return."
(7) The minimum principal value of each Trust under which the Trust Agreement
may be terminated is 20% (40% for Rolling Government Series 4) of the total
aggregate principal amount of securities deposited in each Portfolio during
the initial offering period.
(8) The Trustee's annual fee includes $0.07 per $1,000 principal amount of
Securities which is paid to the Sponsor in return for its providing certain
bookkeeping and administrative services to its customers. See "Trust
Information -- Trust Expenses."
(9) Unitholders will receive interest distributions monthly. The Record Date
for the Investment Grade Series is the 10th day of the month, commencing
June, 1997 and the distribution date is the 20th day of the month,
commencing June, 1997. The Record Date for the Rolling Government Series is
the first day of the month, commencing July, 1997. The distribution date is
the 20th day of the month, commencing July, 1997.
(10) Each Trust (and therefore the Unitholders of the respective Trust) will
bear all or a portion of its organizational costs (including costs of
preparing the registration statement, the trust indenture and other closing
documents, registering Units with the Securities and Exchange Commission
and states, the initial audit of the Trust portfolios, legal fees and the
initial fees and expenses of the Trustee but not including the expenses
incurred in the preparation and printing of brochures and other advertising
materials and other selling expenses) as is common for mutual funds. Total
organizational expenses will be amortized over a five year period or over
the life of a Trust if the term of such Trust is less than five years. See
"Trust Information -- Trust Expenses" and "Statements of Financial
Condition." Historically, the sponsors of unit investment trusts have paid
all of the costs of establishing such trusts.
7
<PAGE> 15
FEE TABLE
This Fee Table is intended to assist investors in understanding the costs and
expenses that an investor in a Trust will bear directly or indirectly. See
"Public Offering Price -- Offering Price" and "Fund Operating Expenses."
Although each Trust is a unit investment trust rather than a mutual fund, this
information is presented to permit a comparison of fees, assuming a public
offering price of $10.
<TABLE>
<CAPTION>
ROLLING INVESTMENT INVESTMENT
GOVERNMENT GRADE GRADE
UNITHOLDER TRANSACTION EXPENSES SERIES 4 SERIES 3 SERIES 4
---------- ---------- ----------
<S> <C> <C> <C>
Maximum Initial Sales Charge Imposed on Purchase (as a percentage of
offering price) (1)................................................... 3.500% 3.500% 3.500%
Maximum Deferred Sales Charge (as a percentage of offering price) (2)... .601% .601% .601%
----- ----- -----
Maximum sales charge.................................................... 4.101% 4.101% 4.101%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Trustee's Fee........................................................... .088% .137% .142%
Portfolio Supervision and Evaluation Fees............................... .015% .017% .017%
Organizational Expenses................................................. .022% .029% .028%
Other Operating Expenses................................................ .015% .015% .015%
----- ----- -----
Total............................................................... .140% .198% .202%
===== ===== =====
</TABLE>
EXAMPLE
<TABLE>
<S> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment
generating a 5% annual return, assuming an estimated expense ratio of:.... .140% .198% .202%
</TABLE>
<TABLE>
<CAPTION>
ROLLING INVESTMENT INVESTMENT
GOVERNMENT GRADE GRADE
CUMULATIVE EXPENSES PAID FOR PERIOD OF: SERIES 4 SERIES 3 SERIES 4
---------- ---------- ----------
<S> <C> <C> <C>
1 year...................................................................... $42 $43 $43
3 years..................................................................... $45 $47 $47
5 years..................................................................... $48 $52 $52
10 years.................................................................... $56 $63 $63
</TABLE>
The example assumes reinvestment of all dividends and distributions and utilize
a 5% annual rate of return as mandated by Securities and Exchange Commission
regulations applicable to mutual funds. For purposes of the example, the
deferred sales charge imposed on reinvestment of dividends is not reflected
until the year following payment of the dividend; the cumulative expenses would
be higher if sales charges on reinvested dividends were reflected in the year of
reinvestment. The example should not be considered as a representation of past
or future expenses or annual rate of return; the actual expenses and annual rate
of return may be more or less than those assumed for purposes of the example.
(1) The maximum Initial Sales Charge for each trust is actually the difference
between 4.101% and the maximum deferred sales charge ($6.01 per 100 Units)
and would exceed 3.5% if the Public Offering Price exceeds $1,000 per 100
Units.
(2) The actual fee is $.167 per month per 100 Units, irrespective of purchase or
redemption price, deducted monthly for 36 months. If a holder sells or
redeems Units before all of these deductions have been made, the balance of
the deferred sales charge payments remaining will be deducted from the sales
or redemption proceeds. If Unit price exceeds $10 per Unit, the deferred
portion of the sales charge will be less than 0.601%; if Unit price is less
than $10 per Unit, the deferred portion of the sales charge will exceed
0.601%. Units purchased subsequent to the initial deferred sales charge
payment will be subject to only that portion of the deferred sales charge
payments not yet collected.
8
<PAGE> 16
THE TRUSTS
Fidelity Defined Trusts Series 4 consists of the underlying separate unit
investment trusts set forth above. The various trusts are collectively referred
to herein as the "Fidelity Defined Trusts," "the Fidelity Advisor Defined
Trusts" or the "Trusts." Each Trust is divided into "Units" representing equal
shares of the underlying assets of such Trust. Rolling Government Series 4, GNMA
Portfolio is referred to herein as the "GNMA Portfolio," Investment Grade Series
3, Intermediate Insured Corporate Portfolio is referred to herein as the
"Insured Corporate Portfolio," and Investment Grade Series 4, Corporate
Portfolio is referred to herein as the "Corporate Portfolio." Each of the Trusts
is separate and is designated by a different series number. Each of the Trusts
was created under the laws of the State of New York pursuant to a trust
indenture dated the Initial Date of Deposit (the "Trust Agreements") between
National Financial Services Corporation (the "Sponsor") and The Chase Manhattan
Bank (the "Trustee").*
As used herein, the terms defined below shall have the following meanings:
"Securities" and "Bonds" shall mean the obligations initially deposited in the
Trusts described under "Portfolio" for each Trust (including all contracts to
purchase such obligations accompanied by an irrevocable letter of credit
sufficient to perform such contracts initially deposited in the Trusts) and any
additional obligations deposited in the Trusts following the Initial Date of
Deposit; "GNMA Securities" and "Ginnie Maes" shall mean the obligations (and
contracts for the purchase thereof) included in the GNMA Portfolio; "Insured
Corporate Bonds" shall mean the obligations (and contracts) included in the
Insured Corporate Portfolio; and "Corporate Bonds" shall mean the obligations
(and contracts) included in the Corporate Portfolio.
On the Initial Date of Deposit, the Sponsor delivered to the Trustee that
aggregate principal amount of Securities or contracts for the purchase thereof
for deposit in the Trust Funds as set forth under "Essential Information." In
exchange for the Securities so deposited, the Trustee delivered to the Sponsor
documentation evidencing the ownership of that number of Units for each Trust as
indicated under "Essential Information." The Sponsor has a limited right of
substitution for such Securities in the event of a failed contract. See "Trust
Information -- General Information."
Additional Units of each Trust may be issued from time to time following the
Initial Date of Deposit by depositing in such Trust additional Securities or
contracts for the purchase thereof together with irrevocable letters of credit
or cash. As additional Units are issued by a Trust, the aggregate value of the
Securities in the Trust will be increased and the fractional undivided interest
in the Trust represented by each Unit will be decreased. The Sponsor may
continue to make additional deposits of Securities into a Trust following the
Initial Date of Deposit, provided that such additional deposits will be in
principal amounts which will maintain the same original percentage relationship
among the principal amounts of the Securities in such Trust established on the
initial deposit of the Securities. Thus, although additional Units will be
issued, each Unit will continue to represent the same principal amount of each
Security, and the percentage relationship among the principal amount of each
Security in the related Trust will remain the same. To the extent that any Units
are redeemed by the Trustee or additional Units are issued the fractional
undivided interest in a Trust (set forth under "Essential Information")
represented by each unredeemed Unit will increase or decrease accordingly,
although the actual interest in such Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Unitholders, which may include the Sponsor, or until the
termination of the Trust Agreement.
Additional Units of each Trust may be issued from time to time following the
Initial Date of Deposit by depositing in such Trust additional Securities or
contracts for the purchase thereof together with irrevocable letters of credit
or cash. As additional Units are issued by a Trust, the aggregate value of the
Securities in the Trust will be increased and the fractional undivided interest
in the Trust represented by each Unit will be decreased. The Sponsor may
continue to make additional deposits of Securities into a Trust following the
Initial Date of Deposit, provided that such additional deposits will be in
principal amounts which will
- ---------------
(*) Reference is made to the Trust Agreements and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreements.
9
<PAGE> 17
maintain the same original percentage relationship among the principal amounts
of the Securities in such Trust established on the initial deposit of the
Securities. Thus, although additional Units will be issued, each Unit will
continue to represent the same principal amount of each Security, and the
percentage relationship among the principal amount of each Security in the
related Trust will remain the same. To the extent that any Units are redeemed by
the Trustee or additional Units are issued the fractional undivided interest in
a Trust (set forth under "Essential Information") represented by each unredeemed
Unit will increase or decrease accordingly, although the actual interest in such
Trust represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which may
include the Sponsor, or until the termination of the Trust Agreement. The Cost
of Bonds to Sponsor and Profit or (Loss) to Sponsor reflect certain carrying
costs and the cost of insurance obtained by the Sponsor for individual Bonds, if
any, prior to the date such Bonds are deposited in the Trust.
ROLLING GOVERNMENT SERIES 4, GNMA PORTFOLIO
THE TRUST PORTFOLIO
Rolling Government Series 4, GNMA Portfolio was formed for the purpose of
obtaining safety of capital as is consistent with current income and current
monthly distributions of interest through investment in a portfolio primarily
consisting of taxable-mortgage-backed securities of the fully modified
pass-through type, the payment of principal and interest on which is fully
guaranteed by GNMA. In an effort to minimize the effect of principal payments
and prepayments during the period when, in the Sponsor's opinion, such
reinvestment is practical (the "Reinvestment Period"), the Sponsor will direct
the Trustee to reinvest all distributions of principal into additional GNMA
securities which are similar as to maturity and interest rates as the GNMA
securities upon which the principal was received. The Sponsor currently expects
the Reinvestment Period to last approximately five years from the Initial Date
of Deposit. Subsequent to the Reinvestment Period, amounts of principal will be
distributed as in accordance with interest distributions.
In selecting Ginnie Maes for deposit in the Trust, the following factors, among
others, were considered by the Sponsor: (i) the types of such securities
available; (ii) the prices and yields of such securities relative to other
comparable securities, including the extent to which such securities are trading
at a premium or at a discount from par; and (iii) the maturities of such
securities. See "Portfolio" for information with respect to the Securities
initially selected for deposit in the Trust. The Ginnie Maes included in the
Trust are backed by the indebtedness secured by the mortgages contained in the
underlying mortgage pools.
Standard & Poor's has rated the Units of the Trust "AAA." This is the highest
rating assigned by Standard & Poor's. See "Rating of Units."
REINVESTMENT
During the Reinvestment Period, the Sponsor will direct the Trustee to reinvest
all payments and prepayments of principal from the underlying Ginnie Maes into
additional Ginnie Mae securities which have similar maturities and interest
rates as the Securities upon which the principal was received. Reinvestment of
principal into additional Ginnie Maes during periods when interest rates are at
a level different from those prevailing at the Initial Date of Deposit will have
the effect of increasing or decreasing monthly distributions of interest income
from the Trust. Reinvestment of principal into the Ginnie Maes eligible for
inclusion in the Trust will also have the effect of increasing the par value of
the Units for reinvestment during periods of increasing interest rates from
those prevailing at the Initial Date of Deposit and during periods of declining
interest rates the par value of the Units will decrease. There may be times when
the Principal Account of the Trust has cash which cannot be reinvested because
additional Ginnie Maes are not available or the amount of cash in the Principal
Account is insufficient to buy additional Ginnie Maes without the Trust
incurring disproportionate expenses. During these periods, the amounts in the
Principal Account will remain uninvested, thus reducing the return to
Unitholders. Amounts, if any, which cannot be reinvested during the Reinvestment
Period will be distributed to Unitholders semiannually unless the amount
available for distribution is
10
<PAGE> 18
less than $0.01 per Unit. In such a circumstance, Unitholders should be aware
that at the time of the receipt of such principal they may not be able to
reinvest such principal in other securities at a yield equal to or in excess of
the yield which such principal would have earned to Unitholders had the
principal been reinvested. In addition, principal will not be reinvested and
will be distributed to Unitholders if required to maintain the status of the
Trust as a "regulated investment company." See "Trust Information -- Tax-Status
- -- Regulated Investment Company." The costs of acquiring the additional Ginnie
Maes will be borne by the Trust and hence, the Unitholders. Although it is
currently anticipated that the Trustee will purchase Ginnie Maes directly from
market makers, the Trustee may retain the Sponsor to purchase the additional
Ginnie Maes and pay them usual and customary brokerage commissions. There will
be no attempt to time or delay the purchase of additional Ginnie Maes for
reinvestment to take advantage of market movements.
TAX STATUS
Rolling Government Series 4, GNMA Portfolio has been created as a regulated
investment company for federal tax reasons. For information concerning the
Trust's status as a regulated investment company see "Trust Information -- Tax
Status -- Regulated Investment Company."
RISK FACTORS
The Portfolio of the Trust consists of contracts to purchase Ginnie Maes fully
guaranteed as to payments of principal and interest by GNMA. Each group of
Ginnie Maes described herein as having a specified range of maturities includes
individual mortgage-backed securities which have varying ranges of maturities
within each range set forth in the Portfolio. Current market conditions accord
no difference in price among individual Ginnie Mae securities within certain
ranges of stated maturity dates on the basis of the difference in the maturity
dates of each Ginnie Mae. A purchase of Ginnie Maes with the same coupon rate
and maturity date within such range will be considered an acquisition of the
same security for both additional deposits and for the reinvestment of
principal. In the future, however, the difference in maturity ranges could
affect market value of the individual Ginnie Maes. At such time, any additional
purchases by the Trust will take into account the maturities of the individual
securities. The mortgages underlying the Ginnie Maes in the Trust have an
original stated maturity of up to 30 years.
The reinvestment of principal by the Trustee in additional Ginnie Maes may
result in Securities being acquired at a market discount or market premium (see
"Trust Information -- Risk Factors -- General"). See "Trust Information -- Risk
Factors -- GNMA Securities" for a general discussion of the risks associated
with an investment in GNMA securities.
During the Reinvestment Period, the Sponsor will direct the Trustee to reinvest
principal payments and prepayments into additional securities. Precise
duplication of the Ginnie Maes may not be possible because fractions of Ginnie
Maes may not be purchased and substantially similar securities may not be
available, but duplication will be the goal of the Sponsor with respect to the
purchase of additional securities. Principal amounts which cannot be reinvested
will be distributed to Unitholders semiannually unless the amount available for
distribution is less than $0.01 per Unit. After the Reinvestment Period,
principal will not be reinvested and will be distributed monthly to Unitholders.
See "Trust Information -- Unitholders -- Distributions to Unitholders."
During the Reinvestment Period, the pro rata share of cash in the Principal
Account which has not been reinvested or committed for reinvestment will be
computed as of the 1st day of each June and December and distributions to the
Unitholders as of the related Record Date will be made on the 20th day of the
respective month. After the Reinvestment Period, the pro rata share of cash in
the Principal Account will also be computed as of the 10th day of each month and
distributions to the Unitholders as of the related Record Date will be made on
the 20th day of such month. Proceeds from the disposition of any of the
Securities or amounts representing principal on the Securities received after
such Record Date and prior to the following Distribution Date will be held in
the Principal Account and not distributed until the next Distribution Date. The
Trustee is not
11
<PAGE> 19
required to pay interest on funds held in the Principal or Interest Account (but
may itself earn interest thereon and therefore benefits from the use of such
funds) nor to make a distribution from the Principal Account unless the amount
available for distribution shall equal at least $0.01 per Unit. See "Trust
Information -- Unitholders -- Distributions to Unitholders."
ROLLING GOVERNMENT SERIES 4, GNMA PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: MAY 29, 1997
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, MODIFIED
PASS-THROUGH MORTGAGE-BACKED SECURITIES
<TABLE>
<CAPTION>
COST OF COST OF
YEARS OF SECURITIES SECURITIES PROFIT
COUPON STATED TO SPONSOR TO TRUST OR (LOSS)
AMOUNT RATE MATURITY (1) (2) TO SPONSOR
- -------- ------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
$500,000 7.50% 2027-2029 $496,336 $496,095 $ (241)
</TABLE>
- ---------------
(1) All Securities on the Initial Date of Deposit are represented by the
Sponsor's contracts to purchase such Securities. Such contracts were
acquired by the Sponsor on May 23, 1997. Interest will begin accruing to the
benefit of Unitholders from June 3, 1997, the First Settlement Date of the
Trust. The cost of Securities to Sponsor and Profit or (Loss) to Sponsor
reflects portfolio hedging gains and losses.
(2) The cost of the Securities to the Trust represents the offering side
evaluation of the Securities as determined by Muller Data Corporation. The
offering side evaluation is greater than the current bid side evaluation of
the Securities which is the basis on which Redemption Price per Unit is
determined. The aggregate value based on the bid side evaluation at the
opening of business on the Initial Date of Deposit was $495,780, which is
$315 ($.006 per Unit; .06% of the aggregate principal amount) lower than the
aggregate cost of the securities to the Trust based on the offering side
evaluation.
The Cost of Securities to Sponsor and Profit or (Loss) to Sponsor reflect
portfolio hedging transaction costs, hedging gains or losses, and certain other
carrying costs.
In addition to the information as to the GNMA fully modified pass-through
mortgage-backed Securities set forth above, the Trustee will furnish Unitholders
a statement listing the name of issuer, pool number, interest rate, maturity
date and principal amount for each such Security in the Portfolio upon written
request.
INVESTMENT GRADE SERIES 3, INTERMEDIATE INSURED CORPORATE PORTFOLIO
THE TRUST PORTFOLIO
Investment Grade Series 3, Intermediate Insured Corporate Portfolio consists
almost entirely of a fixed portfolio of corporate debt obligations ("Bonds")
issued after July 18, 1984. The Insured Corporate Portfolio was created to
provide a high level of current income. The Insured Corporate Portfolio may also
contain zero coupon U.S. Treasury Obligations.
The selection of Bonds for the Trust was based largely upon the experience and
judgment of the Sponsor. In making such selections the Sponsor considered the
following factors: (i) the price of the Bonds relative to other issues of
similar quality and maturity; (ii) the diversification of the Bonds as to
location of issuer, (iii) the income to the Unitholders of the Trusts; (iv)
whether the Bonds were insured or the availability and cost of insurance for the
scheduled payment of principal and interest on the Bonds; (v) whether the Bonds
were issued after July 18, 1984; and (vi) the stated maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds in the Trust's portfolio
other than any U.S. Treasury Obligations are rated "Aaa" by Moody's and "AAA" by
Standard & Poor's. Standard & Poor's states that "bonds rated AAA have the
highest rating assigned by Standard & Poor's to a debt obligation. Capacity to
pay interest and principal is extremely strong." Moody's states that bonds
"which are rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal
12
<PAGE> 20
is secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues. Their safety is so absolute that, with the
occasional exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by money market
fluctuations." See "Trust Information -- Insurance on the Bonds." Subsequent to
the Initial Date of Deposit, a bond may cease to be so rated. If this should
occur, a Trust would not be required to eliminate the Bond from the Trust, but
such event may be considered in the Sponsor's determination to direct the
Trustee to dispose of such investment. See "Trust Information -- Investment
Supervision."
Insurance guaranteeing the scheduled payment of principal and interest on all of
the Bonds in the Trust has been obtained directly by the issuer of such Bonds or
by the Sponsor from MBIA Insurance Corporation or other insurers. As a result of
such insurance, the Units of the Trust are rated "AAA" by Standard & Poor's.
TAX STATUS
Investment Grade Series 3, Intermediate Insured Corporate Portfolio has been
created as a grantor trust for federal tax reasons. For information concerning
the Trust's status as a grantor trust see "Trust Information -- Tax Status --
Grantor Trust."
RISK FACTORS
CORPORATE ISSUES
The majority of the Bonds in the Trust are corporate debt obligations. While
each of the Bonds in the Trust are insured and "AAA" rated, an investment in the
Trust should nevertheless be made with an understanding of the characteristics
of such issuers and the risks which such an investment may entail, including
credit risks and the risk that the value of the units will decline, and may
decline precipitously, with increases in interest rates. In recent years there
have been wide fluctuations in interest rates and thus in the value of fixed
rate, debt obligations generally. The Sponsor cannot predict future economic
policies or their consequences or, therefore, the course or extent of any
similar market fluctuations in the future. The portfolio consists of Bonds that,
in many cases, do not have the benefit of covenants that would prevent the
issuer from engaging in capital structurings or borrowing transactions in
connection with corporate acquisitions, leveraged buyouts or restructurings that
could have the effect of reducing the ability of the issuer to meet its
obligations and might result in the ratings of the Bonds and the value of the
underlying portfolio being reduced. For additional information concerning the
risks associated with an investment in bonds of corporate issuers see "Trust
Information -- Risk Factors -- Corporate Bonds."
ZERO COUPON U.S. TREASURY OBLIGATIONS
Certain of the Bonds in the Trust may be "zero coupon" U.S. Treasury bonds. See
footnote (6) to the "Portfolio." Zero coupon bonds are purchased at a deep
discount because the buyer receives only the right to receive a final payment at
the maturity of the bond and does not receive any periodic interest payments.
The effect of owning deep discount bonds which do not make current interest
payments (such as the zero coupon bonds) is that a fixed yield is earned not
only on the original investment but also, in effect, on all earnings during the
life of the discount obligation. The implicit reinvestment of earnings at the
same rate eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount obligation,
but at the same time eliminates the holder's ability to reinvest at higher rates
in the future. For this reason, zero coupon bonds are subject to substantially
greater price fluctuations during periods of changing market interest rates than
are securities of comparable quality which make regular interest payments. See
"Trust Information -- Risk Factors -- U.S. Treasury Obligations" and "Trust
Information -- Risk Factors -- General" for additional information concerning
the risks of investing in zero coupon U.S. Treasury bonds.
13
<PAGE> 21
INVESTMENT GRADE SERIES 3
INTERMEDIATE INSURED CORPORATE PORTFOLIO AS OF THE INITIAL DATE OF DEPOSIT: MAY
29, 1997
<TABLE>
<CAPTION>
RATING(2)
-------------------- COST OF
AGGREGATE NAME OF ISSUER STANDARD REDEMPTION BONDS TO
PRINCIPAL (1)(5) COUPON MATURITY MOODY'S & POOR'S PROVISIONS(3) TRUST(4)
- --------- ------------------------- ------ -------- ------- -------- ------------- ---------
<C> <S> <C> <C> <C> <C> <C> <C>
$100,000 Southern California 5.625% 10/1/02 Aaa AAA Non-callable $ 94,851
Edison Company
100,000 Ford Motor Credit 6.625% 6/30/03 Aaa AAA Non-callable 98,614
100,000 Public Service Electric & 6.500% 5/1/04 Aaa AAA Non-callable 97,464
Gas
100,000 Pacific Gas and Electric 5.875% 10/1/05 Aaa AAA Non-callable 92,760
100,000 Wisconsin Electric Power 6.625% 11/15/06 Aaa AAA Non-callable 96,615
- --------- ---------
$500,000 $480,304
=========== ===========
</TABLE>
- ---------------
All Bonds in the Trust except for the U.S. Treasury Obligations are insured only
by MBIA. The insurance was obtained either directly by the issuer of the Bonds
or by the Sponsor.
(1) Contracts to acquire Bonds were entered into by the Sponsor on May 22, 1997.
All Bonds are represented by regular way contracts, unless otherwise
indicated, for the performance of which an irrevocable letter of credit has
been deposited with the Trustee.
(2) All the Bonds in the Trust except for any U.S. Treasury Obligations are
insured by MBIA and therefore are rated AAA by Standard & Poor's and Aaa by
Moody's. See "Trust Information -- Insurance on the Bonds." Also, the Units
of the Trust are rated AAA by Standard & Poor's (see "Trust Information --
Rating of Units").
(3) There is shown under this heading the year in which each issue of Bonds is
initially or currently redeemable and the redemption price for that year;
unless otherwise indicated. Each issue continues to be redeemable at
declining prices thereafter, but not below par value. The prices at which
the Bonds may be redeemed or called prior to maturity may or may not include
a premium and, in certain cases, may be less than the cost of the Bonds to
the Trust. In addition, certain Bonds in the portfolio may be redeemed in
whole or in part other than by operation of the stated redemption provisions
under certain unusual or extraordinary circumstances specified in the
instruments setting forth the terms and provisions of such bonds. "S.F."
indicates that a sinking fund is established with respect to that issue of
Bonds.
(4) During the initial offering period, evaluations of Bonds are made on the
basis of current offering side evaluations of the Bonds. The aggregate
offering price is greater than the aggregate bid price of the Bonds, which
is the basis on which the Redemption Price will be determined for purposes
of redemption of Units after the initial offering period.
(5) Other information regarding the Bonds in the Trust, at the opening of
business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
BONDS TO (LOSS) TO INCOME VALUE OF
SPONSOR SPONSOR TO TRUST BONDS
-------- ----------- -------- --------
<S> <C> <C> <C> <C>
Investment of Grade Series 3.......................... $480,004 $ 300 $31,250 $479,054
</TABLE>
The Cost of Bonds to the Sponsor and Profit or (Loss) to Sponsor reflect the
cost of insurance obtained by the Sponsor for individual Bonds, portfolio
hedging transaction costs, hedging gains or losses, and certain other carrying
costs.
14
<PAGE> 22
INVESTMENT GRADE SERIES 4, CORPORATE PORTFOLIO
THE TRUST PORTFOLIO
Investment Grade Series 4, Corporate Portfolio was formed for the purpose of
providing a high level of current income through investment in a fixed portfolio
consisting of investment grade, corporate debt obligations issued after July 18,
1984. For foreign investors who are not United States citizens or residents,
interest income from the Corporate Portfolio may not be subject to federal
withholding taxes if certain conditions are met. See "Trust Information -- Tax
Status -- Grantor Trust."
The Trust may be an appropriate investment vehicle for investors who desire to
participate in a portfolio of intermediate term taxable fixed income securities
issued by corporate obligors with greater diversification than investors might
be able to acquire individually. Diversification of the Trust assets will not
eliminate the risk of loss always inherent in the ownership of securities. In
addition, Bonds of the type deposited in the Trust often are not available in
small amounts.
The selection of Bonds for the Trust was based largely upon the experience and
judgment of the Sponsor. In making such selections the Sponsor considered the
following factors: (a) the price of the Bonds relative to other issues of
similar quality and maturity; (b) the present rating and credit quality of the
issuers of the Bonds and the potential improvement in the credit quality of such
issuers; (c) the diversification of the Bonds as to location of issuer; (d) the
income to the Unitholders of the Trust; (e) whether the Bonds were issued after
July 18, 1984; and (f) the stated maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds in the Trust are rated "A"
or better by Moody's, Standard & Poor's or Duff & Phelps. See "Trust Information
- -- Description of Ratings" and "Portfolio" below. Subsequent to the Initial Date
of Deposit, a Bond may cease to be so rated. If this should occur, the Trust
would not be required to eliminate the Bond from the Trust, but such event may
be considered in the Sponsor's determination to direct the Trustee to dispose of
such investment. See "Trust Information -- Investment Supervision."
TAX STATUS
Investment Grade Series 4, Corporate Portfolio has been created as a grantor
trust for federal tax reasons. For information concerning the Trust's status as
a grantor trust see "Trust Information -- Tax Status -- Grantor Trust."
RISK FACTORS
An investment in Units of the Trust should be made with an understanding of the
risks that an investment in fixed rate, corporate debt obligations may entail,
including credit risks and the risk that the value of the Units will decline,
and may decline precipitously, with increases in interest rates. In recent years
there have been wide fluctuations in interest rates and thus in the value of
fixed-rate, debt obligations generally. The Sponsor cannot predict future
economic policies or their consequences or, therefore, the course or extent of
any similar market fluctuations in the future. The portfolio consists of Bonds
that, in many cases, do not have the benefit of covenants that would prevent the
issuer from engaging in capital structurings or borrowing transactions in
connection with corporate acquisitions, leveraged buyouts or restructurings that
could have the effect of reducing the ability of the issuer to meet its
obligations and might result in the ratings of the Bonds and the value of the
underlying portfolio being reduced. See "Trust Information -- Risk Factors --
Corporate Securities" for additional risk factors concerning corporate debt
obligations.
15
<PAGE> 23
INVESTMENT GRADE SERIES 4
CORPORATE PORTFOLIO AS OF THE INITIAL DATE OF DEPOSIT: MAY 29, 1997
<TABLE>
<CAPTION>
RATING(2)
-------------------- REDEMPTION COST OF
AGGREGATE NAME OF ISSUER STANDARD PROVISIONS BONDS TO
PRINCIPAL (1)(5) COUPON MATURITY MOODY'S & POOR'S (3) TRUST(4)
- ----------- ---------------------------- ------- --------- ------- --------- -------------- ---------
<C> <S> <C> <C> <C> <C> <C> <C>
$ 100,000 Texas Instrument Inc. 6.125% 2/1/06 A3 A Non-callable $ 92,341
100,000 Nationsbank Corp. 6.500% 3/15/06 A2 A Non-callable 94,598
100,000 Walt Disney Company 6.750% 3/30/06 A2 A Non-callable 97,128
100,000 Sears Roebuck Acceptance 6.700% 11/15/06 A2 A- Non-callable 95,929
100,000 J.P. Morgan 6.875% 1/15/07 Aa3 AA Non-callable 97,269
100,000 Morgan Stanley Group 6.875% 3/1/07 A1/*+ A+ Non-callable 96,632
100,000 J.C. Penney & Company 7.600% 4/1/07 A2 A Non-callable 101,343
100,000 Ford Motor Credit 6.750% 8/15/08 A1 A+ Non-callable 94,999
100,000 GTE North Inc. 6.900% 11/1/08 A1 AA- Non-callable 96,982
100,000 Chase Manhattan Corp. 6.500% 1/15/09 A1 A- Non-callable 92,666
- ----------- ---------
$1,000,000 $959,887
============ ===========
</TABLE>
- ---------------
(1) Contracts to acquire Bonds were entered into by the Sponsor on May 23, 1997.
All Bonds are represented by regular way contracts, unless otherwise
indicated, for the performance of which an irrevocable letter of credit has
been deposited with the Trustee.
(2) A brief description of the applicable Standard & Poor's, Moody's and Duff &
Phelps rating symbols and their meanings is set forth under "Trust
Information -- Description of Ratings." "N.R." indicates that the issue has
not been rated by that rating agency.
(3) There is shown under this heading the year in which each issue of Bonds is
initially or currently redeemable and the redemption price for that year.
Unless otherwise indicated, each issue continues to be redeemable at
declining prices thereafter but not below par value. The prices at which the
Bonds may redeemed on called prior to maturity may or may not include a
premium and, in certain cases, may be less than the cost of the Bonds to
Trust. In addition, certain bonds in the portfolio may be redeemed in whole
or in part other than by operation of the stated redemption provisions under
certain unusual or extraordinary circumstances specified in the instruments
setting forth the terms and provisions of such Bonds.
(4) During the initial offering period, evaluations of Bonds are made on the
basis of current offering side evaluations of the Bonds. The aggregate
offering price is greater than the aggregate bid price of the Bonds, which
is the basis on which the Redemption Price will be determined for purposes
of redemption of Units after the initial offering period.
(5) Other information regarding the Bonds in the Trust, at the opening of
business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
SECURITIES (LOSS) TO INCOME VALUE OF
TO SPONSOR SPONSOR TO TRUST BONDS
----------- ----------- -------- --------
<S> <C> <C> <C> <C>
Investment Grade Series 4.................................. $ 961,852 $(1,965) $67,575 $957,387
</TABLE>
The Cost of Securities to Sponsor and Profit or (Loss) to Sponsor reflect
portfolio hedging transaction costs, hedging gains or losses, and certain other
carrying costs.
16
<PAGE> 24
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
UNITHOLDERS
FIDELITY DEFINED TRUSTS SERIES 4
We have audited the accompanying statements of condition and the related
portfolios of Fidelity Defined Trusts Series 4 (Rolling Government Series 4,
GNMA Portfolio, Investment Grade Series 3, Intermediate Insured Corporate
Portfolio and Investment Grade Series 4, Corporate Portfolio) as of the opening
of business, May 29, 1997. The statements of condition and portfolios are the
responsibility of the Trustee and the Sponsor. Our responsibility is to express
an opinion on such financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of Securities owned at May 29, 1997 and a letter of credit
deposited to purchase Securities by correspondence with The Chase Manhattan
Bank, the Trustee. An audit also includes assessing the accounting principles
used and significant estimates made by the Trustee and the Sponsor, as well as
evaluating the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fidelity Defined Trusts Series
4 (Rolling Government Series 4, GNMA Portfolio, Investment Grade Series 3,
Intermediate Insured Corporate Portfolio and Investment Grade Series 4,
Corporate Portfolio) as of the opening of business, May 29, 1997, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
May 29, 1997
17
<PAGE> 25
FIDELITY DEFINED TRUSTS SERIES 4
STATEMENTS OF CONDITION AT THE OPENING OF BUSINESS ON MAY 29, 1997, THE INITIAL
DATE OF DEPOSIT
<TABLE>
<CAPTION>
ROLLING INVESTMENT INVESTMENT
GOVERNMENT GRADE GRADE
SERIES 4 SERIES 3 SERIES 4
----------- ----------- ------------
<S> <C> <C> <C>
INVESTMENT IN SECURITIES
Contracts to purchase Securities(1).................................... $ 496,095 $ 480,304 $ 959,887
Organizational Costs(3)................................................ 32,364 42,934 41,184
Accrued interest to Initial Date of Deposit on underlying
Securities(1)(4) 2,813 7,230 14,599
-------- -------- ----------
Total.............................................................. $ 531,272 $ 530,468 $1,015,670
======== ======== ==========
Number of Units........................................................ 49,702 49,702 99,404
LIABILITIES AND INTEREST OF UNITHOLDERS
Liabilities --
Payment of deferred sales charge..................................... $ 2,987 $ 2,987 $ 5,974
Accrued Organizational Costs(3)...................................... 32,364 42,934 41,184
Accrued interest payable to Sponsor(1)(4)............................ 2,813 7,230 14,599
Interest of Unitholders --
Cost to investors(5)................................................. 514,088 497,725 994,708
Less: Gross underwriting commission(5)............................... (20,980) (20,408) (40,795)
-------- -------- ----------
Net interest to Unitholders(1)(4)(5)................................. $ 493,108 $ 477,317 $ 953,913
-------- -------- ----------
Total.............................................................. $ 531,272 $ 530,468 $1,015,670
======== ======== ==========
</TABLE>
- ---------------
NOTES:
(1) The aggregate value of the Securities listed in each "Portfolio" and their
cost to the Trust are the same. The value of the Securities is determined by
Muller Data Corporation on the bases set forth under "Trust Information --
Public Offering of Units -- Public Offering Price" based on prices as of the
opening of business on May 29, 1997. The contracts to purchase Securities
are collateralized by an irrevocable letter of credit of $3,000,000 which
has been deposited with the Trustee. Of this amount, $1,940,074 relates to
the offering price of Securities to be purchased and $24,642 relates to
accrued interest on such Securities to the expected dates of delivery.
(2) Insurance coverage providing for the timely payment of principal and
interest on the Securities in an Insured Trust Fund has been obtained
directly by the issuer of such Securities or by the Sponsor from MBIA
Insurance Corporation or other insurers.
(3) Each Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs which will be deferred and amortized over five years or
over the life of the Trust if the term of such Trust is less than five
years. Organizational costs have been estimated based on a projected size of
$30,000,000 for each Trust. To the extent a Trust is larger or smaller, the
estimate will vary.
(4) The Trustee will advance to each Trust the amount of net interest accrued to
the First Settlement Date for distribution to the Sponsor as the Unitholder
of Record.
(5) The aggregate public offering price includes a sales charge for the Trust as
set forth under "Essential Information," assuming all single transactions
involve less than 10,000 Units. For single transactions involving 10,000 or
more Units the sales charge is reduced (see "Trust Information -- Public
Offering of Units -- Public Offering Price") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while
the Net interest to Unitholders remains unchanged.
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<PAGE> 26
TRUST INFORMATION
GENERAL INFORMATION
Because certain of the Securities 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 Security. In the event of a failure to deliver any Security that
has been purchased for a Trust under a contract, including those securities
purchased on a "when, as and if issued" basis ("Failed Securities"), the Sponsor
is authorized under the Trust Agreement to direct the Trustee to acquire other
securities ("Replacement Securities") to make up the original corpus of such
Trust.
Securities in certain of the Trusts may have been purchased on a "when, as and
if issued" or delayed delivery basis with delivery expected to take place after
the First Settlement Date. See "Portfolio" for each Trust. Accordingly, the
delivery of such Securities may be delayed or may not occur. Interest on these
Securities begins accruing to the benefit of Unitholders on their respective
dates of delivery. Unitholders will be "at risk" with respect to any "when, as
and if issued" or "delayed delivery" Securities included in their respective
Trust Portfolio (i.e., may derive either gain or loss from fluctuations in the
evaluation of such Securities) from the date they commit for Units.
Replacement Securities must be purchased within 20 days after the Sponsor
receives notice that a contract to deliver a Security will not be honored and
the purchase price of such securities may not exceed the amount of funds
reserved for the purchase of the Failed Securities. The Replacement Securities
(i) must be payable in United States currency, (ii) must be purchased at a price
that results in a yield to maturity and a current return at least equal to that
of the Failed Securities as of the Initial Date of Deposit, (iii) shall not be
"when, as and if issued" or restricted securities, (iv) must satisfy any rating
criteria for Securities originally included in such Trust, (v) must not cause
the Units of such Trust to cease to be rated AAA by the appropriate rating
agency if the Units were so rated on the Initial Date of Deposit and (vi) in the
case of an Insured Trust, must be insured prior to acquisition by a Trust. In
connection with an Insured Corporate Portfolio only, Replacement Securities also
must (i) be intermediate or long-term, as applicable, corporate bonds,
debentures, notes or other straight debt obligations (whether secured or
unsecured and whether senior or subordinated) without equity or other conversion
features, with fixed maturity dates substantially the same as those of the
Failed Securities having no warrants or subscription privileges attached and
(ii) be issued after July 18, 1984 if interest thereon is United States source
income. Whenever a Replacement Security is acquired, the Trustee shall, within
five days thereafter, notify all Unitholders of the Trust of the acquisition of
the Replacement Security and shall, on the next monthly distribution date which
is more than 30 days thereafter, make a pro rata distribution of the amount, if
any, by which the cost to the Trust of the Failed Security exceeded the cost of
the Replacement Security. With the exception of a Rolling Government Series,
once all of the Securities in a Trust are acquired, the Trustee will have no
power to vary the investments of such Trust, i.e., the Trustee will have no
managerial power to take advantage of market variations to improve a
Unitholder's investment.
If the right of limited substitution described in the preceding paragraphs is
not utilized to acquire Replacement Securities, the Sponsor will refund the
principal and accrued interest attributable to such Failed Securities and the
pro rata portion of the sales charge attributable to such Failed Securities not
more than 30 days after the date on which the Trustee would have been required
to purchase a Replacement Security. Unitholders should be aware that, at the
time of receipt of such principal, they may not be able to reinvest such
proceeds in other securities at a yield equal to or in excess of the yield which
such proceeds would have earned for Unitholders of such Trusts.
Whether or not a Replacement Security is acquired, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) will be paid to
Unitholders of the Trust to the date the Sponsor removes the Failed Securities
from the Trust or to the
19
<PAGE> 27
date of substitution if a Replacement Security is purchased. All such interest
paid to Unitholders which accrued after the date of settlement for a purchase of
Units will be paid by the Sponsor. In the event a Replacement Security could not
be acquired by a Trust, the net annual interest income per Unit for such Trust
would be reduced and the Estimated Current Return and Estimated Long-Term Return
might be lowered.
Subsequent to the Initial Date of Deposit, a Security may cease to be rated or
its rating may be reduced below any minimum required as of the Initial Date of
Deposit. Neither event requires the elimination of such investment from a Trust,
but may be considered in the Sponsor's determination to direct the Trustee to
dispose of such investment. See "Trust Information -- Investment Supervision."
The Sponsor may not alter the portfolio of a Trust except upon the occurrence of
certain extraordinary circumstances or, in the case of the Rolling Government
Series, in connection with a reinvestment of principal. See "Trust Information
- -- Investment Supervision." Certain of the Securities may be subject to optional
call or mandatory redemption pursuant to sinking fund provisions, in each case
prior to their stated maturity. See "Portfolio" for each Trust for a description
of applicable redemption provisions. A bond subject to optional call is one
which is subject to redemption or refunding prior to maturity at the option of
the issuer, often at a premium over par. A refunding is a method by which a bond
issue is redeemed, at or before maturity, by the proceeds of a new bond issue. A
bond subject to sinking fund redemption is one which is subject to partial call
from time to time at par with proceeds from a fund accumulated for the scheduled
retirement of a portion of an issue to maturity. Special or extraordinary
redemption provisions may provide for redemption at par of all or a portion of
an issue upon the occurrence of certain circumstances, which may be prior to the
optional call dates shown under "Portfolio" for each Trust. Redemption pursuant
to optional call provisions is more likely to occur, and redemption pursuant to
special or extraordinary redemption provisions may occur, when the Securities
have an offering side evaluation which represents a premium over par. The
proceeds from any such call or redemption pursuant to sinking fund provisions,
as well as proceeds from the sale of Securities and from Securities which mature
in accordance with their terms unless utilized to pay for Units tendered for
redemption, will be distributed to Unitholders of such Trust and will not be
used to purchase additional Securities for such Trust. See "Trust Information --
Interest, Estimated Long-Term Return and Estimated Current Return." The call,
redemption, sale or maturity of Securities also may have tax consequences to a
Unitholder. See "Trust Information -- Tax Status."
Each Unit of a Trust represents an undivided fractional interest in the
Securities deposited therein, in the ratio shown under "Essential Information."
Units may be purchased and certificates, if requested, will be issued in
denominations of one Unit or any multiple or fraction thereof, subject to each
Trust's minimum investment requirement of one Unit. Fractions of Units will be
computed to three decimal points. To the extent that Units of a Trust are
redeemed, the principal amount of Securities in such Trust will be reduced and
the undivided fractional interest represented by each outstanding Unit of such
Trust will increase. See "Trust Information -- Redemption."
RISK FACTORS
U.S. Treasury Obligations. U.S. Treasury Obligations are direct obligations of
the United States and are backed by its full faith and credit although the Units
are not so backed. The U.S. Treasury Obligations are not rated but in the
opinion of the Sponsor have credit characteristics comparable to those of
securities rated "AAA" by nationally recognized rating agencies.
An investment in Units of a Trust which contains U.S. Treasury Obligations
should be made with an understanding of the risks which an investment in fixed
rate debt obligations may entail, including the risk that the value of the
Securities and hence the Units will decline with increases in interest rates.
The high inflation of prior years, together with the fiscal measures adopted to
attempt to deal with it, have resulted in wide fluctuations in interest rates
and, thus, in the value of fixed rate debt obligations generally. The Sponsor
cannot predict whether such fluctuations will continue in the future.
20
<PAGE> 28
GNMA Securities. An investment in Units of the GNMA Portfolio should be made
with an understanding of the risks inherent therein, including the risk that the
value of the portfolio and hence of the Units will decline with increases in
interest rates. The value of the underlying Securities will fluctuate inversely
with changes in interest rates. In addition, the potential for appreciation of
the underlying Securities, which might otherwise be expected to occur as a
result of a decline in interest rates, may be limited or negated by increased
principal prepayments in respect of the underlying mortgages. The high inflation
of prior years, together with the fiscal measures adopted to attempt to deal
with it, have resulted in wide fluctuations in interest rates and, thus, in the
value of fixed rate long term obligations generally. The Sponsor cannot predict
whether such fluctuations will continue in the future.
The Ginnie Maes are backed by the indebtedness secured by underlying mortgage
pools of long-term mortgages on 1- to 4- family dwellings. The pool of mortgages
which is to underlie a particular new issue of Ginnie Maes is assembled by the
proposed issuer of such Ginnie Maes. The issuer is typically a mortgage banking
firm, and in every instance must be a mortgagee approved by and in good standing
with the Federal Housing Administration ("FHA"). In addition, GNMA imposes its
own criteria on the eligibility of issuers, including a net worth requirement.
During the Reinvestment Period for the GNMA Portfolio, the Sponsor will direct
the Trustee to reinvest principal payments and prepayments into additional
securities. While precise duplication of the Ginnie Maes to be purchased with
reinvested principal is the goal of the Sponsor, this may not be possible
because fractions of Ginnie Maes may not be purchased and substantially similar
securities may not be available. Principal amounts which cannot be reinvested
will be distributed to Unitholders of such Trust semiannually unless the amount
available for distribution is less than $0.01 per Unit. After the Reinvestment
Period, principal will not be reinvested and will be distributed monthly
(subject to amount limitations) to Unitholders.
The mortgages underlying a Ginnie Mae may be prepaid at any time without any
significant premium or penalty at the option of the mortgagors. It has been the
experience of the mortgage industry that the average life of mortgages
comparable to those contained in the GNMA Portfolio, owing to prepayments,
refinancings and payments from foreclosures is considerably less than the stated
maturity set forth in "Essential Information." A lower or higher return on Units
may occur depending on (i) whether the price at which the respective Ginnie Maes
were acquired by the Trust is lower or higher than par (which represents the
price at which such Ginnie Maes will be redeemed upon prepayment), (ii) whether
principal is reinvested or distributed to Unitholders and (iii) if reinvestment
occurs, whether the Ginnie Maes purchased by the Trustee with reinvested
principal are purchased at a premium or discount from par. During periods of
declining interest rates, prepayments of Ginnie Maes may occur with increasing
frequency because, among other reasons, mortgagors may be able to refinance
their outstanding mortgages at lower interest rates. In such a case, (i) the
reinvestment of principal may be at prices which result in a lower return on
Units or (ii) principal will be distributed to Unitholders who cannot reinvest
such principal distributions in other securities at an attractive yield.
The Ginnie Maes in the GNMA Portfolio are guaranteed as to timely payment of
principal and interest by GNMA. Funds received by the issuers on account of the
mortgages backing the Ginnie Maes in the GNMA Portfolio are intended to be
sufficient to make the required payments of principal of and interest on such
Ginnie Maes but, if such funds are insufficient for that purpose, the guaranty
agreements between the issuers and GNMA require the issuers to make advances
sufficient for such payments. If the issuers fail to make such payments, GNMA
will do so. Any statement in this Prospectus that a particular Security is
backed by the full faith and credit of the United States is based upon the
opinion of an Assistant Attorney General of the United States and should be so
construed.
The GNMA guaranties referred to herein relate only to payment of principal of
and interest on the Ginnie Maes in the portfolio and not the Units offered
hereby.
A number of factors, including homeowners' mobility, change in family size and
mortgage market interest rates will affect the average life of the Ginnie Maes
in the trust. For example, Ginnie Maes issued during a period of high interest
rates will be backed
21
<PAGE> 29
by a pool of mortgage loans bearing similarly high rates. In general, during a
period of declining interest rates, new mortgage loans with interest rates lower
than those charged during periods of high rates will become available. To the
extent a homeowner has an outstanding mortgage with a high rate, he may
refinance his mortgage at a lower interest rate or he may rapidly repay his old
mortgage. Should this happen, a Ginnie Mae issued with a high interest rate may
experience a rapid prepayment of principal as the underlying mortgage loans
prepay in whole or in part. Accordingly, there can be no assurance that the
prepayment levels which will be actually realized will conform to the experience
of the FHA, other mortgage lenders or other Ginnie Mae investors. It is not
possible to meaningfully predict prepayment levels regarding the Ginnie Maes in
the Trust. Therefore, the termination of the Trust might be accelerated as a
result of prepayments made as described herein.
Public Utility Issues. Certain of the Bonds in an Insured Corporate Portfolio
may be obligations of public utility issuers. In general, public utilities are
regulated monopolies engaged in the business of supplying light, water, power,
heat, transportation or means of communication. Historically, the utilities
industry has provided investors with high levels of reliability, stability and
relative total return on their investments. However, an investment in an Insured
Utility Portfolio should be made with an understanding of the characteristics of
such issuers and the risks which such an investment may entail. General problems
of such issuers include the difficulty in financing large construction programs
in an inflationary period, the limitations on operations and increased costs and
delays attributable to environmental considerations, the difficulty of the
capital markets in absorbing utility debt, the difficulty in obtaining fuel at
reasonable prices and the effect of energy conservation. All of such issuers
have been experiencing certain of these problems in varying degrees. In
addition, federal, state and municipal governmental authorities may from time to
time review existing, and impose additional, regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of certain of the Bonds in an
Insured Utility Portfolio to make payments of principal and/or interest on such
Bonds.
Utilities are generally subject to extensive regulation by state utility
commissions which, for example, establish the rates which may be charged and the
appropriate rate of return on an approved asset base, which must be approved by
the state commissions. Certain utilities have had difficulty from time to time
in persuading regulators, who are subject to political pressures, to grant rate
increases necessary to maintain an adequate return on investment and voters in
many states have the ability to impose limits on rate adjustments (for example,
by initiative or referendum). Any unexpected limitations could negatively affect
the profitability of utilities whose budgets are planned far in advance. Also,
changes in certain accounting standards currently under consideration by the
Federal Accounting Standards Board could cause significant write-downs of assets
and reductions in earnings for many investor-owned utilities. In addition, gas
pipeline and distribution companies have had difficulties in adjusting to short
and surplus energy supplies, enforcing or being required to comply with
long-term contracts and avoiding litigation from their customers, on the one
hand, or suppliers, on the other hand.
Certain of the issuers of the Bonds in an Insured Corporate Portfolio may own or
operate nuclear generating facilities. Governmental authorities may from time to
time review existing, and impose additional, requirements governing the
licensing, construction and operation of nuclear power plants. Nuclear
generating projects in the electric utility industry have experienced
substantial cost increases, construction delays and licensing difficulties.
These have been caused by various factors, including inflation, high financing
costs, required design changes and rework, allegedly faulty construction,
objections by groups and governmental officials, limits on the ability to
finance, reduced forecasts of energy requirements and economic conditions. This
experience indicates that the risk of significant cost increases, delays and
licensing difficulties remains present through completion and achievement of
commercial operation of any nuclear project. Also, nuclear generating units in
service have experienced unplanned outages or extensions of scheduled outages
due to equipment problems or new regulatory requirements sometimes followed by a
significant delay in obtaining regulatory approval to return to service. A major
accident at a nuclear plant anywhere could cause the imposition of limits or
prohibitions on the operation, construction or licensing of nuclear units in the
United States.
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<PAGE> 30
In view of the uncertainties discussed above, there can be no assurance that any
bond issuer's share of the full cost of nuclear units under construction
ultimately will be recovered in rates or of the extent to which a bond issuer
could earn an adequate return on its investment in such units. The likelihood of
a significantly adverse event occurring in any of the areas of concern described
above varies, as does the potential severity of any adverse impact. It should be
recognized, however, that one or more of such adverse events could occur and
individually or collectively could have a material adverse impact on the
financial condition or the results of operations or on a bond issuer's ability
to make interest and principal payments on its outstanding debt.
Other general problems of the gas, water, telephone and electric utility
industry (including state and local joint action power agencies) include
difficulty in obtaining timely and adequate rate increases, difficulty in
financing large construction programs to provide new or replacement facilities
during an inflationary period, rising costs of rail transportation to transport
fossil fuels, the uncertainty of transmission service costs for both interstate
and intrastate transactions, changes in tax laws which adversely affect a
utility's ability to operate profitably, increased competition in service costs,
reductions in estimates of future demand for electricity and gas in certain
areas of the country, restrictions on operations and increased cost and delays
attributable to environmental considerations, uncertain availability and
increased cost of capital, unavailability of fuel for electric generation at
reasonable prices, including the steady rise in fuel costs and the costs
associated with conversion to alternate fuel sources such as coal, availability
and cost of natural gas for resale, technical and cost factors and other
problems associated with construction, licensing, regulation and operation of
nuclear facilities for electric generation, including among other considerations
the problems associated with the use of radioactive materials and the disposal
of radioactive wastes, and the effects of energy conservation. Each of the
problems referred to could adversely affect the ability of the issuers of any
utility Bonds in a Trust to make payments due on these Bonds.
In addition, the ability of state and local joint action power agencies to make
payments on bonds they have issued is dependent in large part on payments made
to them pursuant to power supply or similar agreements. Courts in Washington and
Idaho have held that certain agreements between Washington Public Power Supply
System ("WPPSS") and the WPPSS participants are unenforceable because the
participants did not have the authority to enter into the agreements. While
these decisions are not specifically applicable to agreements entered into by
public entities in other states, they may cause a reexamination of the legal
structure and economic viability of certain projects financed by joint action
power agencies, which might exacerbate some of the problems referred to above
and possibly lead to legal proceedings questioning the enforceability of
agreements upon which payment of these bonds may depend.
Corporate Bonds. An investment in Units of a Corporate Portfolio or an Insured
Corporate Portfolio should be made with an understanding of the risks that an
investment in fixed rate, investment grade corporate debt obligations may
entail, including the risk that the value of the Units will decline with
increases in interest rates. In recent years there have been wide fluctuations
in interest rates and thus in the value of fixed-rate, debt obligations
generally. Generally, bonds with longer maturities will fluctuate in value more
than bonds with shorter maturities. A slowdown in the economy, or a development
adversely affecting an issuer's creditworthiness, may result in the issuer being
unable to maintain earnings or sell assets at the rate and at the prices,
respectively, that are required to produce sufficient cash flow to meet its
interest and principal requirements. The Sponsor cannot predict future economic
policies or their consequences or, therefore, the course or extent of any
similar market fluctuations in the future.
Should the issuer of any Bond default in the payment of principal or interest, a
Trust may incur additional expenses seeking payment on the defaulted Bond.
Because amounts (if any) recovered by a Trust in payment under the defaulted
Bond may not be reflected in the value of the Units until actually received by a
Trust, and depending upon when a Unitholder purchases or sells his Units, it is
possible that a Unitholder would bear a portion of the cost of recovery without
receiving any portion of the payment recovered.
23
<PAGE> 31
General. Certain of the Securities in certain of the Trusts may have been
acquired at a market discount from par value at maturity. The coupon interest
rates on the discount securities at the time they were purchased and deposited
in the Trusts were lower than the current market interest rates for newly issued
bonds of comparable rating and type. If such interest rates for newly issued
comparable securities increase, the market discount of previously issued
securities will become greater, and if such interest rates for newly issued
comparable securities decline, the market discount of previously issued
securities will be reduced, other things being equal. Investors should also note
that the value of securities purchased at a market discount will increase in
value faster than securities purchased at a market premium if interest rates
decrease. Conversely, if interest rates increase, the value of securities
purchased at a market discount will decrease faster than securities purchased at
a market premium. In addition, if interest rates rise, the prepayment risk of
higher yielding, premium securities and the prepayment benefit for lower
yielding, discount securities will be reduced. See "Trust Information -- Tax
Status." Market discount attributable to interest changes does not indicate a
lack of market confidence in the issue.
Certain of the Securities in the Trusts may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the premium
securities at the time they were purchased and deposited in the Trusts were
higher than the current market interest rates for newly issued securities of
comparable rating and type. If such interest rates for newly issued and
otherwise comparable securities decrease, the market premium of previously
issued securities will be increased, and if such interest rates for newly issued
comparable securities increase, the market premium of previously issued
securities will be reduced, other things being equal. The current returns of
securities trading at a market premium are initially higher than the current
returns of comparable securities of a similar type issued at currently
prevailing interest rates because premium securities tend to decrease in market
value as they approach maturity. Because part of the purchase price is thus
returned not at maturity but through current income payments, early redemption
of a premium bond at par or early prepayments of principal will result in a
reduction in yield. Redemption pursuant to call provisions generally will, and
redemption pursuant to sinking fund provisions may, occur at times when the
redeemed Securities have an offering side valuation which represents a premium
over par or, for original issue discount Securities, a premium over the accreted
value. To the extent that the Securities were deposited in the Trusts at a price
higher than the price at which they are redeemed, this will represent a loss of
capital when compared to the original Public Offering Price of the Units.
Because premium securities generally pay a higher rate of interest than
securities priced at or below par, the effect of the redemption of premium
securities would be to reduce Estimated Net Annual Unit Income by a greater
percentage than the par amount of such securities bears to the total par amount
of Securities in a Trust. Although the actual impact of any such redemptions
that may occur will depend upon the specific Securities that are redeemed, it
can be anticipated that the Estimated Net Annual Unit Income will be
significantly reduced after the dates on which such Securities are eligible for
redemption. See "Portfolio" for each Trust for the earliest scheduled call date
and the initial redemption price for each Security.
Certain of the Securities in certain of the Trusts may be "zero coupon" bonds,
i.e., an original issue discount bond that does not provide for the payment of
current interest. Zero coupon bonds are purchased at a deep discount because the
buyer receives only the right to receive a final payment at the maturity of the
bond and does not receive any periodic interest payments. The effect of owning
deep discount bonds which do not make current interest payments is that a fixed
yield is earned not only on the original investment but also, in effect, on all
discount earned during the life of such obligation. This implicit reinvestment
of earnings at the same rate eliminates the risk of being unable to reinvest the
income on such obligation at a rate as high as the implicit yield on the
discount obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds are
subject to substantially greater price fluctuations during periods of changing
market interest rates than are securities of comparable quality which pay
interest currently. A Trust may be required to sell zero coupon bonds prior to
maturity (at their current market price which is likely to be less than their
par value) in the event that all the Securities in the portfolio other than the
zero coupon bonds are called or redeemed in order to pay expenses of a Trust or
in case a Trust is terminated. For the Federal tax consequences of original
issue discount securities such as the zero coupon bonds, see "Trust Information
- -- Tax Status."
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Litigation. To the best of the Sponsor's knowledge, there is no litigation
pending as of the Initial Date of Deposit in respect of any Security which might
reasonably be expected to have a material adverse effect on the Trusts. At any
time after the Initial Date of Deposit, litigation may be instituted on a
variety of grounds with respect to the Securities. The Sponsor is unable to
predict whether any such litigation may be instituted, or if instituted, whether
such litigation might have a material adverse effect on the Trusts.
RATING OF UNITS
Standard & Poor's has rated the Units of the GNMA Portfolio and the Insured
Corporate Portfolio "AAA." This is the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is very strong. Standard &
Poor's has been compensated by the Sponsor for its services in rating Units of
the Trusts.
A Standard & Poor's rating (as described by Standard & Poor's) on the units of
an investment trust (hereinafter referred to collectively as "units" or "trust")
is a current assessment of creditworthiness with respect to the investments held
by such trust. This assessment takes into consideration the financial capacity
of the issuers and of any guarantors, insurers, lessees, or mortgagors with
respect to such investments. The assessment, however, does not take into account
the extent to which trust expenses or portfolio asset sales for less than the
trust's purchase price will reduce payment to the Unitholder of the interest and
principal required to be paid on the portfolio assets. In addition, the rating
is not a recommendation to purchase, sell, or hold units, inasmuch as the rating
does not comment as to market price of the units or suitability for a particular
investor. Trusts rated "AAA" are composed exclusively of assets that are rated
"AAA" by Standard & Poor's or have, in the opinion of Standard & Poor's, credit
characteristics comparable to assets rated "AAA," or certain short-term
investments. Standard & Poor's defines its "AAA" rating for such assets as the
highest rating assigned by Standard & Poor's to a debt obligation. Capacity to
pay interest and repay principal is very strong.
Securities in an Insured Corporate Portfolio for which insurance has been
obtained by the issuer or the Sponsor (all of which were rated "AAA" by Standard
& Poor's and/or "Aaa" by Moody's Investors Service, Inc. ("Moody's")) may or may
not have a higher yield than uninsured Securities rated "AAA" by Standard &
Poor's or "Aaa" by Moody's. In selecting Securities for an Insured Corporate
Portfolio, the Sponsor has applied the criteria hereinbefore described.
INSURANCE ON THE BONDS
All Bonds in an Insured Corporate Portfolio except for any U.S. Treasury
obligations are insured as to the scheduled payment of interest and principal
either by the issuer of the Bonds or by the Sponsor under a financial guaranty
insurance policy obtained from MBIA Insurance Corporation ("MBIA"). The premium
for each such insurance policy has been paid in advance by such issuer or the
Sponsor and each such policy is non-cancellable and will remain in force so long
as the Bonds are outstanding and MBIA remains in business. No premiums for such
insurance are paid by an Insured Corporate Portfolio. If MBIA is unable to meet
its obligations under its policy or if the rating assigned to the claims-paying
ability of MBIA deteriorates, no other insurer has any obligation to insure any
issue adversely affected by either of these events.
The aforementioned insurance guarantees the scheduled payment of principal and
interest on all of the Bonds in an Insured Corporate Portfolio except for any
U.S. Treasury obligations. It does not guarantee the market value of the Bonds
or the value of the Units of the Trust. This insurance is effective so long as
the Bond is outstanding, whether or not held by a Trust. Therefore, any such
insurance may be considered to represent an element of market value in regard to
the Bonds, but the exact effect, if any, of this insurance on such market value
cannot be predicted.
MBIA, formerly known as Municipal Bond Investors Insurance Corporation, is the
principal operating subsidiary of MBIA, Inc., a New York Stock Exchange listed
company. MBIA, Inc. is not obligated to pay the debts of or claims against MBIA.
MBIA is domiciled in the State of New York and licensed to do business in and
subject to regulation under the laws of all 50 states, the
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District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, the Virgin Islands of the United States and the
Territory of Guam. MBIA has two European branches, one in the Republic of France
and the other in the Kingdom of Spain. New York has laws prescribing minimum
capital requirements, limiting classes and concentrations of investments and
requiring the approval of policy rates and forms. State laws also regulate the
amount of both the aggregate and individual risks that may be insured. The
payment of dividends by the Insurer, changes in control and transactions among
affiliates. Additionally, the Insurer is required to maintain contingency
reserves on its liabilities in certain amounts and for certain periods of time.
As of December 31, 1996, MBIA had admitted assets of $4.4 billion (audited),
total liabilities of $3.0 billion (audited), and total capital and surplus of
$1.4 billion (audited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. Copies of
MBIA Corporation's financial statements prepared in accordance with statutory
accounting practices are available from MBIA Corporation. The address of MBIA
Corporation is 113 King Street, Armonk, New York 10504.
Moody's rates all bond issues insured by MBIA "Aaa" and short term loans "MIG
l," both designated to be of the highest quality. Standard & Poor's rates all
new issues by MBIA "AAA."
Because the Bonds in an Insured Corporate Portfolio (other than U.S. Treasury
Obligations) are insured as to the scheduled payment of principal and interest
and on the basis of the financial condition and the method of operation of MBIA,
Standard & Poor's has assigned to Units in an Insured Corporate Portfolio its
"AAA" investment rating. This is the highest rating assigned to securities by
such rating agency. These ratings should not be construed as an approval of the
offering of the Units by Standard & Poor's or as a guarantee of the market value
of a Trust or the Units thereof.
Bonds in a Trust for which insurance has been obtained by the issuer thereof or
by the Sponsor from MBIA (all of which were rated "Aaa" by Moody's) may or may
not have a higher yield than uninsured bonds rated "Aaa" by Moody's. In
selecting Bonds for the portfolio of a Trust, the Sponsor has applied the
criteria hereinbefore described.
RETIREMENT PLANS
Units of the Trusts may be suitable for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other qualified retirement plans.
Generally, capital gains and income received under each of the foregoing plans
are deferred from federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering placing an investment in a Trust on account of any such plan should
review specific tax laws related thereto and should consult their attorneys or
tax advisor. The Trusts will waive the $5,000 minimum investment requirement for
qualified retirement plans. The minimum investment is $250 for tax-deferred
plans such as IRA accounts. Fees and charges with respect to such plans may
vary. Consult your financial Adviser regarding eligibility requirements.
TAX STATUS
GRANTOR TRUST
The following discussion applies only to Investment Grade Series 3, Intermediate
Insured Corporate Portfolio and Investment Grade Series 4, Corporate Portfolio,
each of which are organized as grantor trusts for federal tax purposes. In
addition, it is assumed that the Securities are debt for federal income tax
purposes. In the opinion of Chapman and Cutler, special counsel for the Sponsor,
under existing law:
1. Each Trust is not an association taxable as a corporation for federal
income tax purposes.
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2. Each Unitholder will be considered the owner of a pro rata portion of
each of the Trust assets under Subpart E, Subchapter J of Chapter 1 of the
Internal Revenue Code of 1986 (the "Code"); and the income of the Trust
will be treated as income of the Unitholders. Each Unitholder will be
considered to have received his pro rata share of income derived from each
Trust asset when such income is considered to be received by a Trust. Each
Unitholder will also be required to include in taxable income for federal
income tax purposes, original issue discount with respect to his interest
in any Securities held by a Trust at the same time and in the same manner
as though the Unitholder were the direct owner of such interest.
3. Each Unitholder will have a taxable event when a Security is disposed of
(whether by sale, exchange, liquidation, redemption, or payment at
maturity) or when the Unitholder redeems or sells his Units. A Unitholder's
tax basis in his or her Units will equal his tax basis in his or her pro
rata portion of all the assets of the Trust. basis is determined (before
the adjustments described below) by apportioning the tax basis for the
Units among each of the Trust assets according to value as of the valuation
date nearest the date of acquisition of the Units. Unitholders must reduce
the tax basis of their Units for their share of accrued interest received,
if any, on Securities delivered after the date on which the Unitholders pay
for their Units to the extent that such interest accrued on such Securities
before the date the Unitholders pay for their Units to the extent that such
interest accrued on such Securities before the date the Trust acquired
ownership of the Securities (and the amount of this reduction may exceed
the amount of accrued interest paid to the sellers) and, consequently, such
Unitholders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon the sale or
redemption of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee disposes of
Securities (whether by sale, exchange, payment on maturity, redemption or
otherwise), any gain or loss is recognized to the Unitholder (subject to
various non-recognition provisions of the Code). The amount of any such
gain or loss is measured by comparing the Unitholder's pro rata share of
the total proceeds from such disposition with his basis for his fractional
interest in the asset disposed of. The basis of each Unit and of each
Security which was issued with original issue discount (or which has market
discount) must be increased by the amount of accrued original issue
discount (and market discount, if the Unitholder elects to include market
discount in income as it accrues) and the basis of each Unit and of each
Security which was purchased by a Trust at a premium must be reduced by the
annual amortization of bond premium which the Unitholder has properly
elected to amortize under Section 171 of the Code. The tax basis reduction
requirements of the Code relating to amortization of bond premium may,
under some circumstances, result in the Unitholder realizing a taxable gain
when his Units are sold or redeemed for an amount equal to or less than his
original cost. Original issue discount is effectively treated as interest
for federal income tax purposes, and the amount of original issue discount
in this case is generally the difference between the Security's purchase
price and its stated redemption price at maturity. A Unitholder will be
required to include in gross income for each taxable year the sum of his
daily portions of original issue discount attributable to the Securities
held by a Trust as such original issue discount accrues for such year even
though the income is not distributed to the Unitholders during such year
unless a Securities original issue discount is less than a de minimis
amount as determined under Treasury Regulations. To the extent that the
amount of such discount is less than the respective de minimis amount, such
discount shall be treated as zero. In general, original issue discount
accrues daily under a constant interest rate method which takes into
account the semi-annual compounding of accrued interest. Unitholders should
consult their advisors regarding the federal income tax consequences and
accretion of original issue discount.
Limitations on Deductibility of Trust Expenses by Unitholders. Each Unitholder's
pro rata share of each expense paid by a Trust is deductible by the Unitholder
to the same extent as though the expense had been paid directly by him. It
should be noted as a result of the Tax Reform Act of 1986 certain miscellaneous
itemized deductions, such as investment expenses, tax return preparation fees
and employee business expenses may be deductible by an individual only to the
extent they exceed 2% of such
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individual's adjusted gross income (similar limitations also apply to estates
and trusts). Unitholders may be required to treat some or all of the expenses
paid by a Trust as miscellaneous itemized deductions subject to this limitation.
Premium. If a Unitholder's tax basis of his pro rata portion in any Securities
held by a Trust exceeds the amount payable by the issuer of the Security with
respect to such pro rata interest upon the maturity of the Security, such excess
would be considered "premium" which may be amortized by the Unitholder at the
Unitholder's election as provided in Section 171 of the Code. Unitholders should
consult with their tax advisors regarding whether such election should be made
and the manner of amortizing premium.
Original Issue Discount. Certain of the Securities in a Trust may have been
acquired with "original issue discount." In the case of any Securities in a
Trust acquired with "original issue discount" that exceeds a "de minimis" amount
as specified in the Code, such discount is includable in taxable income of the
Unitholders on an accrual basis computed daily, without regard to when payments
of interest on such Securities are received. The Code provides a complex set of
rules regarding the accrual of original issue discount. These rules provide that
original issue discount generally accrues on the basis of a constant compound
interest rate over the term of the Securities. Unitholders should consult their
tax advisers as to the amount of original issue discount which accrues.
Special original issue discount rules apply if the purchase price of the
Security by a Trust exceeds its original issue price plus the amount of original
issue discount which would have previously accrued based upon its issue price
(its "adjusted issue price"). Similarly, these special rules would apply to a
Unitholder if the tax basis of his pro rata portion of a Security issued with
original issue discount exceeds his pro rata portion of its adjusted issue
price. Unitholders should also consult their tax advisers regarding these
special rules.
It is possible that a Corporate Bond that has been issued at an original issue
discount may be characterized as a "high-yield discount obligation" within the
meaning of Section 163(e)(5) of the Code. To the extent that such an obligation
is issued at a yield in excess of six percentage points over the applicable
Federal rate, a portion of the original issue discount on such obligations will
be characterized as a distribution of stock (e.g., dividends) for purposes of
the dividends received deduction which is available to certain corporations with
respect to certain dividends received by such corporation.
Market Discount. If a Unitholder's tax basis in his pro rata portion of
Securities is less than the allocable portion of such Security's stated
redemption price at maturity (or, if issued with original issue discount, the
allocable portion of its "revised issue price"), such difference will constitute
market discount unless the amount of market discount is "de minimis" as
specified in the Code. Market discount accrues daily computed on a straight line
basis, unless the Unitholder elects to calculate accrued market discount under a
constant yield method. Unitholders should consult their own tax advisers
regarding whether an election should be made and as to the amount of market
discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on the Securities, on the sale, maturity or
disposition of such Securities by a Trust, and on the sale by a Unitholder of
Units, unless a Unitholder elects to include the accrued market discount in
taxable income as such discount accrues. If a Unitholder does not elect to
annually include accrued market discount in taxable income as it accrues,
deductions for any interest expense incurred by the Unitholder which is incurred
to purchase or carry his Units will be reduced by such accrued market discount.
In general, the portion of any interest expense which would ultimately be
deductible when the accrued market discount is included in income. Unitholders
should consult their tax advisors regarding whether an election should be made
to include market discount in income as it accrues and as to the amount of
interest expense which may not be currently deductible.
Computation of the Unitholder's Tax Basis. The tax basis of a Unitholder with
respect to his interest in a Security is increased by the amount of original
issue discount (and market discount, if the Unitholder elects to include market
discount, if any, on the
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Securities held by a Trust in income as it accrues) thereon properly included in
the Unitholder's gross income as determined for Federal income tax purposes and
reduced by the amount of any amortized premium which the Unitholder has properly
elected to amortize under Section 171 of the Code. A Unitholder's tax basis in
his Units will equal his tax basis in his pro rata portion of all of the assets
of a Trust.
Recognition of Taxable Gain or Loss Upon Disposition of Obligations by a Trust
or Disposition of Unit. A Unitholder will recognize taxable capital gain (or
loss) when all or part of his pro rata interest in a Security is disposed of in
a taxable transaction for an amount greater (or less) than his tax basis
therefor. As previously discussed, gain realized on the disposition of the
interest of a Unitholder in any Security deemed to have been acquired with
market discount will be treated as ordinary income to the extent the gain does
not exceed the amount of accrued market discount not previously taken into
income. Any capital gain or loss arising from the disposition of a Security by a
Trust or the disposition of Units by a Unitholder will be short-term capital
gain (or loss) unless the Unitholder has held his Units for more than one year
in which case such capital gain or loss will generally be long-term. 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 marginal stated tax rate of 28 percent. However, it should
be noted that legislative proposals are introduced from time to time that affect
tax rates and could affect relative differences at which ordinary income and
capital gains are taxed. The tax basis reduction requirements of the Code
relating to amortization of bond premium may under some circumstances, result in
the Unitholder's realizing taxable gain when his Units are sold or redeemed for
an amount equal to or less than his original cost. If the Unitholder disposes of
a Unit, he is deemed thereby to have disposed of his entire pro rata interest in
all Trust assets including his pro rata portion of all of the Securities
represented by the Unit. This may result in a portion of the gain, if any, on
such sale being taxable as ordinary income under the market discount rules
(assuming no election was made by the Unitholder to include market discount in
income as it accrues) as previously discussed.
The Revenue Reconciliation Act of 1993 (the "Tax Act") raised tax rates on
ordinary income while capital gains remain subject to a 28 percent maximum
stated rate for taxpayers other than corporations. Because some or all capital
gains are taxed at a comparatively lower rate under the Tax Act, the Tax Act
includes a provision that characterizes capital gains as ordinary income in the
case of certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993. Unitholders and
prospective investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
If the Unitholder disposes of a Unit, he is deemed thereby to have disposed of
his entire pro rata interest in all Trust assets including his pro rata portion
of all of the Securities represented by the Unit. This may result in a portion
of the gain, if any, on such sale being taxable as ordinary income under the
market discount rules (assuming no election was made by the Unitholder to
include market discount in income as its accrues) as previously discussed.
Foreign Investors. A Unitholder who is a foreign investor (i.e., an investor
other than a U.S. citizen or resident of a U.S. corporation, partnership, estate
or trust) will not be subject to United States federal income taxes, including
withholding taxes, on interest income (including any original issue discount)
on, or any gain from the sale or other disposition of, his pro rata interest in
any Security or the sale of his Units provided that all of the following
conditions are met: (i) the interest income or gain is not effectively connected
with the conduct by the foreign investor of a trade or business within the
United States, (ii) with respect to any gain, the foreign investor (if an
individual) is not present in the United States for 183 days or more during his
taxable year, (iii) the foreign investor provides all certification which may be
required of his or her status (foreign investors may contact the Sponsor to
obtain a Form W-8 which must be filed with the Trustee and refiled every three
calendar years thereafter) and (iv) if the interest is United States source
income (which is the case for most securities issued by United States issuers),
the Security is issued after July 18, 1984, the foreign investor does not own,
directly or indirectly, 10% or more of the total combined voting power of all
classes of voting stock of the issuer of the Security and the foreign investor
is not a controlled
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foreign corporation related (within the meaning of Section 864(d)(4) of the
Code) to the issuer of the Security. Foreign investors should consult their tax
advisers with respect to United States tax consequences of ownership of Units.
It should be noted that the Tax Act includes a provision which eliminates the
exemption from United States taxation, including withholding taxes, for certain
"contingent interest." The provision applies to interest received after December
31, 1993. No opinion is expressed herein regarding the potential applicability
of this provision and whether United States taxation or withholding taxes could
be imposed with respect to income derived from the Units as a result thereof.
Unitholders and prospective investors should consult with their tax advisers
regarding the potential effect of this provision on their investment in Units.
In the opinion of Carter, Ledyard & Milburn, special counsel to the Trusts for
New York tax matters each Trust is not an association taxable as a corporation
and the income of each Trust will be treated as the income of the Unitholders
under the existing income tax laws of the State and City of New York.
General. Each Unitholder (other than a foreign investor who has properly
provided the certifications described above) will be requested to provide the
Unitholder's taxpayer identification number to the Trustee and to certify that
the Unitholder has not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by a
Trust to such Unitholder (including amounts received upon the redemption of the
Units) will be subject to back-up withholding.
The foregoing discussion relates only to United States federal income taxes and
applies only to the Investment Grade Series which are described in this
Prospectus; Unitholders may be subject to foreign, state and local taxation in
other jurisdictions (including a foreign investor's country of residence).
Unitholders should consult their tax advisers regarding potential state, local,
or foreign taxation with respect to the Units.
Because each Trust receives interest and makes monthly distributions based upon
each respective Trust's expected total collections of interest and anticipated
expenses, certain tax reporting consequences may arise. Each Trust is required
to report Unitholder information to the Internal Revenue Service ("IRS"), based
upon the actual collection of interest by such Trust on the Securities in such
Trust, without regard to such Trust's expenses or to such Trust's payments to
Unitholders during the year. If distributions to Unitholders exceed interest
collected, the difference will be reported as a return of principal which will
reduce a Unitholder's cost basis in his or her Units (and his or her pro rata
interest in the Securities in the Trust). A Unitholder must include in taxable
income the amount of income reported by such Trust to the IRS regardless of the
amount distributed to such Unitholder. If a Unitholder's share of taxable income
exceeds income distributions made by a Trust to such Unitholder, such excess is
in all likelihood attributable to the payment of miscellaneous expenses of such
Trust which will not be deductible by an individual Unitholder as an itemized
deduction except, as discussed above, to the extent that the total amount of
certain itemized deductions such as investment expenses (which would include the
Unitholder's share of Trust expenses), tax return preparation fees and employee
business expenses, exceeds 2% of such Unitholder's adjusted gross income.
Alternatively, in certain cases, such excess may represent an increase in the
Unitholder's tax basis in the Units owned. Investors with questions regarding
these issues should consult with their tax advisors.
Regulated Investment Company
The following discussion applies only to the Rolling Government Series, which is
structured to qualify as a regulated investment company for federal tax
purposes. In the opinion of Chapman and Cutler, counsel or the Sponsor, under
existing law:
The Rolling Government Series Trust is an association taxable as a corporation
under the Code and intends to qualify on a continuing basis for and elect tax
treatment as a "regulated investment company" under the Code. If the Trust so
qualifies and timely distributes to Unitholders 90% or more of its taxable
income (without regard to its net capital gain, i.e., the excess of its
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net long-term capital gain over its net short-term capital loss), it will not be
subject to federal income tax on the portion of its taxable income (including
any net capital gain) that it distributes to Unitholders. In addition, to the
extent the Trust timely distributes to Unitholders at least 98% of its taxable
income (including any net capital gain), it will not be subject to the 4% excise
tax on certain undistributed income of "regulated investment companies." The
Trust intends to timely distribute its taxable income (including any net capital
gain) to avoid the imposition of federal income tax or the excise tax.
Distributions of the entire net investment income of the Trust is required by
the Indenture.
The Trust intends to file its Federal income tax returns on a calendar year
basis. In any taxable year of a Trust, the distributions from the Trust, other
than distributions which are designated as capital gain dividends, will, to the
extent of the earnings and profits of such Trust, constitute dividends for
federal income tax purposes which are taxable as ordinary income to Unitholders.
To the extent that distributions to a Unitholder in any year exceed the Trust's
current and accumulated earnings and profits, they will be treated as a return
of capital and will reduce the Unitholder's basis in his or her Units and, to
the extent that they exceed his or her basis, will be treated as a gain from the
sale of his or her Units as discussed below. Distributions from the Trust will
not be eligible for the 70% dividends received deduction for corporations.
Although distributions generally will be treated as distributed when paid,
distributions declared in October, November or December, payable to Unitholders
of record on a specified date in one of those months and paid during January of
the following year will be treated as having been distributed by the Trust (and
received by the Unitholders) on December 31 of the year such distributions are
declared.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Trust as long as the Units
of such Trust are held by or for 500 or more persons at all times during the
taxable year or another exception is met. In the event the Units of the Trust
are held by fewer than 500 persons, additional taxable income may be realized by
the individual (and other noncorporate) Unitholders in excess of the
distributions received from the Trust.
Distributions of the Trust's net capital gain which the Trust properly
designates as capital gain dividends will be taxable to Unitholders thereof as
long-term capital gains, regardless of the length of time the Units have been
held by a Unitholder. However, if a Unitholder receives a long-term capital gain
dividend (or is allocated a portion of a Trust's undistributed long-term capital
gain) and sells his or her Units at a loss prior to holding them for 6 months,
such loss will be recharacterized as long-term capital loss to the extent of
such long-term capital gain received as a dividend or allocated to a Unitholder.
Distributions in partial liquidation, reflecting the proceeds of prepayments,
redemptions, maturities or sales of Securities from the Trust (exclusive of net
capital gain) will not be taxable to Unitholders of such Trust to the extent
that they represent a return of capital for tax purposes. The portion of
distributions which represents a return of capital will, however, reduce a
Unitholder's basis in his Units, and to the extent they exceed the basis of his
Units will be taxable as a capital gain. A Unitholder may recognize a taxable
gain (or loss) when his or her Units are sold or redeemed. Such gain or loss
generally will constitute either a long-term or short-term capital gain or loss
depending upon the length of time the Unitholder has held his Units. Any loss of
Units held six months or less will be treated as long-term capital loss to the
extent of any long-term capital gains dividends received (or deemed to have been
received) by the Unitholder with respect to such Units during the six month
period or less that the Unitholder owns the Units. For taxpayers other than
corporations, net capital gains are presently subject to a maximum stated
marginal rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. A capital loss
is long-term if the asset is held for more than one year and short-term if held
for one year or less.
The Tax Act raised tax rates on ordinary income while capital gains remain
subject to a 28% maximum stated rate for taxpayers other than corporations.
Because some or all capital gains are taxed at a comparatively lower rate under
the Tax Act, the Tax Act includes a provision that recharacterizes capital gains
as ordinary income in the case of certain financial transactions that
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are "conversion transactions" effective for transactions entered into after
April 30, 1993. Unitholders and prospective investors should consult with their
tax advisors regarding the potential effect of this provision on their
investment in Units.
If a Security has been purchased by the Trust at a market discount (i.e., for a
purchase price less than its stated redemption price at maturity (or if issued
with original issue discount, its "revised issue price")) unless the amount of
market discount is "de minimis" as specified in the Code, each payment of
principal on the Security will generally constitute ordinary income to the Trust
to the extent of any accrued market discount unless the Trust elects to include
the accrued market discount in taxable income as it accrues. The amount of
market discount that is deemed to accrue each month shall generally be the
amount of discount that bears the same ratio to the total amount of remaining
market discount that the amount of interest paid during the accrual period (each
month) bears to the total amount of interest remaining on the Security as of the
beginning of the accrual period.
Additional Units of the Trust may be issued after the Initial Date of Deposit in
respect of additional Securities deposited in the Trust by the Sponsor. Because
of possible market interest rate fluctuations, the purchase price to the Trust
of the additional Securities may differ from the purchase price of the
Securities in the Trust on the Initial Date of Deposit. If interest rates
decline and such additional Securities are purchased at a higher price than the
Securities originally deposited, then the amounts includable in the taxable
income of the Trust in proportion to the asset value of the Trust will be
reduced for all Unitholders thereof, not just the Unitholders of such additional
Units. Conversely, if interest rates rise and such additional Securities are
purchased at a lower price than the Securities originally deposited, then the
amounts includable in the taxable income of the Trust in proportion to the asset
value of the Trust will be increased for all Unitholders thereof, not just the
Unitholders of such additional Units.
Each Unitholder will be requested to provide the Unitholder's taxpayer
identification number to the Trustee and to certify that the Unitholder has not
been notified that payments to the Unitholder are subject to back-up
withholding. If the proper taxpayer identification number and appropriate
certification are not provided when requested, distributions by the Trust to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding.
Each Unitholder of the Trust shall receive an annual statement describing the
tax status of the distributions paid by the Trust. The forgoing discussion
relates only to the federal income tax status of the Trust and to the tax
treatment of distributions by the Trust to United States Unitholders.
Foreign Investors. A Unitholder who is a foreign investor (i.e., an investor
other than a United States citizen or resident or a United States corporation,
partnership, estate or trust) should be aware that, generally, subject to
applicable tax treaties, distributions from the Trust, which constitute
dividends for Federal income tax purposes (other than dividends which the Trust
designates as capital gain dividends) will be subject to United States income
taxes, including withholding taxes. However, distributions received by a foreign
investor from the Trust that are designated by the Trust as capital gain
dividends should not be subject to United States Federal income taxes, including
withholding taxes, if all of the following conditions are met: (i) the capital
gain dividend is not effectively connected with the conduct by the foreign
investor in a trade or business within the United States, (ii) the foreign
investor (if an individual) is not present in the United States for 183 days or
more during his or her taxable year, and (iii) the foreign investor provides all
certification which may be required of his status (foreign investors may contact
the Sponsor to obtain a Form W-8 which must be filed with the Trustee and
refiled every three calendar years thereafter). Foreign investors should consult
their tax advisors with respect to United States tax consequences of ownership
of Units. Units in the Trust and Trust distributions may also be subject to
state and local taxation and Unitholders should consult their tax advisors in
this regard.
Distributions reinvested into additional Units of the Trust will be taxed to a
Unitholder in the manner described above (i.e., as ordinary income, long-term
capital gain or as a return of capital).
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<PAGE> 40
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 "Trust Information -- Unitholders -- Distributions to
Unitholders."
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Long-Term Return and the Estimated Current Return, if applicable, for each Trust
were as set forth in the "Essential Information." Estimated Current Return is
calculated by dividing the estimated net annual interest income per Unit by the
Public Offering Price. The estimated net annual interest income per Unit will
vary with changes in fees and expenses of the Trustee, the Sponsor and the
Evaluator and with principal/prepayment and reinvestment (in the case of the
Rolling Government Series), redemption (in the case of an Investment Grade
Series), maturity, exchange or sale of the Securities while the Public Offering
Price will vary with changes in the offering price of the underlying Securities
and accrued interest; therefore, there is no assurance that the present
Estimated Current Return will be realized in the future. Estimated Long-Term
Return is calculated using a formula which (i) considers the relative weighting,
the market values, yields (which take into account the amortization of premiums
and the accretion of discounts) and estimated retirements or average life of all
of the Securities in a Trust, and (ii) takes into account a compounding factor
and the expenses and sales charge associated with each Trust Unit. Since the
market values and estimated retirements of the Securities and the expenses of a
Trust will change, there is no assurance that the present Estimated Long-Term
Return will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of Estimated
Long-Term Return reflects the estimated date and amount of principal returned
while Estimated Current Return calculations include only net annual interest
income and Public Offering Price.
In order to acquire certain of the Securities contracted for by a Trust, it may
be necessary for the Sponsor or Trustee to pay on the dates for delivery of such
Securities amounts covering accrued interest on such Securities which exceed the
amount which will be made available in the letter of credit furnished by the
Sponsor on the Initial Date of Deposit. The Trustee has agreed to pay any
amounts necessary to cover any such excess and will be reimbursed therefor,
without interest, when funds become available from interest payments on the
Securities deposited in that Trust.
Payments received in respect of mortgages underlying Ginnie Maes in the GNMA
Portfolio will consist of a portion representing interest and a portion
representing principal. Although the aggregate monthly payment made by the
obligor on each mortgage remains constant (aside from optional prepayments of
principal), in the early years most of each such payment will represent
interest, while in later years, the proportion representing interest will
decline and the proportion representing principal will
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<PAGE> 41
increase. However, by reason of optional prepayments, principal payments in the
earlier years on mortgages underlying Ginnie Maes may be substantially in excess
of those required by the amortization schedules of such mortgages. Therefore,
principal payments in later years may be substantially less since the aggregate
unpaid principal balances of such underlying mortgages may have been greatly
reduced. To the extent that the underlying mortgages bearing higher interest
rates in the GNMA Portfolio are prepaid faster than the other underlying
mortgages, the net annual interest rate per Unit and the Estimated Current
Return on the Units of the GNMA Portfolio can be expected to decline. Monthly
payments to the Unitholders of the GNMA Portfolio will reflect all of these
factors.
PUBLIC OFFERING OF UNITS
Public Offering Price. Units of a Trust are offered at the Public Offering Price
thereof. During the initial offering period, the Public Offering Price per Unit
is equal to the aggregate of the offering side evaluations of the Securities in
a Trust, plus or minus a pro rata share of cash, if any, in the Principal
Account held or owned by such Trust plus accrued interest and an initial sales
charge with respect to each Trust equal to the difference between the maximum
sales charge for each Trust (as set forth in the table below) and the maximum
remaining deferred sales charge (initially $.167 per 100 Units for each Trust)
divided by the number of outstanding Units of such Trust. Commencing in January
of 1998 and monthly on each Trust's respective Record Date, through December of
2000, a deferred sales charge of $.167 will be assessed per Unit per month.
Units purchased subsequent to the initial deferred sales charge payment will
also be subject to the initial sales charge and the remaining deferred sales
charge payments. For each Trust, the deferred sales charge will be paid from
funds in the Principal Account, if sufficient, or from the periodic sale of
Securities. The total maximum sales charge assessed to Unitholders on a per Unit
basis is set forth in the table below. The Public Offering Price for secondary
market transactions, on the other hand, is based on the aggregate bid side
evaluations of the Securities in a Trust, plus or minus cash, if any, in the
Principal Account held or owned by such Trust, plus accrued interest and only an
initial sales charge based upon the dollar weighted average maturity of such
Trust.
The applicable sales charge per Unit for each Trust will be as set forth in the
following table:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AMOUNT INVESTED OFFERING PRICE NET AMOUNT INVESTED
- --------------------------------------------------------------------------- --------------- --------------------
<S> <C> <C>
Less than $100,000......................................................... 4.101% 4.276%
$100,000 to $249,999....................................................... 3.851% 4.005%
$250,000 to $499,999....................................................... 3.601% 3.736%
$500,000 to $999,999....................................................... 3.351% 3.467%
$1,000,000 and up.......................................................... 3.101% 3.200%
</TABLE>
As indicated above, in connection with secondary market transactions the sales
charge is based upon the dollar weighted average maturity of a Trust and is
determined in accordance with the tables set forth below. For purposes of this
computation, Securities will be deemed to mature on their expressed maturity
dates unless: (a) the Securities have been called for redemption or funds or
securities have been placed in escrow to redeem them on an earlier call date, in
which case such call date will be deemed to be the date upon which they mature;
or (b) such Securities are subject to a "mandatory tender," in which case such
mandatory tender will be deemed to be the date upon which they mature. The
effect of this method of sales charge computation will be that different sales
charge rates will be applied to a Trust based upon the dollar weighted average
maturity of such Trust's portfolio, in accordance with the following schedules.
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<PAGE> 42
In connection with secondary market transactions, the sales charge per Unit for
each Trust will be set forth in the following table:
<TABLE>
<CAPTION>
DOLLAR WEIGHTED AVERAGE DOLLAR WEIGHTED AVERAGE
MATURITY LESS THAN 5 YEARS MATURITY GREATER THAN 5 YEARS
----------------------------------------- -----------------------------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
AMOUNT INVESTED OFFERING PRICE* NET AMOUNT INVESTED* OFFERING PRICE* NET AMOUNT INVESTED*
- --------------------------- ---------------- --------------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
Less than $100,000......... 2.500% 2.564% 3.500% 4.276%
$100,000 to $249,999....... 2.250% 2.302% 3.250% 4.005%
$250,000 to $499,999....... 2.000% 2.041% 3.000% 3.736%
$500,000 to $999,999....... 1.750% 1.781% 2.750% 3.467%
$1,000,000 and up.......... 1.500% 1.523% 2.500% 3.200%
</TABLE>
- ---------------
* In addition, a deferred sales load of approximately .601% may be applicable.
The reduced sales charges resulting from quantity discounts as shown on the
tables above will apply to all purchases of Units on any one day by the same
purchaser from the same broker or dealer and for this purpose purchases of Units
of a Trust will be aggregated with concurrent purchases of Units of any other
unit investment trust that may be offered by the Sponsor. Additionally, Units
purchased in the name of a spouse or child (under 21) of such purchaser will be
deemed to be additional purchases by such purchaser. The reduced sales charges
will also be applicable to a trust or other fiduciary purchasing for a single
trust estate or single fiduciary account. The Sponsor intends to permit
officers, directors and employees of the Sponsor and at the discretion of the
Sponsor registered representatives of selling firms to purchase Units of a Trust
without a sales charge, although a transaction processing fee may be imposed on
such trades. In addition, investors who purchase Units through registered
brokers or dealers who charge periodic fees for financial planning, investment
advisory or asset management services, or provide such services in connection
with the establishment of an investment account for which a comprehensive "wrap
fee" charge is imposed may purchase Units in the primary market, subject only to
the deferred portion of the sales charge, or during the secondary market at the
Public Offering Price less the concession the Sponsor typically would allow such
broker-dealer. See "Trust Information -- Public Offering of Units -- Public
Distribution of Units" below. In addition, investors who purchase Units of a
Trust for deposit in a Fidelity sponsored 401k or other retirement plan may
purchase such Units subject only to the deferred portion of the sales charge.
Had Units of a Trust been available for sale at the opening of business on the
Initial Date of Deposit, the Public Offering Price would have been as shown
under "Essential Information." The Public Offering Price per Unit of a Trust on
the date of this Prospectus or on any subsequent date will vary from the amount
stated under "Essential Information" in accordance with fluctuations in the
prices of the underlying Securities and the amount of accrued interest on the
Units. The aggregate bid and offering side evaluations of the Securities shall
be determined: (i) on the basis of current bid or offering prices of the
Securities, (ii) if bid or offering prices are not available for any particular
Security, on the basis of current bid or offering prices for comparable bonds,
(iii) by determining the value of Securities on the bid or offer side of the
market by appraisal, or (iv) by any combination of the above.
The foregoing evaluations and computations shall be made as of the evaluation
time stated under "Essential Information," on each business day commencing with
the Initial Date of Deposit of the Securities, effective for all sales made
during the preceding 24-hour period.
The interest on the Securities deposited in a Trust, less the related estimated
fees and expenses, is estimated to accrue in the annual amounts per Unit set
forth under "Essential Information." The amount of net interest income which
accrues per Unit
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<PAGE> 43
may change as Securities mature or are redeemed, exchanged or sold, or as the
expenses of a Trust change or the number of outstanding Units of a Trust
changes.
Although payment is normally made three business days following the order for
purchase (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 may be used on the Sponsor's business and
may be deemed to be a benefit to the Sponsor, subject to the limitations of the
Securities Exchange Act of 1934.
Accrued Interest. Accrued interest is the accumulation of unpaid interest on a
security from the last day on which interest thereon was paid. Interest on
Securities generally is paid semi-annually (monthly in the case of Ginnie Maes),
although a Trust accrues such interest daily. Because of this, a Trust always
has an amount of interest earned but not yet collected by the Trustee. For this
reason, with respect to sales settling subsequent to the First Settlement Date,
the Public Offering Price of Units will have added to it the proportionate share
of accrued interest to the date of settlement. Unitholders will receive on the
next distribution date of a Trust the amount, if any, of accrued interest paid
on their Units.
In an effort to reduce the amount of accrued interest which would otherwise have
to be paid in addition to the Public Offering Price in the sale of Units to the
public, the Trustee will advance the amount of accrued interest as of the First
Settlement Date and the same will be distributed to the Sponsor as the
Unitholder of record as of the First Settlement Date. Consequently, the amount
of accrued interest to be added to the Public Offering Price of Units will
include only accrued interest from the First Settlement Date to the date of
settlement, less any distributions from the Interest Account subsequent to the
First Settlement Date.
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by the Trusts and distributed to Unitholders. Therefore, there
will always remain an item of accrued interest that is added to the value of the
Units. If a Unitholder sells or redeems all or a portion of his Units, he will
be entitled to receive his proportionate share of the accrued interest from the
purchaser of his Units. Since the Trustee has the use of the funds held in the
Interest Account for distributions to Unitholders and since such Account is
non-interest-bearing to Unitholders, the Trustee benefits thereby.
Comparison of Public Offering Price and Redemption Price. While the Initial
Public Offering Price of Units will be determined on the basis of the current
offering prices of the Securities in a Trust, the redemption price per Unit (see
"Trust Information - Redemption") will be determined on the basis of the current
bid prices of the Securities. As of the opening of business on the Initial Date
of Deposit, the Public Offering Price per Unit (based on the offering prices of
the Securities in a Trust and including the sales charge) exceeded the
redemption price at which Units could have been redeemed (based upon the current
bid prices of the Securities in a Trust) by the amount shown under "Essential
Information." In the past, bid prices on securities similar to those in the
Trusts have been lower than the offering prices thereof by as much as 1% or more
of principal amount in the case of inactively traded bonds or as little as 1/8
to 1/4 of 1% in the case of actively traded bonds, but the difference between
such offering and bid prices may be expected to average approximately 1/2 of 1%
of principal amount. For this reason, among others (including fluctuations in
the market prices of the Securities and the fact that the Public Offering Price
includes a sales charge), the amount realized by a Unitholder upon any
redemption of Units may be less than the price paid for such Units.
Public Distribution of Units. The Sponsor intends to qualify the Units for sale
in a number of states. Units will be sold through dealers who are members of the
National Association of Securities Dealers, Inc. and through others. Sales may
be made to or through dealers and others at prices which represent discounts or
agency commissions from the Public Offering Price as set forth below. Certain
commercial banks are making Units of the Trusts available to their customers on
an agency basis. A portion of the sales charge paid by their customers is
retained by or remitted to the banks in the amount shown in the tables below.
Under
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<PAGE> 44
the Glass-Steagall Act, banks are prohibited from underwriting Trust Units;
however, the Glass-Steagall Act does permit certain agency transactions and the
banking regulators have indicated that these particular agency transactions are
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law. The Sponsor reserves the right to change the discounts and agency
commissions set forth below from time to time. In addition to such discounts and
agency commissions, the Sponsor may, from time to time, pay or allow an
additional discount or agency commission, in the form of cash or other
compensation, to dealers and others employing registered representatives who
sell, during a specified time period, a minimum dollar amount of Units of a
Trust and other unit investment trusts created by the Sponsor. From time to time
the Sponsor, pursuant to objective criteria which it has established, may pay
fees to qualifying dealers, banks or others for certain services or activities
which are primarily intended to result in sales of Units of a Trust. The
difference between the discount or agency commission and the sales charge will
be retained by the Sponsor.
The primary and secondary market concessions and agency commissions for each
Trust are as follows:
<TABLE>
<CAPTION>
PRIMARY MARKET
---------------
SECONDARY MARKET
----------------------------------------------------------
DOLLAR WEIGHTED AVERAGE DOLLAR WEIGHTED AVERAGE
MATURITY LESS THAN 5 YEARS MATURITY GREATER THAN 5 YEARS
-------------------------- -----------------------------
<S> <C> <C> <C>
Less than $100,000 3.000% 1.750% 3.000%
$100,000 to $249,999 2.750% 1.500% 2.750%
$250,000 to $499,999 2.600% 1.350% 2.600%
$500,000 to $999,999 2.400% 1.150% 2.400%
$1,000,000 and up 2.200% 0.950% 2.200%
</TABLE>
- ---------------
* In addition, a deferred sales load of approximately .601% may be applicable.
The Sponsor reserves the right to reject, in whole or in part, any order for the
purchase of Units.
From time to time the Sponsor may implement programs under which dealers of a
Trust may receive nominal awards from the Sponsor for each of their registered
representatives who have sold a minimum number of unit investment trust units
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales force of a dealer may be eligible
to win other nominal awards for certain sales efforts, or under which the
Sponsor will reallow to any such dealer that sponsors sales 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 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.
Profits of Sponsor. In addition to receiving the difference between the gross
sales charge on Units of a Trust and the applicable dealer concessions, the
Sponsor may also realize a profit or a loss resulting from the difference
between the purchase prices of the Securities to the Sponsor and the cost of
such Securities to a Trust, which is based on the offering side evaluation of
the Securities. See "Portfolio" for each Trust. The Sponsor may also realize
profits or losses with respect to Securities deposited in a Trust which were
acquired from underwriting syndicates of which the Sponsor was a member. An
underwriter or underwriting syndicate purchases securities from the issuer on a
negotiated or competitive bid basis, as principal, with the motive of
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<PAGE> 45
marketing such securities to investors at a profit. The Sponsor may realize
additional profits or losses during the initial offering period on unsold Units
as a result of changes in the daily evaluation of the Securities in a Trust.
MARKET FOR UNITS
You can sell your Units at any time without a fee. While not obligated to do so,
the Sponsor intends to, and certain of the dealers may, maintain a market for
Units of the Trusts offered hereby and buy any Units offered for sale at prices,
based on the aggregate bid prices of the underlying Securities in such Trusts,
together with accrued interest to the expected dates of settlement. To the
extent that a market is maintained during the initial offering period, the
prices at which Units will be repurchased will be based upon the aggregate
offering side evaluation of the Securities in the Trusts. Accordingly,
Unitholders who wish to dispose of their Units should inquire of their bank or
broker as to current market prices in order to determine whether there is in
existence any price in excess of the Redemption Price and, if so, the amount
thereof. The Sponsor may suspend or discontinue purchases of Units of any Trust
if the supply of Units exceeds demand, or for other business reasons. Units sold
or tendered for redemption prior to such time as the entire deferred sales
charge on such Units has been collected will be assessed the amount of the
remaining deferred sales charge at the time of sale or redemption.
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. Units tendered for redemption prior to such time as the entire
deferred sales charge on such Units has been collected will be assessed the
amount of the remaining deferred sales charge at the time of redemption.
On the third business day following the day on which a tender for redemption is
received (the "Redemption Date") the Trustee shall make a payment of cash to the
redeeming Unitholder equivalent to the Redemption Price for such Trust,
determined as set forth below under "Computation of Redemption Price,"
multiplied by the number of Units being redeemed. Any Units redeemed shall be
cancelled and any undivided fractional interest in the Trust extinguished. The
price received upon redemption might be more or less than the amount paid by the
Unitholder depending on the value of the Securities in the Trust at the time of
redemption.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a certain percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the Unitholder only when filing a tax return. Under normal circumstances the
Trustee obtains the Unitholder's tax identification number from the selling
broker. However, any time a Unitholder elects to tender Units for redemption,
such Unitholder should make sure that the Trustee has been provided a certified
tax identification number in order to avoid this possible "back-up withholding."
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<PAGE> 46
Any amounts paid on redemption representing interest shall be withdrawn from the
Interest Account for such Trust, to the extent that funds are available then
from the Principal Account. All other amounts paid on redemption shall be
withdrawn from the Principal Account for such Trust. The Trustee is empowered to
sell Securities for a Trust in order to make funds available for the redemption
of Units of such Trust. Such sale may be required when Securities would not
otherwise be sold and might result in lower prices than might otherwise be
realized. To the extent Securities are sold, the size and diversity of a Trust
will be reduced.
Securities will be sold by the Trustee so as to maintain, as closely as
practicable, the original percentage relationship between the principal amounts
of the Securities in such Trusts. The Securities to be sold for purposes of
redeeming Units will be selected from a list supplied by the Sponsor. The
Securities will be chosen for this list by the Sponsor on the basis of such
market and credit factors as it may determine are in the best interests of such
Trusts. Provision is made under the related Trust Agreements for the Sponsor to
specify minimum face amounts in which blocks of Securities are to be sold in
order to obtain the best price available. Due to the minimum principal amount in
which certain securities may be required to be sold, the proceeds of such sales
may exceed the amount necessary for payment of Units redeemed. To the extent not
used to meet other redemption requests in such Trusts, such excess proceeds will
be distributed pro rata to all remaining Unitholders of record of such Trusts,
unless reinvested in substitute Securities. See "Trust Information -- Investment
Supervision."
If the Sponsor elects not to purchase Units tendered for redemption, the Trustee
is irrevocably authorized in its discretion, in lieu of redeeming such Units, to
sell such Units in the over-the-counter market for the account of tendering
Unitholders at prices which will return to the Unitholders amounts in cash, net
after brokerage commissions, transfer taxes and other charges, equal to or in
excess of the Redemption Price for such Units. In the event of any such sale,
the Trustee shall pay the net proceeds thereof to the Unitholders on the day
they would otherwise be entitled to receive payment of the Redemption Price.
The right of redemption may be suspended and payment postponed: (1) for any
period during which the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or during which (as determined by the Securities
and Exchange Commission) trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of which
disposal by the Trustee of Securities is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the underlying
Securities in accordance with the Trust Agreements; or (3) for such other period
as the Securities and Exchange Commission may by order permit. The Trustee is
not liable to any person in any way for any loss or damage which may result from
any such suspension or postponement.
Computation of Redemption Price. The Redemption Price for Units of each Trust
is computed by the Evaluator as of the evaluation time stated under "Essential
Information" next occurring after the tendering of a Unit for redemption and on
any other business day desired by it, by:
A. adding: (1) the cash on hand in the Trust other than cash deposited in
the Trust to purchase Securities not applied to the purchase of such
Securities; (2) the aggregate value of each issue of the Securities
(including "when issued" contracts, if any) held in the Trust as
determined by the Evaluator on the basis of bid prices therefor; and (3)
interest accrued and unpaid on the Securities in the Trust as of the date
of computation;
B. deducting therefrom: (1) amounts representing any applicable taxes or
governmental charges payable out of the Trust and for which no deductions
have been previously made for the purpose of additions to the Reserve
Account described under "Trust Information - Trust Expenses"; (2) an
amount representing estimated accrued expenses of the Trust, including
but not limited to fees and expenses of the Trustee (including legal and
auditing fees and any insurance costs), the Evaluator, the Sponsor and
bond counsel, if any; (3) cash held for distribution to Unitholders of
record, or required for redemption of Units tendered, as of the business
day prior to the evaluation being made; and (4) other liabilities
incurred by the Trust; and
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C. finally dividing the results of such computation by the number of
Units of the Trust outstanding as of the date thereof.
UNITHOLDERS
Ownership of Units. Ownership of Units of a Trust will not be evidenced by
certificates unless a Unitholder, the Unitholder's registered broker/dealer or
the clearing agent for such broker/dealer makes a written request to the
Trustee. Certificates, if issued, will be so noted on the confirmation statement
sent to the Underwriter and broker.
Units may be transferred by making a written request to the Trustee and, in the
case of Units evidenced by a certificate, by presenting and surrendering such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer. Such request should be sent registered or
certified mail for the protection of the Unitholder. Unitholders must sign such
written request, and such certificate or transfer instrument, exactly as their
names appear on the records of the Trustee and on any certificate representing
the Units to be transferred. Such signatures must be guaranteed as provided in
"Trust Information -- Redemption."
Units may be purchased and certificates, if requested, will be issued in
denominations of one Unit subject to each Trust's minimum investment requirement
and any minimum requirement established by the Sponsor from time to time. Any
certificate issued will be numbered serially for identification, issued in fully
registered form and will be transferable only on the books of the Trustee. The
Trustee may require a Unitholder to pay a reasonable fee, to be determined in
the sole discretion of the Trustee, for each certificate re-issued or
transferred and to pay any governmental charge that may be imposed in connection
with each such transfer or interchange. The Trustee at the present time does not
intend to charge for the normal transfer or interchange of certificates.
Destroyed, stolen, mutilated or lost certificates will be replaced upon delivery
to the Trustee of satisfactory indemnity (generally amounting to 3% of the
market value of the Units), affidavit of loss, evidence of ownership and payment
of expenses incurred.
Distributions to Unitholders. Interest received by each Trust, including any
portion of the proceeds from a disposition of Securities which represents
accrued interest, is credited by the Trustee to the Interest Account for such
Trust. All other receipts are credited by the Trustee to the Principal Account
for the Trust. The Trustee normally has no cash for distribution to Unitholders
until it receives interest payments on the Securities in the Trust. Since
interest usually is paid semi-annually (monthly in the case of the GNMA
Portfolio), during the initial months of the Trusts the Interest Account of each
Trust, consisting of accrued but uncollected interest and collected interest
(cash), will be predominantly the uncollected accrued interest that is not
available for distribution. On the dates set forth under "Essential Information"
for each Trust, the Trustee will commence distributions, in part from funds
advanced by the Trustee.
Thereafter, assuming the Trust retains its original size and composition, after
deduction of the fees and expenses of the Trustee, the Sponsor and Evaluator and
reimbursements (without interest) to the Trustee for any amounts advanced to a
Trust, the Trustee will normally make distributions on each Interest
Distribution Date (the twentieth of the month) or shortly thereafter to
Unitholders of record of such Trust on the preceding Record Date (which is the
tenth day of each month).
Unitholders of the Trusts will receive an amount substantially equal to
one-twelfth of such holders' pro rata share of the estimated net annual interest
income to the Interest Account of such Trust. Because the period of time between
the First Settlement Date and the first Interest Distribution Date may be longer
or shorter than a full period, the first distribution may be a partial
distribution. In order to eliminate fluctuations in interest distributions
resulting from variances in the receipt by the Trusts of interest on the
underlying Securities, the Trustee is authorized by the Trust Agreements to
advance such amounts as may be necessary to provide interest distributions of
approximately equal amounts. The Trustee will be reimbursed, without interest,
for any such advances from funds available in the Interest Account for such
Trust. However, interest earned at any point in time will be greater than the
amount actually received by the Trustee and distributed to the Unitholders.
Therefore,
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there will always remain an item of accrued interest that is added to the daily
value of the Units. If Unitholders of a Trust sell or redeem all or a portion of
their Units, they will be paid their proportionate share of the accrued interest
of such Trust to, but not including, the third business day after the date of a
sale or to the date of tender in the case of a redemption.
Persons who purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date following their
purchase of Units.
With the exception of principal amounts to be reinvested in a Rolling Government
Series during the Reinvestment Period, the Trustee will distribute on each
Distribution Date or shortly thereafter, to each Unitholder of record of a Trust
on the preceding Record Date, an amount substantially equal to such Unitholder's
pro rata share of the cash balance, if any, in the Principal Account of such
Trust computed as of the close of business on the preceding Record Date.
However, no distribution will be required if the balance in the Principal
Account is less than $1.00 per 100 Units.
Statements to Unitholders. With each distribution, the Trustee will furnish or
cause to be furnished to each Unitholder a statement of the amount of interest
and the amount of other receipts, if any, which are being distributed, expressed
in each case as a dollar amount per Unit.
The accounts of each Trust are required to be audited annually, at the Trust's
expense, by independent auditors designated by the Sponsor, unless the Sponsor
determines that such an audit would not be in the best interest of the
Unitholders of such Trust. The accountants' report will be furnished by the
Trustee to any Unitholder of such Trust upon written request. Within a
reasonable period of time after the end of each calendar year, the Trustee shall
furnish to each person who at any time during the calendar year was a Unitholder
of a Trust a statement, covering the calendar year, setting forth for the
applicable Trust:
A. As to the Interest Account:
1. The amount of interest received on the Securities;
2. The amount paid for purchases of New Securities;
3. The amount paid from the Interest Account representing accrued interest
of any Units redeemed;
4. The deductions from the Interest Account for applicable taxes, if any,
fees and expenses (including auditing fees) of the Trustee, the Sponsor, the
Evaluator, and, if any, of bond counsel;
5. Any amounts credited by the Trustee to the Reserve Account;
6. The net amount remaining after such payments and deductions, expressed
both as a total dollar amount and a dollar amount per Unit outstanding on
the last business day of such calendar year; and
B. As to the Principal Account:
1. The dates of the sale, maturity, liquidation or redemption of any of the
Securities and the net proceeds received therefrom excluding any portion
credited to the Interest Account;
2. The amount paid from the Principal Account representing the principal of
any Units redeemed;
3. The amount paid for purchases of New Securities, Replacement Securities
or Reinvestment Securities;
4. The deductions from the Principal Account for payment of applicable
taxes, if any, fees and expenses (including auditing fees) of the Trustee,
the Sponsor, the Evaluator, and, if any, of bond counsel;
5. Any amounts credited by the Trustee to the Reserve Account;
6. The net amount remaining after distributions of principal and
deductions, expressed both as a dollar amount and as a dollar amount per
Unit outstanding on the last business day of the calendar year; and
C. The following information:
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1. A list of the Securities as of the last business day of such calendar
year;
2. The number of Units outstanding on the last business day of such
calendar year;
3. The Redemption Price based on the last evaluation made during such
calendar year;
4. The amount actually distributed during such calendar year from the
Interest and Principal Accounts separately stated, expressed both as total
dollar amounts and as dollar amounts per Unit outstanding on the Record
Dates for each such distribution.
Rights of Unitholders. A Unitholder may at any time prior to the termination of
the Trust tender Units to the Trustee for redemption. The death or incapacity of
any Unitholder will not operate to terminate a Trust or entitle legal
representatives or heirs to claim an accounting or to bring any action or
proceeding in any court for partition or winding up of a Trust. No Unitholder
shall have the right to control the operation and management of any Trust in any
manner, except to vote with respect to the amendment of the Trust Agreements or
termination of any Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolios of the Trusts by the purchase, sale or
substitution of Securities, except in the circumstances noted herein. Thus, with
the exception of the redemption or maturity of Securities in accordance with
their terms (and reinvestments made in connection with the Rolling Government
Series), the assets of the Trusts will remain unchanged under normal
circumstances.
The Sponsor may direct the Trustee to dispose of Securities the value of which
has been affected by certain adverse events including institution of certain
legal proceedings or the occurrence of other market factors, including advance
refunding, so that in the opinion of the Sponsor the retention of such
Securities in a Trust would be detrimental to the interest of the Unitholders.
In addition, the Sponsor will instruct the Trustee to dispose of certain
Securities and to take such further action as may be needed from time to time to
ensure that the Rolling Government Series continues to satisfy the
qualifications of a regulated investment company, including the requirements
with respect to diversification under Section 851 of the Internal Revenue Code.
The proceeds from any such sales, exclusive of any portion which represents
accrued interest, will be credited to the Principal Account of such Trust for
distribution to the Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of Securities to issue new obligations in exchange or substitution for
any of such Securities pursuant to a refunding financing plan, except that the
Sponsor may instruct the Trustee to accept or reject such an offer or to take
any other action with respect thereto as the Sponsor may deem proper if (i) the
issuer is in default with respect to such Securities or (ii) in the written
opinion of the Sponsor the issuer will probably default with respect to such
Securities in the reasonably foreseeable future. Any obligation so received in
exchange or substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Securities originally
deposited thereunder. Within five days after deposit of obligations in exchange
or substitution for underlying Securities, the Trustee is required to give
notice thereof to each Unitholder, identifying the Securities eliminated and the
Securities substituted therefor. The Trustee may sell Securities, designated by
the Sponsor, from a Trust for the purpose of redeeming Units of such Trust
tendered for redemption and the payment of expenses.
TRUST ADMINISTRATION
The Trustee. The Trustee is The Chase Manhattan Bank, with its principal
executive office at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, New York, New York 10004-2413.
Unitholders who have questions regarding the Trusts may call the Customer
Service Help Line at 1-800-887-6926. The Trustee is subject to supervision
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and examination by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the Federal
Reserve System.
The Trustee shall keep records of all transactions at its office which shall
include the name and address of, and the number of Units held by, every
Unitholder of each Trust. Such books and records shall be open to inspection by
any Unitholder of such Trust at all reasonable times during usual business
hours. The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or federal statute, rule or
regulation. The Trustee shall keep a certified copy or duplicate original of the
Trust Agreements on file in its office available for inspection at all
reasonable times during usual business hours by any Unitholder, together with a
current list of the Securities held in each Trust. Pursuant to the Trust
Agreements, the Trustee may employ one or more agents for the purpose of custody
and safeguarding of Securities comprising the Trusts. Under the Trust
Agreements, the Trustee or any successor trustee may resign and be discharged of
its duties created by the Trust Agreements by executing an instrument in writing
and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of resignation
to all Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. If the Trustee becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities or shall
fail to meet standards for its performance established by the Sponsor, the
Sponsor may remove the Trustee and appoint a successor trustee as provided in
the Trust Agreements. Notice of such removal and appointment shall be mailed to
each Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original Trustee shall vest in the successor. The Trustee
shall be a corporation organized under the laws of the United States, or any
state thereof, which is authorized under such laws to exercise trust powers. The
Trustee shall have at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
The Evaluator. Muller Data Corporation serves as Evaluator. The Evaluator may
resign or be removed by the Trustee in which event the Trustee is to use its
best efforts to appoint a satisfactory successor. Such resignation or removal
shall become effective upon acceptance of appointment by the successor
evaluator. If upon resignation of the Evaluator no successor has accepted
appointment within 30 days after notice of resignation, the Evaluator may apply
to a court of competent jurisdiction for the appointment of a successor. Notice
of such resignation or removal and appointment shall be mailed by the Trustee to
each Unitholder.
Amendment and Termination. The Trust Agreements may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders: (i) to cure any
ambiguity or to correct or supplement any provision which may be defective or
inconsistent; (ii) to change any provision thereof as may be required by the
Securities and Exchange Commission or any successor governmental agency; or
(iii) to make such provisions as shall not adversely affect the interests of the
Unitholders. The Trust Agreements with respect to the Trusts may also be amended
in any respect by the Sponsor and the Trustee, or any of the provisions thereof
may be waived, with the consent of the holders of Units representing 66 2/3% of
the Units then outstanding of such Trust, provided that no such amendment or
waiver will reduce the interest of any Unitholder thereof without the consent of
such Unitholder or reduce the percentage of Units required to consent to any
such amendment or waiver without the consent of all Unitholders of such Trust.
In no event shall any Trust Agreement be amended to increase the number of Units
of a Trust issuable thereunder or to permit, except in accordance with the
provisions of such Trust Agreement, the acquisition of any Securities in
addition to or in substitution for those initially deposited in a Trust. The
Trustee shall promptly notify Unitholders of the substance of any such
amendment.
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The Trust Agreements provide that the Trusts shall terminate upon the maturity,
redemption or other disposition of the last of the Securities held in a Trust.
If the value of a Trust shall be less than the applicable minimum value stated
under "Essential Information," the Trustee may, in its discretion, and shall,
when so directed by the Sponsor, terminate the Trust. A Trust may be terminated
at any time by the Unitholders representing 66 2/3% of the Units thereof then
outstanding. In the event of termination of a Trust, written notice thereof will
be sent by the Trustee to all Unitholders of such Trust. Within a reasonable
period after termination, the Trustee will sell any Securities remaining in such
Trust and, after paying all expenses and charges incurred by the Trust, will
distribute to Unitholders thereof (upon surrender for cancellation of
certificates for Units, if issued) their pro rata share of the balances
remaining in the Interest and Principal Accounts of such Trust.
Limitations on Liability
The Sponsor: The Sponsor is liable for the performance of its obligations
arising from its responsibilities under the Trust Agreements, but will be under
no liability to the Unitholders for taking any action or refraining from any
action in good faith pursuant to the Trust Agreements or for errors in judgment,
except in cases of its own gross negligence, bad faith or willful misconduct.
The Sponsor shall not be liable or responsible in any way for depreciation or
loss incurred by reason of the sale of any Securities.
The Trustee: The Trust Agreements provide that the Trustee shall be under no
liability for any action taken in good faith in reliance upon prima facie
properly executed documents or for the disposition of monies, Securities or
certificates except by reason of its own gross negligence, bad faith or willful
misconduct, nor shall the Trustee be liable or responsible in any way for
depreciation or loss incurred by reason of the sale by the Trustee of any
Securities. In the event that the Sponsor shall fail to act, the Trustee may act
and shall not be liable for any such action taken by it in good faith. The
Trustee shall not be personally liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the interest
thereon. In addition, the Trust Agreements contain other customary provisions
limiting the liability of the Trustee.
The Sponsor reserves the right to reject, in whole or in part, any order for the
purchase of Units.
The Evaluator: The Trustee and Unitholders may rely on any evaluation furnished
by the Evaluator and shall have no responsibility for the accuracy thereof. The
Trust Agreements provide that the determinations made by the Evaluator shall be
made in good faith upon the basis of the best information available to it,
provided, however, that the Evaluator shall be under no liability to the Trustee
or Unitholders for errors in judgment, but shall be liable only for its gross
negligence, lack of good faith or willful misconduct.
TRUST EXPENSES
The Sponsor will charge the Trusts a surveillance fee for services performed for
the Trusts in an amount not to exceed that amount set forth in "Essential
Information" but in no event will such compensation, when combined with all
compensation received from other unit investment trusts for which the Sponsor
both acts as sponsor and provides portfolio surveillance, exceed the aggregate
cost to the Sponsor for providing such services. Such fee shall be based on the
total number of Units of the related Trust outstanding as of the December Record
Date preceding any annual period. The Sponsor will receive a portion of the
sales commissions paid in connection with the purchase of Units and will share
in profits, if any, related to the deposit of Securities in the Trusts.
The Trustee receives for its services fees set forth under "Essential
Information." The Trustee fee which is calculated monthly is based on the
largest aggregate principal amount of Securities in a Trust at any time during
the period. In no event shall the Trustee be paid less than $2,000 per Trust in
any one year. Funds that are available for future distributions, redemptions and
payment of expenses are held in accounts which are non-interest bearing to
Unitholders and are available for use by the Trustee
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pursuant to normal trust procedures; however, the Trustee is also authorized by
the Trust Agreements to make from time to time certain non-interest bearing
advances to the Trusts.
During the first year the Trustee has agreed to lower its fees and absorb
expenses by the amount set forth under "Essential Information." The Trustee's
fee will not be increased in future years in order to make up this reduction in
the Trustee's fee. The Trustee's fee is payable on or before each Distribution
Date. The Trustee has agreed to pay the Sponsor that portion of the Trustee's
annual fee as set forth under "Essential Information" in return for the Sponsor
providing certain bookkeeping and administrative services to its own customers.
For evaluation of Securities in each Trust, the Evaluator shall receive a fee,
payable monthly, calculated on the basis of that annual rate set forth under
"Essential Information," based upon the largest aggregate principal amount of
Securities in such Trust at any time during such monthly period.
The Trustee's and Evaluator's fees are deducted first from the Interest Account
of a Trust to the extent funds are available and then from the Principal
Account. Such fees may be increased without approval of Unitholders by amounts
not exceeding a proportionate increase in the Consumer Price Index entitled "All
Services Less Rent of Shelter," published by the United States Department of
Labor, or any equivalent index substituted therefor. In addition, the Trustee's
fee may be periodically adjusted in response to fluctuations in short-term
interest rates (reflecting the cost to the Trustee of advancing funds to a Trust
to meet scheduled distributions).
Expenses incurred in establishing the Trusts, including the cost of the initial
preparation of documents relating to the Trusts, federal and state registration
fees, the initial fees and expenses of the Trustee, legal expenses and any other
non-material out-of-pocket expenses, will be paid by the Trusts and amortized
over the lesser of five years or the life of the Trusts. The following
additional charges are or may be incurred by the Trusts: (i) fees for the
Trustee's extraordinary services; (ii) expenses of the Trustee (including legal
and auditing expenses (not to exceed $.50 per 100 Units) and insurance costs for
an Insured Corporate Portfolio, but not including any fees and expenses charged
by any agent for custody and safeguarding of Securities) and of bond counsel, if
any; (iii) various governmental charges; (iv) expenses and costs of any action
taken by the Trustee to protect a Trust or the rights and interests of the
Unitholders; (v) indemnification of the Trustee for any loss, liability or
expense incurred by it in the administration of a Trust not resulting from gross
negligence, bad faith or willful misconduct on its part; (vi) indemnification of
the Sponsor for any loss, liability or expense incurred in acting in that
capacity without gross negligence, bad faith or willful misconduct; and (vii)
expenditures incurred in contacting Unitholders upon termination of the Trusts.
The fees and expenses set forth herein are payable out of the appropriate Trust
and, when owing to the Trustee, are secured by a lien on such Trust. Fees or
charges relating to a Trust shall be allocated to each Trust in the same ratio
as the principal amount of such Trust bears to the total principal amount of all
Trusts. Fees or charges relating solely to a particular Trust shall be charged
only to such Trust.
Fees and expenses of the Trusts shall be deducted from the Interest Account
thereof, or, to the extent funds are not available in such Account, from the
Principal Accounts. The Trustee may withdraw from the Principal Account or the
Interest Account of any Trust such amounts, if any, as it deems necessary to
establish a reserve for any taxes or other governmental charges or other
extraordinary expenses payable out of the Trust. Amounts so withdrawn shall be
credited to a separate account maintained for a Trust known as the Reserve
Account and shall not be considered a part of the Trust when determining the
value of the Units until such time as the Trustee shall return all or any part
of such amounts to the appropriate account.
THE SPONSOR
NFSC is a registered broker and dealer and a member of The New York Stock
Exchange, Inc., and various other national and regional exchanges. As a
securities broker and dealer, NFSC is engaged in various securities trading,
brokerage and clearing activities serving a diverse group of domestic
corporations, institutional and individual investors, and brokers and dealers.
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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 April 30, 1997, it manages more
than $440 billion in assets in over 31 million individual shareholder accounts.
If at any time the Sponsor shall fail to perform any of its duties under the
Trust Agreements 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.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to federal
tax law have been passed upon by Chapman and Cutler, 111 West Monroe Street,
Chicago, Illinois 60603, as special counsel to the Sponsor. Carter, Ledyard &
Milburn has acted as Special Counsel to the Trusts with respect to certain New
York State and City tax matters affecting the Investment Grade Series 3 and 4.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The statements of condition and the related portfolios at the Initial Date of
Deposit included in this Prospectus have been audited by Deloitte & Touche LLP,
independent certified public accountants, as set forth in their report in the
Prospectus, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing.
DESCRIPTION OF RATINGS*
Standard & Poor's
A brief description of the applicable Standard & Poor's rating symbols and their
meanings follow:
A Standard & Poor's bond rating is a current assessment of the creditworthiness
of an obligor with respect to a specific debt obligation. This assessment may
take into consideration obligors such as grantors, insurers, or lessees. The
bond rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished by
the issuer and obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
rating and may, on
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occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
II. Nature and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement, under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to all the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
- ---------------
* As described by the rating company itself.
Plus (+) or Minus (-): The ratings from "AA" to "A" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Moody's Investors Service, Inc.
A brief description of the applicable Moody's rating symbols and their meanings
follow:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Their safety is so absolute
that with the occasional exception of oversupply in a few specific instances,
characteristically, their market value is affected solely by money market
fluctuations.
Aa -- Bonds which are rated Aa are judged to be a high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities. Their market
value is virtually immune to all but money market influences, with the
occasional exception of oversupply in a few specific instances.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future. The market
value of A-rated bonds may be influenced to some
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degree by economic performance during a sustained period of depressed business
conditions, but, during periods of normalcy, A-rated bonds frequently move in
parallel with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
A1 -- Bonds which are rated A1 offer the maximum in security within their
quality group, can be bought for possible upgrading in quality, and
additionally, afford the investor an opportunity to gauge more precisely the
relative attractiveness of offerings in the marketplace.
Conditional Ratings: Bonds rated "Con( )" are ones for which the security
depends upon the completion of some act or the fulfillment of some condition.
These are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals which begin
when facilities are completed, or (d) payments to which some other limiting
conditions attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through B in certain areas of its bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
The designation "*+" in a rating indicates that a security is under review for
possible upgrade at the Initial Date of Deposit.
Duff & Phelps Credit Rating Co. -- A brief description of the applicable Duff &
Phelps Credit Rating Co. rating symbols and their meanings follow:
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
which may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition,
government action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA -- High credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
A -- Protection factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress.
BBB -- Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles.
BB -- Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B -- Below investment grade and possessing risk that obligations will not be met
when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade.
48
<PAGE> 56
CCC -- Well below investment grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD -- Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
49
<PAGE> 57
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the estimated distributions per 100 Units of interest
and principal to Unitholders. The tables assume no changes in Trust expenses
(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 (except for the assumption that there will be a pro
rata sale of Securities based on par value, on the first three anniversary dates
of the Trust in the amount necessary to cover the Deferred Sales Charge) and the
receipt of all remaining principal due upon maturity. To the extent the
foregoing assumptions change actual distributions will vary.
FIDELITY DEFINED TRUSTS
INVESTMENT GRADE SERIES 3
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
- ------------------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
June 1997 $1.184 $ 1.184
July 1997-April 1998 5.075 5.075
May 1998-April 1999 5.064 5.064
May 1999 5.061 5.061
June 1999-April 2000 5.054 5.054
May 2000 5.050 5.050
June 2000-May 2002 5.044 5.044
June 2002-September 2002 5.068 5.068
October 2002 4.786 $200.000 204.786
November 2002-June 2003 4.155 4.155
July 2003 3.786 200.000 203.786
August 2003-April 2004 3.075 3.075
May 2004 2.750 200.000 202.750
June 2004-September 2005 2.016 2.016
October 2005 1.722 200.000 201.722
November 2005-October 2006 1.061 1.061
November 2006 1.061 200.000 201.061
December 2006 0.141 0.141
</TABLE>
50
<PAGE> 58
FIDELITY DEFINED TRUSTS
INVESTMENT GRADE SERIES 4
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
- ------------------------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
June 1997 $1.282 $ 1.282
July 1997-April 1998 5.497 5.497
May 1998-April 1999 5.486 5.486
May 1999-April 2000 5.474 5.474
May 2000-May 2002 5.463 5.463
June 2002-January 2006 5.486 5.486
February 2006 5.333 $100.000 105.333
March 2006 5.001 5.001
April 2006 4.362 200.000 204.362
May 2006-November 2006 3.910 3.910
December 2006 3.444 100.000 103.444
January 2007 3.364 3.364
February 2007 2.887 100.000 102.887
March 2007 2.632 100.000 102.632
April 2007 2.054 100.000 102.054
May 2007-August 2008 1.623 1.623
September 2008 1.154 100.000 101.154
October 2008 1.073 1.073
November 2008 0.900 100.000 100.900
December 2008-January 2009 05.11 0.511
February 2009 0.059 100.000 100.059
</TABLE>
51
<PAGE> 59
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, rating services
and legal counsel
The following exhibits:
1.1 Form of Trust Agreement for Fidelity Defined Trusts, Series 4 among
National Financial Services Corporation as Depositor and Portfolio
Supervisor, Muller Data Corporation as Evaluator and The Chase Manhattan
Bank as Trustee.
1.1.1 Form of Standard Terms and Conditions of Trust for Fidelity Defined
Trusts, Series 1 and certain subsequent series among National Financial
Services Corporation as Depositor, Evaluator and Portfolio Supervisor and
The Chase Manhattan Bank (National Association) as Trustee (incorporated by
reference to Amendment No. 2 to the Registration Statement on Form S-6
(File No. 33-62243) filed on behalf of Fidelity Defined Trusts, Series 1).
1.4 Copy of Articles of Incorporation of National Financial Services
Corporation, Depositor (incorporated by reference to Amendment No. 2 to the
Registration Statement on Form S-6 (File No. 33-62243) filed on behalf of
Fidelity Defined Trusts, Series 1).
1.5 Copy of By-Laws of National Financial Services Corporation, Depositor
(incorporated by reference to Amendment No. 2 to the Registration Statement
on Form S-6 (File No. 33-62243) filed on behalf of Fidelity Defined Trusts,
Series 1).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1.1 filed herewith
on page 2 and incorporated herein by reference).
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of securities being
registered.
3.3 Opinion of Counsel as to New York income tax status of securities being
registered.
3.4 Opinion of Counsel as to advancement of funds by Trustee.
S-1
<PAGE> 60
4.1 Consent of Rating Agency.
4.2 Consent of Independent Certified Public Accountants.
4.3 Consent of Evaluator
6.1 List of Directors and Officers of National Financial Services Corporation,
Depositor (incorporated by reference to Amendment No. 2 to the Registration
Statement on Form S-6 (File No. 33-62243) filed on behalf of Fidelity
Defined Trusts, Series 1).
7.1 Powers of Attorney executed by the Directors and Officers of National
Financial Services Corporation, Sponsor, listed on page S-3 of this
Registration Statement (incorporated by reference to the initial
Registration Statement on Form S-6 [File No. 333-02833] filed on behalf of
Fidelity Defined Trusts, Series 1).
Ex-27 Financial Data Schedules.
S-2
<PAGE> 61
SIGNATURES
The Registrant, Fidelity Defined Trusts, Series 4, hereby identifies
Fidelity Defined Trusts, Series 1 and Fidelity Defined Trusts, Series 2, for
purposes of the representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series as to the
securities of which this Registration Statement is being filed do not
differ materially in type or quality from those deposited in such previous
series;
(2) that, except to the extent necessary to identify the specific
portfolio securities deposited in, and to provide essential financial
information for, the series with respect to the securities of which this
Registration Statement is being filed, this Registration Statement does not
contain disclosures that differ in any material respect from those
contained in the registration statements for such previous series as to
which the effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities Act of
1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Fidelity Defined Trusts, Series 4 has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Boston and State of Massachusetts on the 29th day
of May, 1997.
FIDELITY DEFINED TRUSTS, SERIES 4
(Registrant)
By: NATIONAL FINANCIAL SERVICES CORPORATION
(Depositor)
/s/ David J. Pearlman
-------------------------------------------
David J. Pearlman
Assistant Clerk
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on May 29, 1997.
Signature Title
James H. Messenger President, Chief Executive Officer
and Chairman of the Board
Robert P. Mazzarella Director
<PAGE> 62
Sherif A. Nada Director
Gordon R. Watson Director
Shaugn Stanley Vice President, Finance and Chief
Financial and Accounting Officer
David J. Pearlman
-------------------------------
(Attorney-in-fact)*
- --------------------
* An executed copy of the related powers of attorney were filed as Exhibit
7.1 to the initial Registration Statement for Fidelity Defined Trusts,
Series 1 as filed on August 29, 1995 (File No. 333-02833) and the same is
hereby incorporated herein by this reference.
<PAGE> 1
Memorandum
File No. 333-27077
The Prospectus and the Indenture filed with Amendment No. 1 to the
Registration Statement on Form S-6 have been revised to reflect information
regarding the execution of the Indenture and the deposit of securities on May
29, 1997 and to set forth certain statistical data based thereon. In addition,
there are a number of other changes described below.
The Prospectus
Pages 4-8 The following information for each Trust appears:
The total number of units of each Trust.
The Public Offering Price at the opening of business on the
Initial Date of Deposit.
The initial annual fee of the Trustee.
The first and second distributions and record dates.
The estimated long-term returns and estimated current returns (if
applicable) to Unitholders as of the opening of business on the
Initial Date of Deposit. Estimated net annual unit income.
Pages 11-20 The following information for each Trust appears on the pages
indicated:
Summary data regarding the composition of the portfolio of each
Trust.
The portfolio for each Trust.
Page 21 The Report of Independent Certified Public Accountants has been
completed.
Page 22 The Statements of Condition have been completed.
<PAGE> 2
THE TRUST AGREEMENT AND STANDARD TERMS AND CONDITIONS OF TRUST
The Trust Agreement has been conformed to reflect the execution
thereof.
CHAPMAN AND CUTLER
May 29, 1997
<PAGE> 1
Exhibit 1.1
FIDELITY DEFINED TRUSTS, SERIES 4
TRUST AGREEMENT
Dated: May 29, 1997
This Trust Agreement among National Financial Services Corporation, as
Depositor and Portfolio Supervisor, Muller Data Corporation as Evaluator and The
Chase Manhattan Bank, as Trustee, sets forth certain provisions in full and
incorporates other provisions by reference to the document entitled "Standard
Terms and Conditions of Trust for Fidelity Defined Trusts Series 1 effective
January 3, 1996" (herein called the "Standard Terms and Conditions of Trust"),
and such provisions as are set forth in full and such provisions as are
incorporated by reference constitute a single instrument. All references herein
to Articles and Sections are to Articles and Sections of the Standard Terms and
Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, the Evaluator and Portfolio Supervisor
agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this instrument
as fully and to the same extent as though said provisions had been set forth in
full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
(a) The Securities defined in Section 1.01(5) listed in Schedule A
hereto have been deposited in trust under this Trust Agreement.
<PAGE> 2
(b) The fractional undivided interest in and ownership of the Trust
Fund represented by each Unit for a Trust is the amount set forth under the
caption "Essential Information - Fractional Undivided Interest per Unit" in
the Prospectus.
(c) The number of units in a Trust referred to in Section 2.03 is set
forth under the caption "Essential Information - Number of Units" in the
Prospectus.
(d) The "First Settlement Date" for each Trust is the date set forth
under "Essential Information-First Settlement Date" in the Prospectus.
(e) The Trustee's compensation shall be computed according to the
following schedule, determined on the basis of the largest principal amount
of Securities held by the Trust during the period for which the
compensation is computed; provided , however, that until the Depositor
informs the Trustee that no further deposits of additional Securities will
be made pursuant to Section 2.01(b), such compensation shall be computed on
the basis of the principal amount of Securities held as of the Record Date
preceding the date on which the compensation is paid (or the Initial Date
of Deposit, as appropriate):
<TABLE>
<CAPTION>
Principal amount of Securities Rate per $1,000 principal amount of Securities
held by the Trust
Rolling Gov't Investment Investment
Series 4, Grade Series 3, Grade Series
GNMA Intermediate 4, Corporate
Portfolio Insured Corpo- Portfolio
rate Portfolio
------------- -------------- ------------
<S> <C> <C> <C>
$0 - $25,000,000 $0.880 $1.47 $1.52
$25,000,001 - $45,000,000 $0.880 $1.37 $1.42
$45,000,001 and higher $0.880 $1.25 $1.30
</TABLE>
(f) Article III of the Standard Terms and Conditions of Trust is
hereby amended by inserting the following paragraph which shall be entitled
Section 3.16:
"Section 3.16. Deferred Sales Charge. If the prospectus related
to the Trust specifies a deferred sales charge, the Trustee shall, on
the dates specified in and as permitted by such Prospectus, withdraw
from the Principal Account, an amount per Unit specified in such
Prospectus and credit such amount to a special non-Trust account
designated by the Depositor out of which the deferred sales charge
will be distributed to the Depositor (the "Deferred Sales Charge
Account"). If the balance in the Principal Account is insufficient to
make such withdrawal, the Trustee shall, as directed by the Depositor,
advance funds in an amount required to fund the proposed withdrawal
and be entitled to reimbursement of such
-2-
<PAGE> 3
advance upon the deposit of additional monies in the Principal
Account, and/or sell Securities and credit the proceeds thereof to the
Deferred Sales Charge Account, provided, however, that the aggregate
amount advanced by the Trustee at any time for payment of the deferred
sales charge shall not exceed $15,000. Such direction shall, if the
Trustee is directed to sell a Security, identify the Security to be
sold and include instructions as to the execution of such sale. If a
Unitholder redeems Units prior to full payment of the deferred sales
charge, the Trustee shall, if so provided in the related Prospectus,
on the Redemption Date, withhold from the Redemption Price payable to
such Unitholder an amount equal to the unpaid portion of the deferred
sales charge and distribute such amount to the Deferred Sales Charge
Account. If the Trust is terminated for reasons other than that set
forth in Section 6.01(g)(ii), the Trustee shall, if so provided in the
related Prospectus, on the termination of the Trust, withhold from the
proceeds payable to Unitholders an amount equal to the unpaid portion
of the deferred sales charge and distribute such amount to the
Deferred Sales Charge Account. If the Trust is terminated pursuant to
Section 6.01(g)(ii), the Trustee shall not withhold from the proceeds
payable to Unitholders any amounts of unpaid deferred sales charges.
If pursuant to Section 5.02 hereof, the Depositor shall purchase a
Unit tendered for redemption prior to the payment in full of the
deferred sales charge due on the tendered Unit, the Depositor shall
pay to the Unitholder the amount specified under Section 5.02 less the
unpaid portion of the deferred sales charge. All advances made by the
Trustee pursuant to this Section shall be secured by a lien on the
Trust prior to the interest of the Unitholder."
(g) Notwithstanding the provision of Section 3.05 of the Standard
Terms and Conditions of Trust, the first Monthly Record Date shall be that
date set forth in the Prospectus.
(h) Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust, Muller Data Corporation shall replace National
Financial Services Corporation as Evaluator.
(i) The second and third sentences of Section 4.03 of the Standard
Terms and Conditions of Trust are hereby deleted.
-3-
<PAGE> 4
IN WITNESS WHEREOF, National Financial Services Corporation, Muller Data
Corporation and The Chase Manhattan Bank have each caused this Trust Agreement
to be executed and the respective corporate seal to be hereto affixed and
attested by authorized officers; all as of the day, month and year first above
written.
NATIONAL FINANCIAL SERVICES
CORPORATION, Depositor
By /s/ David J. Pearlman
---------------------------------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
Trustee
By /s/ Jim Donovan
---------------------------------
MULLER DATA CORPORATION,
Evaluator
By /s/ Mario Buscami
---------------------------------
NATIONAL FINANCIAL SERVICES
CORPORATION, Portfolio
Supervisor
By /s/ David J. Pearlman
---------------------------------
<PAGE> 5
SCHEDULE A TO THE TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
FIDELITY DEFINED TRUSTS, SERIES 4
(Note: Incorporated herein and made a part hereof is the "Portfolio" as set
forth for each Trust in the Prospectus.)
<PAGE> 1
Exhibit 3.1
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
May 29, 1997
National Financial Services Corporation
82 Devonshire Street N7A
Boston, Massachusetts 02109-3614
Re: Fidelity Defined Trusts, Series 4
Gentlemen:
We have served as counsel for National Financial Services Corporation, as
Sponsor and Depositor (the "Depositor") of Fidelity Defined Trusts, Series 4
(the "Fund") in connection with the preparation, execution and delivery of a
Trust Agreement dated May 29, 1997 and a Standard Terms and Conditions of Trust
dated January 3, 1996 (collectively, the "Indenture") each of which are between
National Financial Services Corporation, as Depositor and Portfolio Supervisor,
Muller Data Corporation as Evaluator and The Chase Manhattan Bank as Trustee,
pursuant to which the Depositor has delivered to and deposited the Securities
listed in Schedule A to the Trust Agreement with the Trustee and pursuant to
which the Trustee has issued to or on the order of the Depositor a certificate
or certificates representing units of fractional undivided interest in and
ownership of the Fund created under said Trust Agreement.
In connection therewith, we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Indenture and the execution and
issuance of certificates evidencing the Units in the Fund have been duly
authorized; and
2. the certificates evidencing the Units in the Fund when duly
executed and delivered by the Depositor and the Trustee in accordance with
the aforementioned Indenture, will constitute valid and binding obligations
of the Fund and the Depositor in accordance with the terms thereof.
<PAGE> 2
-2-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-27077) relating to the Units referred to
above, to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/slm
<PAGE> 1
Exhibit 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
May 29, 1997
National Financial Services Corporation
82 Devonshire Street N7A
Boston, Massachusetts 02109-3614
The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004-2413
Re: Fidelity Defined Trusts, Series 4
Gentlemen:
We have acted as counsel for National Financial Services Corporation,
Depositor of Fidelity Defined Trusts, Series 4 (the "Fund"), in connection with
the issuance of units of fractional undivided interests in Investment Grade
Series 3, Intermediate Insured Corporate Portfolio and Investment Grade Series
4, Corporate Portfolio (the "Trusts") of said Fund, under a Trust Agreement
dated May 29, 1997 and a Standard Terms and Conditions of Trust dated January 3,
1996 (collectively, the "Indenture") between National Financial Services
Corporation, as Depositor and Portfolio Supervisor, Muller Data Corporation as
Evaluator and The Chase Manhattan Bank, as Trustee.
In this connection, we have examined the Registration Statement, the form
of Prospectus proposed to be filed with the Securities and Exchange Commission,
the Indenture and such other instruments and documents as we have deemed
pertinent. The opinions expressed herein assume that each Trust will be
administered, and investments by a Trust from proceeds of subsequent deposits,
if any, will be made, in accordance with the terms of the Indenture. Each Trust
holds Utility and/or Corporate Bonds (collectively the "Securities") as such
term is defined in the Prospectus.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
<PAGE> 2
-2-
(i) Each Trust is not an association taxable as a corporation for Federal
income tax purposes but will be governed by the provisions of Subpart E,
Subchapter J (relating to Trusts) of Chapter 1, Internal Revenue Code of 1986
(the "Code").
(ii) Each Unitholder will be considered the owner of a pro rata portion of
each Security in each Trust in the proportion that the number of Units held
bears to the total number of Units outstanding for Federal income tax purposes.
Under Subpart E, Subchapter J of Chapter 1 of the Code, income of the Trust
will be treated as income of each Unitholder. Each Unitholder will be
considered to have received his pro rata share of income derived from each
Trust asset when such income is received by the respective Trust. Each
Unitholder will also be required to include in taxable income for federal
income tax purposes, original issue discount with respect to his interest in
any Security held by each Trust at the same time and in the same manner as
though the Unitholder were the direct owner of such interest. If a Security is
a "high yield discount obligation" within the meaning of Section 163(e)(5) of
the Code, certain special rules apply. A Unitholder may elect to include in
taxable income for Federal income tax purposes, market discount as it accrues
with respect to his interest in any Security held by Trust which he is
considered as having acquired with market discount at the same time and in the
same manner as though the Unitholder were the direct owner of such interest.
(iii) Each Unitholder will have a taxable event when a security is disposed
of (whether by sale, exchange, redemption, payment on maturity or otherwise) or
when the Unitholder redeems or sells his Units. A Unitholder's tax basis in his
Units will equal his tax basis in his pro rata portion of all the assets of a
Trust. Such basis is determined (before the adjustments described below) by
apportioning the tax basis for the Units among each of the Trusts assets
according to value as of the valuation date nearest the date of acquisition of
the Units. Unitholders must reduce their tax basis of their Units for their
share of accrued interest received by such Trust, if any, on Securities
delivered after the date the Unitholders pay for their Units to the extent
such interest accrued on such Securities before the date the Trust acquired
ownership of Securities (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 Securities (whether by sale,
exchange, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unitholder (subject to various non-recognition provisions of
the Code). The amount of any such gain or loss is measured by comparing the
Unitholder's pro rata portion of the total proceeds from such disposition with
his basis for his fractional interest in the asset disposed of. The basis of
each Unit and of each Security which was issued with original issue discount
(or has market discount) must be increased by the amount of accrued original
issue discount (and market discount if the Unitholder elects to include market
discount in income as it accrues) and the basis of each Unit and of each
Security which was purchased by the Trust at a premium must be reduced by the
annual amortization of bond premium which the Unitholder has properly elected
to amortize under Section 171 of the Code. The tax basis reduction requirements
of the Code relating to amortization of bond premium may, under some
circumstances, result in the Unitholder realizing a taxable gain when his Units
are sold or redeemed for an amount equal to or less than his original cost.
Each Unitholder's pro rata share of each expense paid by the Trust is
deductible by the Unitholder to the same extent as though the expense had been
paid directly to him. It should be noted that, as a result of the Tax Reform Act
of 1986 (the "Act")
<PAGE> 3
-3-
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by
individuals only to the extent they exceed 2% of such individual's adjusted
gross income (similar limitations also apply to estates and trusts).
Unitholders may be required to treat some or all of the expenses paid by the
Trust as miscellaneous itemized deductions subject to this limitation.
The Code provides a complex set of rules governing the accrual of original
issue discount. These rules provide that original issue discount generally
accrues on the basis of a constant compound interest rate over the term of the
Security. Special rules apply if the purchase price of an Obligation exceeds
its original issue price plus the amount of original issued discount which
would have previously accrued, based upon its issue price (its "adjusted issue
price"). Similarly, these special rules would apply to a Unitholder if the tax
basis of his pro rata portion of a Security that has been issued with original
issue discount exceeds his pro rata portion of its adjusted issue price. It is
possible that a Security that has been issued at an original issue discount may
be characterized as a "high-yield discount obligation" within the meaning of
Section 165(e)(5) of the Code. To the extent that such an obligation is issued
at a yield in excess of six percentage points over the applicable Federal rate,
a portion of the original issue discount on such obligation will be
characterized as a distribution on stock (e.g., dividends) for purposes of the
dividends received deduction which is available to certain corporations with
respect to certain dividends received by such corporations.
If a Unitholder's tax basis in his pro rata portion of any Security held by
the Trust is less than his allocable portion of such Security's stated
redemption price at maturity (or if issued with original issue discount, the
allocable portion of its revised issue price), such difference will constitute
market discount unless the amount of market discount is "de minimis" as
specified in the Code. To the extent the amount of such discount is less than
the respective "de mininis" amount, such discount shall be treated as zero.
Market discount accrues daily computed on a straight line basis, unless the
Unitholder elects to calculate accrued market discount under a constant yield
method.
Accrued market discount is generally includible in taxable income of the
Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on Securities held by the Trust, on the sale, maturity
or disposition of such Securities by the Trust and on the sale of a Unitholder's
Units unless a Unitholder elects to include the accrued market discount in
taxable income as such discount accrues. If a Unitholder does not elect to
annually include accrued market discount in taxable income as it accrues,
deductions for any interest expense incurred by the Unitholder to purchase or
carry his Units will b e reduced by such accrued market discount. In general,
the portion of any interest which was not currently deductible would ultimately
be deductible when the accrued market discount is included in income.
The tax basis of a Unitholder with respect to his interest in a Security is
increased by the amount of original issue discount (and market discount, if the
Unitholder elects to include market discount, if any, on the Securities held by
the Trust in income as it accrues) thereon properly included in the Unitholder's
gross
<PAGE> 4
-4-
income as determined for Federal income tax purposes and reduced by the
amount of any amortized premium which the Unitholder has properly elected to
amortize under Section 171 of the Code. A Unitholder's tax basis in his Units
will equal his tax basis in his pro rata portion of all of the assets of the
Trust.
A Unitholder will recognize taxable gain (or loss) when all or part of the
pro rata interest in a Security is disposed of in a taxable transaction for an
amount greater (or less) than his tax basis therefor in a taxable transaction,
subject to various nonrecognition provisions of the Code.
As previously discussed, gain attributable to any Security deemed to have
been acquired by the Unitholder with market discount will be treated as ordinary
income to the extent the gain does not exceed the amount of accrued market
discount no previously taken into income. The tax basis reduction requirements
of the Code relating to amortization of bond premium may, under certain
circumstances, result in the Unitholder realizing a taxable gain when his Units
are sold or redeemed for an amount equal to or less than his original cost.
If a Unitholder disposes of a Unit, he is deemed thereby to have disposed
of his entire pro rata interest in all Trust assets including his pro rata
portion of all of the Securities represented by the Unit. This may result in a
portion of the gain, if any, on such sale being taxable as ordinary income under
the market discount rules (assuming no election was made by the Unitholder to
include market discount in income as it accrues) as previously discussed.
The "Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates
on ordinary income while capital gains remain subject to a 28 percent maximum
stated rate for taxpayers other than corporations. Because some or all capital
gain are taxed at a comparatively lower rate under the Tax Act, the Tax Act
includes a provision that recharacterizes capital gains a ordinary income in the
case of certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993.
A Unitholder who is a foreign investor (i.e., an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or trust) will
generally not be subject to United States Federal income taxes, including
withholding taxes on interest income (including any original issue discount) on,
or any gain from the sale or other disposition of his pro rata interest in any
Security held by a Trust or the sale of his Units provided that all of the
following conditions are met:
(i) the interest income or gain is not effectively connected with the
conduct by the foreign investor of a trade or business within the United States;
(ii) with respect to any gain, the foreign investor (if an individual) is
not present in the United States for 183 days or more during his or her taxable
year;
(iii) If the interest is United States source income (which is the case for
most securities issued by United States issuers), the Security is issued after
July 18, 1984,
<PAGE> 5
-5-
the foreign investor does not own, directly or indirectly, 10% or
more of the total combined voting power of all classes of voting stock of the
issuer of the Security and the foreign investor is not a controlled foreign
corporation related (within the meaning of Section 864(d)(4) of the Code) to the
issuer of the Security; and
(iv) the foreign investor provides all certification which may be required
of his status.
It should be noted that the Tax Act includes a provision which eliminates
the exemption from United States taxation, including withholding taxes, for
certain "contingent interest." This provision applies to interest received after
December 31, 1993. No opinion is expressed herein regarding the potential
applicability of this provision and whether United States taxation or
withholding taxes could be imposed with respect to income derived from the Units
as a result thereof.
The scope of this opinion is expressly limited to the federal income tax
matters set forth herein, and, except as expressly set forth above, we express
no opinion with respect to any other taxes, including foreign, state or local
taxes or collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-27077) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Very truly yours,
CHAPMAN AND CUTLER
MJK/slm
<PAGE> 1
Exhibit 3.3
CARTER, LEDYARD & MILBURN
2 WALL STREET
NEW YORK, NEW YORK 10005
May 29, 1997
The Chase Manhattan Bank,
as Trustee of Fidelity Defined
Trusts, Series 4
4 New York Plaza
New York, New York 10004-2413
Attention: Mr. Paul J. Holland
Vice President
Re: Fidelity Defined Trusts, Series 4
---------------------------------
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank ("Chase") in
connection with the execution and delivery of a Standard Terms and Conditions of
Trust dated January 3, 1996 and a related Trust Agreement dated as of today
(collectively, the "Indenture"), each between National Financial Services
Corporation, as Depositor and Portfolio Supervisor (the "Depositor"), Muller
Data Corporation as Evaluator and Chase, as Trustee (the "Trustee"),
establishing Fidelity Defined Trusts, Series 4, which comprises Rolling
Government Series 4, GNMA Portfolio, Investment Grade Series 3, Intermediate
Insured Corporate Portfolio, and Investment Grade Series 4, Corporate Portfolio
(each, a "Trust"), and the execution by Chase, as Trustee under the Indenture,
of a certificate or certificates evidencing ownership of a number of units
constituting the entire interest in the respective Trust (such certificate or
certificates and such aggregate units being herein called "Certificates" and
"Units"), each of which Units represents an undivided interest in the Trust,
which, as to the Rolling Government Series 4, consists of mortgage-backed
securities and, as to the Investment Grade Series 3 and 4, consists of debt
obligations (including confirmations of contracts for the purchase of certain
mortgage-backed securities and obligations not yet delivered and cash, cash
equivalents or an irrevocable letter of credit in the amount required for such
purchase upon the receipt of such mortgage-backed securities and debt
obligations), such mortgage-backed securities and debt obligations being defined
in the Indenture as Securities and referenced in the schedules to the Indenture.
<PAGE> 2
We have examined the Indenture, the Closing Memorandum delivered today by
the parties to the Indenture (the "Closing Memorandum"), the form of Certificate
and such other documents as we have deemed necessary to order to render this
opinion. Based on the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing national banking association
authorized to exercise trust powers.
2. The Indenture has been duly executed and delivered by Chase and,
assuming due execution and delivery by the Depositor, constitutes the valid
and legally binding obligation of Chase.
3. The Certificates are in proper form for execution and delivery by
Chase, as Trustee.
4. Chase, as Trustee, has duly executed and delivered to or upon the
order of the Depositor a Certificate or Certificates evidencing ownership
of the Units, registered in the name of the Depositor. Upon receipt of
confirmation of the effectiveness of the registration statement for the
sale of the Units filed with the Securities and Exchange Commission under
the Securities Act of 1933, the Trustee may deliver such other
Certificates, in such names and denominations as the Depositor, may
request, to or upon the order of the Depositor as provided in the Closing
Memorandum.
5. Chase, as Trustee, may lawfully advance to the Trust amounts as may
be necessary to provide periodic interest distributions of approximately
equal amounts, and may be reimbursed, without interest, for any such
advances from funds in the interest account, as provided in the Indenture.
In rendering the foregoing opinion, we have not considered, among other
things, whether the Securities have been duly authorized and delivered.
Very truly yours,
CARTER, LEDYARD & MILBURN
<PAGE> 1
EXHIBIT 3.4
CARTER, LEDYARD & MILBURN
2 WALL STREET
NEW YORK, NEW YORK 10005
May 29, 1997
The Chase Manhattan Bank,
as Trustee of Fidelity Defined
Trusts, Series 2
4 New York Plaza
New York, New York 10004-2413
Attention: Mr. Paul J. Holland
Vice President
Re: Fidelity Defined Trusts, Series 4:
Investment Grade Series 3, Intermediate Insured Corporate Portfolio
and Investment Grade Series 4, Corporate Portfolio
-------------------------------------------------------------------
Dear Sirs:
We are acting as special counsel with respect to New York tax matters for
Fidelity Defined Trusts, Series 4, with respect to two trusts thereunder,
Investment Grade Series 3, Intermediate Insured Corporate Portfolio and
Investment Grade Series 4, Corporate Portfolio (each, a "Trust"), which will be
established under a certain Standard Terms and Conditions of Trust dated January
3, 1996 and a related Trust Agreement dated as of today (collectively, the
"Indenture") between National Financial Services Corporation, as Depositor and
Portfolio Supervisor (the "Depositor"), Muller Data Corporation as Evaluator and
The Chase Manhattan Bank, as Trustee (the "Trustee"). Pursuant to the terms of
the Indenture, units of fractional undivided interest in the Trust (the "Units")
will be issued in the aggregate number set forth in the Indenture.
We have examined and are familiar with originals or certified copies, or
copies otherwise identified to our satisfaction, of such documents as we have
deemed necessary or appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each dated today and addressed to
the Trustee, of Chapman and Cutler, counsel for the Depositor, with respect to
the matters of law set forth therein.
Based upon the foregoing, we are of the opinion that:
1. The Trust will not constitute an association taxable as a
corporation under New York law, and accordingly will not be subject to the
New York State franchise tax of the New York general corporation tax.
2. Under the income tax laws of the State and City of New York, the
income of the Trust will be considered the income of the holders of the
Units.
We consent to the filing of this opinion as an exhibit to the Registration
Statement (No. 333-27077) filed with the Securities and Exchange Commission with
respect to the registration of the sale of the Units and to the references to
our name under the captions "Tax Status" and "Legal Opinions" in such
Registration Statement and the preliminary prospectus included therein.
Very truly yours,
CARTER, LEDYARD & MILBURN
SFl:tbm
<PAGE> 1
Exhibit 4.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated May 29, 1997, accompanying the
financial statements of the Fidelity Defined Trusts Series 4 (Rolling Government
Series 4, Investment Grade Series 3 and Investment Grade Series 4) included
herein and to the reference to our Firm as experts under the heading
"Independent Certified Public Accountants" in the prospectus which is a part of
this registration statement.
Deloitte & Touche LLP
May 29, 1997
New York, New York
<PAGE> 1
Exhibit 4.1
Standard & Poor's
25 Broadway
New York, NY 10004-1064
May 29, 1997
Chapman & Cutler
111 West Monroe Street
Chicago, IL 60603
Re: Fidelity Defined Trusts Series 4 consisting of Rolling Government
Series 3, GNMA Portfolio and Investment Grade Series 3,
Intermediate Insured Corporate Portfolio
Pursuant to your request for a Standard & Poor's rating on the units of the
above-captioned Trust, SEC 333-27077, we have reviewed the information presented
to us and have assigned a "AAA" rating to the units of the Trust and a "AAA"
rating to the securities contained in the Trust. The ratings are direct
reflections of the portfolios of the Trust, which will be composed solely of
Government National Mortgage Association Obligations fully guaranteed as to
principal and interest by the full faith and credit of the United States or
Insured Corporate Obligations.
You have permission to use the name of Standard & Poor's and the
above-assigned ratings in connection with your dissemination of information
relating to these units, provided that it is understood that the ratings are not
"market" ratings nor recommendations to buy, hold, or sell the units of the
trusts or the securities contained in the Trust. Further, it should be
understood the rating on the units does not take into account the extent to
which Trust expenses or portfolio asset sales for less than the Trust's purchase
price will reduce payment to the unit holders of the interest and principal
required to be paid on the portfolio assets. Standard & Poor's reserves the
right to advise its own clients, subscribers, and the public of the ratings.
Standard & Poor's relies on the sponsor and its counsel, accountants, and other
experts for the accuracy and completeness of the information submitted in
connection with the ratings. Standard & Poor's does not independently verify the
truth or accuracy of any such information.
This letter evidences our consent to the use of the name of Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. in
connection with the rating assigned to the units in the registration statement
or prospectus relating to the units or the Trust. However, this letter should
not be construed as a consent by us, within the meaning of Section 7 of the
Securities Act of 1933, to the use of the name of Standard & Poor's Ratings
Services, a division of the McGraw-Hill Companies, Inc. in connection with the
ratings assigned to the securities contained in the Trust. You
<PAGE> 2
are hereby authorized to file a copy of this letter with the Securities and
Exchange Commission.
Please be certain to send us a copy of your final prospectus as soon as it
becomes available. Should we not receive it within a reasonable time after the
closing or should it not conform to the representations made to us, we reserve
the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
<PAGE> 1
Exhibit 4.3
MULLER DATA CORPORATION
395 HUDSON STREET
NEW YORK, NEW YORK 10014-3622
May 29, 1997
Fidelity Capital Markets
164 Northern Avenue
Boston, MA 02110
Re: Fidelity Defined Trusts, Series 4
---------------------------------
Gentlemen:
We have examined Registration Statement File No. 333-27077 for the above
captioned trusts. We hereby acknowledge that Muller Data Corporation is
currently acting as the evaluator for the trust. We hereby consent to the use in
the Registration Statement of the reference to Muller Data Corporation as
evaluator.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.
Sincerely
Mario S. Buscemi
-------------------------------------
Chief Operating Officer
MSB:tg
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR FIDELITY DEFINED TRUST SERIES 4 Fidelity Rolling Government
Series 4, Short Treasury Portfolio AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> FIDELITY DEFINED TRUST SERIES 4 FIDELITY ROLLING GOVERNMENT
SERIES 4
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-29-1998
<PERIOD-START> MAY-29-1997
<PERIOD-END> MAY-29-1997
<INVESTMENTS-AT-COST> 496,095
<INVESTMENTS-AT-VALUE> 496,095
<RECEIVABLES> 2,813
<ASSETS-OTHER> 32,364
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 531,272
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,164
<TOTAL-LIABILITIES> 38,164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 493,108
<SHARES-COMMON-STOCK> 49,702
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 493,108
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49,702
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR FIDELITY DEFINED TRUST SERIES 4 FIDELITY INVESTMENT GRADE
SERIES 3, INTERMEDIATE INSURED CORPORATE PORTFOLIO AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> FIDELITY DEFINED TRUST SERIES 4
FIDELITY INVESTMENT GRADE SERIES 3, INTERMEDIATE INSURED CORPORATE
PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-29-1998
<PERIOD-START> MAY-29-1997
<PERIOD-END> MAY-29-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 480,304
<INVESTMENTS-AT-VALUE> 480,304
<RECEIVABLES> 7,230
<ASSETS-OTHER> 42,934
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 530,468
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,151
<TOTAL-LIABILITIES> 53,151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 477,317
<SHARES-COMMON-STOCK> 49,702
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 477,317
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49,702
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR FIDELITY DEFINED TRUST SERIES 4 FIDELITY INVESTMENT
GRADE 4, CORPORATE PORTFOLIO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<SERIES>
<NUMBER> 3
<NAME> FIDELITY DEFINED TRUST SERIES 4
FIDELITY INVESTMENT GRADE 4, COPORATE PORTFOLIO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAY-29-1998
<PERIOD-START> MAY-29-1997
<PERIOD-END> MAY-29-1997
<INVESTMENTS-AT-COST> 959,887
<INVESTMENTS-AT-VALUE> 959,887
<RECEIVABLES> 14,599
<ASSETS-OTHER> 41,184
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,015,870
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61,758
<TOTAL-LIABILITIES> 61,758
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 953,913
<SHARES-COMMON-STOCK> 99,404
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 953,913
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 99,404
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
