<PAGE>
FILE NO. 333-39466
40 ACT FILE NO. 811-2271
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on
Form N-8B-2
<TABLE>
<S> <C> <C>
A. Exact name of Trust: NUVEEN TAX-FREE UNIT TRUST, SERIES 1175
B. Name of Depositor: JOHN NUVEEN & CO. INCORPORATED
C. Complete address of Depositor's principal executive offices:
333 West Wacker Drive
Chicago, Illinois 60606
D. Name and complete address of agents for service:
JOHN NUVEEN & CO. INCORPORATED
Attn: Alan G. Berkshire
333 West Wacker Drive
Chicago, Illinois 60606
CHAPMAN AND CUTLER
Attn: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on June 27, 2000 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on June 27, 2000 pursuant to paragraph (a) of rule 485 or 486
E. Title of securities being registered: Units of undivided fractional beneficial interest.
F. 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 June 27, 2000 at
1:30 P.M. pursuant to Rule 487.
</TABLE>
<PAGE>
A
[LOGO]
Nuveen National
Insured Trust 430
<TABLE>
<S> <C>
CUSIP NUMBERS:
MONTHLY: 67067W 348
QUARTERLY: 67067W 355
SEMI-ANNUALLY: 67067W 363
</TABLE>
Prospectus Part A dated June 27, 2000
--------------------------------------------------------------------------------
Overview
Nuveen National Insured Trust 430 (the "Trust") is a series of the Nuveen
Tax-Free Unit Trust, Series 1175. The Trust is a unit investment trust
consisting of a portfolio of bonds and seeks to provide income exempt from
Federal income tax and to conserve capital.
THIS PART A PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART B OF
THE NUVEEN TAX-FREE UNIT TRUST PROSPECTUS WHICH IS DATED APRIL 10, 2000.
ADDITIONAL INFORMATION ABOUT THE TRUST MAY BE FOUND IN THE INFORMATION
SUPPLEMENT WHICH CAN BE OBTAINED FROM THE TRUSTEE AT 4 NEW YORK PLAZA, NEW YORK,
NY 10004-2413; (800) 257-8787.
<TABLE>
<S> <C>
Contents
1 Overview 4 Interest Distributions
2 Trust Summary and Financial Highlights 5 Risk Factors
2 The Trust 6 Tax Status
2 Investment Objectives 6 The Insurers
2 The Portfolio 7 Schedule of Investments
2 Insurance on the Bonds 8 Statement of Condition
3 Essential Information 9 Report of Independent Public Accountants
</TABLE>
<TABLE>
<S> <C>
NOT FDIC MAY LOSE VALUE
INSURED NO BANK GUARANTEE
</TABLE>
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
1
<PAGE>
TRUST SUMMARY AND FINANCIAL HIGHLIGHTS
THE TRUST
National Insured Trust 430 (the "Trust") consists of a portfolio of
interest-bearing obligations issued by or on behalf of States, certain United
States Territories or authorities and political subdivisions thereof which, in
the opinion of recognized bond counsel to the issuing authorities, provide
income which is exempt from Federal income tax, to the extent indicated in "WHAT
IS THE TAX STATUS OF UNITHOLDERS?" in Part B of this Prospectus.
INVESTMENT OBJECTIVES
The objectives of the Trust are income exempt from Federal income tax and
conservation of capital. The objectives are, of course, dependent upon the
continuing ability of the issuers, obligors and/or insurers to meet their
respective obligations.
THE PORTFOLIO
The Portfolio of the Trust consists of 9 obligations issued by entities
located in 6 states and two obligations issued by entities located in the
District of Columbia. The bonds in the Trust are either general obligations of
the governmental entity issuing them and are backed by the taxing power thereof
or are payable as to principal and interest from the income of a specific
project or authority and are not supported by the issuer's power to levy taxes.
The sources of payment for the bonds are divided as follows:
<TABLE>
<CAPTION>
NUMBER OF PORTFOLIO
ISSUES PURPOSE OF ISSUE PERCENTAGE
--------- ---------------- ----------
<C> <S> <C>
3 Health Care Facility Revenue 25.0%
3 Water and/or Sewer Revenue 25.0
2 General Obligation 20.0
1 Education Revenue 10.0
1 Power Revenue 10.0
1 Transportation 10.0
</TABLE>
Approximately 20.0% of the aggregate principal amount of the bonds in the
Trust (accounting for approximately 19.4% of the aggregate offering price of the
bonds) are original issue discount bonds. See "Risk Factors" herein and "SUMMARY
OF PORTFOLIOS" in Part B of this Prospectus for a discussion of the
characteristics of such obligations and of the risks associated therewith.
INSURANCE ON THE BONDS
Despite anything to the contrary contained in Part B of the Prospectus
concerning insurance on the bonds included in the Trust, all of the bonds in the
Trust are covered by policies of insurance obtained from AMBAC Assurance
Corporation ("AMBAC"), Financial Guaranty Insurance Company ("FGIC"), Financial
Security Assurance Inc. ("FSA") or MBIA Insurance Corporation ("MBIA"),
guaranteeing payment of principal and interest on the bonds when due. As a
result of such insurance, the bonds in the Trust have received a rating of "Aaa"
by Moody's Investors Services, Inc. ("MOODY'S"), "AAA" by Fitch IBCA, Inc.
("FITCH") and/or "AAA" by Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. ("STANDARD & POOR'S"). Insurance does not guarantee
the market value of the bonds or of Trust Units. See "The Insurers" for
additional information.
2
<PAGE>
ESSENTIAL INFORMATION, ON THE BUSINESS DAY PRIOR TO THE DATE OF DEPOSIT,
JUNE 26, 2000
Sponsor and Evaluator....... John Nuveen & Co. Incorporated
Trustee........................... The Chase Manhattan Bank
-------------------------------------------
<TABLE>
<S> <C>
Principal Amount of Bonds in Trust.......................... $ 10,000,000
Number of Units............................................. 100,000
Fractional Undivided Interest in Trust Per Unit............. 1/100,000
Public Offering Price--Less than 500 Units
Aggregate Offering Price of Bonds in Trust.............. $ 9,381,600
Divided by Number of Units.............................. $ 93.82
Plus Sales Charge 4.9% (5.152% of the Aggregate Offering
Price of the Bonds per Unit)........................... $ 4.83
Plus Maximum Organization Costs Per Unit(1)............. $ .29
Public Offering Price Per Unit(2)....................... $ 98.94
Redemption Price Per Unit (exclusive of accrued interest)... $ 93.71
Sponsor's Initial Repurchase Price Per Unit (exclusive of
accrued interest)......................................... $ 94.11
Excess of Public Offering Price Per Unit over Redemption
Price Per Unit............................................ $ 5.23
Excess of Public Offering Price Per Unit over Sponsor's
Repurchase Price Per Unit................................. $ 4.83
Average Maturity of Bonds in the Trust(3)................... 29.1 years
</TABLE>
The income, expense and distribution data set forth below have been calculated
for Unitholders receiving monthly, quarterly or semi-annual distribution
options.
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMI-ANNUAL
--------- ---------- ------------
<S> <C> <C> <C>
Calculation of Estimated Net Annual Interest Income Per Unit
Annual Interest Income(4)............................... $ 5.4588 $ 5.4588 $ 5.4588
Less Estimated Annual Expense........................... $ .1991 $ .1671 $ .1481
--------- --------- ----------
Estimated Net Annual Interest Income(5)................. $ 5.2597 $ 5.2917 $ 5.3107
Daily Rate of Accrual Per Unit.............................. $ .01461 $ .01469 $ .01475
ESTIMATED CURRENT RETURN(6)................................. 5.32% 5.35% 5.37%
ESTIMATED LONG TERM RETURN(6)............................... 5.44% 5.47% 5.49%
Trustee's Annual Fees(7).................................... $ 1.5671 $ 1.2471 $ 1.0571
</TABLE>
<TABLE>
<S> <C>
Date of Deposit................................................................................June 27, 2000
Settlement Date................................................................................June 30, 2000
Mandatory Termination Date..............................See "OTHER INFORMATION" in Part B of this Prospectus
Minimum Value of Each Trust.............................See "OTHER INFORMATION" in Part B of this Prospectus
Sponsor's Annual Evaluation Fee(8)................................$0.17 per $1,000 principal amount of Bonds
</TABLE>
3
<PAGE>
NOTES TO ESSENTIAL INFORMATION:
BECAUSE CERTAIN OF THE BONDS IN THE TRUST WILL NOT BE DELIVERED TO THE TRUSTEE
UNTIL AFTER THE SETTLEMENT DATE FOR A PURCHASE OF UNITS MADE ON THE DATE OF
DEPOSIT, INTEREST THAT ACCRUES ON THOSE BONDS BETWEEN THE DATE OF DEPOSIT AND
SUCH DELIVERY DATE WILL BE TREATED AS A RETURN OF PRINCIPAL RATHER THAN AS
TAX-EXEMPT INCOME. THE AMOUNT OF ANY SUCH RETURN OF PRINCIPAL IS NOT INCLUDED IN
THE ANNUAL INTEREST INCOME SHOWN ABOVE. FOR THE TRUST, THE FOLLOWING SETS FORTH
THE LATEST SCHEDULED BOND DELIVERY DATE, THE AMOUNT PER UNIT THAT WILL BE
TREATED AS A RETURN OF PRINCIPAL TO UNITHOLDERS WHO PURCHASE ON THE DATE OF
DEPOSIT, AND THE ESTIMATED CURRENT RETURN UNDER THE MONTHLY DISTRIBUTION PLAN
AFTER THE FIRST YEAR, ASSUMING THE PORTFOLIO AND ESTIMATED ANNUAL EXPENSES DO
NOT VARY FROM THAT SET FORTH ABOVE (SEE "PORTFOLIO OPERATING EXPENSES" IN
PART B OF THIS PROSPECTUS AND THE "SCHEDULE OF INVESTMENTS"). THE ESTIMATED
CURRENT RETURN AFTER THE FIRST YEAR WILL ALSO BE HIGHER UNDER THE QUARTERLY AND
SEMI-ANNUAL DISTRIBUTION PLANS:
<TABLE>
<S> <C> <C> <C>
ESTIMATED CURRENT
LATEST SCHEDULED PER UNIT RETURN
DELIVERY DATE RETURN OF PRINCIPAL AFTER THE FIRST YEAR
------------------------ ------------------- -----------------------
NATIONAL INSURED TRUST...................... JULY 13, 2000 $ .02 5.34%
</TABLE>
(1) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing the
Trust. These costs have been estimated at $.29 per Unit for the Trust. A
payment will be made as of the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period to an account
maintained by the Trustee from which the obligations of the investors to the
Sponsor are dispensed. To the extent that actual organization costs are
greater than the estimated amount, only the estimated organization costs
added to the Public Offering Price will be reimbursed to the Sponsor and
deducted from the assets of the Trust.
(2) Units are offered at the Public Offering Price plus accrued interest from
the preceding Record Date to, but not including, the date of settlement
(normally three business days after purchase). The Date of Deposit of the
Fund has been designated as the First Record Date for all plans of
distribution of the Trust and, accordingly, for Units purchased on the Date
of Deposit, $.04 of accrued interest to the Settlement Date will be added to
the Public Offering Price. (See "ACCRUED INTEREST" in Part B of this
Prospectus.) The evaluation time for purpose of sale, purchase or redemption
of Units is 4 p.m. Eastern time or as of any earlier time at which the New
York Stock Exchange closes. (See "PUBLIC OFFERING PRICE" in Part B of this
Prospectus.)
(3) The Average Maturity of bonds in the Trust is calculated based upon the
stated maturities of the bonds in the Trust (or, with respect to bonds for
which funds or securities have been placed in escrow to redeem such bonds on
a stated call date, based upon such call date). The Average Maturity of
bonds in the Trust may increase or decrease from time to time as bonds
mature or are called or sold.
(4) Assumes delivery of all bonds. (See "COMPOSITION OF PORTFOLIOS" appearing in
Part B of this Prospectus.) Interest income does not include accretion of
original issue discount on "zero coupon" bonds, Stripped Obligations or
other original issue discount bonds. (See "SUMMARY OF PORTFOLIOS" in Part B
of this Prospectus.)
(5) The amount and timing of interest distributions from the Trust under the
various plans of distribution are set forth below. It is anticipated that
the amount of interest to be distributed per Unit in each year under each
plan of distribution will initially be substantially equal to the Estimated
Net Annual Interest Income per Unit for that plan. The amount of interest to
be distributed annually per Unit, will generally change as bonds are
redeemed, mature or are sold or as fees and expenses increase or decrease.
(6) Estimated Long Term Return for the Trust represents the average of the
yields to maturity (or call) of the bonds in the Trust's portfolio
calculated in accordance with accepted bond practices and adjusted to
reflect a compounding factor, expenses and sales charges. Estimated Current
Return is computed by dividing the Net Annual Interest Income per Unit by
the Public Offering Price, and in contrast to Estimated Long Term Return
does not reflect the amortization of premium or accretion of discount, if
any. For more information see "ESTIMATED LONG TERM RETURN AND ESTIMATED
CURRENT RETURN" in Part B of this Prospectus.
(7) Each Trustee annual fee is per $1,000 principal amount of the underlying
bonds in the Trust for that portion of the Trust that represents a
particular plan of distribution.
(8) The Sponsor's Annual Evaluation Fee may, from time to time, be adjusted
provided that the total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase, after the date
hereof, in consumer prices for services as measured by the United States
Department of Labor Consumer Price Index entitled "All Services Less Rent"
or if such index no longer exists, a comparable index. The consent or
concurrence of any Unitholder shall not be required for any such adjustment
or increase.
INTEREST DISTRIBUTIONS
Details of interest distributions per Unit of the Trust under the various
plans appear in the following table based upon estimated Net Annual Interest
Income at the Date of Deposit:
<TABLE>
<CAPTION>
NORMAL
DISTRIBUTIONS
2000 2001 PER YEAR
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------- -------------
Record Date*............................................... 8/1 11/1 2/1 5/1
Distribution Date.......................................... 8/15 11/15 2/15 5/15
-------------------------------------------------------------------------------------------------------------------------
Monthly Distribution Plan.................................. $ .4984(1) ---- $.4398 every month ---- $5.2809
Quarterly Distribution Plan................................ $ .4984(1) $1.3275(2) $1.3275 $1.3275 $5.3129
Semi-Annual Distribution Plan.............................. $ .4984(1) $1.3329(3) $2.6658 $5.3319
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Record Dates for semi-annual distributions are May 1 and November 1; for
quarterly distributions, they are February 1, May 1, August 1 and
November 1. Record Dates for monthly distributions are the first day of each
month. Distribution Dates under each distribution plan are the fifteenth day
of the month in which the respective Record Date occurred. For additional
information see "DISTRIBUTIONS TO UNITHOLDERS" in Part B of this Prospectus.
(1) The first distribution will be paid to all Unitholders, regardless of the
distribution plan selected. Such distribution may be more or less than a
regular monthly distribution.
(2) Regular 3-month distribution.
(3) The second distribution under the semi-annual distribution plan represents a
3-month distribution; subsequent semi-annual distributions will be regular
6-month distributions.
4
<PAGE>
RISK FACTORS
Risk is inherent in all investing. Investing in a unit trust involves risk,
including the risk that you may receive little or no return on your investment
or even that you may lose part or all of your investment. Therefore, before
investing you should consider carefully the following risks that you assume when
you invest in this Trust. Because of these and other risks, the Trust should
only represent a portion of your overall portfolio and you should consider an
investment in the Trust to be a part of a longer term investment strategy that
will provide the best results when followed over a number of years. There is no
guarantee that the Trust will achieve its investment objective.
MARKET RISK: the risk that the market value of a bond or the Trust may
change rapidly and unpredictably, causing the bond or the Trust to be worth less
than its original price. Volatility in the market price of the bonds in the
Trust changes the value of the Units of the Trust. Market value may be affected
by a variety of factors including, among others, changes in the perceptions
about the issuers, changes in interest rates or inflation, changes in the
ratings of the issuers or changes in the financial condition of the issuers of
the bonds. Because the Trust is not managed, bonds in the Trust will generally
not be sold in response to market fluctuations, although bonds may be sold in
certain limited circumstances. Accordingly, an investor in the Trust may be
exposed to more market risk than an investor in certain managed investment
vehicles.
INFLATION RISK: the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the Trust's assets can decline as can the
value of the Trust's distributions.
INTEREST RATE RISK: the risk that bonds will decline in value because of a
rise in interest rates. Generally, bonds will increase in value when interest
rates decline and decrease in value when interest rates rise. Typically, bonds
with longer periods before maturity are more sensitive to interest rate changes.
CREDIT RISK: the risk that an issuer of a bond or an insurer is unable to
meet its obligation to make interest and principal payments.
CALL RISK: the risk that bonds can be prepaid or "called" by the issuer
before their stated maturity. If bonds are called, your income will decline and
you may not be able to reinvest the money you receive at as high a yield. Also,
an early call at par of a premium bond will reduce your return. Bonds in the
Trust are more likely to be called when interest rates decline. This would
result in early returns of principal to you and may result in early termination
of the Trust. The dates and prices upon which the bonds are first subject to
optional calls are provided in "Schedule of Investments." The bonds may also be
subject to special or extraordinary call provisions and "mandatory put" features
that may cause the bonds to be removed from the Trust prior to maturity.
LIQUIDITY RISK: the risk that the value of the bonds may be reduced if
trading in the bonds is limited or absent. Because the bonds will generally
trade in the over-the-counter market, there can be no assurance that a liquid
trading market will exist.
BOND QUALITY RISK: the risk that a reduction in a bond's rating may decrease
its value and the value of your investment in the Trust.
REDUCED DIVERSIFICATION RISK: the risk that the diversification of your
investment is reduced as bonds in the Trust are called, sold or mature. This
reduction in diversification may increase the risk of loss and increase your
share of Trust expenses.
LITIGATION AND LEGISLATION RISKS: the risk that future litigation or
legislation could affect the value of the Trust. In particular, future tax
legislation could affect the value of the Trust by reducing tax rates, imposing
a flat or other form of tax, exempting investment income from tax or changing
the tax status of the bonds.
CONCENTRATION RISK: the risk that the Trust is less diversified, and
therefore subject to greater risk of loss, because the Trust is concentrated in
a certain type of bond. Typically, when a certain type of bond makes up 25% or
more of the portfolio, the Trust is considered to be "concentrated" in that bond
type.
The Trust is considered to be concentrated in bonds of Health Care Facility
Revenue Issuers whose revenues are subject to certain risks including increased
governmental regulation, fluctuating occupancy levels and increased competition.
In addition, the Trust is considered to be concentrated in bonds of Water and/or
Sewer Revenue Issuers whose revenues are subject to certain risks including
problems obtaining timely and adequate rate increases and population decline
resulting in decreased user fees.
Twenty percent of the principal amount of bonds in the Trust consist of
issues of entities located in the State of Alabama; such concentration may
involve more risk than if such bonds were issued by issuers located in several
states. In addition, twenty percent of the principal amount of bonds in the
Trust consist of issues of entities located in the State of Illinois; such
concentration may involve more risk than if such bonds were issued by issuers
located in several states.
Further information concerning the various types of bonds contained in the
Trust is available in "SUMMARY OF PORTFOLIOS" in Part B of the Prospectus. An
additional discussion of potential risks may be obtained upon written or
telephonic request to the Trustee as described in "OTHER
INFORMATION--Supplemental Information" appearing in Part B of this Prospectus.
5
<PAGE>
TAX STATUS
For a discussion of the tax status of income earned on Trust Units, see
"WHAT IS THE TAX STATUS OF UNITHOLDERS?" in Part B of this Prospectus.
PURCHASE PROGRAMS
Notwithstanding anything to the contrary in Part B of the Prospectus, Units
may be purchased in the secondary market through Discounted Purchases (as
defined in "PUBLIC OFFERING PRICE" in Part B of the Prospectus) with the
following sales charges:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE*
$50,000 $100,000 $250,000 $500,000 $1,000,000 $2,500,000 WRAP
YEARS TO UNDER TO TO TO TO TO OR ACCOUNT
MATURITY $50,000 $99,999 $249,999 $499,999 $999,999 $2,499,999 MORE PURCHASES
-------- -------- -------- -------- -------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Less than 1 0 0 0 0 0 0 0 0.000%
1 but less than 2 1.523% 1.446% 1.369% 1.317% 1.215% 1.061% .900% 0.523%
2 but less than 3 2.041 1.937 1.833 1.729 1.626 1.420 1.225 0.741%
3 but less than 4 2.564 2.433 2.302 2.175 2.041 1.781 1.546 0.964%
4 but less than 5 3.093 2.961 2.828 2.617 2.459 2.175 1.883 1.093%
5 but less than 7 3.627 3.433 3.239 3.093 2.881 2.460 2.165 1.327%
7 but less than 10 4.167 3.951 3.734 3.520 3.239 2.828 2.489 1.567%
10 but less than 13 4.712 4.467 4.221 4.004 3.788 3.253 2.842 1.712%
13 but less than 16 5.263 4.988 4.712 4.439 4.167 3.627 3.169 2.013%
16 or more 5.820 5.542 5.263 4.987 4.603 4.004 3.500 2.320%
</TABLE>
----------
* Breakpoint sales charges are computed both on a dollar basis and on the
basis of the number of Units purchased, using the equivalent of 500 Units to
$50,000, 2,500 Units to $250,000, etc., and will be applied on that basis
which is more favorable to the purchaser.
THE INSURERS
The bonds in the Trust are covered by insurance policies obtained by the
Sponsor or by the issuers or underwriters of the bonds from AMBAC, FGIC, FSA or
MBIA (the "Insurers"). The "Schedule of Investments" identifies the Insurer of
each bond. Insurance guarantees the timely payment, when due, of all principal
and interest on the bonds. Such insurance is effective so long as the insured
bond is outstanding and the insurer remains in business. Insurance relates only
to the particular bond and not to the Units offered hereby or to their market
value. The bonds have received a rating of "Aaa" by Moody's, "AAA" by Fitch
and/or "AAA" by Standard & Poor's in recognition of such insurance. There can be
no assurance that any Insurer listed will be able to satisfy its commitments in
the event claims are made in the future. However, Standard & Poor's, Fitch
and/or Moody's have rated the claims-paying ability of each Insurer "AAA," "AAA"
or "Aaa," respectively. The following are brief descriptions of the Insurers.
See the Information Supplement for more complete descriptions. The Information
Supplement may be requested from the Trustee.
AMBAC ASSURANCE CORPORATION. AMBAC is a Wisconsin-domiciled stock insurance
corporation regulated by the Office of the Commissioner of Insurance of the
State of Wisconsin and licensed to do business in all 50 states, the District of
Columbia and the Commonwealth of Puerto Rico. AMBAC is a wholly owned subsidiary
of AMBAC Financial Group, Inc., a 100% publicly-held company.
FINANCIAL GUARANTY INSURANCE COMPANY. FGIC is a wholly-owned subsidiary of
FGIC Corporation (the "Corporation"), a Delaware holding company. The
Corporation is a subsidiary of General Electric Capital Corporation ("GE
Capital"). Neither the Corporation nor GE Capital is obligated to pay the debts
of or the claims against FGIC. FGIC is a monoline financial guaranty insurer
domiciled in the State of New York and subject to regulation by the State of New
York Insurance Department. FGIC is currently licensed to write insurance in all
50 states and the District of Columbia.
FINANCIAL SECURITY ASSURANCE INC. FSA is a monoline insurance company
incorporated under the laws of the State of New York. FSA is licensed to engage
in the financial guaranty insurance business in all 50 states, the District of
Columbia and Puerto Rico. FSA and its subsidiaries are engaged in the business
of writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. FSA and its subsidiaries principally
insure asset-backed, collateralized and municipal securities. FSA is a
wholly-owned subsidiary of Financial Security Assurance Holdings Ltd.
("Holdings"), a New York Stock Exchange listed company. FSA participates in
strategic partnerships with XL Capital Ltd. and The Tokio Marine and Fire
Insurance Company Limited.
MBIA INSURANCE CORPORATION. MBIA is the principal operating subsidiary of
MBIA, Inc., a New York Stock Exchange listed company. MBIA, Inc. is not
obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the
State of New York and licensed to do business in and subject to regulation under
the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of
the United States and the Territory of Guam. The Insurer has two European
branches, one in the Republic of France and the other in the Kingdom of Spain.
6
<PAGE>
SCHEDULE OF INVESTMENTS AT THE DATE OF DEPOSIT, JUNE 27, 2000
<TABLE>
<CAPTION>
Ratings(3) Trustee's
Optional -------------------- Determination
Aggregate Name of Issuer and Title of Issue Represented Redemption Standard of Offering
Principal by Sponsor's Contracts to Purchase Bonds(1) Provisions(2) & Poor's Moody's Price
<C> <C> <S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
$ 1,000,000 Jefferson County, Alabama, Sewer Revenue Capital 2009 at 101 AAA Aaa $ 965,670
Improvement Warrants, Series 1999-A, 5.75% Due
2/1/38. (FGIC Insured.)
1,000,000 * The Board of Trustees of the University of Alabama, 2010 at 101 AAA Aaa 986,530
University of Alabama at Birmingham, Hospital
Revenue Bonds, Series 2000-A, 5.875% Due 9/1/31.
(When issued.) (MBIA Insured.)
1,000,000 District of Columbia, Revenue Bonds (The Catholic 2009 at 101 AAA Aaa 961,790
University of America Project), Series 1999, 5.625%
Due 10/1/29. (AMBAC Insured.)
1,000,000 District of Columbia (Washington, D.C.), General 2008 at 101 AAA Aaa 902,850
Obligation Refunding Bonds (Series 1998B), 5.25%
Due 6/1/27. (MBIA Insured.)
1,000,000 City and County of Honolulu (Hawaii), Wastewater 2009 at 101 AAA Aaa 884,030
System Revenue Bonds (Second Bond Resolution),
Junior Series 1998, 5.00% Due 7/1/23. (FGIC
Insured.)
1,000,000 City of Chicago (Illinois), General Obligation Bonds 2010 at 101 AAA Aaa 965,270
(Neighborhoods Alive 21 Program), Series 2000A,
5.75% Due 1/1/40. (Original issue discount bonds
delivered on or about March 22, 2000 at a price of
93.649% of principal amount.)(FGIC Insured.)
500,000 City of Chicago (Illinois), Second Lien Wastewater 2010 at 101 AAA Aaa 503,870
Transmission Revenue Bonds, Series 2000, 6.00% Due
1/1/30. (MBIA Insured.)
500,000 Illinois Health Facilities Authority, Revenue 2008 at 101 AAA Aaa 452,330
Refunding Bonds, Series 1998 (The Methodist Medical
Center of Illinois), 5.25% Due 11/15/21. (MBIA
Insured.)
1,000,000 Iowa Finance Authority, Hospital Facilities Revenue 2010 at 101 AAA Aaa 985,410
Bonds, Series 2000 (Iowa Health System), 5.875% Due
2/15/30. (AMBAC Insured.)
1,000,000 Clark County, Nevada, Las Vegas McCarran 2008 at 101 AAA Aaa 853,790
International Airport, Passenger Facility Charge
Refunding Revenue Bonds, 1998 Series A, 4.75% Due
7/1/22. (Original issue discount bonds delivered on
or about April 16, 1998 at a price of 92.54% of
principal amount.)(MBIA Insured.)
1,000,000 Oliver County, North Dakota (Square Butte Electric 2009 at 102 AAA Aaa 920,060
Cooperative), Pollution Control Revenue Refunding
Bonds, Series 1998A, 5.30% Due 1/1/27. (AMBAC
Insured.)
----------- -----------
$10,000,000 $ 9,381,600
=========== ===========
</TABLE>
* These bonds, or a portion thereof, have delivery dates beyond the normal
settlement date. Their expected delivery date is July 13, 2000. Contracts
relating to bonds with delivery dates after the date of settlement for
purchase made on the Date of Deposit constitute approximately 10% of the
aggregate principal amount of the Trust. (See "COMPOSITION OF PORTFOLIOS" in
Part B of this Prospectus.)
------------
(1) The Sponsor's contracts to purchase bonds were entered into during the
period from June 23, 2000 to June 26, 2000. Other information regarding the
bonds in the Trust on the Date of Deposit is as follows:
<TABLE>
<CAPTION>
COST TO PROFIT (OR LOSS) ANNUAL INTEREST BID PRICE
TRUST SPONSOR TO SPONSOR INCOME TO TRUST OF BONDS
----- ----------- ----------------- ---------------- ----------
<S> <C> <C> <C> <C>
National Insured Trust 430............................... $ 9,346,235 $ 35,365 $548,000 $9,341,600
</TABLE>
In addition, the difference between the Trustee's determination of Offering
Price and Bid Price (as a percentage of principal amount) is .40%. Neither cost
to Sponsor nor profit (or loss) to Sponsor reflects underwriting profits or
losses received or incurred by the Sponsor through its participation in
underwriting syndicates. The Sponsor did not participate as either the sole
underwriter or as a manager or member of a syndicate that acted as the original
underwriter of any of the bonds.
(2) The bonds are first subject to optional redemption in the years, and at
the prices, shown. Unless otherwise indicated, the bonds, except for bonds
issued at a substantial original issue discount, are redeemable at declining
prices (but not below par value) in subsequent years. Original issue discount
bonds, including zero coupon bonds, are generally redeemable at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus, if applicable, some premium, the amount of which will decline
in subsequent years. The bonds may also be subject to sinking fund redemption
without premium prior to the dates shown. Certain bonds may be subject to
redemption without premium prior to the date shown pursuant to special or
mandatory call provisions specified in the instruments setting forth the terms
and provisions of such bonds. See "Risk Factors" herein and "COMPOSITION OF
PORTFOLIOS" and "TAX STATUS" in Part B of this Prospectus.
(3) All the bonds in the Insured Trusts, as insured by AMBAC, FSA, FGIC or
MBIA, are rated AAA by Standard & Poor's, AAA by Fitch and/or Aaa by Moody's.
The insurance on the bonds guarantees the payment of interest and principal on
the bonds when due but does not
7
<PAGE>
cover certain market risks associated with fixed income securities such as
accelerated payments, premiums payable on mandatory redemptions or interest rate
risks. (See "INSURANCE ON THE BONDS" and "DESCRIPTIONS OF RATINGS" in Part B of
this Prospectus.)
8
<PAGE>
STATEMENT OF CONDITION, AS OF JUNE 27, 2000
<TABLE>
<S> <C>
TRUST PROPERTY
Sponsor's contracts to purchase bonds, backed by an
irrevocable letter of credit(1)(2)........................ $ 9,381,600
Accrued interest to June 27, 2000 on underlying bonds(1).... 163,876
Cash in Portfolio........................................... 29,000
-----------
Total........................................... $ 9,574,476
===========
LIABILITIES AND INTEREST OF UNITHOLDERS
LIABILITIES:
Accrued interest to June 27, 2000 on underlying
bonds(4)............................................... $ 163,876
Reimbursement of Sponsor for organization costs(3)...... 29,000
-----------
Total........................................... $ 192,876
===========
INTEREST OF UNITHOLDERS:
Units of fractional undivided interest outstanding
(100,000)
Cost to investors(5).................................. $ 9,893,940
Less: Gross underwriting commission(6).............. 483,340
Less: Organization costs(3)......................... $ 29,000
-----------
Net amount applicable to investors...................... $ 9,381,600
-----------
Total........................................... $ 9,574,476
===========
------------
</TABLE>
(1) Represented by contracts to purchase bonds which include "when issued" or
"regular way" or "delayed delivery" contracts for which an irrevocable
letter of credit issued by a major commercial bank has been deposited with
the Trustee on the Date of Deposit. The amount of such letter of credit and
any cash deposited exceeds the amount necessary for the purchase of the
bonds plus accrued interest to the Date of Deposit. At the Date of Deposit,
bonds may have been delivered to the Sponsor pursuant to certain of these
contracts; the Sponsor has assigned to the Trustee all of its rights, title
and interest in and to such bonds.
(2) Aggregate value (at offering prices) as of the Date of Deposit of the bonds
listed under "Schedule of Investments" herein, and their aggregate cost to
the Trust are the same. Such offering prices were determined by Kenny S&P
Evaluation Services, a division of J. J. Kenny Co., Inc., as of the close of
business on the business day prior to the Date of Deposit. (See "EVALUATION
OF BONDS AT THE DATE OF DEPOSIT" in Part B of this Prospectus.) Insurance
coverage providing for the timely payment, when due, of all principal of and
interest on the bonds in an Insured Trust has been obtained by the Sponsor
or by the issuers of such bonds. Such insurance does not guarantee the
market value of the bonds or the value of the Units. Both the bid and the
offering prices of the underlying bonds and of the Units may include value
attributable to such policies of insurance.
(3) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing the
Trust. These costs have been estimated at $.29 per Unit for the Trust. A
payment will be made as of the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period to an account
maintained by the Trustee from which the obligations of the investors to the
Sponsor are dispensed. To the extent that actual organization costs are
greater than the estimated amount, only the estimated organization costs
added to the Public Offering Price will be reimbursed to the Sponsor and
deducted from the assets of the Trust.
(4) Representing, as set forth in "ACCRUED INTEREST" in Part B of this
Prospectus, advancement by the Trustee of an amount equal to the accrued
bond interest as of the Date of Deposit.
(5) Aggregate Public Offering Price (exclusive of accrued interest) computed as
set forth under "PUBLIC OFFERING PRICE" in Part B of this Prospectus.
(6) The gross underwriting commission of 4.90% of the Public Offering Price has
been calculated on the assumption that the Units sold are not subject to a
reduction of sales charge for quantity purchases. In single transactions
involving 500 Units or more, the sales charge is reduced. (See "PUBLIC
OFFERING PRICE" in Part B of this Prospectus.)
9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF JOHN NUVEEN & CO. INCORPORATED AND UNITHOLDERS OF
NATIONAL INSURED TRUST 430:
We have audited the accompanying statement of condition and the schedule of
investments at date of deposit (included in Part A of this Prospectus) of
National Insured Trust 430 (contained in Nuveen Tax-Free Unit Trust,
Series 1175), as of June 27, 2000. These financial statements are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the irrevocable letter of credit arrangement
for the purchase of securities, described in Note (1) to the statement of
condition, by correspondence with the Trustee. An audit also includes assessing
the accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the statement of condition and the schedule of investments
at date of deposit referred to above present fairly, in all material respects,
the financial position of National Insured Trust 430 as of June 27, 2000, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 27, 2000
10
<PAGE>
[LOGO]
Nuveen National
Insured Trust 430
PROSPECTUS -- PART A
JUNE 27, 2000
<TABLE>
<C> <S> <C>
SPONSOR John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
Telephone: 312.917.7700
Swiss Bank Tower
10 East 50th Street
New York, NY 10022
212.207.2000
TRUSTEE The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
800.257.8787
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR 111 West Monroe Street
Chicago, IL 60603
INDEPENDENT Arthur Andersen LLP
PUBLIC 33 West Monroe Street
ACCOUNTANTS Chicago, IL 60603
FOR THE TRUSTS
</TABLE>
--------------
This Prospectus does not contain complete information about the Unit Trust
filed with the Securities and Exchange Commission in Washington, DC under the
Securities Act of 1933 and the Investment Company Act of 1940.
More information about this Trust, including the code of ethics adopted by
the Sponsor and the Trust, can be found in the Commission's Public Reference
Room. Information about the operation of the Public Reference Room may be
obtained by calling the Commission at 1-202-942-8090. Trust information is also
available on the EDGAR Database on the Commission's website at
http://www.sec.gov, or may be obtained at prescribed rates by sending an e-mail
request to [email protected] or by writing to the Commission's Public Reference
Section at 450 Fifth Street NW, Washington, D.C. 20549-0102.
No person is authorized to give any information or representation about this
Trust not contained in Parts A or B of this Prospectus or the Information
Supplement, and you should not rely on any other information.
When Units of this Fund are no longer available, this Prospectus may be used
as a preliminary Prospectus for a future series, but some of the information in
this Prospectus will be changed for that series.
UNITS OF ANY FUTURE SERIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
UNTIL THAT SERIES HAS BECOME EFFECTIVE WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO UNITS CAN BE SOLD WHERE A SALE WOULD BE ILLEGAL.
<PAGE>
A
[LOGO]
Nuveen California
Insured Trust 339
<TABLE>
<S> <C>
CUSIP NUMBERS:
MONTHLY: 67066S 520
QUARTERLY: 67066S 538
SEMI-ANNUALLY: 67066S 546
</TABLE>
Prospectus Part A dated June 27, 2000
--------------------------------------------------------------------------------
Overview
Nuveen California Insured Trust 339 (the "Trust") is a series of the Nuveen
Tax-Free Unit Trust, Series 1175. The Trust is a unit investment trust
consisting of a portfolio of bonds and seeks to provide income exempt from
Federal and California income tax and to conserve capital.
THIS PART A PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART B OF
THE NUVEEN TAX-FREE UNIT TRUST PROSPECTUS WHICH IS DATED APRIL 10, 2000.
ADDITIONAL INFORMATION ABOUT THE TRUST MAY BE FOUND IN THE INFORMATION
SUPPLEMENT WHICH CAN BE OBTAINED FROM THE TRUSTEE AT 4 NEW YORK PLAZA, NEW YORK,
NY 10004-2413; (800) 257-8787.
<TABLE>
<S> <C>
Contents
1 Overview 5 Interest Distributions
2 Trust Summary and Financial Highlights 6 Risk Factors
2 The Trust 7 Tax Status
2 Investment Objectives 8 The Insurers
2 The Portfolio 9 Schedule of Investments
2 Insurance on the Bonds 10 Statement of Condition
3 Essential Information 11 Report of Independent Public Accountants
</TABLE>
<TABLE>
<S> <C>
NOT FDIC MAY LOSE VALUE
INSURED NO BANK GUARANTEE
</TABLE>
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
1
<PAGE>
TRUST SUMMARY AND FINANCIAL HIGHLIGHTS
THE TRUST
California Insured Trust 339 (the "Trust") consists of a portfolio of
interest-bearing obligations issued by or on behalf of the State of California,
certain United States Territories or authorities and political subdivisions
thereof which, in the opinion of recognized bond counsel to the issuing
authorities, provide income which is exempt from Federal income tax and
California income tax, to the extent indicated below.
INVESTMENT OBJECTIVES
The objectives of the Trust are income exempt from Federal and state income
taxes, and conservation of capital. The objectives are, of course, dependent
upon the continuing ability of the issuers, obligors and/or insurers to meet
their respective obligations. Accordingly, there is no guarantee that the Trust
will meet its objectives.
THE PORTFOLIO
The Portfolio of the Trust consists of 7 obligations issued by entities
located in California. The bonds in the Trust are either general obligations of
the governmental entity issuing them and are backed by the taxing power thereof
or are payable as to principal and interest from the income of a specific
project or authority and are not supported by the issuer's power to levy taxes.
The sources of payment for the bonds are divided as follows:
<TABLE>
<CAPTION>
NUMBER OF PORTFOLIO
ISSUES PURPOSE OF ISSUE PERCENTAGE
--------- ---------------- ----------
<C> <S> <C>
3 Water and/or Sewer Revenue 42.3%
2 Dedicated-Tax Supported Revenue 29.1
2 Health Care Facility Revenue 28.6
</TABLE>
INSURANCE ON THE BONDS
Despite anything to the contrary contained in Part B of the Prospectus
concerning insurance on the bonds included in the Trust, all of the bonds in the
Trust are covered by policies of insurance obtained from AMBAC Assurance
Corporation ("AMBAC"), Financial Guaranty Insurance Company ("FGIC"), Financial
Security Assurance Inc. ("FSA") or MBIA Insurance Corporation ("MBIA"),
guaranteeing payment of principal and interest on the bonds when due. As a
result of such insurance, the bonds in the Trust have received a rating of "Aaa"
by Moody's Investors Services, Inc. ("MOODY'S"), "AAA" by Fitch IBCA, Inc.
("FITCH") and/or "AAA" by Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. ("STANDARD & POOR'S"). Insurance does not guarantee
the market value of the bonds or of Trust Units. See "The Insurers" for
additional information.
2
<PAGE>
ESSENTIAL INFORMATION, ON THE BUSINESS DAY PRIOR TO THE DATE OF DEPOSIT,
JUNE 26, 2000
Sponsor and Evaluator....... John Nuveen & Co. Incorporated
Trustee........................... The Chase Manhattan Bank
-------------------------------------------
<TABLE>
<S> <C>
Principal Amount of Bonds in Trust.......................... $ 3,500,000
Number of Units............................................. 35,000
Fractional Undivided Interest in Trust Per Unit............. 1/35,000
Public Offering Price--Less than 500 Units
Aggregate Offering Price of Bonds in Trust.............. $ 3,288,287
Divided by Number of Units.............................. $ 93.95
Plus Sales Charge 4.9% (5.152% of the Aggregate Offering
Price of the Bonds per Unit)........................... $ 4.84
Plus Maximum Organization Costs Per Unit(1)............. $ .29
Public Offering Price Per Unit(2)....................... $ 99.08
Redemption Price Per Unit (exclusive of accrued interest)... $ 93.85
Sponsor's Initial Repurchase Price Per Unit (exclusive of
accrued interest)......................................... $ 94.24
Excess of Public Offering Price Per Unit over Redemption
Price Per Unit............................................ $ 5.23
Excess of Public Offering Price Per Unit over Sponsor's
Repurchase Price Per Unit................................. $ 4.84
Average Maturity of Bonds in the Trust(3)................... 26.7 years
</TABLE>
The income, expense and distribution data set forth below have been calculated
for Unitholders receiving monthly, quarterly or semi-annual distribution
options.
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMI-ANNUAL
--------- ---------- ------------
<S> <C> <C> <C>
Calculation of Estimated Net Annual Interest Income Per Unit
Annual Interest Income(4)............................... $ 5.2914 $ 5.2914 $ 5.2914
Less Estimated Annual Expense........................... $ .2205 $ .1885 $ .1695
--------- --------- ----------
Estimated Net Annual Interest Income(5)................. $ 5.0709 $ 5.1029 $ 5.1219
Daily Rate of Accrual Per Unit.............................. $ .01408 $ .01417 $ .01422
ESTIMATED CURRENT RETURN(6)................................. 5.12% 5.15% 5.17%
ESTIMATED LONG TERM RETURN(6)............................... 5.18% 5.21% 5.23%
Trustee's Annual Fees(7).................................... $ 1.6346 $ 1.3146 $ 1.1246
</TABLE>
<TABLE>
<S> <C>
Date of Deposit................................................................................June 27, 2000
Settlement Date................................................................................June 30, 2000
Mandatory Termination Date..............................See "OTHER INFORMATION" in Part B of this Prospectus
Minimum Value of Each Trust.............................See "OTHER INFORMATION" in Part B of this Prospectus
Sponsor's Annual Evaluation Fee(8)................................$0.17 per $1,000 principal amount of Bonds
</TABLE>
3
<PAGE>
NOTES TO ESSENTIAL INFORMATION:
(1) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing the
Trust. These costs have been estimated at $.29 per Unit for the Trust. A
payment will be made as of the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period to an account
maintained by the Trustee from which the obligations of the investors to the
Sponsor are dispensed. To the extent that actual organization costs are
greater than the estimated amount, only the estimated organization costs
added to the Public Offering Price will be reimbursed to the Sponsor and
deducted from the assets of the Trust.
(2) Units are offered at the Public Offering Price plus accrued interest from
the preceding Record Date to, but not including, the date of settlement
(normally three business days after purchase). The Date of Deposit of the
Fund has been designated as the First Record Date for all plans of
distribution of the Trust and, accordingly, for Units purchased on the Date
of Deposit, $.04 of accrued interest to the Settlement Date will be added to
the Public Offering Price. (See "ACCRUED INTEREST" in Part B of this
Prospectus.) The evaluation time for purpose of sale, purchase or redemption
of Units is 4 p.m. Eastern time or as of any earlier time at which the New
York Stock Exchange closes. (See "PUBLIC OFFERING PRICE" in Part B of this
Prospectus.)
(3) The Average Maturity of bonds in the Trust is calculated based upon the
stated maturities of the bonds in the Trust (or, with respect to bonds for
which funds or securities have been placed in escrow to redeem such bonds on
a stated call date, based upon such call date). The Average Maturity of
bonds in the Trust may increase or decrease from time to time as bonds
mature or are called or sold.
(4) Assumes delivery of all bonds. (See "COMPOSITION OF PORTFOLIOS" appearing in
Part B of this Prospectus.) Interest income does not include accretion of
original issue discount on "zero coupon" bonds, Stripped Obligations or
other original issue discount bonds. (See "SUMMARY OF PORTFOLIOS" in Part B
of this Prospectus.)
(5) The amount and timing of interest distributions from the Trust under the
various plans of distribution are set forth below. It is anticipated that
the amount of interest to be distributed per Unit in each year under each
plan of distribution will initially be substantially equal to the Estimated
Net Annual Interest Income per Unit for that plan. The amount of interest to
be distributed annually per Unit, will generally change as bonds are
redeemed, mature or are sold or as fees and expenses increase or decrease.
(6) Estimated Long Term Return for the Trust represents the average of the
yields to maturity (or call) of the bonds in the Trust's portfolio
calculated in accordance with accepted bond practices and adjusted to
reflect a compounding factor, expenses and sales charges. Estimated Current
Return is computed by dividing the Net Annual Interest Income per Unit by
the Public Offering Price, and in contrast to Estimated Long Term Return
does not reflect the amortization of premium or accretion of discount, if
any. For more information see "ESTIMATED LONG TERM RETURN AND ESTIMATED
CURRENT RETURN" in Part B of this Prospectus.
(7) Each Trustee annual fee is per $1,000 principal amount of the underlying
bonds in the Trust for that portion of the Trust that represents a
particular plan of distribution.
(8) The Sponsor's Annual Evaluation Fee may, from time to time, be adjusted
provided that the total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase, after the date
hereof, in consumer prices for services as measured by the United States
Department of Labor Consumer Price Index entitled "All Services Less Rent"
or if such index no longer exists, a comparable index. The consent or
concurrence of any Unitholder shall not be required for any such adjustment
or increase.
4
<PAGE>
INTEREST DISTRIBUTIONS
Details of interest distributions per Unit of the Trust under the various
plans appear in the following table based upon estimated Net Annual Interest
Income at the Date of Deposit:
<TABLE>
<CAPTION>
NORMAL
DISTRIBUTIONS
2000 2001 PER YEAR
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------- -------------
Record Date*............................................... 8/1 11/1 2/1 5/1
Distribution Date.......................................... 8/15 11/15 2/15 5/15
-------------------------------------------------------------------------------------------------------------------------
Monthly Distribution Plan.................................. $ .4787(1) ---- $.4224 every month ---- $5.0709
Quarterly Distribution Plan................................ $ .4787(1) $1.2753(2) $1.2753 $1.2753 $5.1029
Semi-Annual Distribution Plan.............................. $ .4787(1) $1.2798(3) $2.5596 $5.1219
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Record Dates for semi-annual distributions are May 1 and November 1; for
quarterly distributions, they are February 1, May 1, August 1 and
November 1. Record Dates for monthly distributions are the first day of each
month. Distribution Dates under each distribution plan are the fifteenth day
of the month in which the respective Record Date occurred. For additional
information see "DISTRIBUTIONS TO UNITHOLDERS" in Part B of this Prospectus.
(1) The first distribution will be paid to all Unitholders, regardless of the
distribution plan selected. Such distribution may be more or less than a
regular monthly distribution.
(2) Regular 3-month distribution.
(3) The second distribution under the semi-annual distribution plan represents a
3-month distribution; subsequent semi-annual distributions will be regular
6-month distributions.
5
<PAGE>
RISK FACTORS
Risk is inherent in all investing. Investing in a unit trust involves risk,
including the risk that you may receive little or no return on your investment
or even that you may lose part or all of your investment. Therefore, before
investing you should consider carefully the following risks that you assume when
you invest in this Trust. Because of these and other risks, the Trust should
only represent a portion of your overall portfolio and you should consider an
investment in the Trust to be a part of a longer term investment strategy that
will provide the best results when followed over a number of years. There is no
guarantee that the Trust will achieve its investment objective.
MARKET RISK: the risk that the market value of a bond or the Trust may
change rapidly and unpredictably, causing the bond or the Trust to be worth less
than its original price. Volatility in the market price of the bonds in the
Trust changes the value of the Units of the Trust. Market value may be affected
by a variety of factors including, among others, changes in the perceptions
about the issuers, changes in interest rates or inflation, changes in the
ratings of the issuers or changes in the financial condition of the issuers of
the bonds. Because the Trust is not managed, bonds in the Trust will generally
not be sold in response to market fluctuations, although bonds may be sold in
certain limited circumstances. Accordingly, an investor in the Trust may be
exposed to more market risk than an investor in certain managed investment
vehicles.
INFLATION RISK: the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the Trust's assets can decline as can the
value of the Trust's distributions.
INTEREST RATE RISK: the risk that bonds will decline in value because of a
rise in interest rates. Generally, bonds will increase in value when interest
rates decline and decrease in value when interest rates rise. Typically, bonds
with longer periods before maturity are more sensitive to interest rate changes.
CREDIT RISK: the risk that an issuer of a bond or an insurer is unable to
meet its obligation to make interest and principal payments.
CALL RISK: the risk that bonds can be prepaid or "called" by the issuer
before their stated maturity. If bonds are called, your income will decline and
you may not be able to reinvest the money you receive at as high a yield. Also,
an early call at par of a premium bond will reduce your return. Bonds in the
Trust are more likely to be called when interest rates decline. This would
result in early returns of principal to you and may result in early termination
of the Trust. The dates and prices upon which the bonds are first subject to
optional calls are provided in "Schedule of Investments." The bonds may also be
subject to special or extraordinary call provisions and "mandatory put" features
that may cause the bonds to be removed from the Trust prior to maturity.
LIQUIDITY RISK: the risk that the value of the bonds may be reduced if
trading in the bonds is limited or absent. Because the bonds will generally
trade in the over-the-counter market, there can be no assurance that a liquid
trading market will exist.
BOND QUALITY RISK: the risk that a reduction in a bond's rating may decrease
its value and the value of your investment in the Trust.
REDUCED DIVERSIFICATION RISK: the risk that the diversification of your
investment is reduced as bonds in the Trust are called, sold or mature. This
reduction in diversification may increase the risk of loss and increase your
share of Trust expenses.
LITIGATION AND LEGISLATION RISKS: the risk that future litigation or
legislation could affect the value of the Trust. In particular, future tax
legislation could affect the value of the Trust by reducing tax rates, imposing
a flat or other form of tax, exempting investment income from tax or changing
the tax status of the bonds.
CONCENTRATION RISK: the risk that the Trust is less diversified, and
therefore subject to greater risk of loss, because the Trust is concentrated in
a certain type of bond. Typically, when a certain type of bond makes up 25% or
more of the portfolio, the Trust is considered to be "concentrated" in that bond
type.
The Trust is considered to be concentrated in bonds of Water and/or Sewer
Revenue Issuers whose revenues are subject to certain risks including problems
obtaining timely and adequate rate increases and population decline resulting in
decreased user fees. In addition, the Trust is considered to be concentrated in
bonds of Dedicated-Tax Supported Revenue Issuers whose revenues are subject to
certain risks including changes in the local economy and the ability to collect
taxes in a timely fashion. In addition, the Trust is considered to be
concentrated in bonds of Health Care Facility Revenue Issuers whose revenues are
subject to certain risks including increased governmental regulation,
fluctuating occupancy levels and increased competition.
The Trust is concentrated in the bonds of issuers located in the State of
California. Such concentration may expose Unitholders to additional risks. The
financial condition of the State of California is affected by various national
and local, economic, social and environmental policies and conditions and may
have an effect on the value of the Units. Additionally, limitations imposed by
constitutional amendments, legislative measures, or voter initiatives on the
State and its local governments concerning taxes, bond indebtedness and other
matters may constrain the revenue-generating capacity of the State and its local
governments and, therefore, the ability of the issuers of the bonds to satisfy
their obligations. The State faces a structural imbalance in its budget with the
largest programs supported by the General Fund (education, health, welfare and
corrections) growing at rates higher than the growth rates for the principal
revenue sources of the General Fund.
6
<PAGE>
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the bonds, are
affected by numerous factors, such as natural disasters and cutbacks in federal
defense spending. The California economy continues to show weakness in
manufacturing, particularly aerospace, construction, services and trade.
California's population increase has resulted in traffic congestion, school
overcrowding and high housing costs which have caused an increase demand for
government services and which may impede future economic growth.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations. On December 7, 1994, Orange
County, California, together with its pooled investment fund (the "POOLED FUND")
filed for protection under Chapter 9 of the federal Bankruptcy Code. Many
governmental entities kept moneys in the Pooled Fund.
All outstanding general obligations bonds of the State are rated "AA-" by
Standard and Poor's, "Aa3" by Moody's and AA by Fitch.
Further information concerning the various types of bonds contained in the
Trust is available in "SUMMARY OF PORTFOLIOS" in Part B of the Prospectus. An
additional discussion of potential risks may be obtained upon written or
telephonic request to the Trustee as described in "OTHER
INFORMATION--Supplemental Information" appearing in Part B of this Prospectus.
TAX STATUS
For a discussion of the Federal tax status of income earned on Trust Units,
see "WHAT IS THE TAX STATUS OF UNITHOLDERS?" in Part B of this Prospectus.
In the opinion of Orrick, Herrington & Sutcliffe, L.L.P. special California
counsel to the Trust, under existing California income and property tax law
applicable to individuals who are California residents:
The Trust is not an association taxable as a corporation and the income
of the Trust will be treated as the income of the Unitholders under the
income tax laws of California.
Interest on the underlying securities (which may include bonds or other
obligations issued by the governments of Puerto Rico, the Virgin Islands,
Guam or the Northern Mariana Islands) which is exempt from tax under
California personal income tax and property tax laws when received by the
Trust will, under such laws, retain its status as tax-exempt interest when
distributed to Unitholders. However, interest on the underlying securities
attributed to a Unitholder which is a corporation subject to the California
franchise tax laws may be includable in its gross income for purposes of
determining its California franchise tax.
Under California income tax law, each Unitholder in the Trust will have
a taxable event when the Trust disposes of a security (whether by sale,
exchange, redemption or payment at maturity) or when the Unitholder redeems
or sells Units. Because of the requirement that tax cost basis be reduced to
reflect amortization of bond premium, under some circumstances a Unitholder
may realize taxable gain when Units are sold or redeemed for an amount equal
to, or less than, their original cost. The total tax cost of each Unit to a
Unitholder is allocated among each of the bond issues held in the Trust (in
accordance with the proportion of the Trust comprised by each bond issue) in
order to determine his per unit tax cost for each bond issue; and the tax
cost reduction requirements relating to amortization of bond premium will
apply separately to the per unit cost of each bond issue. Unitholders' bases
in their Units, and the bases for their fractional interest in each Trust
asset, may have to be adjusted for their pro rata share of accrued interest
received, if any, on securities delivered after the Unitholders' respective
settlement dates.
Under the California personal property tax laws, bonds (including the
Securities) or any interest therein is exempt from such tax.
Proceeds paid under the insurance policy, if any, issued to the Trustee
of the Trust with respect to the Securities which represent maturing
interest on defaulted obligations held by the Trustee will be exempt from
California personal income tax if, and to the same extent as, such interest
would have been so exempt if paid by the issuer of the defaulted
obligations.
Under Section 17280(b)(2) of the California Revenue and Taxation Code,
interest on indebtedness incurred or continued to purchase or carry Units of
the Trust is not deductible for the purposes of the California personal
income tax. While there presently is no California authority interpreting
this provision, Section 17280(b)(2) directs the California Franchise Tax
Board to prescribe regulations determining the proper allocation and
apportionment of interest costs for this purpose. The Franchise Tax Board
has not yet proposed or prescribed such regulations. In interpreting the
generally similar Federal provision, the Internal Revenue Service has taken
the position that such indebtedness need not be directly traceable to the
purchase or carrying of Units (although the Service has not contended that a
deduction for interest on indebtedness incurred to purchase or improve a
personal residence or to purchase goods or services for personal consumption
will be disallowed). In the absence of conflicting regulations or other
California authority, the California Franchise Tax Board generally has
interpreted California statutory tax provisions in accord with Internal
Revenue Service interpretations of similar Federal provisions.
7
<PAGE>
PURCHASE PROGRAMS
Notwithstanding anything to the contrary in Part B of the Prospectus, Units
may be purchased in the secondary market through Discounted Purchases (as
defined in "PUBLIC OFFERING PRICE" in Part B of the Prospectus) with the
following sales charges:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE*
$50,000 $100,000 $250,000 $500,000 $1,000,000 $2,500,000 WRAP
YEARS TO UNDER TO TO TO TO TO OR ACCOUNT
MATURITY $50,000 $99,999 $249,999 $499,999 $999,999 $2,499,999 MORE PURCHASES
-------- -------- -------- -------- -------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Less than 1 0 0 0 0 0 0 0 0.000%
1 but less than 2 1.523% 1.446% 1.369% 1.317% 1.215% 1.061% .900% 0.523%
2 but less than 3 2.041 1.937 1.833 1.729 1.626 1.420 1.225 0.741%
3 but less than 4 2.564 2.433 2.302 2.175 2.041 1.781 1.546 0.964%
4 but less than 5 3.093 2.961 2.828 2.617 2.459 2.175 1.883 1.093%
5 but less than 7 3.627 3.433 3.239 3.093 2.881 2.460 2.165 1.327%
7 but less than 10 4.167 3.951 3.734 3.520 3.239 2.828 2.489 1.567%
10 but less than 13 4.712 4.467 4.221 4.004 3.788 3.253 2.842 1.712%
13 but less than 16 5.263 4.988 4.712 4.439 4.167 3.627 3.169 2.013%
16 or more 5.820 5.542 5.263 4.987 4.603 4.004 3.500 2.320%
</TABLE>
----------
* Breakpoint sales charges are computed both on a dollar basis and on the
basis of the number of Units purchased, using the equivalent of 500 Units to
$50,000, 2,500 Units to $250,000, etc., and will be applied on that basis
which is more favorable to the purchaser.
THE INSURERS
The bonds in the Trust are covered by insurance policies obtained by the
Sponsor or by the issuers or underwriters of the bonds from AMBAC, FGIC, FSA or
MBIA (the "Insurers"). The "Schedule of Investments" identifies the Insurer of
each bond. Insurance guarantees the timely payment, when due, of all principal
and interest on the bonds. Such insurance is effective so long as the insured
bond is outstanding and the insurer remains in business. Insurance relates only
to the particular bond and not to the Units offered hereby or to their market
value. The bonds have received a rating of "Aaa" by Moody's, "AAA" by Fitch
and/or "AAA" by Standard & Poor's in recognition of such insurance. There can be
no assurance that any Insurer listed will be able to satisfy its commitments in
the event claims are made in the future. However, Standard & Poor's, Fitch
and/or Moody's have rated the claims-paying ability of each Insurer "AAA," "AAA"
or "Aaa," respectively. The following are brief descriptions of the Insurers.
See the Information Supplement for more complete descriptions. The Information
Supplement may be requested from the Trustee.
AMBAC ASSURANCE CORPORATION. AMBAC is a Wisconsin-domiciled stock insurance
corporation regulated by the Office of the Commissioner of Insurance of the
State of Wisconsin and licensed to do business in all 50 states, the District of
Columbia and the Commonwealth of Puerto Rico. AMBAC is a wholly owned subsidiary
of AMBAC Financial Group, Inc., a 100% publicly-held company.
FINANCIAL GUARANTY INSURANCE COMPANY. FGIC is a wholly-owned subsidiary of
FGIC Corporation (the "Corporation"), a Delaware holding company. The
Corporation is a subsidiary of General Electric Capital Corporation ("GE
Capital"). Neither the Corporation nor GE Capital is obligated to pay the debts
of or the claims against FGIC. FGIC is a monoline financial guaranty insurer
domiciled in the State of New York and subject to regulation by the State of New
York Insurance Department. FGIC is currently licensed to write insurance in all
50 states and the District of Columbia.
FINANCIAL SECURITY ASSURANCE INC. FSA is a monoline insurance company
incorporated under the laws of the State of New York. FSA is licensed to engage
in the financial guaranty insurance business in all 50 states, the District of
Columbia and Puerto Rico. FSA and its subsidiaries are engaged in the business
of writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. FSA and its subsidiaries principally
insure asset-backed, collateralized and municipal securities. FSA is a
wholly-owned subsidiary of Financial Security Assurance Holdings Ltd.
("Holdings"), a New York Stock Exchange listed company. FSA participates in
strategic partnerships with XL Capital Ltd. and The Tokio Marine and Fire
Insurance Company Limited.
MBIA INSURANCE CORPORATION. MBIA is the principal operating subsidiary of
MBIA, Inc., a New York Stock Exchange listed company. MBIA, Inc. is not
obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the
State of New York and licensed to do business in and subject to regulation under
the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of
the United States and the Territory of Guam. The Insurer has two European
branches, one in the Republic of France and the other in the Kingdom of Spain.
8
<PAGE>
SCHEDULE OF INVESTMENTS AT THE DATE OF DEPOSIT, JUNE 27, 2000
<TABLE>
<CAPTION>
Ratings(3) Trustee's
Optional -------------------- Determination
Aggregate Name of Issuer and Title of Issue Represented Redemption Standard of Offering
Principal by Sponsor's Contracts to Purchase Bonds(1) Provisions(2) & Poor's Moody's Price
<C> <C> <S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
$ 500,000 California Health Facilities Financing Authority, 2009 at 101 AAA Aaa $ 470,250
Insured Revenue Bonds (Sutter Health), Series
1999A, 5.35% Due 8/15/28. (MBIA Insured.)
500,000 California Statewide Communities Development 2009 at 101 AAA Aaa 462,830
Authority, Certificates of Participation, Childrens
Hospital Los Angeles, 5.25% Due 8/15/29. (MBIA
Insured.)
520,000 Fairfield-Suisun Unified School District 2008 at 102 AAA Aaa 489,481
(California), Community Facilities District No. 5
(New School Facilities), Special Tax Bonds, Series
1999, 5.25% Due 8/15/24. (FSA Insured.)
500,000 The City of Los Angeles (California), Wastewater 2008 at 101 AAA Aaa 448,150
System Revenue Bonds, Series 1998-A, 5.00% Due
6/1/28. (FGIC Insured.)
500,000 Petaluma Community Development Commission, Petaluma 2008 at 101 -- Aaa 501,675
Community Development Project (Sonoma County,
California), Tax Allocation Bonds, Series 2000A,
5.70% Due 5/1/20. (MBIA Insured.)
480,000 Placer County Water Agency (California), Water 2009 at 101 AAA Aaa 468,446
Revenue Certificates of Participation (1999 Capital
Improvement Projects), 5.50% Due 7/1/29. (AMBAC
Insured.)
500,000 Pomona Public Financing Authority (California), 1999 2009 at 101 AAA Aaa 447,455
Revenue Bonds, Series AA (Water Facilities
Project), 5.00% Due 5/1/29. (FSA Insured.)
----------- -----------
$ 3,500,000 $ 3,288,287
=========== ===========
</TABLE>
------------
(1) The Sponsor's contracts to purchase bonds were entered into during the
period from June 22, 2000 to June 23, 2000. Other information regarding the
bonds in the Trust on the Date of Deposit is as follows:
<TABLE>
<CAPTION>
COST TO PROFIT (OR LOSS) ANNUAL INTEREST BID PRICE
TRUST SPONSOR TO SPONSOR INCOME TO TRUST OF BONDS
----- ----------- ----------------- ---------------- ----------
<S> <C> <C> <C> <C>
California Insured Trust 339............................. $ 3,276,037 $ 12,250 $185,200 $3,274,787
</TABLE>
In addition, the difference between the Trustee's determination of Offering
Price and Bid Price (as a percentage of principal amount) is .39%. Neither cost
to Sponsor nor profit (or loss) to Sponsor reflects underwriting profits or
losses received or incurred by the Sponsor through its participation in
underwriting syndicates. The Sponsor did not participate as either the sole
underwriter or as a manager or member of a syndicate that acted as the original
underwriter of any of the bonds.
(2) The bonds are first subject to optional redemption in the years, and at
the prices, shown. Unless otherwise indicated, the bonds, except for bonds
issued at a substantial original issue discount, are redeemable at declining
prices (but not below par value) in subsequent years. Original issue discount
bonds, including zero coupon bonds, are generally redeemable at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus, if applicable, some premium, the amount of which will decline
in subsequent years. The bonds may also be subject to sinking fund redemption
without premium prior to the dates shown. Certain bonds may be subject to
redemption without premium prior to the date shown pursuant to special or
mandatory call provisions specified in the instruments setting forth the terms
and provisions of such bonds. See "Risk Factors" herein and "COMPOSITION OF
PORTFOLIOS" and "TAX STATUS" in Part B of this Prospectus.
(3) All the bonds in the Insured Trusts, as insured by AMBAC, FSA, FGIC or
MBIA, are rated AAA by Standard & Poor's, AAA by Fitch and/or Aaa by Moody's.
The insurance on the bonds guarantees the payment of interest and principal on
the bonds when due but does not cover certain market risks associated with fixed
income securities such as accelerated payments, premiums payable on mandatory
redemptions or interest rate risks. (See "INSURANCE ON THE BONDS" and
"DESCRIPTIONS OF RATINGS" in Part B of this Prospectus.)
9
<PAGE>
STATEMENT OF CONDITION, AS OF JUNE 27, 2000
<TABLE>
<S> <C>
TRUST PROPERTY
Sponsor's contracts to purchase bonds, backed by an
irrevocable letter of credit(1)(2)........................ $ 3,288,287
Accrued interest to June 27, 2000 on underlying bonds(1).... 57,794
Cash in Portfolio........................................... 10,150
-----------
Total........................................... $ 3,356,231
===========
LIABILITIES AND INTEREST OF UNITHOLDERS
LIABILITIES:
Accrued interest to June 27, 2000 on underlying
bonds(4)............................................... $ 57,794
Reimbursement of Sponsor for organization costs(3)...... 10,150
-----------
Total........................................... $ 67,944
===========
INTEREST OF UNITHOLDERS:
Units of fractional undivided interest outstanding
(35,000)
Cost to investors(5).................................. $ 3,467,850
Less: Gross underwriting commission(6).............. 169,413
Less: Organization costs(3)......................... $ 10,150
-----------
Net amount applicable to investors...................... $ 3,288,287
-----------
Total........................................... $ 3,356,231
===========
------------
</TABLE>
(1) Represented by contracts to purchase bonds which include "when issued" or
"regular way" or "delayed delivery" contracts for which an irrevocable
letter of credit issued by a major commercial bank has been deposited with
the Trustee on the Date of Deposit. The amount of such letter of credit and
any cash deposited exceeds the amount necessary for the purchase of the
bonds plus accrued interest to the Date of Deposit. At the Date of Deposit,
bonds may have been delivered to the Sponsor pursuant to certain of these
contracts; the Sponsor has assigned to the Trustee all of its rights, title
and interest in and to such bonds.
(2) Aggregate value (at offering prices) as of the Date of Deposit of the bonds
listed under "Schedule of Investments" herein, and their aggregate cost to
the Trust are the same. Such offering prices were determined by Kenny S&P
Evaluation Services, a division of J. J. Kenny Co., Inc., as of the close of
business on the business day prior to the Date of Deposit. (See "EVALUATION
OF BONDS AT THE DATE OF DEPOSIT" in Part B of this Prospectus.) Insurance
coverage providing for the timely payment, when due, of all principal of and
interest on the bonds in an Insured Trust has been obtained by the Sponsor
or by the issuers of such bonds. Such insurance does not guarantee the
market value of the bonds or the value of the Units. Both the bid and the
offering prices of the underlying bonds and of the Units may include value
attributable to such policies of insurance.
(3) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing the
Trust. These costs have been estimated at $.29 per Unit for the Trust. A
payment will be made as of the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period to an account
maintained by the Trustee from which the obligations of the investors to the
Sponsor are dispensed. To the extent that actual organization costs are
greater than the estimated amount, only the estimated organization costs
added to the Public Offering Price will be reimbursed to the Sponsor and
deducted from the assets of the Trust.
(4) Representing, as set forth in "ACCRUED INTEREST" in Part B of this
Prospectus, advancement by the Trustee of an amount equal to the accrued
bond interest as of the Date of Deposit.
(5) Aggregate Public Offering Price (exclusive of accrued interest) computed as
set forth under "PUBLIC OFFERING PRICE" in Part B of this Prospectus.
(6) The gross underwriting commission of 4.90% of the Public Offering Price has
been calculated on the assumption that the Units sold are not subject to a
reduction of sales charge for quantity purchases. In single transactions
involving 500 Units or more, the sales charge is reduced. (See "PUBLIC
OFFERING PRICE" in Part B of this Prospectus.)
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF JOHN NUVEEN & CO. INCORPORATED AND UNITHOLDERS OF
CALIFORNIA INSURED TRUST 339:
We have audited the accompanying statement of condition and the schedule of
investments at date of deposit (included in Part A of this Prospectus) of
California Insured Trust 339 (contained in Nuveen Tax-Free Unit Trust,
Series 1175), as of June 27, 2000. These financial statements are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the irrevocable letter of credit arrangement
for the purchase of securities, described in Note (1) to the statement of
condition, by correspondence with the Trustee. An audit also includes assessing
the accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the statement of condition and the schedule of investments
at date of deposit referred to above present fairly, in all material respects,
the financial position of California Insured Trust 339 as of June 27, 2000, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 27, 2000
11
<PAGE>
[LOGO]
Nuveen California
Insured Trust 339
PROSPECTUS -- PART A
JUNE 27, 2000
<TABLE>
<C> <S> <C>
SPONSOR John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
Telephone: 312.917.7700
Swiss Bank Tower
10 East 50th Street
New York, NY 10022
212.207.2000
TRUSTEE The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
800.257.8787
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR 111 West Monroe Street
Chicago, IL 60603
INDEPENDENT Arthur Andersen LLP
PUBLIC 33 West Monroe Street
ACCOUNTANTS Chicago, IL 60603
FOR THE TRUSTS
</TABLE>
--------------
This Prospectus does not contain complete information about the Unit Trust
filed with the Securities and Exchange Commission in Washington, DC under the
Securities Act of 1933 and the Investment Company Act of 1940.
More information about this Trust, including the code of ethics adopted by
the Sponsor and the Trust, can be found in the Commission's Public Reference
Room. Information about the operation of the Public Reference Room may be
obtained by calling the Commission at 1-202-942-8090. Trust information is also
available on the EDGAR Database on the Commission's website at
http://www.sec.gov, or may be obtained at prescribed rates by sending an e-mail
request to [email protected] or by writing to the Commission's Public Reference
Section at 450 Fifth Street NW, Washington, D.C. 20549-0102.
No person is authorized to give any information or representation about this
Trust not contained in Parts A or B of this Prospectus or the Information
Supplement, and you should not rely on any other information.
When Units of this Fund are no longer available, this Prospectus may be used
as a preliminary Prospectus for a future series, but some of the information in
this Prospectus will be changed for that series.
UNITS OF ANY FUTURE SERIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
UNTIL THAT SERIES HAS BECOME EFFECTIVE WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO UNITS CAN BE SOLD WHERE A SALE WOULD BE ILLEGAL.
<PAGE>
A
[LOGO]
Nuveen New Jersey
Insured Trust 258
<TABLE>
<S> <C>
CUSIP NUMBERS:
MONTHLY: 67067F 436
QUARTERLY: 67067F 444
SEMI-ANNUALLY: 67067F 451
</TABLE>
Prospectus Part A dated June 27, 2000
--------------------------------------------------------------------------------
Overview
Nuveen New Jersey Insured Trust 258 (the "Trust") is a series of the Nuveen
Tax-Free Unit Trust, Series 1175. The Trust is a unit investment trust
consisting of a portfolio of bonds and seeks to provide income exempt from
Federal and New Jersey income tax and to conserve capital.
THIS PART A PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED BY PART B OF
THE NUVEEN TAX-FREE UNIT TRUST PROSPECTUS WHICH IS DATED APRIL 10, 2000.
ADDITIONAL INFORMATION ABOUT THE TRUST MAY BE FOUND IN THE INFORMATION
SUPPLEMENT WHICH CAN BE OBTAINED FROM THE TRUSTEE AT 4 NEW YORK PLAZA, NEW YORK,
NY 10004-2413; (800) 257-8787.
<TABLE>
<S> <C>
Contents
1 Overview 5 Interest Distributions
2 Trust Summary and Financial Highlights 6 Risk Factors
2 The Trust 7 Tax Status
2 Investment Objectives 8 The Insurers
2 The Portfolio 9 Schedule of Investments
2 Insurance on the Bonds 10 Statement of Condition
3 Essential Information 11 Report of Independent Public Accountants
</TABLE>
<TABLE>
<S> <C>
NOT FDIC MAY LOSE VALUE
INSURED NO BANK GUARANTEE
</TABLE>
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
1
<PAGE>
TRUST SUMMARY AND FINANCIAL HIGHLIGHTS
THE TRUST
New Jersey Insured Trust 258 (the "Trust") consists of a portfolio of
interest-bearing obligations issued by or on behalf of the State of New Jersey,
certain United States Territories or authorities and political subdivisions
thereof which, in the opinion of recognized bond counsel to the issuing
authorities, provide income which is exempt from Federal income tax and New
Jersey income tax, to the extent indicated below.
INVESTMENT OBJECTIVES
The objectives of the Trust are income exempt from Federal and state income
taxes, and conservation of capital. The objectives are, of course, dependent
upon the continuing ability of the issuers, obligors and/or insurers to meet
their respective obligations.
THE PORTFOLIO
The Portfolio of the Trust consists of 7 obligations issued by entities
located in New Jersey. The bonds in the Trust are either general obligations of
the governmental entity issuing them and are backed by the taxing power thereof
or are payable as to principal and interest from the income of a specific
project or authority and are not supported by the issuer's power to levy taxes.
The sources of payment for the bonds are divided as follows:
<TABLE>
<CAPTION>
NUMBER OF PORTFOLIO
ISSUES PURPOSE OF ISSUE PERCENTAGE
--------- ---------------- ----------
<C> <S> <C>
2 Bridge and Toll Road Revenue 28.6%
2 Health Care Facility Revenue 28.6
2 General Obligation 28.5
1 Education Revenue 14.3
</TABLE>
Approximately 14.3% of the aggregate principal amount of the bonds in the
Trust (accounting for approximately 13.0% of the aggregate offering price of the
bonds) are original issue discount bonds. See "Risk Factors" herein and "SUMMARY
OF PORTFOLIOS" in Part B of this Prospectus for a discussion of the
characteristics of such obligations and of the risks associated therewith.
INSURANCE ON THE BONDS
Despite anything to the contrary contained in Part B of the Prospectus
concerning insurance on the bonds included in the Trust, all of the bonds in the
Trust are covered by policies of insurance obtained from AMBAC Assurance
Corporation ("AMBAC"), Financial Guaranty Insurance Company ("FGIC"), Financial
Security Assurance Inc. ("FSA") or MBIA Insurance Corporation ("MBIA"),
guaranteeing payment of principal and interest on the bonds when due. As a
result of such insurance, the bonds in the Trust have received a rating of "Aaa"
by Moody's Investors Services, Inc. ("MOODY'S"), "AAA" by Fitch IBCA, Inc.
("FITCH") and/or "AAA" by Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. ("STANDARD & POOR'S"). Insurance does not guarantee
the market value of the bonds or of Trust Units. See "The Insurers" for
additional information.
2
<PAGE>
ESSENTIAL INFORMATION, ON THE BUSINESS DAY PRIOR TO THE DATE OF DEPOSIT,
JUNE 26, 2000
Sponsor and Evaluator....... John Nuveen & Co. Incorporated
Trustee........................... The Chase Manhattan Bank
-------------------------------------------
<TABLE>
<S> <C>
Principal Amount of Bonds in Trust.......................... $ 1,750,000
Number of Units............................................. 17,500
Fractional Undivided Interest in Trust Per Unit............. 1/17,500
Public Offering Price--Less than 500 Units
Aggregate Offering Price of Bonds in Trust.............. $ 1,613,536
Divided by Number of Units.............................. $ 92.20
Plus Sales Charge 4.9% (5.152% of the Aggregate Offering
Price of the Bonds per Unit)........................... $ 4.75
Plus Maximum Organization Costs Per Unit(1)............. $ .29
Public Offering Price Per Unit(2)....................... $ 97.24
Redemption Price Per Unit (exclusive of accrued interest)... $ 92.09
Sponsor's Initial Repurchase Price Per Unit (exclusive of
accrued interest)......................................... $ 92.49
Excess of Public Offering Price Per Unit over Redemption
Price Per Unit............................................ $ 5.15
Excess of Public Offering Price Per Unit over Sponsor's
Repurchase Price Per Unit................................. $ 4.75
Average Maturity of Bonds in the Trust(3)................... 28.6 years
</TABLE>
The income, expense and distribution data set forth below have been calculated
for Unitholders receiving monthly, quarterly or semi-annual distribution
options.
<TABLE>
<CAPTION>
MONTHLY QUARTERLY SEMI-ANNUAL
--------- ---------- ------------
<S> <C> <C> <C>
Calculation of Estimated Net Annual Interest Income Per Unit
Annual Interest Income(4)............................... $ 5.2143 $ 5.2143 $ 5.2143
Less Estimated Annual Expense........................... $ .2409 $ .2089 $ .1899
--------- --------- ----------
Estimated Net Annual Interest Income(5)................. $ 4.9734 $ 5.0054 $ 5.0244
Daily Rate of Accrual Per Unit.............................. $ .01381 $ .01390 $ .01395
ESTIMATED CURRENT RETURN(6)................................. 5.11% 5.15% 5.17%
ESTIMATED LONG TERM RETURN(6)............................... 5.21% 5.25% 5.27%
Trustee's Annual Fees(7).................................... $ 1.6136 $ 1.2936 $ 1.1036
</TABLE>
<TABLE>
<S> <C>
Date of Deposit................................................................................June 27, 2000
Settlement Date................................................................................June 30, 2000
Mandatory Termination Date..............................See "OTHER INFORMATION" in Part B of this Prospectus
Minimum Value of Each Trust.............................See "OTHER INFORMATION" in Part B of this Prospectus
Sponsor's Annual Evaluation Fee(8)................................$0.17 per $1,000 principal amount of Bonds
</TABLE>
3
<PAGE>
NOTES TO ESSENTIAL INFORMATION:
(1) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing the
Trust. These costs have been estimated at $.29 per Unit for the Trust. A
payment will be made as of the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period to an account
maintained by the Trustee from which the obligations of the investors to the
Sponsor are dispensed. To the extent that actual organization costs are
greater than the estimated amount, only the estimated organization costs
added to the Public Offering Price will be reimbursed to the Sponsor and
deducted from the assets of the Trust.
(2) Units are offered at the Public Offering Price plus accrued interest from
the preceding Record Date to, but not including, the date of settlement
(normally three business days after purchase). The Date of Deposit of the
Fund has been designated as the First Record Date for all plans of
distribution of the Trust and, accordingly, for Units purchased on the Date
of Deposit, $.04 of accrued interest to the Settlement Date will be added to
the Public Offering Price. (See "ACCRUED INTEREST" in Part B of this
Prospectus.) The evaluation time for purpose of sale, purchase or redemption
of Units is 4 p.m. Eastern time or as of any earlier time at which the New
York Stock Exchange closes. (See "PUBLIC OFFERING PRICE" in Part B of this
Prospectus.)
(3) The Average Maturity of bonds in the Trust is calculated based upon the
stated maturities of the bonds in the Trust (or, with respect to bonds for
which funds or securities have been placed in escrow to redeem such bonds on
a stated call date, based upon such call date). The Average Maturity of
bonds in the Trust may increase or decrease from time to time as bonds
mature or are called or sold.
(4) Assumes delivery of all bonds. (See "COMPOSITION OF PORTFOLIOS" appearing in
Part B of this Prospectus.) Interest income does not include accretion of
original issue discount on "zero coupon" bonds, Stripped Obligations or
other original issue discount bonds. (See "SUMMARY OF PORTFOLIOS" in Part B
of this Prospectus.)
(5) The amount and timing of interest distributions from the Trust under the
various plans of distribution are set forth below. It is anticipated that
the amount of interest to be distributed per Unit in each year under each
plan of distribution will initially be substantially equal to the Estimated
Net Annual Interest Income per Unit for that plan. The amount of interest to
be distributed annually per Unit, will generally change as bonds are
redeemed, mature or are sold or as fees and expenses increase or decrease.
(6) Estimated Long Term Return for the Trust represents the average of the
yields to maturity (or call) of the bonds in the Trust's portfolio
calculated in accordance with accepted bond practices and adjusted to
reflect a compounding factor, expenses and sales charges. Estimated Current
Return is computed by dividing the Net Annual Interest Income per Unit by
the Public Offering Price, and in contrast to Estimated Long Term Return
does not reflect the amortization of premium or accretion of discount, if
any. For more information see "ESTIMATED LONG TERM RETURN AND ESTIMATED
CURRENT RETURN" in Part B of this Prospectus.
(7) Each Trustee annual fee is per $1,000 principal amount of the underlying
bonds in the Trust for that portion of the Trust that represents a
particular plan of distribution.
(8) The Sponsor's Annual Evaluation Fee may, from time to time, be adjusted
provided that the total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase, after the date
hereof, in consumer prices for services as measured by the United States
Department of Labor Consumer Price Index entitled "All Services Less Rent"
or if such index no longer exists, a comparable index. The consent or
concurrence of any Unitholder shall not be required for any such adjustment
or increase.
4
<PAGE>
INTEREST DISTRIBUTIONS
Details of interest distributions per Unit of the Trust under the various
plans appear in the following table based upon estimated Net Annual Interest
Income at the Date of Deposit:
<TABLE>
<CAPTION>
NORMAL
DISTRIBUTIONS
2000 2001 PER YEAR
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------- -------------
Record Date*............................................... 8/1 11/1 2/1 5/1
Distribution Date.......................................... 8/15 11/15 2/15 5/15
-------------------------------------------------------------------------------------------------------------------------
Monthly Distribution Plan.................................. $ .4695(1) ---- $.4143 every month ---- $4.9734
Quarterly Distribution Plan................................ $ .4695(1) $1.2510(2) $1.2510 $1.2510 $5.0054
Semi-Annual Distribution Plan.............................. $ .4695(1) $1.2555(3) $2.5110 $5.0244
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Record Dates for semi-annual distributions are May 1 and November 1; for
quarterly distributions, they are February 1, May 1, August 1 and
November 1. Record Dates for monthly distributions are the first day of each
month. Distribution Dates under each distribution plan are the fifteenth day
of the month in which the respective Record Date occurred. For additional
information see "DISTRIBUTIONS TO UNITHOLDERS" in Part B of this Prospectus.
(1) The first distribution will be paid to all Unitholders, regardless of the
distribution plan selected. Such distribution may be more or less than a
regular monthly distribution.
(2) Regular 3-month distribution.
(3) The second distribution under the semi-annual distribution plan represents a
3-month distribution; subsequent semi-annual distributions will be regular
6-month distributions.
5
<PAGE>
RISK FACTORS
Risk is inherent in all investing. Investing in a unit trust involves risk,
including the risk that you may receive little or no return on your investment
or even that you may lose part or all of your investment. Therefore, before
investing you should consider carefully the following risks that you assume when
you invest in this Trust. Because of these and other risks, the Trust should
only represent a portion of your overall portfolio and you should consider an
investment in the Trust to be a part of a longer term investment strategy that
will provide the best results when followed over a number of years. There is no
guarantee that the Trust will achieve its investment objective.
MARKET RISK: the risk that the market value of a bond or the Trust may
change rapidly and unpredictably, causing the bond or the Trust to be worth less
than its original price. Volatility in the market price of the bonds in the
Trust changes the value of the Units of the Trust. Market value may be affected
by a variety of factors including, among others, changes in the perceptions
about the issuers, changes in interest rates or inflation, changes in the
ratings of the issuers or changes in the financial condition of the issuers of
the bonds. Because the Trust is not managed, bonds in the Trust will generally
not be sold in response to market fluctuations, although bonds may be sold in
certain limited circumstances. Accordingly, an investor in the Trust may be
exposed to more market risk than an investor in certain managed investment
vehicles.
INFLATION RISK: the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the Trust's assets can decline as can the
value of the Trust's distributions.
INTEREST RATE RISK: the risk that bonds will decline in value because of a
rise in interest rates. Generally, bonds will increase in value when interest
rates decline and decrease in value when interest rates rise. Typically, bonds
with longer periods before maturity are more sensitive to interest rate changes.
CREDIT RISK: the risk that an issuer of a bond or an insurer is unable to
meet its obligation to make interest and principal payments.
CALL RISK: the risk that bonds can be prepaid or "called" by the issuer
before their stated maturity. If bonds are called, your income will decline and
you may not be able to reinvest the money you receive at as high a yield. Also,
an early call at par of a premium bond will reduce your return. Bonds in the
Trust are more likely to be called when interest rates decline. This would
result in early returns of principal to you and may result in early termination
of the Trust. The dates and prices upon which the bonds are first subject to
optional calls are provided in "Schedule of Investments." The bonds may also be
subject to special or extraordinary call provisions and "mandatory put" features
that may cause the bonds to be removed from the Trust prior to maturity.
LIQUIDITY RISK: the risk that the value of the bonds may be reduced if
trading in the bonds is limited or absent. Because the bonds will generally
trade in the over-the-counter market, there can be no assurance that a liquid
trading market will exist.
BOND QUALITY RISK: the risk that a reduction in a bond's rating may decrease
its value and the value of your investment in the Trust.
REDUCED DIVERSIFICATION RISK: the risk that the diversification of your
investment is reduced as bonds in the Trust are called, sold or mature. This
reduction in diversification may increase the risk of loss and increase your
share of Trust expenses.
LITIGATION AND LEGISLATION RISKS: the risk that future litigation or
legislation could affect the value of the Trust. In particular, future tax
legislation could affect the value of the Trust by reducing tax rates, imposing
a flat or other form of tax, exempting investment income from tax or changing
the tax status of the bonds.
CONCENTRATION RISK: the risk that the Trust is less diversified, and
therefore subject to greater risk of loss, because the Trust is concentrated in
a certain type of bond. Typically, when a certain type of bond makes up 25% or
more of the portfolio, the Trust is considered to be "concentrated" in that bond
type.
The Trust is considered to be concentrated in bonds of Bridge and Toll Road
Revenue Issuers whose revenues are subject to certain risks including
competition from other transportation forms and increased fuel costs. In
addition, the Trust is considered to be concentrated in bonds of Health Care
Facility Revenue Issuers whose revenues are subject to certain risks including
increased governmental regulation, fluctuating occupancy levels and increased
competition.
The Trust is concentrated in the bonds of issuers located in the State of
New Jersey. Such concentration may expose Unitholders to additional risks. The
financial condition of the State of New Jersey is affected by various national
and local, economic, social and environmental policies and conditions and may
have an effect on the value of the Units. Additionally, Constitutional and
statutory limitations imposed on the State and its local governments
6
<PAGE>
concerning taxes, bond indebtedness and other matters may constrain the
revenue-generating capacity of the State and its local governments and,
therefore, the ability of the issuers of the bonds to satisfy their obligations.
The economic vitality of the State and its various regions and, therefore,
the ability of the State and its local governments to satisfy the bonds, are
affected by numerous factors. The State's economic base is diversified,
consisting of manufacturing, construction and service industries, supplemented
by rural areas with selective commercial agriculture. The State has a relatively
high wage labor market which has resulted in the State's business sector
becoming more vulnerable to competitive pressures.
The State is a party to numerous lawsuits in which an adverse final decision
could materially affect the State's governmental operations and consequently its
ability to pay debt service on its obligations.
All outstanding general obligation bonds of the State are rated "AA+" by
Standard and Poor's and Fitch and "Aa1" by Moody's.
Further information concerning the various types of bonds contained in the
Trust is available in "SUMMARY OF PORTFOLIOS" in Part B of the Prospectus. An
additional discussion of potential risks may be obtained upon written or
telephonic request to the Trustee as described in "OTHER
INFORMATION--Supplemental Information" appearing in Part B of this Prospectus.
TAX STATUS
For a discussion of the Federal tax status of income earned on Trust Units,
see "WHAT IS THE TAX STATUS OF UNITHOLDERS?" in Part B of this Prospectus.
The assets of the Trust will consist of interest-bearing obligations issued
by or on behalf of the State of New Jersey and counties, municipalities,
authorities and other political subdivisions thereof, and certain territories of
the United States, including Puerto Rico, Guam, the Virgin Islands and the
Northern Mariana Islands (the "New Jersey Bonds").
In the opinion of Harold and Haines, special counsel to the Trust for New
Jersey tax matters, under existing law:
The Trust will be recognized as a Trust and not an association taxable
as a corporation. The Trust will not be subject to the New Jersey
Corporation Business Tax or the New Jersey Corporation Income Tax.
With respect to the non-corporate Unitholders who are residents of New
Jersey, the income of the Trust will be treated as the income of such
Unitholders under the New Jersey Gross Income Tax. Interest on the
underlying New Jersey Bonds which would be exempt from New Jersey Gross
Income Tax if directly received by such Unitholder will retain its status as
tax-exempt interest when received by the Trust and distributed to such
Unitholder. Any proceeds paid under individual policies obtained by issuers
of New Jersey Bonds which represent maturing interest on defaulted
obligations held by the Trustee will be exempt from New Jersey Gross Income
Tax if, and to the same extent as, such interest would have been so exempt
if paid by the issuer of the defaulted obligations.
A non-corporate Unitholder will not be subject to the New Jersey Gross
Income Tax on any gain realized either when the Trust disposes of a New
Jersey Bond (whether by sale, exchange, redemption, or payment at maturity),
when the Unitholder redeems or sells his Units or upon a payment of any
proceeds under individual policies obtained by issuers of New Jersey Bonds
which represent maturing principal on defaulted obligations held by the
Trustee. Any loss realized on such disposition may not be utilized to offset
gains realized by such Unitholder on the disposition of assets the gain on
which is subject to the New Jersey Gross Income Tax.
Units of the Trust may be taxable on the death of a Unitholder under the
New Jersey Transfer Inheritance Tax Law or the New Jersey Estate Tax Law.
If a Unitholder is a corporation subject to the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, interest from the Bonds
in the Trust which is allocable to such corporation will be includable in
its entire net income for purposes of the New Jersey Corporation Business
Tax or New Jersey Corporation Income Tax, less any interest expense incurred
to carry such investment to the extent such interest expense has not been
deducted in computing Federal taxable income. Net gains derived by such
corporation on the disposition of the New Jersey Bonds by the Trust or on
the disposition of its Units will be included in its entire net income for
purposes of the New Jersey Corporation Business Tax or New Jersey
Corporation Income Tax. Any proceeds paid under individual policies obtained
by issuers of New Jersey Bonds which represent maturing interest or maturing
principal on defaulted obligations held by the Trustee will be included in
its entire net income for purposes of the New Jersey Corporation Business
Tax or New Jersey Corporation Income Tax if, and to the same extent as, such
interest or proceeds would have been so included if paid by the issuer of
the defaulted obligations.
7
<PAGE>
PURCHASE PROGRAMS
Notwithstanding anything to the contrary in Part B of the Prospectus, Units
may be purchased in the secondary market through Discounted Purchases (as
defined in "PUBLIC OFFERING PRICE" in Part B of the Prospectus) with the
following sales charges:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE*
$50,000 $100,000 $250,000 $500,000 $1,000,000 $2,500,000 WRAP
YEARS TO UNDER TO TO TO TO TO OR ACCOUNT
MATURITY $50,000 $99,999 $249,999 $499,999 $999,999 $2,499,999 MORE PURCHASES
-------- -------- -------- -------- -------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Less than 1 0 0 0 0 0 0 0 0.000%
1 but less than 2 1.523% 1.446% 1.369% 1.317% 1.215% 1.061% .900% 0.523%
2 but less than 3 2.041 1.937 1.833 1.729 1.626 1.420 1.225 0.741%
3 but less than 4 2.564 2.433 2.302 2.175 2.041 1.781 1.546 0.964%
4 but less than 5 3.093 2.961 2.828 2.617 2.459 2.175 1.883 1.093%
5 but less than 7 3.627 3.433 3.239 3.093 2.881 2.460 2.165 1.327%
7 but less than 10 4.167 3.951 3.734 3.520 3.239 2.828 2.489 1.567%
10 but less than 13 4.712 4.467 4.221 4.004 3.788 3.253 2.842 1.712%
13 but less than 16 5.263 4.988 4.712 4.439 4.167 3.627 3.169 2.013%
16 or more 5.820 5.542 5.263 4.987 4.603 4.004 3.500 2.320%
</TABLE>
----------
* Breakpoint sales charges are computed both on a dollar basis and on the
basis of the number of Units purchased, using the equivalent of 500 Units to
$50,000, 2,500 Units to $250,000, etc., and will be applied on that basis
which is more favorable to the purchaser.
THE INSURERS
The bonds in the Trust are covered by insurance policies obtained by the
Sponsor or by the issuers or underwriters of the bonds from AMBAC, FGIC, FSA or
MBIA (the "Insurers"). The "Schedule of Investments" identifies the Insurer of
each bond. Insurance guarantees the timely payment, when due, of all principal
and interest on the bonds. Such insurance is effective so long as the insured
bond is outstanding and the insurer remains in business. Insurance relates only
to the particular bond and not to the Units offered hereby or to their market
value. The bonds have received a rating of "Aaa" by Moody's, "AAA" by Fitch
and/or "AAA" by Standard & Poor's in recognition of such insurance. There can be
no assurance that any Insurer listed will be able to satisfy its commitments in
the event claims are made in the future. However, Standard & Poor's, Fitch
and/or Moody's have rated the claims-paying ability of each Insurer "AAA," "AAA"
or "Aaa," respectively. The following are brief descriptions of the Insurers.
See the Information Supplement for more complete descriptions. The Information
Supplement may be requested from the Trustee.
AMBAC ASSURANCE CORPORATION. AMBAC is a Wisconsin-domiciled stock insurance
corporation regulated by the Office of the Commissioner of Insurance of the
State of Wisconsin and licensed to do business in all 50 states, the District of
Columbia and the Commonwealth of Puerto Rico. AMBAC is a wholly owned subsidiary
of AMBAC Financial Group, Inc., a 100% publicly-held company.
FINANCIAL GUARANTY INSURANCE COMPANY. FGIC is a wholly-owned subsidiary of
FGIC Corporation (the "Corporation"), a Delaware holding company. The
Corporation is a subsidiary of General Electric Capital Corporation ("GE
Capital"). Neither the Corporation nor GE Capital is obligated to pay the debts
of or the claims against FGIC. FGIC is a monoline financial guaranty insurer
domiciled in the State of New York and subject to regulation by the State of New
York Insurance Department. FGIC is currently licensed to write insurance in all
50 states and the District of Columbia.
FINANCIAL SECURITY ASSURANCE INC. FSA is a monoline insurance company
incorporated under the laws of the State of New York. FSA is licensed to engage
in the financial guaranty insurance business in all 50 states, the District of
Columbia and Puerto Rico. FSA and its subsidiaries are engaged in the business
of writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. FSA and its subsidiaries principally
insure asset-backed, collateralized and municipal securities. FSA is a
wholly-owned subsidiary of Financial Security Assurance Holdings Ltd.
("Holdings"), a New York Stock Exchange listed company. FSA participates in
strategic partnerships with XL Capital Ltd. and The Tokio Marine and Fire
Insurance Company Limited.
MBIA INSURANCE CORPORATION. MBIA is the principal operating subsidiary of
MBIA, Inc., a New York Stock Exchange listed company. MBIA, Inc. is not
obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the
State of New York and licensed to do business in and subject to regulation under
the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of
the United States and the Territory of Guam. The Insurer has two European
branches, one in the Republic of France and the other in the Kingdom of Spain.
8
<PAGE>
SCHEDULE OF INVESTMENTS AT THE DATE OF DEPOSIT, JUNE 27, 2000
<TABLE>
<CAPTION>
Ratings(3) Trustee's
Optional -------------------- Determination
Aggregate Name of Issuer and Title of Issue Represented Redemption Standard of Offering
Principal by Sponsor's Contracts to Purchase Bonds(1) Provisions(2) & Poor's Moody's Price
<C> <C> <S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
$ 250,000 New Jersey Educational Facilities Authority, Revenue 2008 at 100 AAA Aaa $ 229,350
Bonds, Richard Stockton College of New Jersey
Issue, Series 1998 C, 5.125% Due 7/1/28. (AMBAC
Insured.)
250,000 New Jersey Health Care Facilities Financing 2009 at 101 AAA Aaa 210,080
Authority, Health System Revenue Bonds, Catholic
Health East Issue, Series 1998E, 4.75% Due
11/15/29. (Original issue discount bonds delivered
on or about January 20, 1999 at a price of 94.881%
of principal amount.)(AMBAC Insured.)
250,000 New Jersey Health Care Facilities Financing 2009 at 101 AAA Aaa 210,828
Authority, Revenue and Refunding Bonds (Saint
Barnabas Health Care System Issue), Series 1998B,
4.75% Due 7/1/28. (MBIA Insured.)
250,000 Delaware River Port Authority (New Jersey), Port 2010 at 100 AAA Aaa 248,490
District Project Bonds, Series B of 1999, 5.625%
Due 1/1/26. (FSA Insured.)
250,000 The Essex County Improvement Authority (Essex County, 2010 at 100 -- Aaa 250,000
New Jersey), County of Essex General Obligation
Guaranteed Lease Revenue Bonds, Series 2000 (County
Correctional Facility Project), 5.75% Due 10/1/30.
(FGIC Insured.)
250,000 Parking Authority of the City of Trenton, Parking 2010 at 100 -- Aaa 242,850
Revenue Bonds (City Guaranteed, Series 2000),
County of Mercer, New Jersey, 5.50% Due 4/1/30.
(General Obligation Bonds.) (FGIC Insured.)
250,000 South Jersey Transportation Authority (New Jersey), 2009 at 101 AAA Aaa 221,938
Transportation System Revenue Bonds, 1999 Series,
5.00% Due 11/1/29. (AMBAC Insured.)
----------- -----------
$ 1,750,000 $ 1,613,536
=========== ===========
</TABLE>
------------
(1) The Sponsor's contracts to purchase bonds were entered into during the
period from June 21, 2000 to June 22, 2000. Other information regarding the
bonds in the Trust on the Date of Deposit is as follows:
<TABLE>
<CAPTION>
COST TO PROFIT (OR LOSS) ANNUAL INTEREST BID PRICE
TRUST SPONSOR TO SPONSOR INCOME TO TRUST OF BONDS
----- ----------- ----------------- ---------------- ----------
<S> <C> <C> <C> <C>
New Jersey Insured Trust 258............................. $ 1,608,445 $ 5,091 $ 91,250 $1,606,536
</TABLE>
In addition, the difference between the Trustee's determination of Offering
Price and Bid Price (as a percentage of principal amount) is .40%. Neither cost
to Sponsor nor profit (or loss) to Sponsor reflects underwriting profits or
losses received or incurred by the Sponsor through its participation in
underwriting syndicates. The Sponsor did not participate as either the sole
underwriter or as a manager or member of a syndicate that acted as the original
underwriter of any of the bonds.
(2) The bonds are first subject to optional redemption in the years, and at
the prices, shown. Unless otherwise indicated, the bonds, except for bonds
issued at a substantial original issue discount, are redeemable at declining
prices (but not below par value) in subsequent years. Original issue discount
bonds, including zero coupon bonds, are generally redeemable at prices based on
the issue price plus the amount of original issue discount accreted to
redemption plus, if applicable, some premium, the amount of which will decline
in subsequent years. The bonds may also be subject to sinking fund redemption
without premium prior to the dates shown. Certain bonds may be subject to
redemption without premium prior to the date shown pursuant to special or
mandatory call provisions specified in the instruments setting forth the terms
and provisions of such bonds. See "Risk Factors" herein and "COMPOSITION OF
PORTFOLIOS" and "TAX STATUS" in Part B of this Prospectus.
(3) All the bonds in the Insured Trusts, as insured by AMBAC, FSA, FGIC or
MBIA, are rated AAA by Standard & Poor's, AAA by Fitch and/or Aaa by Moody's.
The insurance on the bonds guarantees the payment of interest and principal on
the bonds when due but does not cover certain market risks associated with fixed
income securities such as accelerated payments, premiums payable on mandatory
redemptions or interest rate risks. (See "INSURANCE ON THE BONDS" and
"DESCRIPTIONS OF RATINGS" in Part B of this Prospectus.)
9
<PAGE>
STATEMENT OF CONDITION, AS OF JUNE 27, 2000
<TABLE>
<S> <C>
TRUST PROPERTY
Sponsor's contracts to purchase bonds, backed by an
irrevocable letter of credit(1)(2)........................ $ 1,613,536
Accrued interest to June 27, 2000 on underlying bonds(1).... 30,804
Cash in Portfolio........................................... 5,075
-----------
Total........................................... $ 1,649,415
===========
LIABILITIES AND INTEREST OF UNITHOLDERS
LIABILITIES:
Accrued interest to June 27, 2000 on underlying
bonds(4)............................................... $ 30,804
Reimbursement of Sponsor for organization costs(3)...... 5,075
-----------
Total........................................... $ 35,879
===========
INTEREST OF UNITHOLDERS:
Units of fractional undivided interest outstanding
(17,500)
Cost to investors(5).................................. $ 1,701,740
Less: Gross underwriting commission(6).............. 83,129
Less: Organization costs(3)......................... $ 5,075
-----------
Net amount applicable to investors...................... $ 1,613,536
-----------
Total........................................... $ 1,649,415
===========
------------
</TABLE>
(1) Represented by contracts to purchase bonds which include "when issued" or
"regular way" or "delayed delivery" contracts for which an irrevocable
letter of credit issued by a major commercial bank has been deposited with
the Trustee on the Date of Deposit. The amount of such letter of credit and
any cash deposited exceeds the amount necessary for the purchase of the
bonds plus accrued interest to the Date of Deposit. At the Date of Deposit,
bonds may have been delivered to the Sponsor pursuant to certain of these
contracts; the Sponsor has assigned to the Trustee all of its rights, title
and interest in and to such bonds.
(2) Aggregate value (at offering prices) as of the Date of Deposit of the bonds
listed under "Schedule of Investments" herein, and their aggregate cost to
the Trust are the same. Such offering prices were determined by Kenny S&P
Evaluation Services, a division of J. J. Kenny Co., Inc., as of the close of
business on the business day prior to the Date of Deposit. (See "EVALUATION
OF BONDS AT THE DATE OF DEPOSIT" in Part B of this Prospectus.) Insurance
coverage providing for the timely payment, when due, of all principal of and
interest on the bonds in an Insured Trust has been obtained by the Sponsor
or by the issuers of such bonds. Such insurance does not guarantee the
market value of the bonds or the value of the Units. Both the bid and the
offering prices of the underlying bonds and of the Units may include value
attributable to such policies of insurance.
(3) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing the
Trust. These costs have been estimated at $.29 per Unit for the Trust. A
payment will be made as of the earlier of six months after the Initial Date
of Deposit or the end of the initial offering period to an account
maintained by the Trustee from which the obligations of the investors to the
Sponsor are dispensed. To the extent that actual organization costs are
greater than the estimated amount, only the estimated organization costs
added to the Public Offering Price will be reimbursed to the Sponsor and
deducted from the assets of the Trust.
(4) Representing, as set forth in "ACCRUED INTEREST" in Part B of this
Prospectus, advancement by the Trustee of an amount equal to the accrued
bond interest as of the Date of Deposit.
(5) Aggregate Public Offering Price (exclusive of accrued interest) computed as
set forth under "PUBLIC OFFERING PRICE" in Part B of this Prospectus.
(6) The gross underwriting commission of 4.90% of the Public Offering Price has
been calculated on the assumption that the Units sold are not subject to a
reduction of sales charge for quantity purchases. In single transactions
involving 500 Units or more, the sales charge is reduced. (See "PUBLIC
OFFERING PRICE" in Part B of this Prospectus.)
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF JOHN NUVEEN & CO. INCORPORATED AND UNITHOLDERS OF
NEW JERSEY INSURED TRUST 258:
We have audited the accompanying statement of condition and the schedule of
investments at date of deposit (included in Part A of this Prospectus) of New
Jersey Insured Trust 258 (contained in Nuveen Tax-Free Unit Trust,
Series 1175), as of June 27, 2000. These financial statements are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the irrevocable letter of credit arrangement
for the purchase of securities, described in Note (1) to the statement of
condition, by correspondence with the Trustee. An audit also includes assessing
the accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the statement of condition and the schedule of investments
at date of deposit referred to above present fairly, in all material respects,
the financial position of New Jersey Insured Trust 258 as of June 27, 2000, in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 27, 2000
11
<PAGE>
[LOGO]
Nuveen New Jersey
Insured Trust 258
PROSPECTUS -- PART A
JUNE 27, 2000
<TABLE>
<C> <S> <C>
SPONSOR John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
Telephone: 312.917.7700
Swiss Bank Tower
10 East 50th Street
New York, NY 10022
212.207.2000
TRUSTEE The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
800.257.8787
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR 111 West Monroe Street
Chicago, IL 60603
INDEPENDENT Arthur Andersen LLP
PUBLIC 33 West Monroe Street
ACCOUNTANTS Chicago, IL 60603
FOR THE TRUSTS
</TABLE>
--------------
This Prospectus does not contain complete information about the Unit Trust
filed with the Securities and Exchange Commission in Washington, DC under the
Securities Act of 1933 and the Investment Company Act of 1940.
More information about this Trust, including the code of ethics adopted by
the Sponsor and the Trust, can be found in the Commission's Public Reference
Room. Information about the operation of the Public Reference Room may be
obtained by calling the Commission at 1-202-942-8090. Trust information is also
available on the EDGAR Database on the Commission's website at
http://www.sec.gov, or may be obtained at prescribed rates by sending an e-mail
request to [email protected] or by writing to the Commission's Public Reference
Section at 450 Fifth Street NW, Washington, D.C. 20549-0102.
No person is authorized to give any information or representation about this
Trust not contained in Parts A or B of this Prospectus or the Information
Supplement, and you should not rely on any other information.
When Units of this Fund are no longer available, this Prospectus may be used
as a preliminary Prospectus for a future series, but some of the information in
this Prospectus will be changed for that series.
UNITS OF ANY FUTURE SERIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
UNTIL THAT SERIES HAS BECOME EFFECTIVE WITH THE SECURITIES AND EXCHANGE
COMMISSION. NO UNITS CAN BE SOLD WHERE A SALE WOULD BE ILLEGAL.
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B
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Nuveen Tax-Free Unit Trusts
Prospectus Part B dated April 10, 2000
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THE PROSPECTUS FOR A NUVEEN UNIT TRUST ("DEFINED PORTFOLIO") IS DIVIDED INTO
TWO PARTS. PART A OF THE PROSPECTUS RELATES EXCLUSIVELY TO PARTICULAR PORTFOLIOS
AND PROVIDES SPECIFIC INFORMATION REGARDING THE PORTFOLIOS' INVESTMENTS,
INVESTMENT OBJECTIVES, EXPENSES, FINANCIAL HIGHLIGHTS, INTEREST DISTRIBUTIONS,
ESTIMATED RETURNS, RISK FACTORS AND TAX STATUS. PART B OF THE PROSPECTUS
PROVIDES MORE GENERAL INFORMATION REGARDING THE NUVEEN TAX-FREE DEFINED
PORTFOLIOS. PART A OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED
BY PART B OF THE PROSPECTUS. YOU SHOULD READ BOTH PARTS OF THE PROSPECTUS AND
RETAIN THEM FOR FUTURE REFERENCE. EXCEPT AS PROVIDED IN PART A OF THE
PROSPECTUS, THE INFORMATION CONTAINED IN THIS PART B WILL APPLY TO EACH
PORTFOLIO.
Additional information about the Portfolio is provided in the Information
Supplement. You can receive an Information Supplement by calling The Chase
Manhattan Bank (the "TRUSTEE") at (800) 257-8787.
NUVEEN DEFINED PORTFOLIOS
TAX-FREE INCOME. Each Nuveen Tax-Free Defined Portfolio consists of a
diversified portfolio of municipal bonds (the "Bonds"). (See "Schedule of
Investments" in Part A of the Prospectus for a list of the Bonds included in a
Portfolio.) Under existing law, in the opinion of recognized bond counsel to the
issuing governmental authorities, the Bonds provide interest income exempt from
federal income tax and for State Portfolios, exempt to the extent indicated in
Part A of the Prospectus from state and, in some cases, local income taxes and
intangibles taxes, for residents of the state in which the Bonds are issued.
(See "TAX STATUS".)
INSURED PORTFOLIOS. All Bonds in each Nuveen Insured Portfolio are covered by
insurance policies obtained from AMBAC Assurance Corporation ("AMBAC"),
Financial Guaranty Insurance Company ("FGIC"), Financial Security Assurance Inc.
("FSA") or MBIA Insurance Corporation ("MBIA"), guaranteeing payment of
principal and interest on the bonds when due. As a result of such insurance, the
Bonds in the Portfolio have received a rating of "Aaa" by Moody's Investors
Services, Inc. ("MOODY'S"), "AAA" by Fitch IBCA, Inc. ("FITCH") and/or "AAA" by
Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc.
("STANDARD & POOR'S"). Please note that the insurance relates only to the Bonds
in the Insured Portfolios and not to the Units or the market value of the Bonds
or of the Units. (See "INSURANCE ON THE BONDS.")
TRADITIONAL PORTFOLIOS. Each Traditional Portfolio consists of a diversified
portfolio of Bonds rated in the category of "A" or better by Standard & Poor's,
Moody's or Fitch.
MINIMUM INVESTMENT--$5,000 or 50 Units, whichever is less.
REDEEMABLE UNITS. Units of a Portfolio are redeemable at the offices of the
Trustee at prices based upon the bid prices of the Bonds. (See "REDEMPTION.")
DISTRIBUTIONS. Interest received by a Portfolio will be paid semi-annually,
unless you elect to receive distributions monthly or quarterly. Distributions of
funds in the principal account will ordinarily be made semi-annually. (See
"DISTRIBUTIONS TO UNITHOLDERS.")
PUBLIC OFFERING PRICE. Public Offering Price of a Portfolio during the Initial
Offering Period is based upon the offering prices of the Bonds in the Portfolio
plus an upfront sales charge. The Public Offering Price during the period ending
with the earlier of six months after the Initial Date of Deposit or the end of
the initial offering period also includes organization costs incurred in
establishing a Portfolio. These costs will be deducted from the assets of the
Portfolio as of the close of such period. For Units purchased in the secondary
market, the Public Offering Price is based upon the bid prices of the Bonds in
the Portfolio. Accrued interest on the Bonds in the Portfolio from the preceding
Record Date to, but not including, the Settlement Date (normally three business
days after purchase) is added to the Public Offering Price. (See "PUBLIC
OFFERING PRICE and "ACCRUED INTEREST.")
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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NUVEEN TAX-FREE DEFINED PORTFOLIOS 4
OBJECTIVES OF THE PORTFOLIOS 4
SUMMARY OF PORTFOLIOS 4
COMPOSITION OF PORTFOLIOS 6
INSURANCE ON THE BONDS 8
PUBLIC OFFERING PRICE 9
MARKET FOR UNITS 12
ACCRUED INTEREST 12
ESTIMATED LONG TERM RETURN AND ESTIMATED
CURRENT RETURN 13
EVALUATION OF BONDS AT THE DATE OF DEPOSIT 14
TAX STATUS 14
PORTFOLIO OPERATING EXPENSES 17
DISTRIBUTIONS TO UNITHOLDERS 18
ACCUMULATION PLAN 19
REPORTS TO UNITHOLDERS 19
UNIT VALUE AND EVALUATION 19
DISTRIBUTION OF UNITS TO THE PUBLIC 20
OWNERSHIP AND TRANSFER OF UNITS 21
REDEMPTION 22
HOW UNITS MAY BE PURCHASED BY THE SPONSOR 23
HOW BONDS MAY BE REMOVED FROM THE PORTFOLIOS 23
INFORMATION ABOUT THE TRUSTEE 23
INFORMATION ABOUT THE SPONSOR 24
DESCRIPTION OF RATINGS 24
OTHER INFORMATION 26
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Accrued Interest 12
Accumulation Plan 19
Bond Ratings, Description of 24
Bonds, Initial Determination of Offering Price 14
Bonds, How Selected 4
Bonds, Limited Right of Substitution 7
Bonds, Removal from a Portfolio 23
Call Provisions of Portfolio Bonds 7
Capital Gains Taxability 14
Composition of Portfolios 6
Dealer Discounts 20
Distributions to Unitholders 18
Part
Distribution Payment Dates A,18
Distribution of Units to the Public 20
Essential Information Regarding the Portfolios Part A
Part
Estimated Long Term Return and Estimated Current Return A,13
Evaluation 19
Expenses for Normal Portfolio Operation 17
Indenture, Amendment of 26
Indenture, Termination of 27
Insurance on the Bonds 8
Part
Interest Account Distributions A,18
Legal Opinion 27
Limitations on Liabilities of Sponsor and Trustee 24
Market for Units 12
Minimum Transaction 20
Objectives of the Portfolios 4
Optional Distribution Plan 18
Other Information 26
Ownership and Transfer of Units 21
Principal Account Distributions 18
Public Offering Price of Units 9
Purchase of Units by Sponsor 23
Quantity Purchases 9
Part
Record Dates A,18
Redemption of Units Without Charge 22
Report of Independent Public Accountants Part A
Reports to Unitholders 19
Risk Factors Part A
Sales Charge 9
Schedules of Investments Part A
Sponsor, Information About 24
State Tax Status Part A
Statements of Condition Part A
Successor Trustees and Sponsors 24
Supplemental Information 27
Tax Status of Unitholders 14
Trustee, Information About 23
Units, Description of 4
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NUVEEN TAX-FREE DEFINED PORTFOLIOS
This Nuveen Tax-Free Defined Portfolio is one of a series of separate but
similar investment companies created by John Nuveen & Co. Incorporated, each of
which is designated by a different Series number. The underlying unit investment
trusts contained in this Series are combined under one Trust Indenture and
Agreement. Specific information regarding the Portfolios is set forth in Part A
of this Prospectus. The various Nuveen Tax-Free Defined Portfolios are
collectively referred to herein as the "Portfolios"; the Portfolios in which
some or none of the Bonds are insured are sometimes referred to as the
"Traditional Portfolios," the Portfolios in which all of the Bonds are insured
as described herein are sometimes referred to as the "Insured Portfolios," and
the state Portfolios (both Traditional and Insured) are sometimes referred to as
the "State Portfolios." This Series was created under the laws of the State of
New York pursuant to a Trust Indenture and Agreement dated the Date of Deposit
(the "Indenture") between John Nuveen & Co. Incorporated ("Nuveen" or the
"Sponsor") and The Chase Manhattan Bank.
Sponsor has deposited with the Trustee delivery statements relating to
contracts for the purchase of municipal debt obligations together with funds
represented by an irrevocable letter of credit issued by a major commercial bank
in the amount, including accrued interest, required for their purchase (or the
obligations themselves) (the "Bonds"). See "Schedule of Investments" in Part A
of this Prospectus, for a description of the Bonds deposited in a Portfolio.
Some of the delivery statements may relate to contracts for the purchase of
"when issued" or other Bonds with delivery dates after the date of settlement
for a purchase made on the Date of Deposit. See the "Schedule of Investments" in
Part A of this Prospectus and "COMPOSITION OF PORTFOLIOS." For a discussion of
the Sponsor's obligations in the event of a failure of any contract for the
purchase of any of the Bonds and its limited right to substitute other bonds to
replace any failed contract, see "COMPOSITION OF PORTFOLIOS."
Payment of interest on the Bonds in each Insured Portfolio, and of principal
at maturity, is guaranteed under policies of insurance obtained by the Sponsor,
certain third parties or by the issuers of the Bonds. (See "INSURANCE ON THE
BONDS.") AS A GENERAL MATTER, NEITHER THE ISSUER NOR THE SPONSOR HAS OBTAINED
INSURANCE WITH RESPECT TO MANY OF THE BONDS IN ANY TRADITIONAL PORTFOLIO.
The Trustee has delivered to the Sponsor registered Units which represent
ownership of the entire Portfolio, and which are offered for sale by this
Prospectus. Each Unit of a Portfolio represents a fractional undivided interest
in the principal and net income of such Portfolio. Units may only be sold in
states in which they are registered. To the extent that any Units of any
Portfolio are redeemed by the Trustee, the aggregate value of the Portfolio's
assets will decrease by the amount paid to the redeeming Unitholder, but the
fractional undivided interest of each unredeemed Unit in such Portfolio will
increase proportionately. The Sponsor will initially, and from time to time
thereafter, hold Units in connection with their offering.
OBJECTIVES OF THE PORTFOLIOS
The objectives of the Portfolios are income exempt from Federal income tax
and, in the case of State Portfolios, where applicable, state income and
intangibles taxes, and conservation of capital, through an investment in
obligations issued by or on behalf of states and territories of the United
States and authorities and political subdivisions thereof, the interest on which
is, in the opinion of recognized bond counsel to the issuing governmental
authorities, exempt from Federal income tax under existing law and for State
Portfolios, from certain state income taxes and intangibles taxes, if any, for
purchasers who qualify as residents of that State in which Bonds are issued.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in each Insured Portfolio has been obtained and as a
result of such insurance the Bonds in the Insured Portfolios are rated "Aaa" by
Moody's, "AAA" by Fitch and/or "AAA" by Standard & Poor's. (See "INSURANCE ON
THE BONDS.") All obligations in each Traditional Portfolio are rated in the
category "A" or better (SP-1, MIG 2 or F 2 or better, respectively, in the case
of short term obligations included in a Short Term Traditional Portfolio) by
Standard & Poor's, Moody's and/or Fitch (including provisional or conditional
ratings). In addition, certain Bonds in certain Traditional Portfolios may be
covered by insurance guaranteeing the timely payment, when due, of all principal
and interest. There is, of course, no guarantee that the Portfolios' objectives
will be achieved. For a comparison of net after-tax returns for various tax
brackets, see the "TAXABLE EQUIVALENT ESTIMATED CURRENT RETURN TABLES" included
in the Appendices to the Information Supplement of this Prospectus.
SUMMARY OF PORTFOLIOS
In selecting Bonds for the respective Portfolio, the following factors,
among others, were considered: (i) the Standard & Poor's, Moody's and/or Fitch
ratings of the Bonds, (ii) the prices of the Bonds relative to other bonds of
comparable quality and maturity, (iii) the diversification of Bonds as to
purpose of issue and location of issuer, (iv) the maturity dates of the Bonds,
and (v) in the case of the Insured Portfolios only, the availability of
insurance on such Bonds. (See "INSURANCE ON THE BONDS.")
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Each Portfolio consists of municipal bonds. As set forth in Part A of this
Prospectus, the Portfolios may contain or be concentrated in one or more of the
types of bonds discussed below. The following paragraphs briefly discuss certain
circumstances which may adversely affect the ability of issuers of Bonds held in
a Portfolio to make payments of principal and interest or the ratings of such
Bonds. For economic risks specific to the individual Portfolios, see Part A of
this Prospectus and the Appendices to the Information Supplement of this
Prospectus.
ESCROW SECURED OBLIGATIONS are typically secured by direct obligations of
the U.S. Government or in some cases obligations guaranteed by the U.S.
Government placed in an escrow account maintained by an independent trustee
until maturity or a predetermined redemption date. These obligations are
generally noncallable prior to maturity or the predetermined redemption date. In
a few isolated instances, however, bonds which were thought to be escrowed to
maturity have been called for redemption prior to maturity.
HEALTH CARE FACILITY OBLIGATIONS are obligations of issuers whose revenues
are derived from services provided by hospitals or other health care facilities,
including nursing homes. The ability of such issuers to make debt service
payments on these obligations is dependent on various factors, including
occupancy levels of the facility, demand for services, wages of employees,
overhead expenses, competition from other similar providers, government
regulation, the cost of malpractice insurance, and the degree of governmental
financial assistance, including Medicare and Medicaid.
HOUSING OBLIGATIONS are obligations of issuers whose revenues are primarily
derived from mortgage loans on single family residences or housing projects for
low to moderate income families. Housing obligations are generally prepayable at
any time and therefore their average life will ordinarily be less than their
stated maturities. The ability of such issuers to make debt service payments on
these obligations is dependent on various factors, including occupancy levels,
rental income, mortgage default rates, taxes, operating expenses, governmental
regulations and the appropriation of subsidies.
INDUSTRIAL REVENUE OBLIGATIONS are industrial revenue bonds ("IRBs"),
including pollution control revenue bonds, which are tax-exempt securities
issued by states, municipalities, public authorities or similar entities to
finance the cost of acquiring, constructing or improving various industrial
projects. Debt service payment on IRBs is dependent upon various factors,
including the creditworthiness of the corporate operator of the project and, if
applicable, corporate guarantor, revenues generated from the project, expenses
associated with the project and regulatory and environmental restrictions.
UTILITY OBLIGATIONS are obligations of issuers whose revenues are primarily
derived from the sale of several types of energy, including electric and natural
gas. The ability of such issuers to make debt service payments on these
obligations is dependent on various factors, including the rates for electricity
and natural gas, the demand for electricity and natural gas, the degree of
competition, governmental regulation, overhead expenses and variable costs, such
as fuel.
TRANSPORTATION FACILITY REVENUE OBLIGATIONS are obligations of issuers which
are payable from and secured by revenues derived from the ownership and
operation of airports, public transit systems and ports. The ability of issuers
to make debt service payments on airport obligations is dependent on the
capability of airlines to meet their obligations under use agreements. Due to
increased competition, deregulation, increased fuel costs and other factors,
many airlines may have difficulty meeting their obligations under these use
agreements. Bonds that are secured primarily by the revenue collected by a
public transit system typically are additionally secured by a pledge of sales
tax receipts collected at the state or local level, or of other governmental
financial assistance. The revenue of issuers of transit system obligations will
be affected by variations in utilization, which in turn may be affected by the
degree of local governmental subsidization, competition from other forms of
transportation, and increased costs. Port authorities derive their revenues
primarily from fees imposed on ships using the facilities which may fluctuate
depending on the local economy and on competition from competing forms of
transportation such as air, rail and trucks. The revenues of issuers which
derive their payments from bridge, road or tunnel toll revenues could be
adversely affected by increases in fuel costs, competition from toll-free
vehicular bridges and roads and alternative modes of transportation.
WATER AND/OR SEWERAGE OBLIGATIONS are obligations of issuers whose revenues
are payable from user fees from the sale of water and/or sewerage services. The
problems of such issuers include the ability to obtain rate increases,
population declines, the limitations on operations and increased costs and
delays attributable to environmental considerations, the difficulties obtaining
new supplies of fresh water, the effect of conservation programs and "no-growth"
zoning ordinances.
UNIVERSITY AND COLLEGE REVENUE OBLIGATIONS are obligations of issuers whose
revenues are derived mainly from tuition, dormitory revenues, grants and
endowments. General problems faced by such issuers include declines in the
number of "college" age individuals, possible inability to raise tuitions and
fees, the uncertainty of continued receipt of Federal grants and state funding,
and government legislation or regulations which may adversely affect the
revenues or costs of such issuers.
DEDICATED-TAX SUPPORTED OBLIGATIONS are obligations of issuers which are
payable from and secured by tax revenues from a designated source, which
revenues are pledged to secure the bonds. The various types of Bonds described
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below differ in structure and with respect to the rights of the bondholders to
the underlying property. Each type of dedicated-tax supported Bond has distinct
risks, only some of which are set forth below. One type of dedicated-tax
supported Bond is secured by the incremental tax received on either real
property or on sales within a specifically defined geographical area; such tax
generally will not provide bondholders with a lien on the underlying property or
revenues. Another type of dedicated-tax supported Bond is secured by a special
tax levied on real property within a defined geographical area in such a manner
that the tax is levied on those who benefit from the project; such bonds
typically provide for a statutory lien on the underlying property for unpaid
taxes. A third type of dedicated-tax supported Bond may be secured by a tax
levied upon the manufacture, sale or consumption of commodities or upon the
license to pursue certain occupations or upon corporate privileges within a
taxing jurisdiction. As to any of these types of Bonds, the ability of the
designated revenues to satisfy the interest and principal payments on such bonds
may be affected by changes in the local economy, the financial success of the
enterprise responsible for the payment of the taxes, the value of any property
on which taxes may be assessed and the ability to collect such taxes in a timely
fashion. Each of these factors will have a different affect on each distinct
type of dedicated-tax supported bonds.
MUNICIPAL LEASE OBLIGATIONS are obligations that are secured by lease
payments of a governmental entity and are normally subject to annual budget
appropriations of the leasing governmental entity. A governmental entity that
enters into such a lease agreement cannot obligate future governments to
appropriate for and make lease payments but covenants to take such action as is
necessary to include any lease payments due in its budgets and to make the
appropriations therefor. A governmental entity's failure to appropriate for and
to make payments under its lease obligation could result in insufficient funds
available for payment of the obligations secured thereby.
ORIGINAL ISSUE DISCOUNT OBLIGATIONS AND STRIPPED OBLIGATIONS are bonds which
were issued with nominal interest rates less than the rates then offered by
comparable securities and as a consequence were originally sold at a discount
from their face, or par, values. In a stable interest rate environment, the
market value of an original issue discount bond would tend to increase more
slowly in early years and in greater increments as the bond approached maturity.
Certain of the original issue discount obligations in a Portfolio may be
zero coupon bonds. Zero coupon bonds do not provide for the payment of any
current interest; the buyer receives only the right to receive a final payment
of the face amount of the bond at its maturity. Zero coupon bonds are subject to
substantially greater price fluctuations during periods of changing market
interest rates than are securities of comparable quality that pay interest
currently.
Original issue discount obligations, including zero coupon bonds, may be
subject to redemption at prices based on the issue price plus the amount of
original issue discount accreted to redemption (the "accreted value") plus, if
applicable, some premium. Pursuant to such call provisions, an original issue
discount bond may be called prior to its maturity date at a price less than its
face value. See the "Schedule of Investments" appearing in Part A of this
Prospectus for more information about the call provisions of portfolio Bonds.
Certain of the Bonds in a Portfolio may be stripped obligations, which
represent evidences of ownership with respect to either the principal amount of
or a payment of interest on a tax-exempt obligation ("Stripped Obligations").
Each Stripped Obligation has been purchased at a discount from the amount
payable at maturity. A Stripped Obligation therefore has economic
characteristics similar to zero coupon bonds, as described above.
Unitholders should consult their own tax advisers with respect to the state
and local tax consequences of owning original issue discount bonds or Stripped
Obligations. Under applicable provisions governing determination of state and
local taxes, interest on original issue discount obligations or Stripped
Obligations may be deemed to be received in the year of accrual even though
there is no corresponding cash payment.
COMPOSITION OF PORTFOLIOS
Each Portfolio initially consists of delivery statements relating to
contracts to purchase Bonds (or of such Bonds) as are listed under "Schedule of
Investments" in Part A of this Prospectus and, thereafter, of such Bonds as may
continue to be held from time to time (including certain securities deposited in
the Portfolio in substitution for Bonds not delivered to a Portfolio or in
exchange or substitution for Bonds upon certain refundings), together with
accrued and undistributed interest thereon and undistributed cash realized from
the disposition of Bonds.
"WHEN-ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The contracts to
purchase Bonds delivered to the Trustee represent an obligation by issuers or
dealers to deliver Bonds to the Sponsor for deposit in the Portfolios. Certain
of the contracts relate to Bonds which have not been issued as of the Date of
Deposit and which are commonly referred to as "when issued" or "when, as and if
issued" Bonds. Although the Sponsor believes it unlikely, if such Bonds, or
replacement bonds described below, are not acquired by a Portfolio or if their
delivery is delayed, the Estimated Current Returns and Estimated Long Term
Returns shown in Part A of this Prospectus may be reduced. Certain of the
contracts for the purchase of Bonds provide for delivery dates after the date of
settlement for purchases made on the Date of Deposit. Interest on such
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"when issued" and "delayed delivery" Bonds accrues to the benefit of Unitholders
commencing with the first settlement date for the Units. However, in the opinion
of counsel, Unitholders who purchase their Units prior to the date such Bonds
are actually delivered to the Trustee must reduce the tax basis of their Units
for interest accruing on such Bonds during the interval between their purchase
of Units and the delivery of the Bonds because such amounts constitute a return
of principal. As a result of such adjustment, the Estimated Current Returns set
forth in Part A of the Prospectus (which are based on the Public Offering Price
as of the business day prior to the Date of Deposit) may be slightly lower than
that which Unitholders will receive after the first year, assuming the Portfolio
does not change and estimated annual expense does not vary from that set forth
in Part A of the Prospectus. Those Bonds in each Portfolio purchased with
delivery dates after the date of settlement for purchases made on the Date of
Deposit are so noted in the "Schedule of Investments" in Part A of this
Prospectus.
LIMITED REPLACEMENT OF CERTAIN BONDS. Neither the Sponsor nor the Trustee
shall be liable in any way for any default, failure or defect in any Bond. In
the event of a failure to deliver any Bond that has been purchased for a
Portfolio under a contract, including those Bonds purchased on a when, as and if
issued basis ("Failed Bonds"), the Sponsor is authorized under the Indenture to
direct the Trustee to acquire other specified Bonds ("Replacement Bonds") to
make up the original corpus of the Portfolio within 20 days after delivery of
notice of the failed contract and the cost to the Portfolio (exclusive of
accrued interest) may not exceed the amount of funds reserved for the purchase
of the Failed Bonds. The Replacement Bonds must satisfy the criteria previously
described for the Portfolios and shall be substantially identical to the Failed
Bonds they replace in terms of (i) the exemption from federal and state
taxation; (ii) maturity and; (iii) cost to the Portfolio. In addition,
Replacement Bonds shall not be "when, as and if issued" Bonds. Whenever a
Replacement Bond has been acquired for a Portfolio, the Trustee shall, within
five days after the delivery thereof, mail or deliver a notice of such
acquisition to all Unitholders of the Portfolio involved. Once the original
corpus of the Portfolio is acquired, the Trustee will have no power to vary the
investment of the Portfolio.
To the extent Replacement Bonds are not acquired, the Sponsor shall refund
to all Unitholders of the Portfolio involved the sales charge attributable to
such Failed Bonds not replaced, and the principal and accrued interest
attributable to such Bonds shall be distributed not more than 30 days after the
determination of such failure or at such earlier time as the Trustee in its sole
discretion deems to be in the interest of the Unitholders. Any such accrued
interest paid to Unitholders will be paid by the Sponsor and, accordingly, will
not be treated as tax-exempt income. In the event Failed Bonds in a Portfolio
could not be replaced, the Net Annual Interest Income per Unit for such
Portfolio would be reduced and the Estimated Current Return thereon might be
lowered.
SALE, MATURITY AND REDEMPTION OF BONDS. Certain of the Bonds may from time
to time under certain circumstances be sold or redeemed or will mature in
accordance with their terms. The proceeds from such events will be used to pay
for Units redeemed or distributed to Unitholders and not reinvested;
accordingly, no assurance can be given that a Portfolio will retain for any
length of time its present size and composition.
All of the Bonds in each Portfolio are subject to being called or redeemed
in whole or in part prior to their stated maturities pursuant to the optional
redemption provisions described in the "Schedule of Investments" in Part A of
this Prospectus and in most cases pursuant to a sinking fund or special or
extraordinary redemption provisions. See the discussion of the various types of
bond issues, above, for information on the call provisions of such bonds,
particularly single family mortgage revenue bonds. Certain Bonds may carry a
"mandatory put" (also referred to as a "mandatory tender" or "mandatory
repurchase") feature pursuant to which the holder of such Bonds will receive
payment of the full principal amount thereof on a stated date prior to the
maturity date unless such holder affirmatively acts to retain the Bond. The
Trustee does not have the authority to act to retain Bonds with such features;
accordingly, it will receive payment of the full principal amount of any such
Bonds on the stated put date and such date is therefore treated as the maturity
date of such Bonds in selecting Bonds for the respective Portfolios and for
purposes of calculating the average maturity of the Bonds in any Portfolio.
The exercise of redemption or call provisions will (except to the extent the
proceeds of the called Bonds are used to pay for Unit redemptions) result in the
distribution of principal and may result in a reduction in the amount of
subsequent interest distributions; it may also affect the current return on
Units of the Portfolio involved. The exercise of redemption or call provisions
is more likely to occur in situations where the Bonds have an offering side
evaluation which represents a premium over par (as opposed to a discount from
par). (In the case of original issue discount bonds, such redemption is
generally to be made at the issue price plus the amount of original issue
discount accreted to the date of redemption; such price is referred to herein as
"accreted value.") Because Bonds may have been valued at prices above or below
par value or the then current accreted value at the time Units were purchased,
Unitholders may realize gain or loss upon the redemption of portfolio Bonds.
(See "TAX STATUS" and "DISTRIBUTIONS TO UNITHOLDERS" and the "Schedule of
Investments" in Part A of this Prospectus.)
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CERTAIN TAX MATTERS; LITIGATION. Certain of the Bonds in a Portfolio may be
subject to continuing requirements regarding the actual use of bond proceeds,
the manner of operation of the project financed from bond proceeds or the rebate
of excess earnings on bond proceeds, any of which may affect the exemption of
interest on such Bonds from Federal income taxation. Although at the time of
issuance of each of the Bonds in each Portfolio an opinion of bond counsel was
rendered as to the exemption of interest on such obligations from Federal income
taxation, and the issuers covenanted to comply with all requirements necessary
to retain the tax-exempt status of the Bonds, there can be no assurance that the
respective issuers or other obligors on such obligations will fulfill the
various continuing requirements established upon issuance of the Bonds. A
failure to comply with such requirements may cause a determination that interest
on such obligations is subject to Federal income taxation, perhaps even
retroactively from the date of issuance of such Bonds, thereby reducing the
value of the Bonds and subjecting Unitholders to unanticipated tax liabilities.
To the best knowledge of the Sponsor, there is no litigation pending as of
the Date of Deposit in respect of any Bonds which might reasonably be expected
to have a material adverse effect on any of the Portfolios. It is possible that
after the Date of Deposit, litigation may be initiated with respect to Bonds in
any Portfolio. Any such litigation may affect the validity of such Bonds or the
tax-exempt nature of the interest thereon, but while the outcome of litigation
of such nature can never be entirely predicted, the opinions of bond counsel to
the issuer of each Bond on the date of issuance state that such Bonds were
validly issued and that the interest thereon is, to the extent indicated, exempt
from Federal income tax.
INSURANCE ON THE BONDS
The bonds in the Insured Portfolios are covered by insurance policies
obtained by the Sponsor or by the issuers or underwriters of the bonds from
AMBAC, FGIC, FSA or MBIA (the "Insurers"). The "Schedule of Investments" in Part
A of the Prospectus identifies the Insurer of each bond. Insurance guarantees
the timely payment, when due, of all principal and interest on the bonds. Such
insurance is effective so long as the insured bond is outstanding and the
insurer remains in business. Insurance relates only to the particular bond and
not to the Units offered hereby or to their market value. The bonds have
received a rating of "Aaa" by Moody's, "AAA" by Fitch and/or "AAA" by Standard &
Poor's in recognition of such insurance. There can be no assurance that any
Insurer listed will be able to satisfy its commitments in the event claims are
made in the future. However, Standard & Poor's, Fitch and/or Moody's have rated
the claims-paying ability of each Insurer "AAA," "AAA" or "Aaa," respectively.
The following are brief descriptions of the Insurers. See "INSURANCE ON THE
BONDS" and the Information Supplement for more complete descriptions. The
Information Supplement may be requested from the Trustee.
AMBAC ASSURANCE CORPORATION. AMBAC is a Wisconsin-domiciled stock insurance
corporation regulated by the Office of the Commissioner of Insurance of the
State of Wisconsin and licensed to do business in all 50 states, the District of
Columbia, the Territory of Guam and the Commonwealth of Puerto Rico. AMBAC is a
wholly owned subsidiary of AMBAC Financial Group, Inc., a 100% publicly-held
company.
FINANCIAL GUARANTY INSURANCE COMPANY. FGIC is a wholly-owned subsidiary of
FGIC Corporation (the "Corporation"), a Delaware holding company. The
Corporation is a subsidiary of General Electric Capital Corporation ("GE
Capital"). Neither the Corporation nor GE Capital is obligated to pay the debts
of or the claims against FGIC. FGIC is a monoline financial guaranty insurer
domiciled in the State of New York and subject to regulation by the State of New
York Insurance Department. FGIC is currently licensed to write insurance in all
50 states and the District of Columbia.
FINANCIAL SECURITY ASSURANCE INC. FSA is a monoline insurance company
incorporated under the laws of the State of New York. FSA is licensed to engage
in the financial guaranty insurance business in all 50 states, the District of
Columbia and Puerto Rico. FSA and its subsidiaries are engaged in the business
of writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. FSA and its subsidiaries principally
insure asset-backed, collateralized and municipal securities. FSA is a
wholly-owned subsidiary of Financial Security Assurance Holdings Ltd.
("Holdings"), a New York Stock Exchange listed company. FSA participates in
strategic partnerships with XL Capital Ltd. and The Tokio Marine and Fire
Insurance Company Limited.
MBIA INSURANCE CORPORATION. MBIA is the principal operating subsidiary of
MBIA, Inc., a New York Stock Exchange listed company. MBIA, Inc. is not
obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the
State of New York and licensed to do business in and subject to regulation under
the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of
the United States and the Territory of Guam. The Insurer has two European
branches, one in the Republic of France and the other in the Kingdom of Spain.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on certain Bonds in a Traditional Portfolio may have been obtained by
the Sponsor, issuer or underwriter of the particular Bonds involved or by
another party. Such insurance, which provides coverage substantially the same as
that obtained with respect to Bonds in Insured Portfolio as described above, is
effective so long as the insured Bond is outstanding and the insurer remains in
business.
8
<PAGE>
Insurance relates only to the particular Bond and not to the Units offered
hereby or to their market value. Insured Bonds have received a rating of "Aaa"
by Moody's, "AAA" by Fitch and/or "AAA" by Standard & Poor's in recognition of
such insurance.
If a Bond in a Traditional Portfolio is insured, the "Schedule of
Investments" appearing in Part A of this Prospectus will identify the insurer.
There can be no assurance that any insurer listed therein will be able to
satisfy its commitments in the event claims are made in the future. However,
Standard & Poor's, Fitch and/or Moody's have rated the claims-paying ability of
each insurer "AAA," "AAA" or "Aaa," respectively.
Insurance companies are subject to extensive regulation and supervision
where they do business by state insurance commissioners who regulate the
standards of solvency which must be maintained, the nature of and limitations on
investments, reports of financial condition, and requirements regarding reserves
for unearned premiums, losses and other matters. A significant portion of the
assets of insurance companies is required by law to be held in reserve against
potential claims on policies and is not available to general creditors. Although
the federal government does not regulate the business of insurance, federal
initiatives including pension regulation, controls on medical care costs,
minimum standards for no-fault automobile insurance, national health insurance,
tax law changes affecting life insurance companies and repeal of the antitrust
exemption for the insurance business can significantly impact the insurance
business.
The above ratings are not recommendations to buy, sell or hold the Bonds,
and such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either or both ratings
may have an adverse effect on the market price of the Bonds. See the Information
Supplement for further information concerning insurance.
Because the insurance on the Bonds, if any, will be effective so long as the
Bonds are outstanding, such insurance will be taken into account in determining
the market value of the Bonds and therefore some value attributable to such
insurance will be included in the value of the Units of the Insured Portfolios.
The insurance does not, however, guarantee the market value of the Bonds or of
the Units.
PUBLIC OFFERING PRICE
The Public Offering Price of the Units of each Portfolio is equal to the
Trustee's determination of the aggregate OFFERING prices of the Bonds deposited
therein (minus any advancement to the principal account of the Portfolio made by
the Trustee) plus a sales charge set forth in Part A of this Prospectus, in each
case adding to the total thereof cash held by the Portfolio (minus accrued
expenses and any advances to the Portfolio made by the Trustee), if any, and
dividing the sum so obtained by the number of Units outstanding in the
Portfolio. See "UNIT VALUE AND EVALUATION."In addition, a portion of the Public
Offering Price during the initial offering period also consists of cash and/or
Bonds in an amount sufficient to pay for all or a portion of the costs incurred
in establishing a Portfolio, including costs for preparing the registration
statement, the trust indenture and other closing documents, registering Units
with the Securities and Exchange Commission and states, the initial audit of
each Portfolio, the initial evaluation, legal fees, the initial fees and
expenses of the Trustee and any non-material out-of-pocket expenses.
If Bonds are purchased with the portion of the Public Offering Price
intended to be used to reimburse the Sponsor for the Portfolio's organization
costs, such Bonds will be purchased in the same proportionate relationship as
all the Bonds contained in the Portfolio. These Bonds will be sold to reimburse
the Sponsor for the Portfolio's organization costs at the earlier of six months
after the Initial Date of Deposit or the end of the initial offering period (a
shorter time period than the life of the Portfolio). Also, any cash reserved for
these purposes will be paid to the Sponsor at the earlier of six months after
the Initial Date of Deposit or the end of the initial offering period. During
the period ending with the earlier of six months after the Initial Date of
Deposit or the end of the initial offering period, there may be a decrease in
the value of the Bonds. To the extent the proceeds from the sale of these Bonds
and any cash reserved are insufficient to repay the Sponsor for the Portfolio
organization costs, the Trustee will sell additional Bonds to allow the
Portfolio to fully reimburse the Sponsor. In that event, the net asset value per
Unit will be reduced by the amount of additional Bonds sold. Although the dollar
amount of the reimbursement due to the Sponsor will remain fixed and will never
exceed the amount per Unit set forth for the Portfolio in Part A of the
Prospectus, this will result in a greater effective cost per Unit to Unitholders
for the reimbursement to the Sponsor. See "UNIT VALUE AND EVALUATION."
The sales charge applicable to quantity purchases is reduced on a graduated
scale for sales to any purchaser of at least $50,000 or 500 Units and will be
applied on whichever basis is more favorable to the purchaser. For purposes of
calculating the applicable sales charge, purchasers who have indicated their
intent to purchase a specified amount of Units of any Portfolio in the primary
or secondary offering period by executing and delivering a letter of intent to
the Sponsor, which letter of intent must be in a form acceptable to the Sponsor
and shall have a maximum duration of thirteen months, will be eligible to
receive a reduced sales charge according to the following tables based on the
amount of intended aggregate purchases as expressed in the letter of intent. Due
to administrative limitations and in order to permit adequate tracking,
9
<PAGE>
the only secondary market purchases that will be permitted to be applied toward
the intended specified amount and that will receive the corresponding reduced
sales charge are those Units that are acquired through or from the Sponsor. By
establishing a letter of intent, a Unitholder agrees that the first purchase of
Units following the execution of such letter of intent will be at least 5% of
the total amount of the intended aggregate purchases expressed in such
Unitholder's letter of intent. Further, through the establishment of the letter
of intent, such Unitholder agrees that Units representing 5% of the total amount
of the intended purchases will be held in escrow by the Trustee pending
completion of these purchases. All distributions on Units held in escrow will be
credited to such Unitholder's account. If total purchases prior to the
expiration of the letter of intent period equal or exceed the amount specified
in a Unitholder's letter of intent, the Units held in escrow will be transferred
to such Unitholder's account. A Unitholder who purchases Units during the letter
of intent period in excess of the number of Units specified in a Unitholder's
letter of intent, the amount of which would cause the Unitholder to be eligible
to receive an additional sales charge reduction, will be allowed such additional
sales charge reduction on the purchase of Units which caused the Unitholder to
reach such new breakpoint level and on all additional purchases of Units during
the letter of intent period. If the total purchases are less than the amount
specified, the Unitholder involved must pay the Sponsor an amount equal to the
difference between the amounts paid for these purchases and the amounts which
would have been paid if the higher sales charge had been applied; the Unitholder
will, however, be entitled to any reduced sales charge qualified for by reaching
any lower breakpoint level. If such Unitholder does not pay the additional
amount within 20 days after written request by the Sponsor or the Unitholder's
securities representative, the Sponsor will instruct the Trustee to redeem an
appropriate number of the escrowed Units to meet the required payment. By
establishing a letter of intent, a Unitholder irrevocably appoints the Sponsor
as attorney to give instructions to redeem any or all of such Unitholder's
escrowed Units, with full power of substitution in the premises. A Unitholder or
his securities representative must notify the Sponsor whenever such Unitholder
makes a purchase of Units that he wishes to be counted towards the intended
amount. Sales charges during the primary offering period are as follows:
<TABLE>
<CAPTION>
NATIONAL AND STATE LONG NATIONAL AND STATE
TERM TRUSTS LONG INTERMEDIATE TRUSTS INTERMEDIATE TRUSTS
---------------------------- ---------------------------- ----------------------------
PERCENT PERCENT PERCENT PERCENT PERCENT PERCENT
OF OF NET OF OF NET OF OF NET
OFFERING AMOUNT OFFERING AMOUNT OFFERING AMOUNT
NUMBER OF UNITS* PRICE INVESTED PRICE INVESTED PRICE INVESTED
---------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Less than 500................. 4.90% 5.152% 4.25% 4.439% 3.90% 4.058%
500 but less than 1,000....... 4.75 4.987 4.15 4.330 3.70 3.842
1,000 but less than 2,500..... 4.50 4.712 3.85 4.004 3.50 3.627
2,500 but less than 5,000..... 4.25 4.439 3.60 3.734 3.25 3.359
5,000 but less than 10,000.... 3.50 3.627 3.35 3.466 3.00 3.093
10,000 but less than 25,000... 3.00 3.093 3.00 3.093 2.75 2.828
25,000 or more................ 2.50 2.564 2.50 2.564 2.50 2.564
</TABLE>
<TABLE>
<CAPTION>
NATIONAL AND STATE SHORT
INTERMEDIATE TRUSTS SHORT TERM TRUSTS
---------------------------- ----------------------------
PERCENT PERCENT PERCENT PERCENT
OF OF NET OF OF NET
OFFERING AMOUNT OFFERING AMOUNT
NUMBER OF UNITS* PRICE INVESTED PRICE INVESTED
---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Less than 500........................... 3.00% 3.093% 2.50% 2.564%
500 but less than 1,000................. 2.80 2.881 2.30 2.354
1,000 but less than 2,500............... 2.60 2.670 2.10 2.145
2,500 but less than 5,000............... 2.35 2.407 1.85 1.885
5,000 but less than 10,000.............. 2.10 2.145 1.60 1.626
10,000 but less than 25,000............. 1.85 1.885 1.35 1.368
25,000 or more.......................... 1.80 1.833 1.25 1.266
</TABLE>
*Breakpoint sales charges are computed both on a dollar basis and on the basis
of the number of Units purchased, using the equivalent of 500 Units to $50,000,
2,500 Units to $250,000 etc., and will be applied on that basis which is more
favorable to the purchaser.
For "secondary market" sales the Public Offering Price per Unit of each
Portfolio is determined by adding to the Sponsor's determination of the BID
price of each Bond in the Portfolio a sales charge determined in accordance with
the table set forth below based upon the number of years remaining to the
maturity of each such Bond. See "UNIT VALUE AND EVALUATION." The effect of this
method of sales charge calculation will be that different sales charge rates
will be applied to the various Bonds in a Portfolio based upon the maturities of
such Bonds. As shown, the sales charge on Bonds in each
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<PAGE>
maturity range (and therefore the aggregate sales charge on the purchase) is
reduced with respect to purchases of at least $50,000 or 500 Units:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE*
-----------------------------------------------------------------------------------
$50,000 $100,000 $250,000 $500,000 $1,000,000
UNDER TO TO TO TO TO $2,500,000
YEARS TO MATURITY $50,000 $99,999 $249,999 $499,999 $999,999 $2,499,999 OR MORE
----------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than 1................... 0 0 0 0 0 0 0
1 but less than 2............. 1.523% 1.446% 1.369% 1.317% 1.215% 1.061% .900%
2 but less than 3............. 2.041 1.937 1.833 1.729 1.626 1.420 1.225
3 but less than 4............. 2.564 2.433 2.302 2.175 2.041 1.781 1.546
4 but less than 5............. 3.093 2.961 2.828 2.617 2.459 2.175 1.883
5 but less than 7............. 3.627 3.433 3.239 3.093 2.881 2.460 2.165
7 but less than 10............ 4.167 3.951 3.734 3.520 3.239 2.828 2.489
10 but less than 13........... 4.712 4.467 4.221 4.004 3.788 3.253 2.842
13 but less than 16........... 5.263 4.988 4.712 4.439 4.167 3.627 3.169
16 or more.................... 5.820 5.542 5.263 4.987 4.603 4.004 3.500
</TABLE>
*Breakpoint sales charges are computed both on a dollar basis and on the basis
of the number of Units purchased, using the equivalent of 500 Units to
$50,000, 2,500 Units to $250,000, etc., and will be applied on that basis
which is more favorable to the purchaser.
The secondary market sales charges above are expressed as a percent of
the net amount invested; expressed as a percent of the Public Offering Price,
the maximum sales charge on a Portfolio, for instance one consisting entirely of
Bonds with 16 years or more to maturity, would be 5.50% (5.820% of the net
amount invested). The actual secondary market sales charge included in the
Public Offering Price of any particular Portfolio will depend on the maturities
of the Bonds in the Portfolio.
Pursuant to the terms of the Indenture, the Trustee may terminate a
Portfolio if the net asset value of such Portfolio, as shown by any evaluation,
is less than 20% of the original principal amount of the Portfolio.
At all times while Units are being offered for sale, the Sponsor will
appraise or cause to be appraised daily the value of the underlying Bonds in
each Trust as of 4:00 p.m. eastern time, or as of any earlier closing time on a
day on which the New York Stock Exchange (the "Exchange") is scheduled in
advance to close at such earlier time and will adjust the Public Offering Price
of the Units commensurate with such appraisal. Such Public Offering Price will
be effective for all orders received by a dealer or the Sponsor at or prior to
4:00 p.m. eastern time on each such day or as of any earlier closing time on a
day on which the Exchange is scheduled in advance to close at such earlier time.
Orders received after that time, or on a day when the Exchange is closed for a
scheduled holiday or weekend, will be held until the next determination of
price.
Accrued interest from the preceding Record Date to, but not including, the
settlement date of the transaction (three business days after purchase) will be
added to the Public Offering Price to determine the purchase price of Units.
(See "ACCRUED INTEREST".)
The graduated sales charges set forth above will apply on all applicable
purchases of Nuveen investment company securities on any one day by the same
purchaser in the amounts stated, and for this purpose purchases of this Series
will be aggregated with concurrent purchases of any other Series or of shares of
any open-end management investment company of which the Sponsor is principal
underwriter and with respect to the purchase of which a sales charge is imposed.
Purchases by or for the account of individuals and their spouses, parents,
children, grandchildren, grandparents, parents-in-law, sons- and
daughters-in-law, siblings, a sibling's spouse and a spouse's siblings
("immediate family members") will be aggregated to determine the applicable
sales charge. The graduated sales charges are also applicable to a trustee or
other fiduciary purchasing securities for a single trust estate or single
fiduciary account.
Units may be purchased in the primary market with sales charges of 1.70% of
the Public Offering Price for National and State Long Term Portfolios, 1.35% of
the Public Offering Price for Long Intermediate Portfolios, 1.20% of the Public
Offering Price for National and State Intermediate Portfolios, 1.0% of the
Public Offering Price for National and State Short Intermediate Portfolios and
1.0% of the Public Offering Price for Short Term Portfolios by: (1) investors
who purchase Units through registered investment advisers, certified financial
planners and registered broker-dealers who in each case either charge periodic
fees for financial planning, investment advisory services, brokerage services,
investment services or asset management services, or provide such services in
connection with the establishment of an investment account for which a
comprehensive "wrap fee" charge is imposed, (2) bank trust departments investing
funds over which they exercise exclusive discretionary investment authority and
that are held in a fiduciary, agency, custodial or similar capacity, (3) any
person who, for at least 90 days, has been an officer, director or bona fide
employee of any firm offering Units for sale to investors, (4) officers and
directors of bank holding companies that make Units available directly or
through subsidiaries or bank affiliates, (5) officers or directors and bona
fide, full-time employees of Nuveen, Nuveen Advisory Corp., Nuveen Institutional
Advisory Corp., Rittenhouse Financial Services, Inc., and The John Nuveen
Company, including in each case these individuals and their spouses, children,
parents and spouses' parents, however, purchases by parents and adult children
who are not members of the household of the officers, directors or full-time
employees described above, must be made through a
11
<PAGE>
registered broker-dealer, and (6) any person who for at least 90 days, has been
an officer, director or bona fide employee of any vendor who provides services
to the Sponsor and who purchases Units through a registered broker-dealer
(collectively, the "Discounted Purchases"). In addition, such investors may
purchase Units in the secondary market at the Public Offering Price for
non-breakpoint purchases minus the concession the Sponsor typically allows to
brokers and dealers for non-breakpoint purchases. Notwithstanding anything to
the contrary in this Prospectus, investors who purchase Units as described in
this paragraph will not receive sales charge reductions for quantity purchases.
The initial or primary Public Offering Price of the Units in each Portfolio
is based upon a pro rata share of the OFFERING prices per Unit of the Bonds in
such Portfolio plus the applicable sales charge. The secondary market Public
Offering Price of each Portfolio is based upon a pro rata share of the BID
prices per Unit of the Bonds in such Portfolio plus the applicable sales charge.
The OFFERING prices of Bonds in a Portfolio may be expected to average between
1/2% to 2% more than the BID prices of such Bonds. The difference between the
bid side evaluation and the offering side evaluation of the Bonds in each
Portfolio on the business day prior to the Date of Deposit is shown in the
discussion of each Portfolio.
Whether or not Units are being offered for sale, the Sponsor will determine
the aggregate value of each Portfolio as of 4:00 p.m. eastern time: (i) on each
June 30 or December 31 (or, if such date is not a business day, the last
business day prior thereto), (ii) on any day on which a Unit is tendered for
redemption (or the next succeeding business day if the date of tender is a
non-business day) and (iii) at such other times as may be necessary. For this
purpose, a "business day" shall be any day on which the Exchange is normally
open. (See "UNIT VALUE AND EVALUATION.")
MARKET FOR UNITS
During the initial public offering period, the Sponsor intends to offer to
purchase Units of each Portfolio at a price equivalent to the pro rata share per
Unit of the OFFERING prices of the Bonds in such Portfolio (plus accrued
interest). Afterward, although it is not obligated to do so, the Sponsor intends
to maintain a secondary market for Units of each Portfolio at its own expense
and to continuously offer to purchase Units of each Portfolio at prices, subject
to change at any time, which are based upon the BID prices of Bonds in the
respective Portfolios. During the period ending with the earlier of six months
after the Initial Date of Deposit or the end of the initial offering period, the
price at which the Sponsor expects to repurchase Units (the "SPONSOR'S
REPURCHASE PRICE") includes estimated organization costs per Unit. After such
period, the Sponsor's Repurchase Price will not include such estimated
organization costs. See Part A of the Prospectus. UNITHOLDERS WHO WISH TO
DISPOSE OF THEIR UNITS SHOULD INQUIRE OF THE TRUSTEE OR THEIR BROKER AS TO THE
CURRENT REDEMPTION PRICE. (See "REDEMPTION.") In connection with its secondary
market-making activities, the Sponsor may from time to time enter into secondary
market joint account agreements with other brokers and dealers. Pursuant to such
an agreement, the Sponsor will purchase Units from the broker or dealer at the
bid price and will place the Units into a joint account managed by the Sponsor;
sales from the account will be made in accordance with the then current
prospectus and the Sponsor and the broker or dealer will share profits and
losses in the joint account in accordance with the terms of their joint account
agreement.
In maintaining a market for the Units, the Sponsor will realize profits or
sustain losses in the amount of any difference between the price at which Units
are purchased and the price at which Units are resold or redeemed. The secondary
market Public Offering Price of Units may be greater or less than the cost of
such Units to the Sponsor.
Certificates, if any, for Units are delivered to the purchaser as promptly
after the date of settlement (three business days after purchase) as the Trustee
can complete the mechanics of registration, normally within 48 hours after
registration instructions are received. Purchasers of Units to whom Certificates
are issued will be unable to exercise any right of redemption until they have
received their Certificates, properly endorsed for transfer. (See "REDEMPTION.")
ACCRUED INTEREST
Accrued interest is the accumulation of unpaid interest on a bond from the
last day on which interest thereon was paid. Interest on Bonds in each Portfolio
is accounted for daily on an accrual basis. For this reason, the purchase price
of Units of a Portfolio will include not only the Public Offering Price but also
the proportionate share of accrued interest to the date of settlement. Accrued
interest does not include accrual of original issue discount on zero coupon
bonds, Stripped Obligations or other original issue discount bonds. Interest
accrues to the benefit of Unitholders commencing with the settlement date of
their purchase transaction.
In an effort to reduce the amount of accrued interest that investors would
have to pay in addition to the Public Offering Price, the Trustee has agreed to
advance to each Portfolio the amount of accrued interest due on the Bonds as of
the Date of Deposit (which has been designated the first Record Date for all
plans of distribution). This accrued interest will be paid to the Sponsor as the
holder of record of all Units on the Date of Deposit. Consequently, the amount
of accrued interest to be added to the Public Offering Price of Units will
include only accrued interest from the Date of Deposit to, but not including,
the date of settlement of the investor's purchase (three business days after
purchase), less any distributions from the
12
<PAGE>
related Interest Account. The Trustee will recover its advancements (without
interest or other cost to the Portfolios) from interest received on the Bonds
deposited in each Portfolio.
The Trustee has no cash for distribution to Unitholders until it receives
interest payments on the Bonds in the Portfolios. Since municipal bond interest
is accrued daily but paid only semi-annually, during the initial months of the
Portfolios, the Interest Accounts, consisting of accrued but uncollected
interest and collected interest (cash), will be predominantly the uncollected
accrued interest that is not available for distribution. However, due to
advances by the Trustee, the Trustee will provide a first distribution between
approximately 30 and 60 days after the Date of Deposit. Assuming each Portfolio
retains its original size and composition and expenses and fees remain the same,
annual interest collected and distributed will approximate the estimated Net
Annual Interest Income stated in Part A of the Prospectus. However, the amount
of accrued interest at any point in time will be greater than the amount that
the Trustee will have actually received and distributed to the Unitholders.
Therefore, there will always remain an item of accrued interest that is included
in the purchase price and the redemption price of the Units.
Interest is accounted for daily and a proportionate share of accrued and
undistributed interest computed from the preceding Record Date is added to the
daily valuation of each Unit of each Portfolio. (See Part A of the Prospectus
and "DISTRIBUTIONS TO UNITHOLDERS.") As Bonds mature, or are redeemed or sold,
the accrued interest applicable to such Bonds is collected and subsequently
distributed to Unitholders. Unitholders who sell or redeem all or a portion of
their Units will be paid their proportionate share of the remaining accrued
interest to, but not including, the third business day following the date of
sale or tender.
ESTIMATED LONG TERM RETURN AND ESTIMATED CURRENT RETURN
The Estimated Long Term Return for each Portfolio is a measure of the return
to the investor expected to be earned over the estimated life of the Portfolio.
The Estimated Long Term Return represents an average of the yields to maturity
(or call) of the Bonds in the Portfolio calculated in accordance with accepted
bond practice and adjusted to reflect expenses and sales charges. Under accepted
bond practice, tax-exempt bonds are customarily offered to investors on a "yield
price" basis, which involves computation of yield to maturity or to an earlier
call date (whichever produces the lower yield), and which takes into account not
only the interest payable on the bonds but also the amortization or accretion of
any premium over, or discount from, the par (maturity) value inherent in the
bond's purchase price. In the calculation of Estimated Long Term Return, the
average yield for a Portfolio is derived by weighting each Bond's yield by the
market value of the Bond and by the amount of time remaining to the date to
which the Bond is priced. This weighted average yield is then adjusted to
reflect estimated expenses, is compounded, and is reduced by a factor which
represents the amortization of the sales charge over the expected average life
of a Portfolio. The Estimated Long Term Return calculation does not take into
account the effect of a first distribution which may be less than a regular
distribution or may be paid at some point after 30 days (or a second
distribution which may be less than a normal distribution for Unitholders who
choose quarterly or semi-annual plans of distribution), and it also does not
take into account the difference in timing of payments to Unitholders who choose
quarterly or semi-annual plans of distribution, each of which will reduce the
return.
Estimated Current Return is computed by dividing the Net Annual Interest
Income per Unit by the Public Offering Price. In contrast to Estimated Long Term
Return, Estimated Current Return does not reflect the amortization of premium or
accretion of discount, if any, on the Bonds in a Portfolio. Net Annual Interest
Income per Unit is calculated by dividing the annual interest income to a
Portfolio, less estimated expenses, by the number of Units outstanding.
Net Annual Interest Income per Unit, used to calculate Estimated Current
Return, will vary with changes in fees and expenses of the Trustee and the
Evaluator and with the redemption, maturity, exchange or sale of Bonds. A
Unitholder's actual return may vary significantly from the Estimated Long-Term
Return, based on their holding period, market interest rate changes, other
factors affecting the prices of individual bonds in the Portfolio, and
differences between the expected remaining life of Portfolio bonds and the
actual length of time that they remain in a Portfolio; such actual holding
periods may be reduced by termination of a Portfolio, as described in "OTHER
INFORMATION." Since both the Estimated Current Return and the Estimated Long
Term Return quoted in Part A of the Prospectus are based on the market value of
the underlying Bonds on the business day prior to the Date of Deposit,
subsequent calculations of these performance measures will reflect the then
current market value of the underlying Bonds and may be higher or lower. The
Sponsor will provide estimated cash flow information relating to a Portfolio
without charge to each potential investor in a Portfolio who receives this
prospectus and makes an oral or written request to the Sponsor for such
information.
A portion of the monies received by a Portfolio may be treated, in the first
year only, as a return of principal due to the inclusion in the Portfolio of
"when-issued" or other Bonds having delivery dates after the date of settlement
for purchases made on the Date of Deposit. A consequence of this treatment is
that in the computation of Estimated Current Return for the first year, such
monies are excluded from Net Annual Interest Income and treated as an adjustment
to the Public Offering Price. (See Part A of the Prospectus, "COMPOSITION OF
PORTFOLIOS" and "TAX STATUS.")
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A comparison of tax-free and equivalent taxable estimated current returns
with the returns on various taxable investments is one element to consider in
making an investment decision. The Sponsor may from time to time in its
advertising and sales materials compare the then current estimated returns and
taxable-equivalent returns on a Portfolio and returns over specified periods on
other similar Nuveen Portfolios with returns on taxable investments such as
corporate or U.S. Government bonds, bank CD's and money market accounts or money
market funds, each of which has investment characteristics that may differ from
those of the Portfolio. U.S. Government bonds, for example, are backed by the
full faith and credit of the U.S. Government and bank CD's and money market
accounts are insured by an agency of the federal government. Money market
accounts and money market funds provide stability of principal, but pay interest
at rates that vary with the condition of the short-term debt market. The
investment characteristics of the Portfolios are described more fully elsewhere
in the Prospectus.
EVALUATION OF BONDS AT THE DATE OF DEPOSIT
The prices at which the Bonds deposited in the Portfolios would have been
offered to the public on the business day prior to the Date of Deposit were
determined by the Trustee on the basis of an evaluation of such Bonds prepared
by Kenny S&P Evaluation Services, a division of J. J. Kenny Co., Inc. ("Kenny
S&P"), a firm regularly engaged in the business of evaluating, quoting or
appraising comparable bonds. With respect to Bonds in Insured Portfolios and
insured Bonds in Traditional Portfolios, Kenny S&P evaluated the Bonds as so
insured. (See "INSURANCE ON THE BONDS.")
The amount by which the Trustee's determination of the OFFERING PRICES of
the Bonds deposited in the Portfolios was greater or less than the cost of such
Bonds to the Sponsor was PROFIT OR LOSS to the Sponsor exclusive of any
underwriting profit. (See Part A of the Prospectus.) The Sponsor also may
realize FURTHER PROFIT OR SUSTAIN FURTHER LOSS as a result of fluctuations in
the Public Offering Price of the Units. Cash, if any, made available to the
Sponsor prior to the settlement date for a purchase of Units, or prior to the
acquisition of all Portfolio securities by a Portfolio, may be available for use
in the Sponsor's business, and may be of benefit to the Sponsor.
TAX STATUS
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income were rendered by bond counsel to the respective issuing authorities. In
addition, with respect to State Portfolios, where applicable, bond counsel to
the issuing authorities rendered opinions as to the exemption of interest on
such Bonds, when held by residents of the state in which the issuers of such
Bonds are located, from state income taxes and certain state or local
intangibles and local income taxes. For a discussion of the tax status of State
Portfolios, see Part A of this Prospectus. Neither the Sponsor nor Chapman and
Cutler has made any review of the Portfolios proceedings relating to the
issuance of the Bonds or of the basis for the opinions rendered in connection
therewith. If the interest on a Bond should be determined to be taxable, the
Bond would generally have to be sold at a substantial discount. In addition,
investors could be required to pay income tax on interest received prior to the
date of which interest is determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or of a
Unit by a Unitholder is includable in gross income for Federal income tax
purposes, and may be includable in gross income for state tax purposes. (Such
gain does not include any amounts received in respect of accrued interest or
accrued original issue discount, if any.)
For purposes of the following opinions, it is assumed that each asset of the
Portfolios is debt, the interest on which is excluded for Federal income tax
purposes.
In the opinion of Chapman and Cutler, Counsel to the Sponsor, under existing
law as of the date of this Prospectus:
(1) the Portfolios are not associations taxable as corporations for Federal
income tax purposes, and interest and accrued original issue discount on
Bonds which is excludable from gross income under the Internal Revenue
Code of 1986, as amended (the "Code") will retain its status for Federal
income tax purposes when received by the Portfolios and when distributed
to the Unitholders; however such interest may be taken into account in
computing the alternative minimum tax and the additional tax on branches
of foreign corporations. See "CERTAIN TAX MATTERS APPLICABLE TO
CORPORATE UNITHOLDERS", below;
(2) each Unitholder of a Portfolio is considered to be the owner of a pro
rata portion of each asset of such Portfolio under Subpart E, subchapter
J of Chapter 1 of the Code and will have a taxable event when such
Portfolio disposes of a Bond or when the Unitholder redeems or sells
Units. If the Unitholder disposes of a Unit, he is deemed thereby to
have disposed of his entire pro rata interest in all the assets of the
Portfolio involved including his pro rata portion of all the Bonds
represented by the Unit. The Taxpayer Relief Act of 1997 includes
provisions that treat certain transactions designed to reduce or
eliminate risk of loss and opportunities for gain (e.g., short sales,
offsetting notional principal contracts, futures or forward contracts,
or similar transactions) as constructive sales for purposes of
recognition of gain (but not loss) and for purposes of determining the
holding period. Unitholders
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should consult their own tax advisors with regard to any such
constructive sales rules. Unitholders must reduce the tax basis of their
Units for their share of accrued interest received by the respective
Portfolio, if any, on Bonds delivered after the date the Unitholders pay
for their Units to the extent that such interest accrued on such Bonds
before the date the Portfolio acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest paid
to the seller) and, consequently, such Unitholders may have an increase
in taxable gain or reduction in capital loss upon the disposition of
such Units. Gain or loss upon the sale or redemption of Units is
measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Bonds (whether
by sale, payment at maturity, redemption or otherwise), gain or loss is
recognized to the Unitholder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unitholder's pro rata share of the total proceeds from
such disposition with the Unitholder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unitholder who
purchases Units, such basis (before adjustment for accrued original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Portfolio assets
ratably according to value as of the valuation date nearest the date of
acquisition of the Units. 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 or her Units are sold or redeemed for an amount less than or equal
to their original cost; Unitholders should consult their own tax
advisors with regard to the calculation of basis; and
(3) any amounts paid on defaulted Bonds held by the Trustee under policies
of insurance issued with respect to such Bonds which represent maturing
interest on defaulted Bonds held by the Trustee will be excludable from
Federal gross income if, and to the same extent as, such interest would
have been so excludable if paid in the normal course by the issuer of
the defaulted Bonds provided that, at the time such policies are
purchased, the amounts paid for such policies are reasonable, customary
and consistent with the reasonable expectation that the issuer of the
Bonds, rather than the insurer, will pay debt service on the Bonds.
Sections 1288 and 1272 of the Internal Revenue Code of 1986, as amended (the
"Code") provide a complex set of rules governing the accrual of original issue
discount. These rules provide that original issue discount accrues either on the
basis of a constant compound interest rate or ratably over the term of the Bond,
depending on the date the Bond was issued. In addition, special rules apply if
the purchase price of a Bond exceeds the original issue price plus the amount of
original issue discount which would have previously accrued based upon its issue
price (its "adjusted issue price") to prior owners. If a Bond is acquired with
accrued interest, that portion of the price paid for the accrued interest is
added to the tax basis of the Bond. When this accrued interest is received, it
is treated as a return of capital and reduces the tax basis of the Bond. If a
Bond is purchased for a premium, the amount of the premium is added to the tax
basis of the Bond. Bond premium is amortized over the remaining term of the
Bond, and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules will also
vary depending on the value of the Bonds on the date a Unitholder acquires his
Units and the price the Unitholder pays for his Units. Unitholders should
consult with their tax advisers regarding these rules and their application.
The "Revenue Reconciliation Act of 1993" (the "1993 Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code, effective for bonds
purchased after April 30, 1993. In general, market discount is the amount (if
any) by which the stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if any, is
attributable to original issue discount not yet accrued), subject to a statutory
DE MINIMIS rule. Market discount can arise based on the price the Portfolio pays
for the Bonds or the price a Unitholder pays for his or her Units. Under the
1993 Tax Act, accretion of market discount is taxable as ordinary income; under
prior law, the accretion had been treated as capital gain. Market discount that
accretes while the Portfolio holds a Bond would be recognized as ordinary income
by the Unitholders when principal payments are received on the Bond, upon sale
or at redemption (including early redemption), or upon the sale or redemption of
his or her Units, unless a Unitholder elects to include market discount in
taxable income as it accrues. The market discount rules are complex and
Unitholders should consult their tax advisors regarding these rules and their
application.
Counsel for the Sponsor has also advised that under Section 265 of the Code,
interest on indebtedness incurred or continued to purchase or carry Units of a
Portfolio is not deductible for Federal income tax purposes. The Internal
Revenue Service has taken the position that such indebtedness need not be
directly traceable to the purchase or carrying of Units (however, these rules
generally do not apply to interest paid on indebtedness incurred to purchase or
improve a personal residence). Also, under Section 265 of the Code, certain
financial institutions that acquire Units would generally not be able to deduct
any of the interest expense attributable to ownership of such Units.
In the case of certain of the Bonds in the Portfolio, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial user" of
the facilities being financed with the proceeds of these Bonds, or persons
related thereto, for periods while such Bonds are held by such a user or related
person, will not be excludable from Federal gross
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income, although interest on such Bonds received by others would be excludable
from Federal gross income. "Substantial user" and "related person" are defined
under the Code and U.S. Treasury Regulations. Any person who believes that he or
she may be a "substantial user" or a "related person" as so defined should
contact his or her tax adviser.
CERTAIN TAX MATTERS APPLICABLE TO CORPORATE UNITHOLDERS. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax for
taxable years beginning after December 31, 1986 depend upon the corporation's
alternative minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used in computing
AMTI of a corporation (other than an S corporation, Regulated Investment
Company, Real Estate Investment Trust, REMIC or FASIT) is an amount equal to 75%
of the excess of such corporation's "adjusted current earnings" over an amount
equal to its AMTI (before such adjustment item and the alternative tax net
operating loss deduction). "Adjusted current earnings" includes all tax-exempt
interest, including interest on all Bonds in the Trust. Under the provisions of
Section 884 of the Code, a branch profits tax is levied on the "effectively
connected earnings and profits" of certain foreign corporations which include
tax-exempt interest such as interest on the Bonds in the Portfolio. Unitholders
should consult their tax advisors with respect to the particular tax
consequences to them including the corporate alternative minimum tax and the
branch profits tax imposed by Section 884 of the Code.
ALL STATEMENTS IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS INCOME FOR
FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINION OF COUNSEL AND ARE TO BE SO
CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exclusion of interest thereon from Federal gross
income are rendered by bond counsel to the respective issuing authorities.
Neither the Sponsor nor Chapman and Cutler has made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the basis
for such opinions.
For taxpayers other than corporations, net capital gain is subject to a
maximum marginal stated tax rate of 20% (10% in the case of certain taxpayers in
the lowest tax bracket). Capital gain or loss is long-term if the holding period
for the asset is more than one year, and is short-term if the holding period for
the asset is one year or less. The date on which a Unit is acquired (i.e., the
"trade date") is excluded for purposes for determining the holding period of the
Unit. Capital gains realized from assets held for one year or less are taxed at
the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on their
investment in Units.
For purposes of computing the alternative minimum tax for individuals and
corporations, interest on certain private activity bonds (which includes most
industrial and housing revenue bonds) issued on or after August 8, 1996 is
included as an item of tax preference. However, the assets of the Portfolio do
not include any such private activity bonds issued on or after that date.
In general, Section 86 of the Code, provides that 50% of Social Security
benefits are includible in gross income to the extent that the sum of "modified
adjusted gross income" plus 50% of the Social Security benefits received exceeds
a "base amount." The base amount is $25,000 for unmarried taxpayers, $32,000 for
married taxpayers filing a joint return and zero for married taxpayers who do
not live apart at all times during the taxable year and who file separate
returns. Modified adjusted gross income is adjusted gross income determined
without regard to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent that Social
Security benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible in gross
income to the extent that the sum of "modified adjusted gross income" plus 50%
of Social Security benefits received exceeds an "adjusted base amount." The
adjusted base amount is $34,000 for unmarried taxpayers, $44,000 for married
taxpayers filing a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross income
solely for the purpose of determining what portion, if any, of Social Security
benefits will be included in gross income, no tax-exempt interest, including
that received from the Portfolios, will be subject to tax. A taxpayer whose
adjusted gross income already exceeds the base amount or the adjusted base
amount must include 50% or 85%, respectively, of his Social Security benefits in
gross income whether or not he receives any tax-exempt interest. A taxpayer
whose modified adjusted gross income (after inclusion of tax-exempt interest)
does not exceed the base amount need not include any Social Security benefits in
gross income.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, corporations
subject to the branch profits tax, financial institutions, certain insurance
companies, certain S
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corporations, individual recipients of Social Security or Railroad Retirement
benefits and taxpayers who may be deemed to have incurred (or continued)
indebtedness to purchase or carry tax-exempt obligations. Prospective investors
should consult their tax advisers as to the applicability of any such collateral
consequences.
EXCEPT AS NOTED ABOVE AND IN PART A OF THIS PROSPECTUS, THE EXEMPTION OF
INTEREST ON STATE AND LOCAL OBLIGATIONS FOR FEDERAL INCOME TAX PURPOSES
DISCUSSED ABOVE DOES NOT NECESSARILY RESULT IN EXEMPTION UNDER THE INCOME OR
OTHER TAX LAWS OF ANY STATE OR CITY. THE LAWS OF THE SEVERAL STATES VARY WITH
RESPECT TO THE TAXATION OF SUCH OBLIGATIONS.
In the opinion of Carter, Ledyard & Milburn, counsel to the Trustee and special
counsel for the Series for New York tax matters, under existing law:
Under the income tax laws of the State and City of New York, each Unit
Trust is not an association taxable as a corporation and the income of each
Portfolio will be treated as the income of the Unitholders.
For a summary of each opinion of special counsel to the respective State
Portfolio for state tax matters, see Part A of this Prospectus.
PORTFOLIO OPERATING EXPENSES
No annual advisory fee is charged to the Portfolios by the Sponsor. The
Sponsor does, however, receive a fee as set forth in Part A of the Prospectus
for regularly evaluating the Bonds and for maintaining surveillance over the
portfolio (the "Sponsor's Evaluation Fee"). Estimated annual Portfolio expenses
are as set forth in Part A of the Prospectus; if actual expenses are higher than
the estimate, the excess will be borne by the Portfolio.
The Trustee receives for ordinary recurring services an annual fee for each
plan of distribution for each Portfolio as set forth in in Part A of the
Prospectus. Each annual fee is per $1,000 principal amount of the underlying
Bonds in a Portfolio for that portion of the Portfolio that represents a
particular plan of distribution, provided, however, that for services performed
prior to the record date for the second distribution from the Interest Account,
the Trustee's compensation shall be computed in respect of all Units outstanding
at the rate specified for the monthly plan of distribution. The Trustee's
compensation and the Sponsor's Evaluation Fee with respect to each Portfolio is
computed on the basis of the largest principal amount of Bonds in the Portfolio
at any time during the period with respect to which such compensation is being
computed. 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 Portfolio to meet scheduled distributions). In addition,
the Sponsor's Evaluation Fee and the Trustee's fee may be adjusted in accordance
with the cumulative percentage increase of the United States Department of
Labor's Consumer Price Index entitled "All Services Less Rent of Shelter" since
the establishment of the Portfolios or if such index no longer exists, a
comparable index. In addition, with respect to any fees payable to the Sponsor
or an affiliate of the Sponsor for providing bookkeeping and other
administrative services, supervisory services and evaluation services, such
individual fees may exceed the actual costs of providing such services for a
Portfolio, but at no time will the total amount received for such services, in
the aggregate, rendered to all unit investment trusts of which John Nuveen & Co.
Incorporated is the Sponsor in any calendar year exceed the actual cost to the
Sponsor or its affiliates of supplying such services, in the aggregate, in such
year. The Trustee has the use of funds, if any, being held in the Interest and
Principal Accounts of each Portfolio for future distributions, payment of
expenses and redemptions. These Accounts are non-interest bearing to
Unitholders. Pursuant to normal banking procedures, the Trustee benefits from
the use of funds held therein. Part of the Trustee's compensation for its
services to the Portfolios is expected to result from such use of these funds.
Premiums for the policies of insurance obtained by the Sponsor or by the
Bond issuers with respect to the Bonds in the Insured Portfolios and with
respect to insured Bonds in Traditional Portfolios have been paid in full prior
to the deposit of the Bonds in the Portfolios, and the value of such insurance
has been included in the evaluation of the Bonds in each Portfolio and
accordingly in the Public Offering Price of Units of each Portfolio. There are
no annual continuing premiums for such insurance.
The following are additional expenses of the Portfolios and, when paid by or
are owed to the Trustee, are secured by a lien on the assets of the Portfolio or
Portfolios to which such expenses are allocable: (1) the expenses and costs of
any action undertaken by the Trustee to protect the Portfolios and the rights
and interests of the Unitholders; (2) all taxes and other governmental charges
upon the Bonds or any part of the Portfolios (no such taxes or charges are being
levied or made or, to the knowledge of the Sponsor, contemplated); (3) amounts
payable to the Trustee as fees for ordinary recurring services and for
extraordinary non-recurring services rendered pursuant to the Indenture, all
disbursements and expenses including counsel fees (including fees of bond
counsel which the Trustee may retain) sustained or incurred by the Trustee in
connection therewith; and (4) any losses or liabilities accruing to the Trustee
without negligence, bad faith or willful misconduct on its part. The Trustee is
empowered to sell Bonds in order to pay these amounts if funds are not otherwise
available in the applicable Interest and Principal Accounts.
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Except as provided in the Indenture, the Indenture generally requires each
Portfolio to be audited on an annual basis at the expense of the Portfolio by
independent public accountants selected by the Sponsor. The Trustee shall not be
required, however, to cause such an audit to be performed if its cost to a
Portfolio shall exceed $.05 per Unit on an annual basis. Unitholders of a
Portfolio covered by an audit may obtain a copy of the audited financial
statements upon request.
DISTRIBUTIONS TO UNITHOLDERS
Interest received by the Trustee on the Bonds in each Portfolio, including
that part of the proceeds of any disposition of Bonds which represents accrued
interest and including any insurance proceeds representing interest due on
defaulted Bonds, shall be credited to the "Interest Account" of such Portfolio
and all other moneys received by the Trustee shall be credited to the "Principal
Account" of such Portfolio.
The pro rata share of cash in the Principal Account in each Portfolio will
be computed as of each semi-annual Record Date and distributions to the
Unitholders as of such Record Date will be made on or shortly after the
fifteenth day of the month. Proceeds received from the disposition, including
sale, call or maturity, of any of the Bonds and all amounts paid with respect to
zero coupon bonds and Stripped Obligations will be held in the Principal Account
and either used to pay for Units redeemed or distributed on the Distribution
Date following the next semi-annual Record Date. The Trustee is not required to
make a distribution from the Principal Account of any Portfolio unless the
amount available for distribution in such account equals at least $0.10 per
Unit.
The pro rata share of the Interest Account in each Portfolio will be
computed by the Trustee each month as of each Record Date and distributions will
be made on or shortly after the fifteenth day of the month to Unitholders of
such Portfolio as of the Record Date who are entitled to distributions at that
time under the plan of distribution chosen. Persons who purchase Units between a
Record Date and a Distribution Date will receive their first distribution on the
Distribution Date following the next Record Date under the applicable plan of
distribution.
Purchasers of Units who desire to receive interest distributions on a
monthly or quarterly basis may elect to do so at the time of purchase during the
initial public offering period. Those indicating no choice will be deemed to
have chosen the semi-annual distribution plan. All Unitholders, however, who
purchase Units during the initial public offering period and who hold them of
record on the first Record Date will receive the first distribution of interest.
Thereafter, Record Dates for monthly distributions will be the first day of each
month; Record Dates for quarterly distributions will be the first day of
February, May, August and November; and Record Dates for semi-annual
distributions will be the first day of May and November. See Part A of the
Prospectus for details of distributions per Unit of each Portfolio under the
various plans based upon estimated Net Annual Interest Income at the Date of
Deposit. The amount of the regular distributions will generally change when
Bonds are redeemed, mature or are sold or when fees and expenses increase or
decrease. For the purpose of minimizing fluctuations in the distributions from
the Interest Account of a Portfolio, the Trustee is authorized to advance such
amounts as may be necessary to provide for interest distributions of
approximately equal amounts. The Trustee shall be reimbursed, without interest,
for any such advances from funds in the Interest Account of such Portfolio. The
Trustee's fee takes into account the costs attributable to the outlay of capital
needed to make such advances.
The plan of distribution selected by a Unitholder will remain in effect
until changed. Unitholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. Unitholders desiring to change their plan of distribution may do so by
sending a written notice requesting the change, together with any
Certificate(s), to the Trustee. The notice and any Certificate(s) must be
received by the Trustee not later than the semi-annual Record Date to be
effective as of the semi-annual distribution following the subsequent
semi-annual Record Date. Unitholders are requested to make any such changes
within 45 days prior to the applicable Record Date. Certificates should only be
sent by registered or certified mail to minimize the possibility of their being
lost or stolen. (See "OWNERSHIP AND TRANSFER OF UNITS.")
As of the first day of each month the Trustee will deduct from the Interest
Account of a Portfolio or, to the extent funds are not sufficient therein, from
the Principal Account of a Portfolio, amounts needed for payment of expenses of
such Portfolio. The Trustee also may withdraw from said accounts such amount, if
any, as it deems necessary to establish a reserve for any governmental charges
payable out of such Portfolio. Amounts so withdrawn shall not be considered a
part of a Portfolio's assets until such time as the Trustee shall return all or
any part of such amounts to the appropriate account. In addition, the Trustee
shall withdraw from the Interest Account and the Principal Account of a
Portfolio such amounts as may be necessary to cover redemptions of Units of such
Portfolio by the Trustee. Funds which are available for future distributions,
redemptions and payment of expenses are held in accounts which are non-interest
bearing to Unitholders and are available for use by the Trustee pursuant to
normal banking procedures.
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ACCUMULATION PLAN
The Sponsor is also the principal underwriter of several open-end mutual
funds (the "Accumulation Funds") into which Unitholders may choose to reinvest
Portfolio distributions. Unitholders may elect to reinvest principal
distributions or interest and principal distributions automatically, without any
sales charge. Each Accumulation Fund has investment objectives which differ in
certain respects from those of the Portfolios and may invest in securities which
would not be eligible for deposit in the Portfolios. Further information
concerning the Accumulation Plan and a list of Accumulation Funds is set forth
in the Information Supplement of this Prospectus, which may be obtained by
contacting the Trustee at the phone number listed on the back cover of this
Prospectus.
Participants may at any time, by so notifying the Trustee in writing, elect
to change the Accumulation Fund into which their distributions are being
reinvested, to change from principal only reinvestment to reinvestment of both
principal and interest or vice versa, or to terminate their participation in the
Accumulation Plan altogether and receive future distributions on their Units in
cash. Such notice will be effected as of the next Record Date occuring at least
ten days after the Trustee's receipt of the notice. There will be no charge or
other penalty for such change of election or termination. The character of
Portfolio distributions for income tax purposes will remain unchanged even if
they are reinvested in an Accumulation Fund.
REPORTS TO UNITHOLDERS
The Trustee shall furnish Unitholders of a Portfolio in connection with each
distribution, a statement of the amount of interest, if any, and the amount of
other receipts (received since the preceding distribution) being distributed,
expressed in each case as a dollar amount representing the pro rata share of
each Unit of a Portfolio outstanding and a year to date summary of all
distributions paid on said Units. Within a reasonable period of time after the
end of each calendar year, the Trustee shall furnish to each person, who at any
time during the calendar year was a registered Unitholder of a Portfolio, a
statement with respect to such Portfolio (i) as to the Interest Account:
interest received (including amounts representing interest received upon any
disposition of Bonds), and, except for any State Portfolio, the percentage of
such interest by states in which the issuers of the Bonds are located,
deductions for fees and expenses of such Portfolio, redemption of Units and the
balance remaining after such distributions and deductions, expressed in each
case both as a total dollar amount and as a dollar amount representing the pro
rata share of each Unit outstanding on the last business day of such calendar
year; (ii) as to the Principal Account: the dates of disposition of any Bonds
and the net proceeds received therefrom (excluding any portion representing
accrued interest), the amount paid for purchase of Replacement Bonds, the amount
paid upon redemption of Units, deductions for payment of applicable taxes and
fees and expenses of the Trustee, and the balance remaining after such
distributions and deductions expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (iii) a list of the Bonds held and the
number of Units outstanding on the last business day of such calendar year; (iv)
the Unit Value based upon the last computation thereof made during such calendar
year; and (v) amounts actually distributed during such calendar year from the
Interest Account and from the Principal Account, separately stated, expressed
both as total dollar amounts and as dollar amounts representing the pro rata
share of each Unit outstanding. Each annual statement will reflect pertinent
information in respect of all plans of distribution so that Unitholders may be
informed regarding the results of other plans of distribution.
UNIT VALUE AND EVALUATION
The value of each Portfolio is determined by the Sponsor on the basis of (1)
the cash on hand in the Portfolio or moneys in the process of being collected,
(2) the value of the Bonds in the Portfolio based on the BID prices of the Bonds
and (3) interest accrued thereon not subject to collection, LESS (1) amounts
representing taxes or governmental charges payable out of the Portfolio, (2)
amounts representing unpaid organization costs, and (3) the accrued expenses of
the Portfolio. The result of such computation is divided by the number of Units
of such Portfolio outstanding as of the date thereof to determine the per Unit
value ("Unit Value") of such Portfolio. The Sponsor may determine the value of
the Bonds in each Portfolio (1) on the basis of current BID prices of the Bonds
obtained from dealers or brokers who customarily deal in bonds comparable to
those held by a Portfolio, (2) if bid prices are not available for any of the
Bonds, on the basis of bid prices for comparable bonds, (3) by causing the value
of the Bonds to be determined by others engaged in the practice of evaluating,
quoting or appraising comparable bonds or (4) by any combination of the above.
Although the Unit Value of each Portfolio is based on the BID prices of the
Bonds, the Units are sold initially to the public at the Public Offering Price
based on the OFFERING prices of the Bonds.
Because the insurance obtained by the Sponsor or by the issuers of Bonds
with respect to the Bonds in the Insured Portfolios and with respect to insured
Bonds in Traditional Portfolios is effective so long as such Bonds are
outstanding,
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<PAGE>
such insurance will be taken into account in determining the bid and offering
prices of such Bonds and therefore some value attributable to such insurance
will be included in the value of Units of Portfolios that include such Bonds.
DISTRIBUTION OF UNITS TO THE PUBLIC
Nuveen, in addition to being the Sponsor, is the sole Underwriter of the
Units. It is the intention of the Sponsor to qualify Units of National, Long
Intermediate, Intermediate, Short Intermediate and Short Term Portfolios for
sale under the laws of substantially all of the states of the United States of
America, and Units of State Portfolios only in the state for which the Portfolio
is named and selected other states.
Promptly following the deposit of Bonds in exchange for Units of the
Portfolios, it is the practice of the Sponsor to place all of the Units as
collateral for a letter or letters of credit from one or more commercial banks
under an agreement to release such Units from time to time as needed for
distribution. Under such an arrangement the Sponsor pays such banks compensation
based on the then current interest rate. This is a normal warehousing
arrangement during the period of distribution of the Units to public investors.
To facilitate the handling of transactions, sales of Units shall be limited to
transactions involving a minimum of either $5,000 or 50 Units, whichever is
less. The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units.
The Sponsor plans to allow a discount to brokers and dealers in connection
with the primary distribution of Units and also in secondary market
transactions. The primary market discounts are as follows:
<TABLE>
<CAPTION>
DISCOUNT PER UNIT
-----------------------------------------------------------------------------------
NATIONAL AND LONG INTERMEDIATE INTERMEDIATE SHORT INTERMEDIATE SHORT TERM
NUMBER OF UNITS* STATE PORTFOLIOS PORTFOLIOS PORTFOLIOS PORTFOLIOS PORTFOLIOS
---------------- ---------------- ----------------- ------------ ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Less than 500................. $3.20 $2.90 $2.70 $2.00 $1.50
500 but less than 1,000....... 3.20 2.90 2.70 2.00 1.50
1,000 but less than 2,500..... 3.20 2.70 2.50 1.80 1.30
2,500 but less than 5,000..... 3.20 2.45 2.25 1.55 1.05
5,000 but less than 10,000.... 2.50 2.45 2.25 1.55 1.05
10,000 but less than 25,000... 2.00 2.00 2.00 1.30 .80
25,000 or more................ 1.75 1.75 1.75 1.30 .60
</TABLE>
*Breakpoint sales charges and related dealer concessions are computed both on a
dollar basis and on the basis of the number of Units purchased, using the
equivalent of 500 Units to $50,000, 2,500 Units to $250,000 etc. and will be
applied on that basis which is more favorable to the purchaser.
The Sponsor currently intends to maintain a secondary market for Units of
each Portfolio. See "MARKET FOR UNITS." The amount of the dealer concession on
secondary market purchases of Portfolio Units through the Sponsor will be
computed based upon the value of the Bonds in the Portfolio, including the sales
charge computed as described in "PUBLIC OFFERING PRICE", and adjusted to reflect
the cash position of the Portfolio principal account, and will vary with the
size of the purchase as shown in the following table:
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE*
-------------------------------------------------------------------------------------
$50,000 $100,000 $250,000 $500,000 $1,000,000
UNDER TO TO TO TO TO $2,500,000
YEARS TO MATURITY $50,000 $99,999 $249,999 $499,999 $999,999 $2,499,999 OR MORE
----------------- --------- ------------ ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than 1.............. 0 0 0 0 0 0 0
1 but less than 2........ 1.00% .90% .85% .80% .70% .55% .467%
2 but less than 3........ 1.30% 1.20% 1.10% 1.00% .90% .73% .634%
3 but less than 4........ 1.60% 1.45% 1.35% 1.25% 1.10% .90% .781%
4 but less than 5........ 2.00% 1.85% 1.75% 1.55% 1.40% 1.25% 1.082%
5 but less than 7........ 2.30% 2.15% 1.95% 1.80% 1.65% 1.50% 1.320%
7 but less than 10....... 2.60% 2.45% 2.25% 2.10% 1.95% 1.70% 1.496%
10 but less than 13...... 3.00% 2.80% 2.60% 2.45% 2.30% 2.00% 1.747%
13 but less than 16...... 3.25% 3.15% 3.00% 2.75% 2.50% 2.15% 1.878%
16 or more............... 3.50% 3.50% 3.40% 3.35% 3.00% 2.50% 2.185%
</TABLE>
*Breakpoint sales charges and related dealer concessions are computed both on a
dollar basis and on the basis of the number of Units purchased, using the
equivalent of 500 Units to $50,000, 2,500 Units to $250,000, etc., and will be
applied on that basis which is more favorable to the purchaser.
The Sponsor reserves the right to change the dealer concessions from time to
time.
Volume incentives can be earned as a marketing allowance by eligible dealer
firms who reach cumulative firm sales arrangement levels of a specified dollar
amount of Nuveen Defined Portfolios (other than any series of the Nuveen--The
Dow 5-TM- Portfolios and Nuveen--The Dow 10-TM- Portfolios) sold in the primary
or secondary market during any quarter as set forth in the table below. Eligible
dealer firms are dealers that are providing marketing support for Nuveen Defined
Portfolios in the form of 1) distributing or permitting the distribution of
marketing materials and other product information, 2) providing Nuveen
representatives access to the dealer's branch offices, and 3) generally
facilitating the placement of
20
<PAGE>
orders by the dealer's registered representatives such as putting Nuveen Defined
Portfolios on their order entry screens. Eligible firms will not include firms
that solely provide clearing services to broker/dealer firms. For purposes of
determining the applicable volume incentive rate for a given quarter, the dollar
amount of all Units sold over the current and three previous quarters (the
"Measuring Period") is aggregated. The volume incentive received by the dealer
firm will equal the dollar amount of Units sold during the current quarter times
the highest applicable rate for the Measuring Period. For firms that meet the
necessary volume level, volume incentives may be given on all applicable trades
originated from or by that firm.
<TABLE>
<CAPTION>
TOTAL DOLLAR AMOUNT SOLD
OVER MEASURING PERIOD VOLUME INCENTIVE
-------------------------- --------------------------------
<S> <C>
$ 5,000,000 to $ 9,999,999 0.10% of current quarter sales
$10,000,000 to $19,999,999 0.125% of current quarter sales
$20,000,000 to $49,999,999 0.1375% of current quarter sales
$50,000,000 or more 0.15% of current quarter sales
</TABLE>
Only sales through the Sponsor qualify for volume incentives and for meeting
minimum requirements. The Sponsor reserves the right to modify or change the
volume incentive schedule at any time and make the determination as to which
firms qualify for the marketing allowance and the amount paid.
Firms are not entitled to receive any dealer concession for any sales made
to investors which qualified as "Discounted Purchases" (as defined in PUBLIC
OFFERING PRICE) during the primary or secondary market. (See "PUBLIC OFFERING
PRICE")
OWNERSHIP AND TRANSFER OF UNITS
The ownership of Units is evidenced in Certificated form unless the
Unitholder expressly requests that the purchased Units be evidenced by book
entry positions recorded on the books and records of the Trustee. The Trustee is
authorized to treat as the owner of Units that person who at the time is
registered as such on the books of the Trustee. Any Unitholder who holds a
Certificate may change to book entry ownership by submitting to the Trustee the
Certificate along with a written request that the Units represented by such
Certificate be held in book entry form. Likewise, a Unitholder who holds Units
in book entry form may obtain a Certificate for such Units by written request to
the Trustee. Units may be held in denominations of one Unit or any multiple or
fraction thereof. Fractions of Units are computed to three decimal places. Any
Certificates issued will be numbered serially for identification, and are issued
in fully registered form, transferable only on the books of the Trustee. Book
entry Unitholders will receive a Book Entry Position Confirmation reflecting
their ownership.
For Portfolios allowing optional plans of distribution, Certificates for
Units will bear an appropriate notation on their face indicating which plan of
distribution has been selected. When a change is made, the existing Certificates
must be surrendered to the Trustee and new Certificates issued to reflect the
currently effective plan of distribution. There will be no charge for this
service. Holders of book entry Units can change their plan of distribution by
making a written request to the Trustee, which will issue a new Book Entry
Position Confirmation to reflect such change.
Units are transferable by making a written request to the Trustee and, in
the case of Units evidenced by Certificate(s), by presenting and surrendering
such Certificate(s) to the Trustee, at its address listed on the back cover of
this Part B of the Prospectus, properly endorsed or accompanied by a written
instrument or instruments of transfer. The Certificate(s) should be sent
registered or certified mail for the protection of the Unitholder. Each
Unitholder must sign such written request, and such Certificate(s) or transfer
instrument, exactly as his name appears on (a) the face of the Certificate(s)
representing the Units to be transferred, or (b) the Book Entry Position
Confirmation(s) relating to the Units to be transferred. Such signature(s) must
be guaranteed by a guarantor acceptable to the Trustee. In certain instances the
Trustee may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or administrator or
certificates of corporate authority. Mutilated Certificates must be surrendered
to the Trustee in order for a replacement Certificate to be issued. Although at
the date hereof no charge is made and none is contemplated, a Unitholder may be
required to pay $2.00 to the Trustee for each Certificate reissued or transfer
of Units requested and to pay any governmental charge which may be imposed in
connection therewith.
REPLACEMENT OF LOST, STOLEN OR DESTROYED CERTIFICATES.
To obtain a new Certificate replacing one that has been lost, stolen, or
destroyed, the Unitholder must furnish the Trustee with sufficient
indemnification and pay such expenses as the Trustee may incur. This
indemnification must be in the form of an Open Penalty Bond of Indemnification.
The premium for such an indemnity bond may vary, but currently amounts to 1% of
the market value of the Units represented by the Certificate. In the case
however, of a Portfolio as to which
21
<PAGE>
notice of termination has been given, the premium currently amounts to 0.5% of
the market value of the Units represented by such Certificate.
REDEMPTION
Unitholders may redeem all or a portion of their Units by (1) making a
written request for such redemption (book entry Unitholders may use the
redemption form on the reverse side of their Book Entry Position Confirmation)
to the Trustee at its address listed on the back cover of this Part B of the
Prospectus (redemptions of 1,000 Units or more will require a signature
guarantee), (2) in the case of Units evidenced by a Certificate, by also
tendering such Certificate to the Trustee, duly endorsed or accompanied by
proper instruments of transfer with signatures guaranteed as explained above, or
by providing satisfactory indemnity required in connection with lost, stolen or
destroyed Certificates and (3) payment of applicable governmental charges, if
any. Certificates should be sent only by registered or certified mail to
minimize the possibility of their being lost or stolen. (See "OWNERSHIP AND
TRANSFER OF UNITS.") No redemption fee will be charged. A Unitholder may
authorize the Trustee to honor telephone instructions for the redemption of
Units held in book entry form. Units represented by Certificates may not be
redeemed by telephone. The proceeds of Units redeemed by telephone will be sent
by check either to the Unitholder at the address specified on his account or to
a financial institution specified by the Unitholder for credit to the account of
the Unitholder. A Unitholder wishing to use this method of redemption must
complete a Telephone Redemption Authorization Form and furnish the Form to the
Trustee. Telephone Redemption Authorization Forms can be obtained from a
Unitholder's registered representative or by calling the Trustee. Once the
completed Form is on file, the Trustee will honor telephone redemption requests
by any authorized person. The time a telephone redemption request is received
determines the "date of tender" as discussed below. The redemption proceeds will
be mailed within three business days following the telephone redemption request.
Only Units held in the name of individuals may be redeemed by telephone;
accounts registered in broker name, or accounts of corporations or fiduciaries
(including among others, trustees, guardians, executors and administrators) may
not use the telephone redemption privilege.
On the third business day following the date of tender, the Unitholder will
be entitled to receive in cash for each Unit tendered an amount equal to the
Unit Value of such Portfolio determined by the Trustee, as of 4:00 p.m. eastern
time, or as of any earlier closing time on a day on which the Exchange is
scheduled in advance to close at such earlier time, on the date of tender as
defined hereafter, plus accrued interest to, but not including, the third
business day after the date of tender ("Redemption Price"). During the period
ending with the earlier of six months after the Initial Date of Deposit or the
end of the initial offering period, the Redemption Price per Unit includes
estimated organization costs per Unit. After such period, the Redemption Price
will not include such estimated organization costs. See Part A of the
Prospectus. The price received upon redemption may be more or less than the
amount paid by the Unitholder depending on the value of the Bonds on the date of
tender. Unitholders should check with the Trustee or their broker to determine
the Redemption Price before tendering Units.
The "date of tender" is deemed to be the date on which the request for
redemption of Units is received in proper form by the Trustee, except that as
regards a redemption request received after 4:00 p.m. eastern time, or as of any
earlier closing time on a day on which the Exchange is scheduled in advance to
close at such earlier time, or on any day on which the Exchange is normally
closed, the date of tender is the next day on which such Exchange is normally
open for trading and such request will be deemed to have been made on such day
and the redemption will be effected at the Redemption Price computed on that
day.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account of the appropriate Portfolio or, if the balance therein is insufficient,
from the Principal Account of such Portfolio. All other amounts paid on
redemption shall be withdrawn from the Principal Account. The Trustee is
empowered to sell underlying Bonds of a Portfolio in order to make funds
available for redemption. (See "REMOVAL OF BONDS FROM THE PORTFOLIOS.") Units so
redeemed shall be cancelled. To the extent that Bonds are sold from a Portfolio,
the size and diversity of such Portfolio will be reduced. Such sales may be
required at a time when Bonds would not otherwise be sold and might result in
lower prices than might otherwise be realized.
The Redemption Price is determined on the basis of the BID prices of the
Bonds in each Portfolio, while the initial Public Offering Price of Units will
be determined on the basis of the OFFERING prices of the Bonds, as of 4:00 p.m.
eastern time on any day on which the Exchange is normally open for trading, or
as of any earlier closing time on a day on which the Exchange is scheduled in
advance to close at such earlier time. As of any given time, the difference
between the bid and offering prices of such Bonds may be expected to average
1/2% to 2% of principal amount. In the case of actively traded Bonds, the
difference may be as little as 1/4 to 1/2 of 1%, and in the case of inactively
traded Bonds such difference usually will not exceed 3%.
22
<PAGE>
The right of redemption may be suspended and payment postponed for any
period during which the Securities and Exchange Commission determines that
trading in the municipal bond market is restricted or an emergency exists, as a
result of which disposal or evaluation of the Bonds is not reasonably
practicable, or for such other periods as the Securities and Exchange Commission
may by order permit.
Under regulations issued by the Internal Revenue Service, the Trustee will
be required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the Unitholder only when filing his or her tax return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker at the time the Certificate or Book Entry Return
Confirmation is issued, and this number is printed on the Certificate or Book
Entry Return Confirmation and on distribution statements. If a Unitholder's tax
identification number does not appear as described above, or if it is incorrect,
the Unitholder should contact the Trustee before redeeming Units to determine
what action, if any, is required to avoid this "back-up withholding."
HOW UNITS MAY BE PURCHASED BY THE SPONSOR
The Trustee will notify the Sponsor of any tender of Units for redemption.
If the Sponsor's bid in the secondary market at that time equals or exceeds the
Redemption Price it may purchase such Units by notifying the Trustee before the
close of business on the second succeeding business day and by making payment
therefor to the Unitholder not later than the day on which payment would
otherwise have been made by the Trustee. (See "REDEMPTION.") The Sponsor's
current practice is to bid at the Redemption Price in the secondary market.
Units held by the Sponsor may be tendered to the Trustee for redemption as any
other Units.
HOW BONDS MAY BE REMOVED FROM THE PORTFOLIOS
Bonds will be removed from a Portfolio as they mature or are redeemed by the
issuers thereof. See "Risk Factors" in Part A of this Prospectus and "SUMMARY OF
PORTFOLIOS" herein for a discussion of call provisions of Portfolio Bonds.
The Indenture also empowers the Trustee to sell Bonds for the purpose of
redeeming Units tendered by any Unitholder, and for the payment of expenses for
which income may not be available. Under the Indenture, the Sponsor is obligated
to provide the Trustee with a current list of Bonds in each Portfolio to be sold
in such circumstances. In deciding which Bonds should be sold the Sponsor
intends to consider, among other things, such factors as: (1) market conditions;
(2) market prices of the Bonds; (3) the effect on income distributions to
Unitholders of the sale of various Bonds; (4) the effect on principal amount of
underlying Bonds per Unit of the sale of various Bonds; (5) the financial
condition of the issuers; and (6) the effect of the sale of various Bonds on the
investment character of the Portfolio. Such sales, if required, could result in
the sale of Bonds by the Trustee at prices less than original cost to the
Portfolio. To the extent Bonds are sold, the size and diversity of such
Portfolio will be reduced.
In addition, the Sponsor is empowered to direct the Trustee to liquidate
Bonds upon the happening of certain other events, such as default in the payment
of principal and/or interest, an action of the issuer that will adversely affect
its ability to continue payment of the principal of and interest on its Bonds,
or an adverse change in market, revenue or credit factors affecting the
investment character of the Bonds. If a default in the payment of the principal
of and/or interest on any of the Bonds occurs, and if the Sponsor fails to
instruct the Trustee whether to sell or continue to hold such Bonds within 30
days after notification by the Trustee to the Sponsor of such default, the
Indenture provides that the Trustee shall liquidate said Bonds forthwith and
shall not be liable for any loss so incurred. The Sponsor may also direct the
Trustee to liquidate Bonds in a Portfolio if the Bonds in the Portfolio are the
subject of an advanced refunding, generally considered to be when refunding
bonds are issued and the proceeds thereof are deposited in irrevocable trust to
retire the refunded Bonds on their redemption date.
Except as stated in "COMPOSITION OF TRUSTS" regarding the limited right of
substitution of Replacement Bonds for Failed Bonds, except for refunding
securities that may be exchanged for Bonds under certain conditions specified in
the Indenture and except as otherwise provided in the Prospectus or the
Indenture, the Indenture does not permit either the Sponsor or the Trustee to
acquire or deposit bonds either in addition to, or in substitution for, any of
the Bonds initially deposited in a Portfolio.
INFORMATION ABOUT THE TRUSTEE
The Trustee and its address are stated on the back cover of this Part B of
the Prospectus. The Trustee is subject to supervision and examination by the
Federal Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve System and either the Comptroller of the Currency or state banking
authorities.
23
<PAGE>
The Trustee has assumed no responsibility for the accuracy, adequacy and
completeness of the information not furnished by it contained in this
Prospectus.
LIMITATIONS ON LIABILITIES OF SPONSOR AND TRUSTEE
The Sponsor and the Trustee shall be under no liability to Unitholders for
taking any action or for refraining from any action in good faith pursuant to
the Indenture, or for errors in judgment, but shall be liable only for their own
negligence, lack of good faith or willful misconduct. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the Trustee of
any of the Bonds. In the event of the failure of the Sponsor to act under the
Indenture, the Trustee may act thereunder and shall not be liable for any action
taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Bonds or upon the interest thereon or upon it
as Trustee under the Indenture or upon or in respect of any Portfolio which the
Trustee may be required to pay under any present or future law of the United
States of America or of any other taxing authority having jurisdiction. In
addition, the Indenture contains other customary provisions limiting the
liability of the Trustee.
SUCCESSOR TRUSTEES AND SPONSORS
The Trustee or any successor trustee may resign by executing an instrument
of resignation in writing and filing same with the Sponsor and mailing a copy of
a notice of resignation to all Unitholders then of record. Upon receiving such
notice, the Sponsor is required to promptly appoint a successor trustee. If the
Trustee becomes incapable of acting or is adjudged bankrupt or insolvent, or a
receiver or other public officer shall take charge of its property or affairs,
the Sponsor may remove the Trustee and appoint a successor by written
instrument. The resignation or removal of a trustee and the appointment of a
successor trustee shall become effective only when the successor trustee accepts
its appointment as such. Any successor trustee shall be a corporation authorized
to exercise corporate trust powers, having capital, surplus and undivided
profits of not less than $5,000,000. Any corporation into which a trustee may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which a trustee shall be a party, shall be the
successor trustee.
If upon resignation of a trustee no successor has been appointed and has
accepted the appointment within 30 days after notification, the retiring trustee
may apply to a court of competent jurisdiction for the appointment of a
successor.
If the Sponsor fails to undertake any of its duties under the Indenture, and
no express provision is made for action by the Trustee in such event, the
Trustee may, in addition to its other powers under the Indenture (1) appoint a
successor sponsor or (2) terminate the Indenture and liquidate the Portfolios.
INFORMATION ABOUT THE SPONSOR
Since our founding in 1898, Nuveen has been synonymous with investments that
withstand the test of time. Today, we offer a broad range of investments
designed for investors seeking to build and sustain their wealth. More than 1.5
million investors have entrusted Nuveen to help them maintain the lifestyle they
currently enjoy.
To meet the unique circumstances and financial planning needs of our
investors, Nuveen offers a wide array of taxable and tax-free investment
products--including equity and fixed-income mutual funds, defined portfolios,
exchange-traded funds, customized asset management services and cash management
products. Nuveen is a subsidiary of The John Nuveen Company which, in turn, is
approximately 78% owned by the St. Paul Companies, Inc. ("ST. PAUL"). St. Paul
is located in St. Paul, Minnesota and is principally engaged in providing
property-liability insurance through subsidiaries. Nuveen is a member of the
National Association of Securities Dealers, Inc. and the Securities Industry
Association and has its principal office located in Chicago (333 West Wacker
Drive). Nuveen maintains six regional offices.
To help advisors and investors better understand and more efficiently use an
investment in the Portfolios to reach their investment goals, the Sponsor may
advertise and create specific investment programs and systems. For example, such
activities may include presenting information on how to use an investment in the
Portfolios, alone or in combination with an investment in other mutual funds or
unit investment trusts sponsored by Nuveen, to accumulate assets for future
education needs or periodic payments such as insurance premiums. The Sponsor may
produce software or additional sales literature to promote the advantages of
using the Portfolios to meet these and other specific investor needs.
DESCRIPTION OF RATINGS
The Bonds included in the Portfolios are rated by one of the rating agencies
provided below. The following descriptions are published by the rating agencies.
24
<PAGE>
STANDARD & POOR'S CORPORATION. The following is a brief description of the
applicable Standard & Poor's rating symbols and their meanings:
A Standard & Poor's rating is a current assessment of the creditworthiness
of an obligor with respect to a specific debt obligation. This assessment may
take into consideration obligors such as guarantors, insurers or lessees.
The rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or based on other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of payment--capacity and willingness of the obligor to meet
its financial commitment on an obligation in accordance with the terms
of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA--An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on an obligation
is extremely strong.
AA--An obligation rated AA differs from the highest rated issues only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A--An obligation rated A is somewhat more susceptible to changes in
circumstances and economic conditions than obligations in higher rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB--An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
PLUS (+) OR MINUS (-): The ratings from "AA" to "BBB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful and
timely completion of the project.
NOTE RATINGS: A Standard & Poor's note rating reflects the liquidity
concerns and market access risks unique to notes. Notes due in 3 years or less
will likely receive a note rating. Notes maturing beyond 3 years will most
likely receive a long-term debt rating.
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the
term of the notes.
MOODY'S INVESTORS SERVICE, INC. The following is a description of the
applicable Moody's Investors Service, Inc. rating symbols and their meanings:
Aaa--Bonds that 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.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
---------
25
<PAGE>
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 that make the long-term risks appear somewhat larger than in Aaa
securities.
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.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Con. (...)--Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally. These are
bonds secured by: (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
NOTE RATINGS:
MIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
FITCH IBCA, INC. (formerly Fitch Investors Service, L.P.). The following is
a brief description of the applicable Fitch IBCA, Inc. rating symbols and their
meanings:
AAA--'AAA' ratings denote the lowest expectation of credit risk. They are
assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
AA--'AA' ratings denote a very low expectation of credit risk. They indicate
very strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.
A--'A' ratings denote a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or economic
conditions than is the case for higher ratings.
BBB--'BBB' ratings indicate that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
NOTE RATINGS:
F1 Indicates the Best capacity for timely payment of financial commitments;
may have an added "+" to denote any exceptionally strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in
the case of the higher ratings.
OTHER INFORMATION
AMENDMENT OF INDENTURE
The Indenture may be amended by the Trustee and the Sponsor without the
consent of any of the Unitholders (1) to cure any ambiguity or to correct or
supplement any provision thereof which may be defective or inconsistent, or
(2) to make such other provisions as shall not adversely affect the Unitholders,
provided, however, that the Indenture may not be amended to increase the number
of Units in any Portfolio or to permit the deposit or acquisition of bonds
either in addition to, or in substitution for any of the Bonds initially
deposited in any Portfolio except as stated in "COMPOSITION OF TRUSTS" regarding
the limited right of substitution of Replacement Bonds, except for the
substitution of refunding bonds under certain circumstances and except as
otherwise provided herein or in the Indenture. The Trustee shall advise the
Unitholders of any amendment promptly after execution thereof.
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TERMINATION OF INDENTURE
Each Portfolio may be liquidated at any time by written consent of 100% of
the Unitholders or by the Trustee when the value of such Portfolio, as shown by
any evaluation, is less than 20% of the original principal amount of such
Portfolio and will be liquidated by the Trustee in the event that Units not yet
sold aggregating more than 60% of the Units originally created are tendered for
redemption by the Sponsor thereby reducing the net worth of such Portfolio to
less than 40% of the principal amount of the Bonds originally deposited in the
Portfolio. The sale of Bonds from the Portfolios upon termination may result in
realization of a lesser amount than might otherwise be realized if such sale
were not required at such time. For this reason, among others, the amount
realized by a Unitholder upon termination may be less than the principal amount
of Bonds originally represented by the Units held by such Unitholder. The
Indenture will terminate upon the redemption, sale or other disposition of the
last Bond held thereunder, but in no event shall it continue beyond the end of
the calendar year preceding the fiftieth anniversary of its execution for
National and State Portfolios, beyond the end of the calendar year preceding the
twentieth anniversary of its execution for Long Intermediate, and Intermediate
Portfolios or beyond the end of the calendar year preceding the tenth
anniversary of its execution for Short Intermediate and Short Term Portfolios.
Written notice of any termination specifying the time or times at which
Unitholders may surrender their Certificates, if any, for cancellation shall be
given by the Trustee to each Unitholder at the address appearing on the
registration books of a Portfolio by the Trustee. Within a reasonable time
thereafter, the Trustee shall liquidate any Bonds in the Portfolio then held and
shall deduct from the assets of the Portfolio any accrued costs, expenses or
indemnities provided by the Indenture which are allocable to such Portfolios,
including estimated compensation of the Trustee and costs of liquidation and any
amounts required as a reserve to provide for payment of any applicable taxes or
other governmental charges. The Trustee shall then distribute to Unitholders of
such Portfolio their pro rata share of the balance of the Interest and Principal
Accounts. With such distribution, the Unitholders shall be furnished a final
distribution statement, in substantially the same form as the annual
distribution statement, of the amount distributable. At such time as the Trustee
in its sole discretion shall determine that any amounts held in reserve are no
longer necessary, it shall make distribution thereof to Unitholders in the same
manner.
CODE OF ETHICS
The Sponsor and the Portfolios have adopted a code of ethics requiring the
Sponsor's employees who have access to information on Portfolio transactions to
report personal securities transactions. The purpose of the code is to avoid
potential conflicts of interest and to prevent fraud, deception or misconduct
with respect to the Portfolios.
LEGAL OPINION
The legality of the Units offered hereby has been passed upon by Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603. Special counsel for the
Portfolios for respective state tax matters are named in "Tax Status" for each
Portfolio appearing in Part A of this Prospectus. Carter, Ledyard & Milburn,
2 Wall Street, New York, New York 10005, has acted as counsel for the Trustee
with respect to the Series and as special New York tax counsel for the Series.
AUDITORS
The "Statement of Condition" and "Schedule of Investments" at Date of
Deposit included in Part A of the Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report in
Part A of the Prospectus, and are included herein in reliance upon the authority
of said firm as experts in giving said report.
SUPPLEMENTAL INFORMATION
Upon written or telephonic request to the Trustee, investors will receive at
no cost to the investor supplemental information about the Portfolios, which has
been filed with the Securities and Exchange Commission and is intended to
supplement information contained in Part A and Part B of the Prospectus. The
supplemental information includes more detailed information concerning certain
of the Bonds included in the Portfolios, taxable-equivalent yield tables and
more specific risk information concerning the individual state Portfolios. This
supplement also includes additional general information about the Sponsor, the
accumulation plan and the Portfolios.
HOW THE PORTFOLIOS COMPARE PERFORMANCE
The Sponsor may compare the estimated returns of the Portfolios with the
returns or yields of other tax-free and taxable investments, often on a taxable
equivalent basis. In addition, the Sponsor from time to time may quote various
performance measures and studies in order to compare the historical returns
available from an investment in municipal securities with investments in both
tax-free and taxable securities.
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<PAGE>
Nuveen Research prepared one such study which compared the after-tax value
of $100,000 initially invested in 1977 in various asset classes including
municipal bonds, treasury bonds and corporate bonds. As indicated in the chart
provided below, the 20-year study shows that municipal bonds significantly
outperformed corporate and treasury bonds once the effects of taxes were
factored in. In fact, over the 20-year period, municipal bond returns in dollars
were almost double those of treasury bonds.
AFTER-TAX VALUE OF $100,000 INVESTED IN 1977*
The graph appearing here compares after-tax total returns of $100,000
initially in 1977 in each of the Lehman Brothers MuniBond Index, Long-Term
Treasury Index and Long-Term Corporate Index. As indicated in the graph, such an
investment in the Lehman Brothers MuniBond Index, Long-Term Treasury Index and
Long-Term Corporate Index would have appreciated to $511,039, $274,434, and
$298,682, respectively at the end of 1996. The graph assumes all proceeds of
investment are reinvested at the respective index rates at the time of
reinvestment and also assumes that 20% of the assets in each category are turned
over annually and proceeds are reinvested in the respective indexes. The tax
rates assumed to generate the after-tax total returns were based upon the income
and capital gain rates applicable each year from 1977-1996 for an investor who
earned the inflation-adjusted equivalents of $500,000 in 1996. In addition,
treasury returns were "grossed up" an assumed 5% to take into account the
Treasuries' exemption from state income tax. The graph is for illustrative
purposes only, and does not represent the return or performance of any Nuveen
Tax-Free Unit Trust and is not intended to predict future results.
* The graph compares after-tax total returns using the Lehman Brothers
MuniBond Index, Long-Term Treasury Index and Long-Term Corporate Index. The
graph assumes all proceeds of investment are reinvested at the respective index
rates at the time of reinvestment and also assumes that 20% of the assets in
each category are turned over annually and proceeds are reinvested in the
respective indexes. The tax rates assumed to generate the after-tax total
returns were based upon the income and capital gain rates applicable each year
from 1977-1996 for an investor who earned the inflation-adjusted equivalents of
$100,000 in 1996. In addition, treasury returns were "grossed up" an assumed 5%
to take into account the Treasuries' exemption from state income tax. The graph
is for illustrative purposes only, and does not represent the return or
performance of any Nuveen Tax-Free Defined Portfolio and is not intended to
predict future results.
A comparison of the estimated returns of the Portfolios and the historic
performance of municipal bonds to the returns and performance of other
investments is one element to consider in making an informed investment
decision. Taxable investments have investment characteristics that differ from
those of the Portfolios. U.S. Government bonds are investments backed by the
full faith and credit of the U.S. Government and are subject to federal income
tax but are exempt from state income taxes. Bank CDs are generally short-term
FDIC insured investments, which pay fixed principal and interest but are subject
to fluctuating rollover rates. Corporate bonds are debt obligations of
corporations with varying maturities. Both bank CDs and corporate bonds are
generally subject to both federal and state income taxes. Money market funds are
short term investments with stable net asset values, fluctuating yields and
special features that enhance liquidity.
28
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<TABLE>
<S> <C>
[NUVEEN LOGO]
NUVEEN TAX-FREE
UNIT TRUSTS
PROSPECTUS -- PART B
APRIL 10, 2000
</TABLE>
<TABLE>
<C> <S> <C>
SPONSOR John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
Telephone: 312.917.7700
TRUSTEE The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Telephone: 800.257.8787
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR 111 West Monroe Street
Chicago, IL 60603
INDEPENDENT Arthur Andersen LLP
PUBLIC 33 West Monroe Street
ACCOUNTANTS Chicago, IL 60603
FOR THE TRUSTS
</TABLE>
--------------
This Prospectus does not contain complete information about the Portfolios
filed with the Securities and Exchange Commission in Washington, DC under the
Securities Act of 1933 and the Investment Company Act of 1940.
More information about the Portfolios, including the code of ethics adopted
by the Sponsor and the Portfolios, can be found in the Commission's Public
Reference Room. Information about the operation of the Public Reference Room may
be obtained by calling the Commission at 1-202-942-8090. Portfolio information
is also available on the EDGAR Database on the Commission's website at
http://www.sec.gov, or may be obtained at proscribed rates by sending an e-mail
request to [email protected] or by writing to the Commission's Public Reference
Section at 450 Fifth Street NW, Washington, D.C. 20549-0102.
No person is authorized to give any information or representation about the
Portfolios not contained in Parts A or B of this Prospectus or the Information
Supplement, and you should not rely on any other information.
When Units of a Portfolio are no longer available or for investors who will
reinvest into subsequent series of the Portfolios may be used as a preliminary
Prospectus for a future series. If this is the case, investors should note the
following:
1. Information in this Prospectus is not complete and may be changed;
2. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective; and
3. This Prospectus is not an offer to sell the securities of a future
series and is not soliciting an offer to buy such securities in any state
where the offer or sale is not permitted.
<PAGE>
NUVEEN TAX-FREE UNIT TRUSTS
---------------------------------------------
INFORMATION SUPPLEMENT
NUVEEN SERIES 1175
This Information Supplement provides additional
information concerning the structure, operations and risks
of a Nuveen Tax-Free Unit Trust not found in the
prospectuses for the Trusts. This Information Supplement
is not a prospectus and does not include all of the
information that a prospective investor should consider
before investing in a Trust. This Information Supplement
should be read in conjunction with the prospectus for the
Trust in which an investor is considering investing
("Prospectus"). Copies of the Prospectus can be obtained
by calling or writing the Trustee at the telephone number
and address indicated in Part B of the Prospectus. This
Information Supplement has been created to supplement
information contained in the Prospectus.
This Information Supplement is dated June 27, 2000.
Capitalized terms have been defined in the Prospectus.
TABLE OF CONTENTS
----------------------------------------------
<TABLE>
<S> <C>
GENERAL RISK DISCLOSURE..................................... 2
Health Care Facility Revenue Obligations.................. 2
Single Family and Multi-Family Housing Revenue
Obligations.............................................. 2
Single Family Mortgage Revenue Bonds...................... 2
Congregate Care Revenue Obligations....................... 3
Federally Enhanced Obligations............................ 3
Public Housing Authority Revenue Obligations.............. 3
Industrial Revenue Obligations............................ 3
Power Revenue Obligations................................. 4
Utility Obligations....................................... 4
Transportation Bonds...................................... 4
Water and/or Sewerage Revenue Obligations................. 4
Resource Recovery Revenue Obligations..................... 5
Education Revenue Obligations............................. 5
Bridge and Tollroad Revenue Obligations................... 5
Dedicated-Tax Supported Revenue Bonds..................... 5
Municipal Lease Revenue Bonds............................. 5
Special Obligation to Crossover........................... 5
Civic Organization Obligations............................ 5
Original Issue Discount Bonds and Stripped Obligations.... 5
WHY AND HOW ARE THE BONDS INSURED?.......................... 6
ACCUMULATION PLAN........................................... 8
HOW TO CALCULATE YOUR ESTIMATED INCOME...................... 11
Appendix A -- National Disclosure........................... A-1
Appendix B -- California Disclosure......................... B-1
Appendix C -- New Jersey Disclosure......................... C-1
</TABLE>
<PAGE>
GENERAL RISK DISCLOSURE
An investment in Units of any Trust should be made with an understanding of
the risks that such an investment may entail. These include the ability of the
issuer, or, if applicable, an insurer, to make payments of interest and
principal when due, the effects of changes in interest rates generally, early
call provisions and the potential for changes in the tax status of the Bonds. As
set forth in the portfolio summaries in Part A of this Prospectus, the Trusts
may contain or be concentrated in one or more of the types of bonds discussed
below. The following paragraphs discuss certain circumstances which may
adversely affect the ability of issuers of Bonds held in the portfolio of a
Trust to make payment of principal and interest thereon or which may adversely
affect the ratings of such Bonds; with respect to Insured Trusts, however,
because of the insurance obtained by the Sponsor or by the issuers of the Bonds,
such changes should not adversely affect an Insured Trust's receipt of principal
and interest, the Standard & Poor's Corporation ("Standard & Poor's") AAA or
Moody's Investors Service, Inc. ("Moody's") Aaa ratings of the Bonds in the
Insured Trust portfolio. For economic risks specific to the individual Trusts,
see "Risk Factors" for each Trust.
HEALTH CARE FACILITY REVENUE OBLIGATIONS. Some of the Bonds in a Trust may
be obligations of issuers whose revenues are derived from services provided by
hospitals or other health care facilities, including nursing homes. Ratings of
bonds issued for health care facilities are sometimes based on feasibility
studies that contain projections of occupancy levels, revenues and expenses. A
facility's gross receipts and net income available for debt service may be
affected by future events and conditions including, among other things, demand
for services, the ability of the facility to provide the services required, an
increasing shortage of qualified nurses or a dramatic rise in nursing salaries,
physicians' confidence in the facility, management capabilities, economic
developments in the service area, competition from other similar providers,
efforts by insurers and governmental agencies to limit rates, legislation
establishing state rate-setting agencies, expenses, government regulation, the
cost and possible unavailability of malpractice insurance, and the termination
or restriction of governmental financial assistance, including that associated
with Medicare, Medicaid and other similar third party payor programs. Medicare
reimbursements are currently calculated on a prospective basis and are not based
on a provider's actual costs. Such method of reimbursement may adversely affect
reimbursements to hospitals and other facilities for services provided under the
Medicare program and thereby may have an adverse effect on the ability of such
institutions to satisfy debt service requirements. In the event of a default
upon a bond secured by hospital facilities, the limited alternative uses for
such facilities may result in the recovery upon such collateral not providing
sufficient funds to fully repay the bonds.
Certain hospital bonds provide for redemption at par upon the damage,
destruction or condemnation of the hospital facilities or in other special
circumstances.
SINGLE FAMILY AND MULTI-FAMILY HOUSING REVENUE OBLIGATIONS. Some of the
Bonds in a Trust may be obligations of issuers whose revenues are primarily
derived from mortgage loans to housing projects for the elderly or for low to
moderate income families. Such issues are generally characterized by mandatory
redemption at par or, in the case of original issue discount bonds, accreted
value in the event of economic defaults and in the event of a failure of the
operator of a project to comply with certain covenants as to the operation of
the project. The failure of such operator to comply with certain covenants
related to the tax-exempt status of interest on the Bonds, such as provisions
requiring that a specified percentage of units be rented or available for rental
to low or moderate income families, potentially could cause interest on such
Bonds to be subject to Federal income taxation from the date of issuance of the
Bonds. The ability of such issuers to make debt service payments will be
affected by events and conditions affecting financed projects, including, among
other things, the achievement and maintenance of sufficient occupancy levels and
adequate rental income, employment and income conditions prevailing in local
labor markets, increases in taxes, utility costs and other operating expenses,
the managerial ability of project managers, changes in laws and governmental
regulations, the appropriation of subsidies, and social and economic trends
affecting the localities in which the projects are located. Occupancy of such
housing projects may be adversely affected by high rent levels and income
limitations imposed under Federal and state programs.
SINGLE FAMILY MORTGAGE REVENUE BONDS. Some of the Bonds in a Trust may be
single family mortgage revenue bonds, which are issued for the purpose of
acquiring from originating financial institutions notes secured by mortgages on
residences located within the issuer's boundaries and owned by persons of low or
moderate income. Mortgage loans are generally partially or completely prepaid
prior to their final maturities as a result of events such as sale of the
mortgaged premises, default, condemnation or casualty loss. Because these bonds
are subject to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will probably
be redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. Extraordinary mandatory redemption without premium could also result
from the failure of the originating financial institutions to make mortgage
loans in sufficient amounts within a specified time period. The redemption price
of such issues may be more or less than the offering price of such bonds.
Additionally, unusually high rates of default on the underlying mortgage loans
may reduce revenues available for the payment of principal of or interest on
such mortgage revenue
2
<PAGE>
bonds. Single family mortgage revenue bonds issued after December 31, 1980 were
issued under Section 103A of the Internal Revenue Code of 1954, as amended, or
Section 143 of the Internal Revenue Code of 1986, which Sections contain certain
requirements relating to the use of the proceeds of such bonds in order for the
interest on such bonds to retain its tax-exempt status. In each case, the issuer
of the bonds has covenanted to comply with applicable requirements and bond
counsel to such issuer has issued an opinion that the interest on the bonds is
exempt from Federal income tax under existing laws and regulations. There can be
no assurance that such continuing requirements will be satisfied; the failure to
meet such requirements could cause interest on the Bonds to be subject to
Federal income taxation, possibly from the date of issuance of the Bonds.
CONGREGATE CARE REVENUE OBLIGATIONS. Some of the Bonds in a Trust may be
obligations of issuers whose revenues are primarily derived from loans to
finance the construction and/or acquisition of congregate care facilities,
including retirement facilities and nursing care units. A facility's gross
receipts and net income available for debt service may be affected by future
events and conditions, including, among other things, demand for services, the
ability of the facility to provide the services required, management
capabilities, an increasing shortage of qualified nurses or a dramatic rise in
nursing salaries, economic developments in the service area, competition from
other similar providers, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses,
government regulation and the termination or restriction of governmental
financial assistance.
FEDERALLY ENHANCED OBLIGATIONS. Some of the mortgages which secure the
various health care or housing projects which underlie the previously discussed
Health Care Facility Revenue, Single Family and Multi-Family Housing Revenue,
Single Family Mortgage Revenue Obligations and Congregate Care Revenue Bonds
(the "Obligations") in a Trust may be insured by the Federal Housing
Administration ("FHA"). Under FHA regulations, the maximum insurable mortgage
amount cannot exceed 90% of the FHA's estimated value of the project. The FHA
mortgage insurance does not constitute a guarantee of timely payment of the
principal of and interest on the Obligations. Payment of mortgage insurance
benefits may be (1) less than the principal amount of Obligations outstanding or
(2) delayed if disputes arise as to the amount of the payment or if certain
notices are not given to the FHA within the prescribed time periods. In
addition, some of the previously discussed Obligations may be secured by
mortgage-backed certificates guaranteed by the Government National Mortgage
Association ("GNMA"), a wholly owned corporate instrumentality of the United
States, and/or the Federal National Mortgage Association ("Fannie Mae") a
federally chartered and stockholder-owed corporation. GNMA and Fannie Mae
guarantee timely payment of principal and interest on the mortgage-backed
certificates, even where the underlying mortgage payments are not made. While
such mortgage-backed certificates are often pledged to secure payment of
principal and interest on the Obligations, timely payment of interest and
principal on the Obligations is not insured or guaranteed by the United States,
GNMA, Fannie Mae or any other governmental agency or instrumentality. The GNMA
mortgage-backed certificates constitute a general obligation of the United
States backed by its full faith and credit. The obligations of Fannie Mae,
including its obligations under the Fannie Mae mortgage-backed securities, are
obligations solely of Fannie Mae and are not backed by, or entitled to, the full
faith and credit of the United States.
PUBLIC HOUSING AUTHORITY REVENUE OBLIGATIONS. Some of the Bonds in a Trust
may be obligations of issuers whose revenues are primarily derived from loans to
finance public housing projects. These bonds are guaranteed by the federal
Department of Housing and Urban Development. Such issues are generally
characterized by mandatory redemption at par or, in the case of original issue
discount bonds, accreted value in the event of economic defaults. The ability of
such issuers to make debt service payments will be affected by events and
conditions affecting financed projects, including, among other things, the
achievement and maintenance of sufficient occupancy levels, employment and
income conditions prevailing in local labor markets, increases in taxes, utility
costs and other operating expenses, changes in laws and governmental
regulations, and social and economic trends affecting the localities in which
the projects are located. In addition, the federal Department of Housing and
Urban Development may impose regulations and/or limitations which may have an
adverse impact on the Bonds in a Trust.
INDUSTRIAL REVENUE OBLIGATIONS. Certain of the Bonds in a Trust may be
industrial revenue bonds ("IRBs"), which are tax-exempt securities issued by
states, municipalities, public authorities or similar entities to finance the
cost of acquiring, constructing or improving various industrial projects. These
projects are usually operated by corporate entities. Issuers are obligated only
to pay amounts due on the IRBs to the extent that funds are available from the
unexpended proceeds of the IRBs or receipts or revenues of the issuer under an
arrangement between the issuer and the corporate operator of a project. The
arrangement may be in the form of a lease, installment sale agreement,
conditional sale agreement or loan agreement, but in each case the payments to
the issuer are designed to be sufficient to meet the payments of amounts due on
the IRBs. Regardless of the structure, payment of IRBs is solely dependent upon
the creditworthiness of the corporate operator of the project and, if
applicable, corporate guarantor. Corporate operators or guarantors may be
affected by many factors which may have an adverse impact on the credit quality
of the particular company or industry. These include cyclicality of revenues and
earnings, regulatory and environmental restrictions, litigation resulting from
accidents or environmentally-caused illnesses, extensive competition and
financial deterioration resulting from a corporate restructuring pursuant to a
leveraged buy-out, takeover or otherwise. Such a restructuring may
3
<PAGE>
result in the operator of a project becoming highly leveraged which may have an
impact on such operator's creditworthiness which in turn would have an adverse
impact on the rating and/or market value of such Bonds. Further, the possibility
of such a restructuring may have an adverse impact on the market for and
consequently the value of such Bonds, even though no actual takeover or other
action is ever contemplated or effected. The IRBs in a Trust may be subject to
special or extraordinary redemption provisions which may provide for redemption
at par or, in the case of original issue discount bonds, accreted value. The
Sponsor cannot predict the causes or likelihood of the redemption of IRBs in a
Trust prior to the stated maturity of such Bonds.
POWER REVENUE OBLIGATIONS. Some of the Bonds in a Trust may be obligations
of issuers whose revenues are primarily derived from pollution control bonds as
well as the sale of electric energy and oil and gas. Some of these obligations
are backed by the credit of an investor owned utility (IOU). The problems faced
by such issuers include the difficulty in obtaining approval for timely and
adequate rate increases from the applicable public utility commissions, the
difficulty of financing large construction programs, increased competition,
reductions in estimates of future demand for electricity in certain areas of the
country, the limitations on operations and increased costs and delays
attributable to environmental considerations, the difficulty of the capital
market in absorbing utility debt, the difficulty in obtaining fuel at reasonable
prices and the effect of energy conservation. All of such issuers have been
experiencing certain of these problems in varying degrees. In addition, Federal,
state and municipal governmental authorities may from time to time review
existing, and impose additional, regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of certain of the Bonds in a Trust to make payments
of principal and/or interest on such Bonds.
UTILITY OBLIGATIONS. Some of the Bonds in a Trust may be obligations of
issuers whose revenues are primarily derived from the sale of natural gas or the
combined net revenue of two or more municipal utility systems operating as a
single entity. The problems faced by such issuers include the difficulty in
obtaining approval for timely and adequate rate increases from the applicable
public utility commissions, the difficulty of financing large construction
programs, increased competition, reductions in estimates of future demands for
natural gas in certain areas of the country, the limitations on operations and
increased costs and delays attributable to environmental considerations, the
difficulty of the capital market in absorbing utility debt, the difficulty in
obtaining fuel at reasonable prices and the effect of energy conservation. In
addition, Federal, state and municipal governmental authorities may from time to
time review existing, and impose additional, regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of certain of the Bonds in a Trust
to make payments of principal and/or interest on such Bonds.
TRANSPORTATION BONDS. Some of the Bonds in a Trust may be obligations of
issuers which are payable from and secured by revenues derived from the
ownership and operation of airports, public transit systems and ports. The major
portion of an airport's gross operating income is generally derived from fees
received from airlines pursuant to use agreements which consist of annual
payments for airport use, occupancy of certain terminal space, service fees and
leases. Airport operating income may therefore be affected by the ability of the
airlines to meet their obligations under the use agreements. The air transport
industry is experiencing significant variations in earnings and traffic, due to
increased competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing severe
financial difficulties. In particular, facilities with use agreements involving
airlines experiencing financial difficulty may experience a reduction in revenue
due to the possible inability of these airlines to meet their use agreement
obligations because of such financial difficulties and possible bankruptcy. The
Sponsor cannot predict what effect these industry conditions may have on airport
revenues which are dependent for payment on the financial condition of the
airlines and their usage of the particular airport facility. Bonds that are
secured primarily by the revenue collected by a public transit system typically
are additionally secured by a pledge of sales tax receipts collected at the
state or local level, or of other governmental financial assistance. Transit
system net revenues will be affected by variations in utilization, which in turn
may be affected by the degree of local governmental subsidization, demographic
and population shifts, and competition from other forms of transportation; and
by increased costs, including costs resulting from previous deferrals of
maintenance. Port authorities derive their revenues primarily from fees imposed
on ships using the facilities. The rate of utilization of such facilities may
fluctuate depending on the local economy and on competition from competing forms
of transportation such as air, rail and trucks.
WATER AND/OR SEWERAGE REVENUE OBLIGATIONS. Some of the Bonds in a Trust may
be obligations of issuers whose revenues are derived from the sale of water
and/or sewerage services. Such Bonds are generally payable from user fees. The
problems of such issuers include the ability to obtain timely and adequate rate
increases, population decline resulting in decreased user fees, the difficulty
of financing large construction programs, the limitations on operations and
increased costs and delays attributable to environmental considerations, the
increasing difficulty of obtaining or discovering new supplies of fresh water,
the effect of conservation programs and the impact of "no-growth" zoning
ordinances. All of such issuers have been experiencing certain of these problems
in varying degrees.
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RESOURCE RECOVERY REVENUE OBLIGATIONS. Some of the Bonds in a Trust may be
obligations of issuers whose revenues are derived from the sale of sewerage or
solid waste disposal services. Such bonds are generally payable from user fees.
The problems of such issuers include the ability to obtain timely and adequate
rate increases, population decline resulting in decreased user fees, the
difficulty of financing large construction programs, the limitations on
operations and increased costs and delays attributable to environmental
considerations, the effect of conservation programs and the impact of
"no-growth" zoning ordinances. All of such issuers have been experiencing
certain of these problems in varying degrees.
EDUCATION REVENUE OBLIGATIONS. Some of the Bonds in a Trust may be
obligations of issuers which are, or which govern the operation of, colleges and
universities and whose revenues are derived mainly from tuition, dormitory
revenues, grants and endowments. General problems of such issuers include the
prospect of a declining percentage of the population consisting of "college" age
individuals, possible inability to raise tuitions and fees sufficiently to cover
increased operating costs, the uncertainty of continued receipt of Federal
grants and state funding, and government legislation or regulations which may
adversely affect the revenues or costs of such issuers. All of such issuers have
been experiencing certain of these problems in varying degrees.
BRIDGE AND TOLLROAD REVENUE OBLIGATIONS. Some of the Bonds in a Trust may
be obligations of issuers which derive their payments from bridge, road or
tunnel toll revenues. The revenues of such an issuer could be adversely affected
by competition from toll-free vehicular bridges and roads and alternative modes
of transportation. Such revenues could also be adversely affected by a reduction
in the availability of fuel to motorists or significant increases in the costs
thereof. Specifically, governmental regulations restricting the use of vehicles
in the New York City metropolitan area may adversely affect revenues of the
Triborough Bridge and Tunnel Authority.
DEDICATED-TAX SUPPORTED REVENUE BONDS. Some of the Bonds in a Trust may be
obligations of issuers which are payable from and secured by tax revenues from a
designated source, which revenues are pledged to secure the bonds. The various
types of Bonds described below differ in structure and with respect to the
rights of the bondholders to the underlying property. Each type of dedicated-tax
supported Bond has distinct risks, only some of which are set forth below. One
type of dedicated-tax supported Bond is secured by the incremental tax received
on either real property or on sales within a specifically defined geographical
area; such tax generally will not provide bondholders with a lien on the
underlying property or revenues. Another type of dedicated-tax supported Bond is
secured by a special tax levied on real property within a defined geographical
area in such a manner that the tax is levied on those who benefit from the
project; such bonds typically provide for a statutory lien on the underlying
property for unpaid taxes. A third type of dedicated-tax supported Bond may be
secured by a tax levied upon the manufacture, sale or consumption of commodities
or upon the license to pursue certain occupations or upon corporate privileges
within a taxing jurisdiction. As to any of these types of Bonds, the ability of
the designated revenues to satisfy the interest and principal payments on such
bonds may be affected by changes in the local economy, the financial success of
the enterprise responsible for the payment of the taxes, the value of any
property on which taxes may be assessed and the ability to collect such taxes in
a timely fashion. Each of these factors will have a different affect on each
distinct type of dedicated-tax supported bonds.
MUNICIPAL LEASE REVENUE BONDS. Some of the Bonds in a Trust may be
obligations that are secured by lease payments of a governmental entity. Such
payments are normally subject to annual budget appropriations of the leasing
governmental entity. A governmental entity that enters into such a lease
agreement cannot obligate future governments to appropriate for and make lease
payments but covenants to take such action as is necessary to include any lease
payments due in its budgets and to make the appropriations therefor. A
governmental entity's failure to appropriate for and to make payments under its
lease obligation could result in insufficient funds available for payment of the
obligations secured thereby.
SPECIAL OBLIGATION TO CROSSOVER. Some of the Bonds in a Trust may be issued
with the intention of crossover refunding an outstanding issue at a future date.
These bonds are secured to the crossover date by U.S. Government securities
purchased with the proceeds of the refunding bonds. The revenues of such an
issuer could be adversely affected by problems associated with the outstanding
issue, economic, social and environmental policies and conditions that are not
within the control of the issuer and governmental policies and regulations
affecting the issuer.
CIVIC ORGANIZATION OBLIGATIONS. Some of the Bonds in a Trust may be
obligations of issuers whose revenues are derived from the pledge of civic
organizations, including their assets. The problems faced by such issuers
include the ability to collect pledges made, the unpredictable nature of an
organization's composition and participation, the quality and skill of
management, increased costs and delays attributable to organizations, expenses,
and legislation regarding certain organizational purposes.
ORIGINAL ISSUE DISCOUNT BONDS AND STRIPPED OBLIGATIONS. Certain of the
Bonds in a Trust may be original issue discount bonds. These Bonds were issued
with nominal interest rates less than the rates then offered by comparable
securities and as a consequence were originally sold at a discount from their
face, or par, values. This original issue discount, the difference between the
initial purchase price and face value, is deemed under current law to accrue on
a
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daily basis and the accrued portion is treated as tax-exempt interest income for
federal income tax purposes. On sale or redemption, gain, if any, realized in
excess of the earned portion of original issue discount will be taxable as
capital gain. See "What is the Tax Status of Unitholders". The current value of
an original issue discount bond reflects the present value of its face amount at
maturity. In a stable interest rate environment, the market value of an original
issue discount bond would tend to increase more slowly in early years and in
greater increments as the bond approached maturity.
Certain of the original issue discount bonds in a Trust may be zero coupon
bonds. Zero coupon bonds do not provide for the payment of any current interest;
the buyer receives only the right to receive a final payment of the face amount
of the bond at its maturity. The effect of owning a zero coupon bond is that a
fixed yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of the obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable to
reinvest the income on such obligation at a rate as high as the implicit yield,
but at the same time also eliminates the holder's ability to reinvest at higher
rates in the future. For this reason, zero coupon bonds are subject to
substantially greater price fluctuations during periods of changing market
interest rates than are securities of comparable quality that pay interest
currently.
Original issue discount bonds, including zero coupon bonds, may be subject
to redemption at prices based on the issue price plus the amount of original
issue discount accreted to redemption (the "accreted value") plus, if
applicable, some premium. Pursuant to such call provisions an original issue
discount bond may be called prior to its maturity date at a price less than its
face value. See the "Schedules of Investments" for more information about the
call provisions of portfolio Bonds.
Certain of the Bonds in a Trust may be Stripped Obligations, which represent
evidences of ownership with respect to either the principal amount of or a
payment of interest on a tax-exempt obligation. An obligation is "stripped" by
depositing it with a custodian, which then effects a separation in ownership
between the bond and any interest payment which has not yet become payable, and
issues evidences of ownership with respect to such constituent parts. A Stripped
Obligation therefore has economic characteristics similar to zero coupon bonds,
as described above.
Each Stripped Obligation has been purchased at a discount from the amount
payable at maturity. With respect to each Unitholder, the Internal Revenue Code
treats as "original issue discount" that portion of the discount which produces
a yield to maturity (as of the date of purchase of the Unitholder's Units) equal
to the lower of the coupon rate of interest on the underlying obligation or the
yield to maturity on the basis of the purchase price of the Unitholder's Units
which is allocable to each Stripped Obligation. Original issue discount which
accrues with respect to a Stripped Obligation will be exempt from Federal income
taxation to the same extent as interest on the underlying obligations. (See
"WHAT IS THE TAX STATUS OF UNITHOLDERS?" in Part B of this Prospectus.)
Unitholders should consult their own tax advisers with respect to the state
and local tax consequences of owning original issue discount bonds or Stripped
Obligations. Under applicable provisions governing determination of state and
local taxes, interest on original issue discount bonds or Stripped Obligations
may be deemed to be received in the year of accrual even though there is no
corresponding cash payment.
WHY AND HOW ARE THE BONDS INSURED?
INSURANCE ON THE BONDS
INSURED TRUSTS--The bonds in the Trust are covered by insurance policies
obtained by the Sponsor or by the issuers or underwriters of the bonds from
AMBAC Assurance Corporation ("AMBAC"), Financial Guaranty Insurance Company
("FGIC"), Financial Security Assurance Inc. ("FSA") or MBIA Insurance
Corporation ("MBIA") (the "Insurers"). The "Schedule of Investments" in Part A
of the Prospectus identifies the Insurer of each bond. Insurance guarantees the
timely payment, when due, of all principal and interest on the bonds. Such
insurance is effective so long as the insured bond is outstanding and the
insurer remains in business. Insurance relates only to the particular bond and
not to the Units offered hereby or to their market value. The bonds have
received a rating of "Aaa" by Moody's, "AAA" by Fitch and/ or "AAA" by
Standard & Poor's in recognition of such insurance. There can be no assurance
that any Insurer listed will be able to satisfy its commitments in the event
claims are made in the future. However, Standard & Poor's, Fitch and/or Moody's
have rated the claims-paying ability of each Insurer "AAA," 'AAA" or "Aaa,"
respectively. The following are brief descriptions of the Insurers.
AMBAC ASSURANCE CORPORATION. Effective July 14, 1997, AMBAC Indemnity
Corporation changed its name to AMBAC Assurance Corporation. AMBAC is a
Wisconsin-domiciled stock insurance corporation regulated by the Office of the
Commissioner of Insurance of the State of Wisconsin and licensed to do business
in 50 states, the District of Columbia, the Territory of Guam and the
Commonwealth of Puerto Rico, with admitted assets of approximately
$4,013,000,000 (unaudited) and statutory capital of approximately $2,402,000,000
(unaudited) as of December 31, 1999. Statutory capital consists of AMBAC's
policyholders' surplus and statutory contingency reserve. AMBAC is a wholly
owned subsidiary of
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AMBAC Financial Group, Inc., a 100% publicly-held company. Moody's Investors
Service, Inc., Fitch IBCA and Standard & Poor's have both assigned a triple-A
financial strength rating to AMBAC.
Copies of its financial statements prepared in accordance with statutory
accounting standards are available from AMBAC. The address of AMBAC's
administrative offices and its telephone number are One State Street Plaza, 17th
Floor, New York, New York 10004 and (212) 668-0340.
AMBAC has entered into quota share reinsurance agreements under which a
percentage of the insurance underwritten pursuant to certain municipal bond
insurance programs of AMBAC has been and will be assumed by a number of foreign
and domestic unaffiliated reinsurers.
MBIA INSURANCE CORPORATION. MBIA is the principal operating subsidiary of
MBIA, Inc., a New York Stock Exchange listed company (the "Company"). MBIA, Inc.
is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled
in the State of New York and licensed to do business in and subject to
regulation under the laws of all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands,
the Virgin Islands of the United States and the Territory of Guam. MBIA has two
European branches, one in the Republic of France and the other in the Kingdom of
Spain. New York has laws prescribing minimum capital requirements, limiting
classes and concentrations of investments and requiring the approval of policy
rates and forms. State laws also regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by MBIA, changes
in control and transactions among affiliates. Additionally, MBIA is required to
maintain contingency reserves on its liabilities in certain amounts and for
certain periods of time.
As of December 31, 1999, MBIA had admitted assets of $7.0 billion (audited),
total liabilities of $4.6 billion (audited), and total capital and surplus of
$2.4 billion (audited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. As of
March 31, 2000, MBIA had admitted assets of $7.1 billion (unaudited), total
liabilities of $4.7 billion (unaudited), and total capital and surplus of
$2.4 billion (unaudited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities.
Furthermore, copies of MBIA's year end financial statements prepared in
accordance with statutory accounting practices are available without charge from
MBIA. A copy of the Annual Report on Form 10-K of the Company is available from
the Insurer or the Securities and Exchange Commission. The address of the
Insurer is 113 King Street, Armonk, New York 10504. The telephone number of the
Insurer is (914) 273-4545.
Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa".
Standard & Poor's Ratings Services Group, a division of The McGraw-Hill
Companies, Inc., rates the financial strength of MBIA "AAA".
Fitch IBCA, Inc. rates the financial strength of MBIA "AAA".
Each rating of MBIA should be evaluated independently. The ratings reflect
the respective rating agency's current assessment of the creditworthiness of
MBIA and its ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the above ratings may be obtained only
from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the Bonds,
and such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of any of the above ratings
may have an adverse effect on the market price of the Bonds. MBIA does not
guaranty the market price of the Bonds nor does it guaranty that the ratings on
the Bonds will not be revised or withdrawn.
FINANCIAL GUARANTY INSURANCE COMPANY. FGIC is a wholly-owned subsidiary of
FGIC Corporation (the "Corporation"), a Delaware holding company. The
Corporation is a subsidiary of General Electric Capital Corporation ("GE
Capital"). Neither the Corporation nor GE Capital is obligated to pay the debts
of or the claims against FGIC. FGIC is a monoline financial guaranty insurer
domiciled in the State of New York and subject to regulation by the State of New
York Insurance Department. As of March 31, 2000, the total capital and surplus
of FGIC was $1.281 billion. FGIC prepares financial statements on the basis of
both statutory accounting principles, and generally accepted accounting
principles. Copies of such financial statements may be obtained by writing to
FGIC at 115 Broadway, New York, New York 10006, Attention: Communications
Department, telephone number: (212) 312-3000 or to the New York State Insurance
Department at 25 Beaver Street, New York, New York 10004-2319, Attention:
Financial Condition Property/Casualty Bureau, telephone number: (212) 480-5187.
In addition, FGIC is currently licensed to write insurance in all 50 states
and the District of Columbia.
FINANCIAL SECURITY ASSURANCE INC. FSA is a monoline insurance company
incorporated in 1984 under the laws of the State of New York. FSA is licensed to
engage in the financial guaranty insurance business in all 50 states, the
District of Columbia and Puerto Rico.
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FSA and its subsidiaries are engaged in the business of writing financial
guaranty insurance, principally in respect of securities offered in domestic and
foreign markets. Financial guaranty insurance provides a guaranty of scheduled
payments of an issuer's securities--thereby enhancing the credit rating of those
securities--in consideration of payment of a premium to the insurer. FSA and its
subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are typically supported by residential
mortgage loans, consumer or trade receivables, securities or other asset having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities include general obligation bonds, special revenue bonds and
other special obligations of state and local governments. FSA insures both newly
issued securities sold in the primary market and outstanding securities sold in
the secondary market that satisfy FSA underwriting criteria.
FSA is a wholly-owned subsidiary of Financial Security Assurance Holdings
Ltd. ("Holdings"), a New York Stock Exchange listed company. Major shareholders
of Holdings include White Mountains Insurance Group, Ltd., The Tokio Marine and
Fire Insurance Co., Ltd. and XL Capital Ltd. No shareholder of FSA is obligated
to pay any debt of FSA or its subsidiaries or any claim under any insurance
policy issued by FSA or its subsidiaries or to make any additional contribution
to the capital of FSA. As of December 31, 1999, the total policyholders' surplus
and contingency reserves and the total unearned premium reserve, respectively,
of FSA and its consolidated subsidiaries were, in accordance with statutory
accounting principles, approximately $1,320,082,000 (unaudited) and $669,691,000
(unaudited), and the total shareholders' equity and the total unearned premium
reserve, respectively, of FSA and its consolidated subsidiaries were, in
accordance with generally accepted accounting principles, approximately
$1,294,946,000 (audited) and $559,041,000 (audited). Copies of FSA's financial
statements may be obtained by writing to FSA at 350 Park Avenue, New York, New
York 10022, Attention: Communications Department. Its telephone number is
(212) 826-0100.
Under an intercompany agreement, liabilities on financial guaranty insurance
written or reinsured from third parties by FSA or its domestic or Bermuda
operating insurance company subsidiaries are generally reinsured among such
companies on an agreed-upon percentage substantially proportional to their
respective capital, surplus and reserves, subject to applicable statutory risk
limitations. In addition, FSA reinsures a portion of its liabilities under
certain of its financial guaranty insurance policies with other reinsurers under
various quota share treaties and on a transaction-by-transaction basis. This
reinsurance is used by FSA as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or limit
FSA's obligations under any financial guaranty insurance policy.
FSA's insurance financial strength is rated "Aaa" by Moody's Investors
Service, Inc. FSA's insurer financial strength is rated "AAA" by Standard &
Poor's Ratings Services and Standard & Poor's (Australia) Pty. Ltd. FSA's
claims-paying ability is rated "AAA" by Fitch IBCA Inc. and Japan Rating and
Investment Information, Inc. These ratings reflect only the views of the
respective rating agencies, are not recommendations to buy, sell or hold
securities and are subject to revision or withdrawal at any time by those rating
agencies.
TRADITIONAL TRUSTS--Insurance guaranteeing the timely payment, when due, of all
principal and interest on certain Bonds in a Traditional Trust may have been
obtained by the Sponsor, issuer or underwriter of the particular Bonds involved
or by another party. Such insurance, which provides coverage substantially the
same as that obtained with respect to Bonds in Insured Trusts as described
above, is effective so long as the insured Bond is outstanding and the insurer
remains in business. Insurance relates only to the particular Bond and not to
the Units offered hereby or to their market value. Insured Bonds have received a
rating of "Aaa" by Moody's Investors Service, Inc. and/or "AAA" by Standard &
Poor's Corporation in recognition of such insurance.
If a Bond in a Traditional Trust is insured, the Schedule of Investments in
Part A of this Prospectus will identify the insurer. Such insurance will be
provided by FGIC, AMBAC, Bond Investors Guaranty Insurance Company, now known as
MBIA Corp. of Illinois ("BIG"), FSA, Municipal Bond Insurance Association (the
"Association"), MBIA or Connie Lee Insurance Company ("ConnieLee"). There can be
no assurance that any insurer listed therein will be able to satisfy its
commitments in the event claims are made in the future. However, Standard &
Poor's Corporation has rated the claims-paying ability of each insurer "AAA,"
and Moody's Investors Service has rated all bonds insured by each such insurer,
except ConnieLee, "Aaa." Moody's Investor's Service gives no ratings for bonds
insured by ConnieLee.
Because any such insurance will be effective so long as the insured Bonds
are outstanding, such insurance will be taken into account in determining the
market value of such Bonds and therefore some value attributable to such
insurance will be included in the value of the Units of the Trust that includes
such Bonds. The insurance does not, however, guarantee the market value of the
Bonds or of the Units.
ACCUMULATION PLAN
The Sponsor, John Nuveen & Co. Incorporated, is also the principal
underwriter of the Accumulation Funds listed in the following table. Each of
these funds is an open-end, diversified management investment company into which
Unitholders may choose to reinvest Trust distributions automatically, without
any sales charge. Unitholders may reinvest both interest and principal
distributions or principal distributions only. Each Accumulation Fund has
investment
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objectives which differ in certain respects from those of the Trusts and may
invest in securities which would not be eligible for deposit in the Trusts. The
investment adviser to each Accumulation Fund is a wholly-owned subsidiary of the
Sponsor. Unitholders should contact their financial adviser or the Sponsor to
determine which of the Accumulation Funds they may reinvest into, as
reinvestment in certain of the Accumulation Funds may be restricted to residents
of a particular state or states. Unitholders may obtain a prospectus for each
Accumulation Fund through their financial adviser or through the Sponsor at
(800) 257-8787. For a more detailed description, Unitholders should read the
prospectus of the Accumulation Fund in which they are interested.
The following is a complete list of the Accumulation Funds currently
available, as of the Date of Deposit of this Prospectus, to Unitholders under
the Accumulation Plan. The list of available Accumulation Funds is subject to
change without the consent of any of the Unitholders.
ACCUMULATION FUNDS
MUTUAL FUNDS
NUVEEN FLAGSHIP MUNICIPAL TRUST
Nuveen Municipal Bond Fund
Nuveen Insured Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Intermediate Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST I
Nuveen Flagship Arizona Municipal Bond Fund
Nuveen Flagship Colorado Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Flagship Florida Intermediate Municipal Bond Fund
Nuveen Maryland Municipal Bond Fund
Nuveen Flagship New Mexico Municipal Bond Fund
Nuveen Flagship Pennsylvania Municipal Bond Fund
Nuveen Flagship Virginia Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST II
Nuveen California Municipal Bond Fund
Nuveen California Insured Municipal Bond Fund
Nuveen Flagship Connecticut Municipal Bond Fund
Nuveen Massachusetts Municipal Bond Fund
Nuveen Massachusetts Insured Municipal Bond Fund
Nuveen Flagship New Jersey Municipal Bond Fund
Nuveen Flagship New Jersey Intermediate Municipal Bond Fund
Nuveen Flagship New York Municipal Bond Fund
Nuveen New York Insured Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST III
Nuveen Flagship Alabama Municipal Bond Fund
Nuveen Flagship Georgia Municipal Bond Fund
Nuveen Flagship Louisiana Municipal Bond Fund
Nuveen Flagship North Carolina Municipal Bond Fund
Nuveen Flagship South Carolina Municipal Bond Fund
Nuveen Flagship Tennessee Municipal Bond Fund
NUVEEN FLAGSHIP MULTISTATE TRUST IV
Nuveen Flagship Kansas Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Flagship Kentucky Limited Term Municipal Bond Fund
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen Flagship Missouri Municipal Bond Fund
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen Flagship Wisconsin Municipal Bond Fund
Flagship Utility Income Fund
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Nuveen Municipal Money Market Fund, Inc.
Nuveen Taxable Funds, Inc.
Nuveen Investment Trust
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen European Value Fund
Nuveen Investment Trust II
Nuveen Rittenhouse Growth Fund
Nuveen Innovation Fund
Nuveen International Growth Fund
Nuveen Investment Trust III
Nuveen Income Fund
MONEY MARKET FUNDS
Nuveen California Tax-Free Money Market Fund
Nuveen Massachusetts Tax-Free Money Market Fund
Nuveen New York Tax-Free Money Market Fund
Nuveen Tax-Free Reserves, Inc.
Nuveen Tax-Exempt Money Market Fund, Inc.
Each person who purchases Units of a Trust may become a participant in the
Accumulation Plan and elect to have his or her distributions on Units of the
Trust invested directly in shares of one of the Accumulation Funds. Reinvesting
Unitholders may select any interest distribution plan. Thereafter, each
distribution of interest income or principal on the participant's Units
(principal only in the case of a Unitholder who has chosen to reinvest only
principal distributions) will, on the applicable distribution date, or the next
day on which the New York Stock Exchange is normally open ("business day") if
the distribution date is not a business day, automatically be received by the
transfer agent for each of the Accumulation Funds, on behalf of such participant
and applied on that date to purchase shares (or fractions thereof) of the
Accumulation Fund chosen at net asset value as computed as of 4:00 p.m. eastern
time on each such date. All distributions will be reinvested in the Accumulation
Fund chosen and no part thereof will be retained in a separate account. These
purchases will be made without a sales charge.
The Transfer Agent of the Accumulation Fund will mail to each participant in
the Accumulation Plan a quarterly statement containing a record of all
transactions involving purchases of Accumulation Fund shares (or fractions
thereof) with Trust interest distributions or as a result of reinvestment of
Accumulation Fund dividends. Any distribution of principal used to purchase
shares of an Accumulation Fund will be separately confirmed by the Transfer
Agent. Unitholders will also receive distribution statements from the Trustee
detailing the amounts transferred to their Accumulation Fund accounts.
Participants may at any time, by so notifying the Trustee in writing, elect
to change the Accumulation Fund into which their distributions are being
reinvested, to change from principal only reinvestment to reinvestment of both
principal and interest or vice versa, or to terminate their participation in the
Accumulation Plan altogether and receive future distributions on their Units in
cash. There will be no charge or other penalty for such change of election or
termination. The character of Trust distributions for income tax purposes will
remain unchanged even if they are reinvested in an Accumulation Fund.
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HOW TO CALCULATE YOUR ESTIMATED INCOME
The examples provided below illustrate how to calculate the estimated annual
income generated by a hypothetical $10,000 investment in each respective Trust.
The illustrations assume that the investment was made on the day prior to the
date of deposit by an investor electing the monthly distribution plan and that
the portfolio contains all the securities described in the portfolio. These
hypothetical examples are for illustrative purposes only and not intended to
reflect or predict the results of any actual investment and do not contemplate
changes to the portfolio or expenses.
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE OF HOW TO CALCULATE YOUR ESTIMATED INCOME:
NATIONAL INSURED TRUST 430
$10,000 DIVIDED BY $98.98 = 101.030
Investment Offering price and # of units purchased
(as of 06/26/00) accrued interest
101.030 X $5.2809 = $533.53
# of units purchased Annual income per unit annual income
(monthly plan)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE OF HOW TO CALCULATE YOUR ESTIMATED INCOME:
CALIFORNIA INSURED TRUST 339
$10,000 DIVIDED BY $99.12 = 100.887
Investment Offering price and # of units purchased
(as of 06/26/00) accrued interest
100.887 X $5.0709 = $511.59
# of units purchased Annual income per unit annual income
(monthly plan)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE OF HOW TO CALCULATE YOUR ESTIMATED INCOME:
NEW JERSEY INSURED TRUST 258
$10,000 DIVIDED BY $97.28 = 102.796
Investment Offering price and # of units purchased
(as of 06/26/00) accrued interest
102.796 X $4.9734 = $511.25
# of units purchased Annual income per unit annual income
(monthly plan)
</TABLE>
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APPENDIX A
NATIONAL DISCLOSURE
NATIONALLY DIVERSIFIED TRUST TAXABLE ESTIMATED CURRENT RETURN TABLE
(NATIONAL INSURED TRUST)
The following tables show the approximate taxable estimated current returns
for individuals that are equivalent to tax-exempt estimated current returns
under published 2000 marginal Federal tax rates. The tables illustrate what you
would have to earn on taxable investments to equal the tax-exempt estimated
current return for your income tax bracket. A taxpayer's marginal tax rate is
affected by both his taxable income and his adjusted gross income. Locate your
adjusted gross income and your taxable income (which is your adjusted gross
income reduced by any deductions and exemptions), then locate your tax bracket
based on joint or single tax filing. Read across to the equivalent taxable
estimated current return you would need to match the tax-free income.
MARGINAL FEDERAL TAX RATES FOR JOINT TAXPAYERS WITH FOUR PERSONAL EXEMPTIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED
TAXABLE GROSS TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL ----------------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25% 6.50%
-------------- -------------- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 43.85 $ 0-128.95 15.0% 5.59 5.88 6.18 6.47 6.76 7.06 7.35 7.65
43.85-105.95 0-128.95 28.0 6.60 6.94 7.29 7.64 7.99 8.33 8.68 9.03
128.95-193.40 29.0 6.69 7.04 7.39 7.75 8.10 8.45 8.80 9.15
105.95-161.45 0-128.95 31.0 6.88 7.25 7.61 7.97 8.33 8.70 9.06 9.42
128.95-193.40 32.0 6.99 7.35 7.72 8.09 8.46 8.82 9.19 9.56
193.40-315.90 34.5 7.25 7.63 8.02 8.40 8.78 9.16 9.54 9.92
161.45-288.35 128.95-193.40 37.0 7.54 7.94 8.33 8.73 9.13 9.52 9.92 10.32
193.40-315.90 40.5 7.98 8.40 8.82 9.24 9.66 10.08 10.50 10.92
Over 315.90 37.02 7.54 7.94 8.33 8.73 9.13 9.52 9.92 10.32
Over 288.35 193.40-315.90 44.5 8.56 9.01 9.46 9.91 10.36 10.81 11.26 11.71
Over 315.90 41.03 8.05 8.47 8.90 9.32 9.75 10.17 10.59 11.02
</TABLE>
MARGINAL FEDERAL TAX RATES FOR SINGLE TAXPAYERS WITH ONE PERSONAL EXEMPTION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED
TAXABLE GROSS TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL ----------------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25% 6.50%
-------------- -------------- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26.25 $ 0-128.95 15.0% 5.59 5.88 6.18 6.47 6.76 7.06 7.35 7.65
26.25- 63.55 0-128.95 28.0 6.60 6.94 7.29 7.64 7.99 8.33 8.68 9.03
63.55-132.60 0-128.95 31.0 6.88 7.25 7.61 7.97 8.33 8.70 9.06 9.42
128.95-251.45 32.5 7.04 7.41 7.78 8.15 8.52 8.89 9.26 9.63
132.60-288.35 128.95-251.45 38.0 7.66 8.06 8.47 8.87 9.27 9.68 10.08 10.48
Over 251.45 37.02 7.54 7.94 8.33 8.73 9.13 9.52 9.92 10.32
Over 288.35 Over 251.45 41.03 8.05 8.47 8.90 9.32 9.75 10.17 10.59 11.02
</TABLE>
------------------
1 The table reflects the effect of the limitations on itemized deductions
and the deduction for personal exemptions. They were designed to phase out
certain benefits of these deductions for higher income taxpayers. These
limitations, in effect, raise the current maximum marginal combined state and
Federal tax rate to approximately 44.34 percent for taxpayers filing a joint
return and entitled to four personal exemptions and to approximately 40.79
percent for taxpayers filing a single return entitled to only one personal
exemption. These limitations are subject to certain maximums, which depend on
the number of exemptions claimed and the total amount of the taxpayer's itemized
deductions. For example, the limitation on itemized deductions will not cause a
taxpayer to lose more than 80% of his allowable itemized deductions, with
certain exceptions.
2 Federal tax rate reverts to 36.0% after the 80% cap on the limitation on
itemized deductions has been met.
3 Federal tax rate reverts to 39.6% after the 80% cap on the limitation on
itemized deductions has been met.
A-1
<PAGE>
APPENDIX B
CALIFORNIA DISCLOSURE
ECONOMIC FACTORS--CALIFORNIA
As described above, except to the extent the Fund invests in temporary
investments, the Fund will invest substantially all of its assets in California
Municipal Obligations. The Fund is therefore susceptible to political, economic
or regulatory factors affecting issuers of California Municipal Obligations.
These include the possible adverse effects of certain California
constitutional amendments, legislative measures, voter initiatives and other
matters that are described below. The following information provides only a
brief summary of the complex factors affecting the financial situation in
California (the "State") and is derived from sources that are generally
available to investors and are believed to be accurate. No independent
verification has been made of the accuracy or completeness of any of the
following information. It is based in part on information obtained from various
State and local agencies in California or contained in Official Statements for
various California Municipal Obligations.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local government finances
generally, will not adversely affect the market value of California Municipal
Obligations held in the portfolio of a Trust or the ability of particular
obligors to make timely payments of debt service on (or relating to) those
obligations.
ECONOMIC OVERVIEW
Despite a recession in the beginning of the decade and the Asian financial
crisis which affected the high-technology manufacturing industry in 1997 and
1998, California's economy has expanded over the last several years and ended
1999 on a strong note. Nonfarm employment growth averaged 2.9% and personal
income was up more than 6.5%. The jobless rate was below 6% all year. The
construction industry led California's employment growth in 1999, expanding by
almost 9% over the year.
The high technology manufacturing sector is improving as major foreign
economies improve. Demand for computer services and software remains extremely
strong, buoyed by the continued explosive growth of the Internet, and by
financial sector needs related to the new Euro currency.
California's population is expected to grow by 578,000 people in 1999-2000
to a total of 34.7 million. This reflects a 1.7% increase of population for the
year. California's population is concentrated in metropolitan areas specifically
located in the Los Angeles and San Diego counties. California's unemployment
rate was 5.9% in 1999. In comparison, the unemployment rate for the United
States during the same time was 4.2%.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS
LIMITATION ON TAXES. Certain California Municipal Obligations may be
obligations of issuers which rely in whole or in part, directly or indirectly,
on AD VALOREM property taxes as a source of revenue. The taxing powers of
California local governments and districts are limited by Article XIIIA of the
California Constitution, enacted by the voters in 1978 and commonly known as
"Proposition 13." Briefly, Article XIIIA limits to 1% of full cash value the
rate of AD VALOREM property taxes on real property and generally restricts the
reassessment of property to 2% per year, except upon new construction or change
of ownership (subject to a number of exemptions). Taxing entities may, however,
raise AD VALOREM taxes above the 1% limit to pay debt service on voter-approved
bonded indebtedness.
Under Article XIIIA, the basic 1% AD VALOREM tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This system
has resulted in widely varying amounts of tax on similarly situated properties.
Several lawsuits have been filed challenging the acquisition-based assessment
system of Proposition 13, and on June 18, 1992 the U.S. Supreme Court announced
a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through AD
VALOREM property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special tax." Court
decisions, however, allowed a non-voter approved levy of "general taxes" which
were not dedicated to a specific use. In response to these decisions, the voters
of the State in 1986 adopted an initiative statute which imposed significant new
limits on the ability of local entities to raise or levy general taxes, except
by receiving majority local voter approval. Significant elements of this
initiative, "Proposition 62," have been overturned in recent court cases. An
initiative proposed to re-enact the provisions of Proposition 62 as a
constitutional amendment was defeated by the voters in November 1990, but such a
proposal may be renewed in the future.
APPROPRIATIONS LIMITS. The State and its local governments are subject to an
annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98
B-1
<PAGE>
and 111 in 1988 and 1990, respectively. Article XIIIB prohibits the State or any
covered local government from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitation" are authorizations to spend "proceeds of taxes," which consist of
tax revenues and certain other funds, including proceeds from regulatory
licenses, user charges or other fees, to the extent that such proceeds exceed
the cost of providing the product or service, but "proceeds of taxes" exclude
most State subventions to local governments. No limit is imposed on
appropriations of funds which are not "proceeds of taxes," such as reasonable
user charges or fees, and certain other non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations
limit are (1) the debt service cost of bonds issued or authorized prior to
January 1, 1979, or subsequently authorized by the voters, (2) appropriations
arising from certain emergencies declared by the Governor, (3) appropriations
for certain capital outlay projects, (4) appropriations by the State of
post-1989 increases in gasoline taxes and vehicle weight fees, and
(5) appropriations made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such adjustments
were liberalized in 1990 to follow more closely growth in the State's economy.
"Excess" revenues are measured over a two-year cycle. Local governments must
return any excess to taxpayers by rate reductions. The State must refund 50% of
any excess, with the other 50% paid to schools and community colleges. With more
liberal annual adjustment factors since 1988, and depressed revenues since 1990
because of the recession, few governments are currently operating near their
spending limits, but this condition may change over time. Local governments may
by voter approval exceed their spending limits for up to four years. During
Fiscal Year 1986-87, State receipts from proceeds of taxes exceeded its
appropriations limit by $1.1 billion, which was returned to taxpayers. Since
that year, appropriations subject to limitation have been under the State limit.
State appropriations were $6.5 billion under the limit for Fiscal Year 1995-96.
A 1986 initiative statute, called "Proposition 62," imposed additional
limits on local governments, by requiring either majority or 2/3 voter approval
for any increases in "general taxes" or "special taxes," respectively (other
than property taxes, which are unchangeable). Court decisions had struck down
most of Proposition 62 and many local governments, especially cities, had
enacted or raised local "general taxes" without voter approval. In September,
1995, the California Supreme Court overruled the prior cases, and upheld the
constitutionality of Proposition 62. Many aspects of this decision remain
unclear (such as its impact on charter (home rule) cities, and whether it will
have retroactive effect), but its future effect will be to further limit the
fiscal flexibility of many local governments.
Because of the complex nature of Articles XIIIA and XIIIB of the California
Constitution, the ambiguities and possible inconsistencies in their terms, and
the impossibility of predicting future appropriations or changes in population
and cost of living, and the probability of continuing legal challenges, it is
not currently possible to determine fully the impact of Article XIIIA or
Article XIIIB on California Municipal Obligations or on the ability of the State
or local governments to pay debt service on such California Municipal
Obligations. It is not possible, at the present time, to predict the outcome of
any pending litigation with respect to the ultimate scope, impact or
constitutionality of either Article XIIIA or Article XIIIB, or the impact of any
such determinations upon State agencies or local governments, or upon their
ability to pay debt service on their obligations. Future initiatives or
legislative changes in laws or the California Constitution may also affect the
ability of the State or local issuers to repay their obligations.
OBLIGATIONS OF THE STATE OF CALIFORNIA.
Under the California Constitution, debt service on outstanding general
obligation bonds is the second charge to the General Fund after support of the
public school system and public institutions of higher education. The State had
$19.9 billion aggregate principal amount of general obligation bonds
outstanding, and $13.2 billion general obligation bonds authorized and unissued,
as of June 30, 1999.
From July 1, 1997 to July 1, 1998, the State issued approximately
$2.6 billion in non-self liquidating general obligation bonds and $1.0 billion
in revenue bonds. Refunding bonds, which are used to refinance existing
long-term debt, accounted for $1.0 billion of the general obligation bonds and
$514 million of the revenue bonds.
RECENT FINANCIAL RESULTS.
California maintains a Special Fund for Economic Uncertainties derived from
General Fund revenues as a reserve to meet cash needs of the General Fund. As of
June 30, 1999, the balance of this fund was $1.6 billion.
THE BUDGET. California's solid economic performance during 1998 led to
healthy revenue growth. General Fund collections grew by 11.7% in fiscal year
1997-98 to reach $55.0 billion, an increase of $5.8 billion from the prior year.
For fiscal year 1999-2000, the Governor's Budget expects total General Fund
revenues of $60.3 billion, a 7.1% net increase
B-2
<PAGE>
from 1998-99. This revised estimate reflects the impact of the tax relief
legislation which reduces current year collections $320 million from the
baseline estimate, with a more moderate revenue loss in the budget year.
Overall, General Fund revenues and transfers represent nearly 80% of total
revenues. The remaining 20% are special funds dedicated to specific programs.
The three largest revenue sources (personal income, sales, and bank and
corporation) account for about 75% of total revenues with personal income
comprising 50% of the total. The personal income tax revenue in 1999-2000 is
expected to be $30,175 million, an increase of $1,649 million from the forecast
for 1998-1999.
BOND RATING. The State's general obligation bonds have received rating of
Aa3 by Moody's, AA- by Standard & Poor's and AA by Fitch. There can be no
assurance that such ratings will be maintained in the future. It should be noted
that the creditworthiness of obligations issued by local California issuers may
be unrelated to the creditworthiness of obligations issued by the State of
California, and that there is no obligation on the part of the State to make
payment on such local obligations in the event of default.
There can be no assurance that such ratings will be maintained in the
future. It should be noted that the creditworthiness of obligations issued by
local California issuers may be unrelated to the creditworthiness of obligations
issued by the State of California, and that there is no obligation on the part
of the State to make payment on such local obligations in the event of default.
LEGAL PROCEEDINGS.
The State is involved in certain legal proceedings (described in the State's
recent financial statements) that, if decided against the State, may require the
State to make significant future expenditures or may substantially impair
revenues.
OBLIGATIONS OF OTHER ISSUERS
OTHER ISSUERS OF CALIFORNIA MUNICIPAL OBLIGATIONS. There are a number of
state agencies, instrumentalities and political subdivisions of the State that
issue Municipal Obligations, some of which may be conduit revenue obligations
payable from payments from private borrowers. These entities are subject to
various economic risks and uncertainties, and the credit quality of the
securities issued by them may vary considerably from the credit quality of
obligations backed by the full faith and credit of the State.
OTHER CONSIDERATIONS.
Substantially all of California is within an active geologic region subject
to major seismic activity. Northern California in 1989 and Southern California
in 1994 experienced major earthquakes causing billions of dollars in damages.
The federal government provided more than $13 billion in aid for both
earthquakes, and neither event is expected to have any long-term negative
economic impact. Any California Municipal Obligation in the Fund could be
affected by an interruption of revenues because of damaged facilities, or,
consequently, income tax deductions for casualty losses or property tax
assessment reductions. Compensatory financial assistance could be constrained by
the inability of (i) an issuer to have obtained earthquake insurance coverage at
reasonable rates; (ii) an insurer to perform on its contracts of insurance in
the event of widespread losses; or (iii) the federal or State government to
appropriate sufficient funds within their respective budget limitations.
The State of California has no obligation with respect to any obligations or
securities of the County or any of the other participating entities, although
under existing legal precedents, the State may be obligated to ensure that
school districts have sufficient funds to operate.
B-3
<PAGE>
CALIFORNIA TAXABLE ESTIMATED CURRENT RETURN TABLE
The following tables show the approximate taxable estimated current returns
for individuals that are equivalent to tax-exempt estimated current returns
under combined Federal and state taxes, using published 2000 marginal Federal
tax rates and marginal state tax rates currently available and scheduled to be
in effect. The table assumes that federal taxable income is equal to state
income subject to tax, and for cases in which more than one state rate falls
within a Federal bracket, the state rate corresponding to the highest income
within that Federal bracket is used. The combined state and Federal tax brackets
shown reflect the fact that state tax payments are currently deductible for
Federal tax purposes. The tables do not reflect any local taxes or any taxes
other than personal income taxes. The tables illustrate what you would have to
earn on taxable investments to equal the tax-exempt estimated current return for
your income tax bracket. A taxpayer's marginal tax rate is affected by both his
taxable income and his adjusted gross income. Locate your adjusted gross and
your taxable income (which is your adjusted gross income reduced by any
deductions and exemptions), then locate your tax bracket based on joint or
single tax filing. Read across to the equivalent taxable estimated current
return you would need to match the tax-free income.
COMBINED MARGINAL TAX RATES FOR JOINT TAXPAYERS WITH FOUR PERSONAL EXEMPTIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL ----------------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
-------------- -------------- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 43.85 $ 0-128.95 20.0% 5.63 5.94 6.25 6.56 6.88 7.19 7.50 7.81
43.85-105.95 0-128.95 34.5 6.87 7.25 7.63 8.02 8.40 8.78 9.16 9.54
128.95-193.40 35.5 6.98 7.36 7.75 8.14 8.53 8.91 9.30 9.69
105.95-161.45 0-128.95 37.5 7.20 7.60 8.00 8.40 8.80 9.20 9.60 10.00
128.95-193.40 38.5 7.32 7.72 8.13 8.54 8.94 9.35 9.76 10.16
193.40-239.63 41.0 7.63 8.05 8.47 8.90 9.32 9.75 10.17 10.59
239.63-269.63 42.0 7.76 8.19 8.62 9.05 9.48 9.91 10.34 10.78
269.63-315.90 41.5 7.69 8.12 8.55 8.97 9.40 9.83 10.26 10.68
161.45-288.35 128.95-193.40 43.0 7.89 8.33 8.77 9.21 9.65 10.09 10.53 10.96
193.40-239.63 46.0 8.33 8.80 9.26 9.72 10.19 10.65 11.11 11.57
239.63-269.63 47.0 8.49 8.96 9.43 9.91 10.39 10.85 11.32 11.79
269.63-315.90 46.5 8.41 8.88 9.35 9.81 10.28 10.75 11.21 11.68
315.90-332.13 43.5 7.96 8.41 8.85 9.29 9.73 10.18 10.62 11.06
Over 332.13 43.52 7.96 8.41 8.85 9.29 9.73 10.18 10.62 11.06
Over 288.35 193.40-239.63 49.5 8.91 9.41 9.90 10.40 10.89 11.39 11.88 12.38
239.63-269.63 50.5 9.09 9.60 10.10 10.61 11.11 11.62 12.12 12.63
269.63-315.90 50.0 9.00 9.50 10.00 10.50 11.00 11.50 12.00 12.50
315.90-332.13 47.0 8.49 8.96 9.43 9.91 10.38 10.85 11.32 11.79
Over 332.13 46.52 8.41 8.88 9.35 9.81 10.28 10.75 11.21 11.68
</TABLE>
COMBINED MARGINAL TAX RATES FOR SINGLE TAXPAYERS WITH ONE PERSONAL EXEMPTION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL ----------------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
-------------- -------------- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26.25 $ 0-119.81 20.0% 5.63 5.94 6.25 6.56 6.88 7.19 7.50 7.81
26.25- 63.55 0-119.81 34.5 6.87 7.25 7.63 8.02 8.40 8.78 9.16 9.54
63.55-132.60 0-119.81 37.5 7.20 7.60 8.00 8.40 8.80 9.20 9.60 10.00
119.81-128.95 38.0 7.26 7.66 8.06 8.47 8.87 9.27 9.68 10.08
128.95-149.81 39.5 7.44 7.85 8.26 8.68 9.09 9.50 9.92 10.33
149.81-251.45 39.5 7.44 7.85 8.26 8.68 9.09 9.50 9.92 10.33
132.60-288.35 128.95-149.81 44.0 8.04 8.48 8.93 9.38 9.82 10.27 10.71 11.16
149.81-251.45 44.0 8.04 8.48 8.93 9.38 9.82 10.27 10.71 11.16
Over 251.45 43.52 7.96 8.41 8.85 9.29 9.73 10.18 10.62 11.06
Over 288.35 Over 251.45 46.53 8.41 8.88 9.35 9.81 10.28 10.75 11.21 11.68
</TABLE>
------------------
1 The table reflects the effect of the limitations on itemized deductions
and the deduction for personal exemptions. They were designed to phase out
certain benefits of these deductions for higher income taxpayers. These
limitations, in effect, raise the current maximum marginal combined Federal and
state tax rate to approximately 50.36 percent for taxpayers filing a joint
return and entitled to four personal exemptions and to approximately 46.63
percent for taxpayers filing a single return entitled to only one personal
exemption. These limitations are subject to certain maximums, which depend on
the number of exemptions claimed and the total amount of the taxpayer's itemized
deductions. For example, the limitation on itemized deductions will not cause a
taxpayer to lose more than 80% of his allowable itemized deductions.
2 Combined Federal and state tax rate reverts to 41.95% rate after the 80%
cap on the limitation on itemized deductions, under federal or state law, as
appropriate has been met.
3 Combined Federal and state tax rate reverts to 45.22% after the 80% cap on
the limitation on itemized deductions, under federal or state law, as
appropriate has been met.
B-4
<PAGE>
APPENDIX C
NEW JERSEY DISCLOSURE
ECONOMIC FACTORS--NEW JERSEY
The fund is susceptible to political, economic or regulatory factors
affecting issuers of New Jersey Municipal Obligations. The following provides
only a brief summary of the complex factors affecting the financial situation in
New Jersey and is derived from sources that are generally available to investors
and is believed to be accurate. It is based in part on information obtained from
various State and local agencies in New Jersey. No independent verification has
been made of any of the following information.
New Jersey is the ninth largest state in population and the fifth smallest
in land area. With an average of 1,077 persons per square mile, it is the most
densely populated of all the states. The State's economic base is diversified,
consisting of a variety of manufacturing, construction and service industries,
supplemented by rural areas with selective commercial agriculture.
The State of New Jersey is experiencing strong economic growth and
increasing reserve balances. The services and construction sectors have been
adding jobs. Job creation has lead to strong personal income tax receipts which
have resulted in a series of operating surpluses and a growing Rainy Day Fund.
Led by growth in personal income taxes and sales tax receipts, New Jersey
estimates finishing Fiscal Year 2000 with an operating surplus of $750 million,
4.0% of revenues. The surplus will be split between the Rainy Day Fund, with a
balance of $634 million, and an unreserved General Fund balance of
$113 million.
The State operates on a fiscal year beginning July 1 and ending June 30. The
State closed recent fiscal years with surpluses in the General Fund (the fund
into which all State revenues not otherwise restricted by statute are deposited
and from which the appropriations are made) of $442 million in 1996,
$281 million in 1997 and $228 million in 1998. It is estimated that Fiscal Year
1999 ended with a surplus of $311 million.
The State's Fiscal Year 2000 revenue projections are based on moderate
overall economic growth. Total General Fund and available revenues are projected
to be $19.1 billion. Of this amount 39.8% is recommended for State Aid to Local
Governments, 28.2% is recommended for Grants-in-Aid, 25.3% is recommended for
Direct State Services, 2.7% is recommended for Debt Service on State general
obligation bonds and 4% is recommended for Capital Construction. Of these
appropriations, the largest recommended State Aid appropriation in the amount of
$6,030.3 million is provided for local elementary and secondary education
programs. The second largest portion of recommended appropriation in Fiscal Year
2000 is for Grants-in-Aid, totaling $5,391.0 million, which represents payments
to individuals or public or private agencies for benefits to which a recipient
is entitled to by law, or for the provision of services on behalf of the State.
Of this amount the largest amount recommended is for programs administered by
the Department of Human Services. The third largest portion of recommended
appropriations in Fiscal Year 2000 is applied to Direct State Services which
supports the operations of State government's departments, the Executive Office,
several commissions, the State Legislature and the Judiciary. This amount totals
$4,858.5 million for Fiscal Year 2000, of which the largest amounts are
recommended for programs administered by the Department of Human Services and
the Department of Law and Public Safety.
In addition to payments from bond proceeds, capital construction can also be
funded by appropriation of current revenues on a pay-as-you-go basis. In Fiscal
Year 2000, the amount recommended for this purpose is $771.4 million, of which
$477.8 million is for transportation projects and debt service and is being
credited to the Transportation Trust Fund Account of the General Fund. In
addition, $98.0 million is for open space preservation, $72.2 million is for
hazardous substance remediation and underground tank remediation and
$15.0 million is for shore protection. All appropriations for capital projects
and all proposals for State bond authorization are subject to the review and
recommendation of the New Jersey Commission on Capital Budgeting and Planning.
In Fiscal Year 1992 the State initiated a program under which it issued tax
and revenue anticipation notes to aid in providing effective cash flow
management to fund balances which occur in the collection and disbursement of
the General Fund and Property Tax Relief Fund revenues. There are $700 million
of tax and revenue anticipation notes outstanding which notes matured on
June 15, 1999. Such tax and revenue anticipation notes do not constitute a
general obligation of the State or a debt or liability within the meaning of the
State constitution. Such notes constitute special obligations of the State
payable solely from moneys on deposit in the General Fund and the Property Tax
Relief Fund and legally available for such payment.
The State finances certain capital projects through the sale of the general
obligation bonds of the State. These bonds are backed by the full faith and
credit of the State. Certain state tax revenues and certain other fees are
pledged to meet the principal payments, interest payments, redemption premium
payments, if any, required to fully pay the bonds. As of
C-1
<PAGE>
June 30, 1998, the State's outstanding general obligation bonded indebtedness
totaled $3.6 billion. The recommended appropriation for the debt service
obligation on outstanding projected indebtedness is $518.7 million for Fiscal
Year 2000.
New jobs in service industries are leading the growth in New Jersey's labor
force. The services sector accounts for approximately 30% of total
non-agricultural employment in the State. New Jersey also has an above average
concentration of employment in the transportation and public utilities sector.
This sector accounts for approximately 7% of the non-agricultural work force.
The strong economy has lead to growth in construction jobs, too. The State's
unemployment rate has been declining from its high of 8.4% in 1992 to an
January, 2000, rate of 3.9%. The national rate for January, 2000, was 4.0%.
The State has implemented a plan to address the Y2K problem. As of
December 31, 1998, the testing, validation and implementation of 75% of all
centrally maintained State systems is complete. The total estimated cost to the
State to achieve year 2000 compliance is $120 million of which approximately
$66 million of expenditures has been incurred as of December 31, 1998.
At any given time, there are various numbers of claims and cases pending
against the State, State Agencies and employees, seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New
Jersey Claims Act. The State does not formally estimate its reserve representing
a potential exposure for these claims and cases. The State is unable to estimate
its exposure for these claims and cases.
The State routinely receives notices of claims seeking substantial sums of
money. The majority of those claims have historically proven to be of
substantially less value than the amount originally claimed. Under the New
Jersey Tort Claims Act, any tort litigation against the State must be preceded
by a notice of claim, which affords the State the opportunity for a six month
investigation prior to the filing of any suit against it.
In addition, at any given time, there are various numbers of contracts and
other claims against the State and State Agencies, including environmental
claims asserted against the State, among other parties, arising from the alleged
disposal of hazardous waste. Claimants in such matters are seeking recovery of
monetary damages or other relief which, if granted, would require the
expenditure of funds. The State is unable to estimate its exposure for these
claims.
The State is a party in numerous legal proceedings pertaining to matters
incidental to the performance of routine governmental operations. Such
litigation includes, but is not limited to, the following: claims regarding
violations of numerous laws allegedly resulting from the existence of chromium
contamination in the State owned Liberty State Park in Jersey City; challenges
to the constitutionality of annual A-901 hazardous and solid waste licensure
renewal fees collected by the Department of Environmental Protection; claims on
behalf of 17 rural school districts seeking sufficient funds to allow the school
districts to spend at the average of wealthy suburban school districts, to
implement additional programs such as full-day kindergarten, half-day pre-school
programs for three and four year olds, technology, alternative school,
accountability and school-to-work and college transition programs, and to
upgrade school facilities; claims alleging that the State's system of funding
for their schools is violative of the constitutional rights of equal protection
and a thorough and efficient education; claims by insurers licensed or admitted
to write property and casualty insurance in the State alleging that their
assessments are being used to retire debt of the Market Transition Fund; a
purported class action consisting of prisoners with serious mental disorders who
are confined within the facilities of the Department of Corrections alleging
cruel and unusual punishment, violation of the Americans with Disabilities Act
of 1990, discrimination against members of the class, sex discrimination and
violation of due process; cases involving spousal impoverishment provisions of
the Medicare Catastrophic Coverage Act; challenges by 19 New Jersey hospitals to
Medicaid hospital reimbursement since 1995; several cases filed in opposition to
a road and tunnel project in Atlantic City; claims on behalf of providers of
Medicare Part B services to Qualified Medicare Beneficiaries seeking
reimbursement for Medicare co-insurance and deductibles not paid by the State
Medicaid program from 1988 to February 10, 1995; relief sought to have the
Camden County solid waste procurement process halted to clarify bid
specifications; a case involving the award of a contract for the design,
construction, operation and maintenance of the State's enhanced motor vehicle
inspection system; a claim seeking damages in declaratory and injunctive relief
overturning, on State constitutional grounds, the "family cap" provisions of the
State Work First New Jersey Act; and challenges by various hospitals to the $10
per adjusted hospital admission charges imposed by State statute.
As of February 9, 1999, the State's general obligation ratings were Aa1 by
Moody's and AA+ by S&P and Fitch. New Jersey's strong economic growth during the
past seven years and its growing reserves support its strong credit rating. The
State's combined debt burden is above average but is mitigated by New Jersey's
high wealth levels. Although these ratings indicate that the State is in
relatively good economic health, there can be no assurance that this will
continue or that particular bond issues may not be adversely affected by changes
in the State or local economic or political conditions.
C-2
<PAGE>
NEW JERSEY TAXABLE ESTIMATED CURRENT RETURN TABLE
The following tables show the approximate taxable estimated current returns
for individuals that are equivalent to tax-exempt estimated current returns
under combined Federal and state taxes, using published 2000 marginal Federal
tax rates and marginal state tax rates currently available and scheduled to be
in effect. The table assumes that federal taxable income is equal to state
income subject to tax, and for cases in which more than one state rate falls
within a Federal bracket, the state rate corresponding to the highest income
within that Federal bracket is used. The combined state and Federal tax brackets
shown reflect the fact that state tax payments are currently deductible for
Federal tax purposes. The tables do not reflect any local taxes or any taxes
other than personal income taxes. The tables illustrate what you would have to
earn on taxable investments to equal the tax-exempt estimated current return for
your income tax bracket. A taxpayer's marginal tax rate is affected by both his
taxable income and his adjusted gross income. Locate your adjusted gross and
your taxable income (which is your adjusted gross income reduced by any
deductions and exemptions), then locate your tax bracket based on joint or
single tax filing. Read across to the equivalent taxable estimated current
return you would need to match the tax-free income.
COMBINED MARGINAL TAX RATES FOR JOINT TAXPAYERS WITH FOUR PERSONAL EXEMPTIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL ----------------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
-------------- -------------- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 43.85 $ 0-128.95 16.5% 5.39 5.69 5.99 6.29 6.59 6.89 7.19 7.49
43.85-105.95 0-128.95 32.0 6.62 6.99 7.35 7.72 8.09 8.46 8.82 9.19
128.95-193.40 33.0 6.72 7.09 7.46 7.84 8.21 8.58 8.96 9.33
105.95-161.45 0-128.95 35.5 6.98 7.36 7.75 8.14 8.53 8.91 9.30 9.69
128.95-193.40 36.5 7.09 7.48 7.87 8.27 8.66 9.06 9.45 9.84
193.40-315.90 39.0 7.38 7.79 8.20 8.61 9.02 9.43 9.84 10.25
161.45-288.35 128.95-193.40 41.0 7.63 8.05 8.47 8.90 9.32 9.75 10.17 10.59
193.40-315.90 44.0 8.04 8.48 8.93 9.38 9.82 10.27 10.71 11.16
Over 315.90 41.02 6.78 7.20 7.63 8.05 8.47 8.90 10.17 10.59
Over 288.35 193.40-315.90 48.0 8.65 9.13 9.62 10.10 10.58 11.06 11.54 12.02
Over 315.90 44.53 8.11 8.56 9.01 9.46 9.91 10.36 10.81 11.26
</TABLE>
COMBINED MARGINAL TAX RATES FOR SINGLE TAXPAYERS WITH ONE PERSONAL EXEMPTION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED COMBINED
TAXABLE GROSS STATE AND TAX-FREE ESTIMATED CURRENT RETURN
INCOME INCOME FEDERAL ----------------------------------------------------------------------
(1,000'S) (1,000'S) TAX RATE1 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25%
-------------- -------------- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0- 26.25 $ 0-128.95 16.5% 5.39 5.69 5.99 6.29 6.59 6.89 7.19 7.49
26.25- 63.55 0-128.95 32.0 6.62 6.99 7.35 7.72 8.09 8.46 8.82 9.19
63.55-132.60 0-128.95 35.5 6.98 7.36 7.75 8.14 8.53 8.91 9.30 9.69
128.95-251.45 37.0 7.14 7.54 7.94 8.33 8.73 9.13 9.52 9.92
132.60-288.35 128.95-251.45 42.0 7.76 8.19 8.62 9.05 9.48 9.91 10.34 10.78
Over 251.45 41.02 7.63 8.05 8.47 8.90 9.32 9.75 10.17 10.59
Over 288.35 Over 251.45 44.53 8.11 8.56 9.01 9.46 9.91 10.36 10.81 11.26
</TABLE>
------------------
1 The table reflects the effect of the limitations on itemized deductions
and the deduction for personal exemptions. They were designed to phase out
certain benefits of these deductions for higher income taxpayers. These
limitations, in effect, raise the current maximum marginal combined Federal and
state tax rate to approximately 47.89 percent for taxpayers filing a joint
return and entitled to four personal exemptions and to approximately 44.56
percent for taxpayers filing a single return entitled to only one personal
exemption. These limitations are subject to certain maximums, which depend on
the number of exemptions claimed and the total amount of the taxpayer's itemized
deductions. For example, the limitation on itemized deductions will not cause a
taxpayer to lose more than 80% of his allowable itemized deductions, with
certain exceptions.
2 Combined Federal and state tax rate reverts to 40.08% after the 80% cap on
the limitation on itemized deductions has been met.
3 Combined Federal and state tax rate reverts to 43.45% after the 80% cap on
the limitation on itemized deductions has been met.
C-3
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
A. BONDING ARRANGEMENTS OF DEPOSITOR:
The Depositor has obtained the following Stockbrokers Blanket Bonds for its
officers, directors and employees:
<TABLE>
<S> <C>
INSURER/POLICY NO. AMOUNT
Reliance Insurance Company $26,000,000
B 262 6895
</TABLE>
B. THIS AMENDMENT OF REGISTRATION STATEMENT COMPRISES THE FOLLOWING PAPERS AND
DOCUMENTS:
The facing sheet
The Prospectus
The signatures
Consents of Independent Public
Accountants and Counsel as indicated
Exhibits as listed on page S-5
C. EXPLANATORY NOTE:
This Amendment No. 1 to the Registration Statement may contain multiple
separate prospectuses. Each prospectus will relate to an individual unit
investment trust and will consist of a Part A, a Part B and an Information
Supplement. Each prospectus will be identical with the exception of the
respective Part A which will contain the financial information specific to such
underlying unit investment trust.
D. UNDERTAKINGS:
1. The Information Supplement to the Trust will not include third party
financial information.
S-1
<PAGE>
SIGNATURES
The Registrant, Nuveen Tax-Free Unit Trust, Series 1175 hereby identifies
Series 401, 507, 512, 515, 517, 519, 723, 814 and 823 of the Nuveen Tax-Exempt
Unit Trust (the former name of the Nuveen Tax-Free Unit Trust) for purposes of
the representations required by Rule 487 and represents the following:
(1) that the portfolio securities deposited in the series as to the
securities of which this Registration Statement is being filed do not differ
materially in type or quality from those deposited in such previous series;
(2) that, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential financial information for, the
series with respect to the securities of which this Registration Statement is
being filed, this Registration Statement does not contain disclosures that
differ in any material respect from those contained in the registration
statements for such previous series as to which the effective date was
determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Nuveen Tax-Free Unit Trust, Series 1175 has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Chicago and State of Illinois on June 27, 2000.
NUVEEN TAX-FREE UNIT TRUST, SERIES
1175
(Registrant)
By JOHN NUVEEN & CO. INCORPORATED
(Depositor)
By: Benjamin T. Fulton
--------------------------------------
Vice President and Managing Director
Attest: Nicholas Dalmaso
--------------------------------------
Assistant Secretary
S-2
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
of Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE* DATE
<S> <C> <C> <C>
Timothy T. Schwertfeger Chairman, Board of Directors, )
Chief Executive Officer and )
Director )
)
John P. Amboian President and Director ) Larry W. Martin
) Attorney-In-Fact**
)
) June 27, 2000
Margaret E. Wilson Vice President and Controller )
)
)
)
</TABLE>
--------------
* The titles of the persons named herein represent their capacity in and
relationship to John Nuveen & Co. Incorporated, the Depositor.
** The powers of attorney for Messrs. Amboian and Schwertfeger and for
Ms. Wilson were filed on May 3, 2000 as Exhibit 6.2 to Nuveen Unit Trusts,
Series 94 (File No. 333-35488).
S-3
<PAGE>
1175
CONSENT OF CHAPMAN AND CUTLER
The consent of Chapman and Cutler to the use of its name in the Prospectus
included in the Registration Statement is contained in its opinions filed by
this amendment as Exhibits 3.1 and 3.2 to the Registration Statement.
CONSENT OF STATE COUNSEL
The consents of special counsel to the Fund for state tax matters to the use
of their names in the Prospectus included in the Registration Statement are
contained in their opinions filed by this amendment as Exhibit 3.3 to the
Registration Statement.
CONSENT OF KENNY S&P EVALUATION SERVICES
The consent of Kenny S&P Evaluation Services to the use of its name in the
Prospectus included in the Registration Statement is filed by this amendment as
Exhibit 4.1 to the Registration Statement.
CONSENT OF CARTER, LEDYARD & MILBURN
The consent of Carter, Ledyard & Milburn to the use of its name in the
Prospectus included in the Registration Statement is filed by this amendment as
Exhibit 4.2 to the Registration Statement.
CONSENT OF ARTHUR ANDERSEN LLP
The consent of Arthur Andersen LLP to the use of its name in the Prospectus
included in the Registration Statement is filed by this amendment as Exhibit 4.3
to the Registration Statement.
S-4
<PAGE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
1.1(a) Copy of Standard Terms and Conditions of Trust between John
Nuveen & Co. Incorporated, Depositor, and The Chase
Manhattan Bank, Trustee (filed as Exibit 1.1 (a) to the
Sponsor's Amendment to the Registration Statement on
Form S-6 relating to Series 823 of the Fund [File
No. 33-62325] filed on September 7, 1995 and incorporated
herein by reference).
1.1(b) Trust Indenture and Agreement.
1.2 Copy of Certificate of Incorporation, as amended, of John
Nuveen & Co. Incorporated, Depositor (incorporated by
reference to Form N-8B-2 [File No. 811-1547] filed on
September 29, 1967 on behalf of Nuveen Tax-Exempt Unit
Trust, Series 16).
1.3 Copy of amendment of Certificate of Incorporation changing
name of Depositor to John Nuveen & Co. Incorporated
(incorporated by reference to Form N-8B-2 [File
No. 811-2198] filed on April 11, 1985 on behalf of Nuveen
Tax-Exempt Unit Trust, Series 37).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1(a)
on pages 2 to 8, inclusive, and incorporated herein by
reference).
2.2 Code of Ethics of the Trust(s) and Principal Underwriter
(filed as Exhibit 2.2 to Amendment No. 3 to the Registration
Statement on Form S-6 relating to Nuveen Unit Trusts,
Series 82 [File No. 333-96279] filed on March 6, 2000 and
incorporated herein by reference).
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinions of special state counsel to the Fund for state tax
matters as to income tax status to residents of the
respective states of the units of the respective trusts and
consents to the use of their names in the Prospectus.
3.4 Corporate opinion of Trustee's counsel.
3.5 Opinion of Trustee's counsel as to New York tax status.
4.1 Consent of Kenny S&P Evaluation Services.
4.2 Consent of Carter, Ledyard & Milburn.
4.3 Consent of Arthur Andersen LLP
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to Exhibit E
to Form N-8B-2 [File No. 811-08103] filed on March 20, 1997
on behalf of Nuveen Unit Trusts, Series 1 and subsequent
series).
</TABLE>
S-5
