FILE NO. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: Fidelity Defined Trusts
Series 1
B. Name of Depositor: National Financial Services Corporation
C. Complete address of Depositor's principal executive offices:
82 Devonshire Street C8A
Boston, MA 02109-3614
D. Name and complete address of agents for service:
David J. Pearlman Chapman And Cutler
Fidelity Investments Attention: Mark J. Kneedy
82 Devonshire Street C8A 111 West Monroe Street
Boston, MA 02109 Chicago, Illinois 60603
E. Title and amount of securities being registered: An indefinite number
of Units pursuant to Rule 24f-2 promulgated under the Investment Company
Act of 1940, as amended
F. Proposed maximum offering price to the public of the securities being
registered: Indefinite
G. Amount of registration fee (as required by Rule 24f-2): $500.00
H. Approximate date of proposed sale to the public:
As Soon As Practicable After The Effective Date Of
The Registration Statement
/ / Check box if it is proposed that this filing will become effective on
pursuant to Rule 487.
______________________________________________________________________
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a) may determine.
FIDELITY DEFINED TRUSTS
SERIES 1
CROSS REFERENCE SHEET
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Essential Information
) The Sponsor
3. Name and address of Trustee ) Essential Information
) Trust Administration
4. Name and address of principal ) Public Offering of Units
underwriter
5. Organization of trust ) The Trusts
6. Execution and termination of ) The Trusts
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Trusts
trust's securities and ) Tax Status
rights of security holders ) Public Offering of Units
) Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trusts
) Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Load, fees, charges and expenses ) Prospectus Front Cover Page
) Essential Information
) Portfolio
)
) Trust Expenses
) Public Offering of Units
) Unitholders and Sponsor
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Essential Information
)
(d) Variations in fees among certain ) Public Offering of Units
classes of holders ) Unitholders
(e) Certain other fees, expenses or ) Trust Expenses
charges payable by holders ) Unitholders
(f) Certain profits to be received ) Public Offering of Units
by depositor, principal ) Public Offering of Units
underwriter, trustee or any ) Portfolio
affiliated persons )
(g) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Unitholders
15. Receipt and handling of payments ) Public Offering of Units
from purchasers )
16. Acquisition and disposition of ) The Trusts
underlying securities ) Unitholders
) Trust Administration
17. Withdrawal or redemption ) Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Unitholders
(b) Reinvestment of distributions ) Distribution Reinvestment
(c) Reserves or special funds ) Trust Expenses
) Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Portfolio
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) The Sponsor
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) The Sponsor
of Depositor )
30. Controlling persons of Depositor ) The Sponsor
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering of Units
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering of Units
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices of principal ) *
underwriter )
(c) Salesmen of principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Essential Information
) Trust Expenses
) Public Offering of Units
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
45. Suspension of Redemption Rights ) *
46. (a) Redemption valuation ) Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering of Units
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Essential Information
) Trust Expenses
50. Trustee's lien ) Trust Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's ) Trust Expenses
securities )
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
of elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Tax Status
VII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent Certified
1(c) to Form S-6) ) Public Accountants
Statements of Financial
Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
FIDELITY DEFINED TRUSTS SERIES 1
LADDERED GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
LADDERED GOVERNMENT SERIES 2, SHORT/INTERMEDIATE TREASURY PORTFOLIO
ROLLING GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
ROLLING GOVERNMENT SERIES 2, GNMA PORTFOLIO
INVESTMENT GRADE SERIES 1, INTERMEDIATE INSURED UTILITY PORTFOLIO
INVESTMENT GRADE SERIES 2, CORPORATE PORTFOLIO
FIDELITY.EPS
LADDERED GOVERNMENT SERIES-Laddered Government Series 1, Short Treasury
Portfolio and Laddered Government Series 2, Short/Intermediate Treasury
Portfolio were each formed for the purpose of providing safety of capital
and investment flexibility through an investment in a portfolio of U.S.
Treasury Obligations with laddered maturity levels that are backed by the
full faith and credit of the United States Government. Interest Income
distributed by each Treasury Portfolio is exempt from state personal income
taxes in all states. Each Treasury Portfolio is available to non-resident
aliens and the income from such Trusts, provided certain conditions are
met, will be exempt from withholding for U.S. federal income tax for such
foreign investors. A FOREIGN INVESTOR MUST PROVIDE A COMPLETED W-8 FORM TO
HIS FINANCIAL REPRESENTATIVE OR THE TRUSTEE TO AVOID WITHHOLDING ON HIS
ACCOUNT. Units of the Trust are rated "AAA" by Standard & Poor's, a
Division of The McGraw-Hill Companies ("Standard & Poor's").
ROLLING GOVERNMENT SERIES-Rolling Government Series 1, Short Treasury
Portfolio was formed to obtain safety of capital and current monthly
distributions of interest through an investment in a portfolio of U.S.
Treasury Obligations that are backed by the full faith and credit of the
United States Government. The Trust has been designed to maintain a short
average maturity, no greater than 8 months. This Trust seeks to reduce Unit
price fluctuations due to changing interest rates by reinvesting
approximately four times a year until January, 1998 the proceeds of
maturing U.S. Treasury Obligations into additional U.S. Treasury
Obligations with maturities of approximately one year so that the Trust
will maintain a portfolio with a weighted average maturity of approximately
0.63 years for most of the Trust's life. Units of the Trust are rated "AAA"
by Standard & Poor's.
Rolling Government Series 2, GNMA Portfolio was formed for the purpose of
obtaining safety of capital and current monthly distributions of interest
through investment in a portfolio primarily consisting of taxable
mortgage-backed securities of the fully modified pass-through type, the
payments of principal and interest on which are fully guaranteed by the
Government National Mortgage Association ("GNMA"). In an effort to minimize
the effect of principal payments and prepayments during the period when, in
t he opinion of the Sponsor, such reinvestment is practical (the
""Reinvestment Period"), the Sponsor will direct the Trustee to reinvest
all distributions of principal into additional GNMA securities which are
similar as to maturity and interest rates as the GNMA securities upon which
the principal was received. The Sponsor currently expects the Reinvestment
Period to last two years from the Initial Date of Deposit. Units of the
Trust are rated "AAA" by Standard & Poor's.
INVESTMENT GRADE SERIES-Investment Grade Series 1, Intermediate Insured
Utility Portfolio primarily consists of a fixed portfolio of corporate debt
obligations ("Bonds") issued after July 18, 1984 by utility companies and
was created to provide a high level of current income. Insurance
guaranteeing the scheduled payment of principal and interest on all of the
Bonds in such Trust has been obtained directly by the issuer of such Bonds
or by the Sponsor from MBIA Insurance Corporation or other insurers. See
"Trust Information-Insurance on the Bonds" and "Investment Grade Series 1,
Intermediate Insured Utility Portfolio-Portfolio." THE INSURANCE DOES NOT
RELATE TO THE UNITS OFFERED HEREBY OR TO THEIR MARKET VALUE. As a result of
such insurance, the Units of the Trust have received a rating of "AAA" by
Standard & Poor's.
Investment Grade Series 2, Corporate Portfolio was formed for the purpose
of providing a high level of current income through investment in a fixed
portfolio consisting primarily of investment grade corporate debt
obligations issued afterJuly 18, 1984.
UNITS OF THE TRUSTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE INVESTMENT RISK INCLUDING
LOSS OF PRINCIPAL.
SPONSOR: NATIONAL FINANCIAL SERVICES CORPORATION
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The investor is advised to read and retain this Prospectus for future
reference.
THE DATE OF THIS PROSPECTUS IS , 1995.
SUMMARY
PUBLIC OFFERING PRICE. The Public Offering Price per Unit of a Trust during
the initial offering period is equal to a pro rata share of the offering
prices of the Securities in such Trust plus or minus a pro rata share of
cash, if any, in the Principal Account held or owned by such Trust, plus
accrued interest plus that sales charge indicated under "Essential
Information." The secondary market Public Offering Price per Unit will be
based upon a pro rata share of the bid prices of the Securities in each
Trust plus or minus a pro rata share of cash, if any, in the Principal
Account held or owned by such Trust, plus accrued interest plus the
applicable sales charge indicated under "Trust Information-Public Offering
of Units-Public Offering Price." The sales charge is reduced on a graduated
scale for sales involving at least $100,000 or 10,000 Units and will be
applied on whichever basis is more favorable to the investor. The minimum
purchase for each Trust is $1,000.
REINVESTMENT. Each Unitholder of a Trust offered herein may elect to have
distributions of principal or interest or both automatically invested
without charge in shares of certain mutual funds advised by Fidelity
Management & Research Company. See "Trust Information-Distribution
Reinvestment."
ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of the opening
of business on the Initial Date of Deposit, the Estimated Long-Term Return
and the Estimated Current Return, if applicable, for each Trust were as set
forth in "Essential Information." The Estimated Current Return is
calculated by dividing the estimated net annual interest income per Unit by
the Public Offering Price. The estimated net annual interest income per
Unit will vary with changes in fees and expenses of the Trustee, the
Sponsor and Evaluator and with principal prepayment (in the case of GNMA
Securities), any reinvestment (in the case of a Rolling Government Series),
redemption (in the case of an Investment Grade Series), maturity and
exchange or sale of Securities while the Public Offering Price will vary
with changes in the offering price of the underlying Securities and with
changes in the accrued interest; therefore, there is no assurance that the
present Estimated Current Return will be realized in the future. Estimated
Long-Term Return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements or
average lives of all of the Securities in the applicable Trust, including
the reinvestment of Securities in a Rolling Government Series, and (2)
takes into account the expenses and sales charge associated with each Trust
Unit. Since the market values and estimated retirements or average lives of
the Securities and the expenses of a Trust will change, there is no
assurance that the present Estimated Long-Term Return will be realized in
the future. Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while
Estimated Current Return calculations include only net annual interest
income and Public Offering Price.
MARKET FOR UNITS. After the initial offering period, the Sponsor while
under no obligation to do so, intends to maintain a market for the Units
and to offer to repurchase such Units at prices subject to change at any
time which are based on the aggregate bid side evaluation of the Securities
in a Trust plus accrued interest.
RISK FACTORS. An investment in the Trusts should be made with an
understanding of the risks associated therewith, including, among other
factors, the inability of the issuer or an insurer to pay the principal of
or interest on a security when due, the general condition of the relevant
securities market, economic recession, volatile interest rates, early call
provisions and changes to the tax status of the Securities. Rolling
Government Series 2 is subject to the additional risk that the GNMA
securities which make up the Trust may be prepaid more quickly than
expected and that, during the reinvestment period, the Sponsor may be
unable to reinvest principal into additional Securities. Investment Grade
Series 1 is subject to the additional risks associated with utility
companies including the possibility of increased federal, state or local
regulations, the inability to adequately raise rates and the effects of
energy conservation. See "Risk Factors" in each Trust section and "Trust
Information-Risk Factors."
FIDELITY DEFINED TRUSTS SERIES 1
ESSENTIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT
SPONSOR AND EVALUATOR: NATIONAL FINANCIAL SERVICES CORPORATION
TRUSTEE: UNITED STATES TRUST COMPANY OF NEW YORK
The income, expense and distribution data set forth below has been
calculated for Unitholders purchasing less than 10,000 Units of a Trust.
Unitholders purchasing 10,000 Units or more of a Trust will receive a
slightly higher return because of the reduced sales charge for larger
purchases.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
LADDERED LADDERED ROLLING ROLLING INVESTMENT INVESTMENT
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GRADE GRADE
SERIES 1 SERIES 2 SERIES 1 SERIES 2 SERIES 1 SERIES 2
Public Offering Price per Unit (1) (2) $ $ $ $ $ $
Principal Amount of Securities per Unit $ $ $ $ $ $
Estimated Current Return based on Public
Offering Price (3) (4) (5) (6)
Estimated Long-Term
Return (3) (4) (5) (6)
Estimated Normal Annual Distribution
per Unit (6) $ $ $ $ $ $
Principal Amount of Securities $ $ $ $ $ $
Number of Units
Fractional Undivided Interest per Unit
Calculation of Public Offering Price:
Aggregate Offering Price of Securities $ $ $ $ $ $
Aggregate Offering Price of
Securities per Unit $ $ $ $ $ $
Plus Sales Charge per Unit (7) $ $ $ $ $ $
Public Offering Price per Unit (1) (2) $ $ $ $ $ $
Redemption Price per Unit $ $ $ $ $ $
Sponsor's Initial Repurchase Price
per Unit $ $ $ $ $ $
Excess of Public Offering Price per Unit
over Redemption Price per Unit $ $ $ $ $ $
Excess of Public Offering Price per Unit
over Sponsor's Initial Repurchase Price
per Unit $ $ $ $ $ $
Calculation of Estimated Net Annual
Interest Income per Unit (6):
Estimated Annual Interest $ $ $
Less: Estimated Annual Expense $ $ $ $
Estimated Net Annual Interest $ $
Estimated Daily Rate of Net Interest
Accrual per Unit (if applicable) $ $ $ $
Estimated Average Life of Securities
Type of GNMA Securities
Minimum Principal Value of the Trust
under which Trust Agreement may be
terminated (8) $ $ $ $ $ $
</TABLE>
Evaluations for purposes of sale, purchase or redemption of Units are made
as of the close of business of the Sponsor (currently 3:15 p.m. Central
Time) next following receipt of an order for a sale or purchase of Units or
receipt by the Trustee of Units tendered for redemption.
ESSENTIAL INFORMATION-(CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
LADDERED LADDERED ROLLING ROLLING INVESTMENT INVESTMENT
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GRADE GRADE
SERIES 1 SERIES 2 SERIES 1 SERIES 2 SERIES 1 SERIES 2
Trustee's Annual Fee per $1,000 principal
amount of Securities (9)
Reduction of Trustee's fee per Unit during
the first year (6)
Estimated annual interest income per Unit
during the first year (6)
Interest Payments (10):
First Payment per Unit, representing
days
Estimated Normal Monthly Distribution
per Unit
Estimated Normal Annual Distribution
per Unit
Sales Charge (7):
As a percentage of Public Offering Price
per Unit
As a percentage of net amount invested
As a percentage of net amount invested
in earning assets
Date of Trust Agreements , 1995
First Settlement Date , 1995
Mandatory Termination Date
Maximum Evaluator's Annual Evaluation
Fee per $1,000 Principal Amount of
Securities
Maximum Sponsor's Annual Surveillance
Fee per $1,000 Principal Amount of
Securities
Estimated Annual Organizational Expenses
per Unit (11)
</TABLE>
(1) Anyone ordering Units for settlement after the First Settlement Date
will pay accrued interest from such date to the date of settlement
(normally three business days after order) less distributions from the
Interest Account subsequent to the First Settlement Date. For purchases
settling on the First Settlement Date, no accrued interest will be added to
the Public Offering Price.
(2) Many unit investment trusts issue a number of units such that each
unit represents approximately $1,000 principal amount of underlying
securities. The Sponsor, on the other hand, in determining the number of
Units for each Trust has elected not to follow this format but rather to
provide that number of Units which will establish as close as possible as
of the Initial Date of Deposit a Principal Amount of Securities per Unit of
$10.
(3) The Estimated Current Return and Estimated Long-Term Return are
increased for transactions entitled to a reduced sales charge. See "Trust
Information-Public Offering of Units-Public Offering Price."
(4) The Estimated Current Returns are calculated by dividing the estimated
net annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee, the Sponsor and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of
Securities while the Public Offering Price will vary with changes in the
offering price of the underlying Securities and with changes in the accrued
interest; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The
Estimated Long-Term Returns are calculated using a formula which (1) takes
into consideration, and determines and factors in the relative weightings
of, the market values, yield (which take into account the amortization of
premiums and the accretion of discounts) and the expected retirement dates
of all of the Securities in the applicable Trust (or in the case of a GNMA
Portfolio, the estimated average life of all the Securities in such
Portfolio) and (2) takes into account the expenses and sales charge
associated with each Trust Unit. Since the market values and estimated
retirement dates of the Securities and expenses of each Trust will change,
there is no assurance that the present Estimated Long-Term Returns as
indicated above will be realized in the future. The Estimated Current
Returns and Estimated Long-Term Returns are expected to differ because the
calculation of the Estimated Long-Term Returns reflects the estimated date
and amount of principal returned while the Estimated Current Return
calculations include only net annual interest income and Public Offering
Price.
(5) This figure is based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in current
interest rates and with the principal prepayment, redemption, maturity,
call, exchange or sale of the underlying Securities and, in the case of a
GNMA Portfolio, with changes in the average life assumptions of the GNMA
pools. The estimated cash flows to Unitholders for the Trusts are either
set forth under "Estimated Cash Flows to Unitholders" for each Trust or are
available upon request at no charge from the Sponsor.
(6) Estimated Annual Interest amounts are expressed in dollar amounts
except for GNMA Portfolios, which are expressed as percentages due to the
prepayment risk associated with GNMA Securities. During the first year, the
Trustee has agreed to reduce its fee (and to the extent necessary pay
expenses of the Trusts) in the amounts stated above. The Trustee has agreed
to the foregoing to cover all or a portion of the interest on any
Securities accruing prior to their expected dates of delivery, since
interest will not accrue to the benefit of Unitholders of a Trust until
such Securities are actually delivered to the Trust. The estimated net
annual interest income per Unit will remain as indicated. See "The Trusts"
and "Trust Information-Interest, Estimated Long-Term Return and Estimated
Current Return."
(7) The sales charge as a percentage of the net amount invested in earning
assets will increase as accrued interest increases. Transactions subject to
quantity discounts (see "Trust Information-Public Offering of Units-Public
Offering Price") will have reduced sales charges, thereby reducing all
percentages in the table.
(8) The minimum principal value of a GNMA Portfolio under which the Trust
Agreement may be terminated is 40% of the total aggregate principal amount
of securities deposited in each Portfolio during the primary offering
period. The minimum principal value of each other Trust under which the
Trust Agreement may be terminated is 20% of the initial aggregate principal
amount of securities deposited in each Portfolio.
(9) See "Trust Information-Trust Expenses."
(10) Unitholders will receive interest distributions monthly. The Record
Date is the 10th day of the month, commencing , 1995,
and the distribution date is the 20th day of the month, commencing
, 1995.
(11) Each Trust (and therefore the Unitholders of the respective Trust)
will bear all or a portion of its organizational costs (including costs of
preparing the registration statement, the trust indenture and other closing
documents, registering Units with the Securities and Exchange Commission
and states, the initial audit of the Trust portfolios and the initial fees
and expenses of the Trustee but not including the expenses incurred in the
preparation and printing of brochures and other advertising materials and
other selling expenses) as is common for mutual funds. Total organizational
expenses will be amortized over a five year period or over the life of a
Trust if the term of such Trust is less than five years. See "Trust
Information-Trust Expenses" and "Statements of Financial Condition."
Historically, the sponsors of unit investment trusts have paid all of the
costs of establishing such trusts.
THE TRUSTS
Fidelity Defined Trusts Series 1 consists of the underlying separate unit
investment trusts set forth above. The various trusts are collectively
referred to herein as the "Trusts." Each Trust is divided into "Units"
representing equal shares of the underlying assets of such Trust. Laddered
Government Series 1, Short Treasury Portfolio, Laddered Government Series
2, Short/Intermediate Treasury Portfolio and Rolling Government Series 1,
Short Treasury Portfolio are collectively referred to herein as the
"Treasury Portfolios", Rolling Government Series 2, GNMA Portfolio is
referred to herein as the "GNMA Portfolio", Investment Grade Series 1,
Intermediate Insured Utility Portfolio is referred to herein as the
"Insured Utility Portfolio" and Investment Grade Series 2, Corporate
Portfolio is referred to herein as the "Corporate Portfolio." Each of the
Trusts is separate and is designated by a different series number. Each of
the Trusts was created under the laws of the State of New York pursuant to
a trust indenture dated the Initial Date of Deposit (the "Trust
Agreements") between National Financial Services Corporation (the
"Sponsor") and United States Trust Company of New York (the "Trustee").*
As used herein, the terms defined below shall have the following meanings:
"Securities" and "Bonds" shall mean the obligations initially deposited in
the Trusts described under "Portfolio" for each Trust (including all
contracts to purchase such obligations accompanied by an irrevocable letter
of credit sufficient to perform such contracts initially deposited in the
Trusts) and any additional obligations deposited in the Trusts following
the Initial Date of Deposit; "GNMA Securities" and "Ginnie Maes" shall mean
the obligations (and contracts for the purchase thereof) included in the
GNMA Portfolios; "U.S. Treasury Obligations" shall mean the obligations
(and contracts) included in the Treasury Portfolios; "Utility Bonds" shall
mean the obligations (and contracts) included in the Insured Utility
Portfolio; and "Corporate Bonds" shall mean the obligations (and contracts)
included in the Corporate Portfolio.
On the Initial Date of Deposit, the Sponsor delivered to the Trustee that
aggregate principal amount of Securities or contracts for the purchase
thereof for deposit in the Trust Funds as set forth under "Essential
Information." Of such principal amount, the amount specified in "Essential
Information" was deposited in each Trust. In exchange for the Securities so
deposited, the Trustee delivered to the Sponsor documentation evidencing
the ownership of that number of Units for each Trust as indicated under "
Essential Information." Each Trust initially consists of delivery
statements (i.e., contracts) to purchase obligations. The Sponsor has a
limited right of substitution for such Securities in the event of a failed
contract. See "Trust Information-General Information."
Additional Units of each Trust may be issued from time to time following
the Initial Date of Deposit by depositing in such Trust additional
Securities or contracts for the purchase thereof together with irrevocable
letters of credit or cash. As additional Units are issued by a Trust as a
result of the deposit of additional Securities by the Sponsor, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of
Securities into a Trust following the Initial Date of Deposit, provided
that such additional deposits will be in principal amounts which will
maintain the same original percentage relationship among the principal
amounts of the Securities in such Trust established on the initial deposit
of the Securities. Thus, although additional Units will be issued, each
Unit will continue to represent the same principal amount of each Security,
and the percentage relationship among the principal amount of each Security
in the related Trust will remain the same.
* Reference is made to the Trust Agreements, and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreements.
Each Unit initially offered represents that undivided interest in the
appropriate Trust indicated under "Essential Information." To the extent
that any Units are redeemed by the Trustee or additional Units are issued
as a result of additional Securities being deposited by the Sponsor, the
fractional undivided interest in a Trust represented by each unredeemed
Unit will increase or decrease accordingly, although the actual interest in
such Trust represented by such fraction will remain unchanged. Units will
remain outstanding until redeemed upon tender to the Trustee by
Unitholders, which may include the Sponsor, or until the termination of the
Trust Agreement.
An investment in Units of a Trust should be made with an understanding of
the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the portfolio and hence of the Units
will decline with increases in interest rates. The value of the underlying
Securities will fluctuate inversely with changes in interest rates. The
uncertain economic conditions of recent years, together with the monetary
policies and fiscal measures adopted to attempt to deal with them, have
resulted in wide fluctuations in interest rates and, thus, in the value of
fixed rate debt obligations generally and long-term obligations in
particular. The Sponsor cannot predict the degree to which such
fluctuations will continue in the future.
LADDERED GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
LADDERED GOVERNMENT SERIES 2, SHORT/INTERMEDIATE TREASURY PORTFOLIO
THE TRUST PORTFOLIO
Laddered Government Series 1, Short Treasury Portfolio and Laddered
Government Series 2, Short/Intermediate Treasury Portfolio were both formed
for the purpose of providing safety of capital and investment flexibility
by staggering the return of principal over a predetermined period of time
(a strategy referred to as "laddered maturities"). Each portfolio consists
of U.S. Treasury Obligations that are backed by the full faith and credit
of the United States government. Each Trust Portfolio was also formed for
the purpose of providing protection against changes in interest rates and
also passing through to Unitholders in all states the exemption from state
personal income taxes afforded to direct owners of U.S. obligations. The
value of the Units, the estimated current return and estimated long-term
return to new purchasers will fluctuate with the value of the Securities
included in a portfolio which will generally increase or decrease inversely
with changes in interest rates.
In selecting U.S. Treasury Obligations for deposit in the Trusts the
following factors, among others were, considered by the Sponsor: (a) the
types of such obligations available; (b) the prices and yields of such
obligations relative to other comparable obligations, including the extent
to which such obligations are traded at a premium or at a discount from
par; and (c) the maturities of such obligations.
Laddered Government Series 1, Short Treasury Portfolio consists of a
portfolio of U.S. Treasury Obligations with differing maturity levels,
designed to return approximately 20% of the principal amount of the Trust
semi-annually over the three year life of the Trust, commencing at the end
of the first year of the Trust.
Laddered Government Series 2, Short/Intermediate Portfolio consists of a
portfolio of U.S. Treasury Obligations with differing maturity levels,
designed to return approximately 20% of the principal amount of the Trust
annually over the six year life of the Trust, commencing at the end of the
second year of the Trust.
TAX STATUS
The Trusts may be appropriate investments for investors who desire to
participate in a portfolio of taxable, fixed income securities offering the
safety of capital provided by an investment backed by the full faith and
credit of the United States. In addition, many investors may benefit from
the exemption from state and local personal income taxes that will pass
through the Trust to Unitholders in virtually all states. Each Trust has
been created as a grantor trust for federal tax reasons. For additional
information concerning each Trusts status as a grantor trust see "Trust
Information-Tax Status-Grantor Trust."
RISK FACTORS
The Securities are direct obligations of the United States and are backed
by its full faith and credit although the Units of the Trusts are not so
backed. The Securities are not rated but in the opinion of the Sponsor have
credit characteristics comparable to those of securities rated "AAA" by
nationally recognized rating agencies.
An investment in Units of a Trust should be made with an understanding of
the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the Securities and hence the Units
will decline with increases in interest rates. The high inflation of prior
years, together with the fiscal measures adopted to attempt to deal with
it, have resulted in wide fluctuations in interest rates and, thus, in the
value of fixed rate debt obligations generally. The Sponsor cannot predict
whether such fluctuations will continue in the future. For a discussion of
other considerations associated with an investment in Units, see "Trust
Information-General Information" and "Trust Information-Risk
Factors-General."
LADDERED GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
COST OF
FACE SECURITIES
AMOUNT COUPON MATURITIES TO TRUST(1)
$ $
$ $
LADDERED GOVERNMENT SERIES 2, SHORT/INTERMEDIATE TREASURY PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
COST OF
FACE SECURITIES
AMOUNT COUPON MATURITIES TO TRUST(1)
$ $
$ $
(1) Some Securities may be represented by contracts to purchase such
Securities. During the initial offering period, evaluations of Securities
are made on the basis of current offering side evaluations of the
Securities. The aggregate offering price is greater than the aggregate bid
price of the Securities, which is the basis on which Redemption Prices will
be determined for purposes of redemption of Units after the initial
offering period. Other information regarding the Securities in the Trusts,
at the opening of business on the Initial Date of Deposit, is as follows:
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
SECURITIES (LOSS) TO INCOME VALUE OF
TRUST TO SPONSOR SPONSOR TO TRUST SECURITIES
Laddered Government Series 1 $ $ $ $
Laddered Government Series 2 $ $ $ $
(2) This Security has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Securities
which pay no interest are normally described as "zero coupon" bonds. Over
the life of Securities purchased at a deep discount the value of such
Securities will increase such that upon maturity the holders of such
securities will receive 100% of the principal amount thereof.
ROLLING GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
THE TRUST PORTFOLIO
Rolling Government Series 1, Short Treasury Portfolio was formed for the
purpose of providing safety of capital and current monthly distributions of
interest through an investment in a portfolio of U.S. Treasury Obligations
that are backed by the full faith and credit of the United States
government. Rolling Government Series 1, Short Treasury Portfolio was also
formed for the purpose of passing through to Unitholders in all states the
exemption from state personal income taxes afforded to direct owners of
U.S. obligations. The Trust also seeks to provide an extendible investment
by quarterly reinvesting, until approximately January 1998 (the "Extension
Period"), the proceeds of maturing Securities into new U.S. Treasury
securities ("Extension Securities") with maturities of approximately one
year. This reinvestment strategy is designed to produce a higher overall
yield than shorter-term investments with less price volatility than
longer-term investments. The Trust has been designed to maintain a short
average maturity, no greater than 8 months. The value of the Units, the
estimated current return and estimated long-term return to new purchasers
will fluctuate with the value of the Securities included in a portfolio
which will generally increase or decrease inversely with changes in
interest rates.
In selecting U.S. Treasury Obligations for deposit in the Trust, the
following factors, among others were, considered by the Sponsor: (a) the
types of such obligations available; (b) the prices and yields of such
obligations relative to other comparable obligations, including the extent
to which such obligations are traded at a premium or at a discount from
par; and (c) the maturities of such obligations.
EXTENSIONS. The initial portfolio consists of U.S. Treasury Obligations
with "laddered" maturities of approximately six months to 15 months.
Therefore, approximately 25% of the initial portfolio matures every three
months. The Sponsor is authorized to direct the reinvestment of the
proceeds of each maturing Security into Extension Securities (an
"Extension"). Extensions of approximately 25% of the portfolio at each
maturity of Securities will continue through the Extension Period and,
assuming the Trust does not terminate prior thereto, it is anticipated that
there will be eight Extensions until principal distributions commence in
1998.
"Extension Securities" means Securities (i) issued by the U.S. Treasury;
(ii) with a fixed maturity date that is within one month of the first
anniversary of the maturity date of the Security the proceeds of which are
being reinvested in the Extension Security; (iii) purchased at par or, in
order of preference, at a discount to, or premium over, par as close to par
as practicable; (iv) that could not cause Units of the Trust to cease to be
rated in the category AAA by Standard & Poor's; and (v) that are not when,
as and if issued obligations. The purchase of Extension Securities shall
not disqualify the Trust as a "regulated investment company" under the
Internal Revenue Code.
The guidelines under which the Trust will purchase Extension Securities
take into account price and maturity date. Whenever a U.S. Treasury
security in the Trust's portfolio matures, the Trust's buyers will purchase
the most currently available 1-year U.S. Treasury security at par. If no
obligations are available at par, the buyer will select obligations with a
price as close as possible to par. To preserve the Trust's par values,
there will be a bias favoring discounts, when available. Therefore,
discounted obligations will be selected so long as the discount is not more
than three times the smaller premium available. That is, assuming no
maturity date differences, if there is an obligation available at a price
of $100.125, no alternative obligation will be selected at less than
$99.625. If obligations mature at different dates within the one month
permissible, in determining which obligation to purchase the Trust's buyers
will increase the premium or discount of the bond by 25 cents (1/4 point)
for every month away from the precise one year maturity date of the
original obligation being extended. There will be no attempt to delay the
purchase of the Extension Securities to take advantage of market movements.
During the Extension Period, the pro rata share of cash in the Principal
Account which has not been reinvested or committed for reinvestment will
also be computed as of the 10th day of the month and distributions to the
Unitholders as of the related Record Date will be made on the 20th day of
the same month. After the Extension Period, the pro rata share of cash in
the Principal Account will also be computed as described above. Proceeds
from the disposition of any of the Securities or amounts representing
principal on the Securities received after such Record Date and prior to
the following Distribution Date will be held in the Principal Account and
not distributed until the next Distribution Date. The Trustee is not
required to pay interest on funds held in the Principal or Interest Account
(but may itself earn interest thereon and therefore benefits from the use
of such funds) nor to make a distribution from the Principal Account unless
the amount available for distribution shall equal at least $1.00 per 100
Units. See "Trust Information-Unitholders-Distributions to Unitholders."
TAX STATUS
Rolling Government Series 1, Short Treasury Portfolio may be an appropriate
investment vehicle for investors who desire to participate in a portfolio
of taxable, fixed income securities offering the safety of capital provided
by an investment backed by the full faith and credit of the United States.
In addition, many investors may benefit from the exemption from state and
local personal income taxes that will pass through the Trust to Unitholders
in virtually all states. Rolling Government Series 1, Short Treasury
Portfolio has been created as a regulated investment company for federal
tax reasons. For additional information concerning the Trust's status as a
regulated investment company see "Trust Information-Tax Status-Regulated
Investment Company."
RISK FACTORS
The Securities are direct obligations of the United States and are backed
by its full faith and credit although the Units of the Trusts are not so
backed. The Securities are not rated but in the opinion of the Sponsor have
credit characteristics comparable to those of securities rated "AAA" by
nationally recognized rating agencies.
An investment in Units of a Trust should be made with an understanding of
the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the Securities and hence the Units
will decline with increases in interest rates. The high inflation of prior
years, together with the monetary policies and fiscal measures adopted to
attempt to deal with it, have resulted in wide fluctuations in interest
rates and, thus, in the value of fixed rate debt obligations generally. The
Sponsor cannot predict whether such fluctuations will continue in the
future. For a discussion of other considerations associated with an
investment in Units, see "Trust Information-General Information" and "Trust
Information-Risk Factors."
The reinvestment of the proceeds of maturing Securities into Extension
Securities may result in Extension Securities being acquired at a market
discount or a market premium. See "Trust Information-Risk Factors-General"
for a discussion of market discounts and premiums.
ROLLING GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
COST OF
FACE SECURITIES
AMOUNT COUPON MATURITIES TO TRUST(1)
(1) Some Securities may be represented by contracts to purchase such
Securities. During the initial offering period, evaluations of Securities
are made on the basis of current offering side evaluations of the
Securities. The aggregate offering price is greater than the aggregate bid
price of the Securities, which is the basis on which Redemption Prices will
be determined for purposes of redemption of Units after the initial
offering period. Other information regarding the Securities in the Trust,
at the opening of business on the Initial Date of Deposit, is as follows:
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
SECURITIES (LOSS) TO INCOME VALUE OF
TRUST TO SPONSOR SPONSOR TO TRUST SECURITIES
Rolling Government Series 1 $ $ $ $
(2) This Security has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Securities
which pay no interest are normally described as "zero coupon" bonds. Over
the life of Securities purchased at a deep discount the value of such
Securities will increase such that upon maturity the holders of such
securities will receive 100% of the principal amount thereof.
ROLLING GOVERNMENT SERIES 2, GNMA PORTFOLIO
THE TRUST PORTFOLIO
Rolling Government Series 1, GNMA Portfolio was formed for the purpose of
obtaining safety of capital and current monthly distributions of interest
through investment in a portfolio primarily consisting of taxable
mortgage-backed securities of the fully modified pass-through type, the
payment of principal and interest on which is fully guaranteed by GNMA. In
an effort to minimize the effect of principal payments and prepayments
during the period when such reinvestment is practical in the opinion of the
Sponsor (the "Reinvestment Period"), the Sponsor will direct the Trustee to
reinvest all distributions of principal into additional GNMA securities
which are similar as to maturity and interest rates as the GNMA securities
upon which the principal was received. The Sponsor currently expects the
Reinvestment Period to last two years from the Initial Date of Deposit.
Subsequent to the Reinvestment Period, amounts of principal will be
distributed as in accordance with interest distributions.
In selecting Ginnie Maes for deposit in the Trust, the following factors,
among others, were considered by the Sponsor: (i) the types of such
securities available; (ii) the prices and yields of such securities
relative to other comparable securities, including the extent to which such
securities are trading at a premium or at a discount from par; and (iii)
the maturities of such securities. See "Portfolio" for information with
respect to the Securities initially selected for deposit in the Trust. The
Ginnie Maes included in the Trust are backed by the indebtedness secured by
the mortgages contained in the underlying mortgage pools.
REINVESTMENT
During the Reinvestment Period the Sponsor will direct the Trustee to
reinvest all payments and prepayments of principal from the underlying
Ginnie Maes into additional Ginnie Mae securities which have similar
maturities and interest rates as the Securities upon which the principal
was received. Reinvestment of principal into additional Ginnie Maes during
periods when interest rates are at a level different from those prevailing
at the Initial Date of Deposit will have the effect of increasing or
decreasing monthly distributions of interest income from the Trust.
Reinvestment of principal into the Ginnie Maes eligible for inclusion in
the Trust will also have the effect of increasing the par value of the
Units for reinvestment during periods of increasing interest rates from
those prevailing at the Initial Date of Deposit and during periods of
declining interest rates the par value of the Units will decrease. There
may be times when the Principal Account of the Trust has cash which cannot
be reinvested because additional Ginnie Maes are not available or the
amount of cash in the Principal Account is insufficient to buy additional
Ginnie Maes without the Trust incurring disproportionate expenses. During
these periods, the amounts in the Principal Account will remain uninvested,
thus reducing the return to Unitholders. Amounts, if any, which cannot be
reinvested during the Reinvestment Period in additional Ginnie Maes will be
distributed to Unitholders semiannually unless the amount available for
distribution is less than $1.00 per 100 Units. In such a circumstance,
Unitholders should be aware that at the time of the receipt of such
principal they may not be able to reinvest such principal in other
securities at a yield equal to or in excess of the yield which such
principal would have earned to Unitholders had the principal been
reinvested in additional Ginnie Maes by the Trustee. In addition, principal
will not be reinvested and will be distributed to Unitholders if required
to maintain the status of the Trust as a "regulated investment company."
See "Trust Information-Tax-Status-Regulated Investment Company." The costs
of acquiring the additional Ginnie Maes will be borne by the Trust and
hence, the Unitholders. Although it is currently anticipated that the
Trustee will purchase Ginnie Maes directly from market makers, the Trustee
may retain the Sponsor to purchase the additional Ginnie Maes and pay them
usual and customary brokerage commissions. There will be no attempt to time
or delay the purchase of additional Ginnie Maes for reinvestment to take
advantage of market movements.
TAX STATUS
Rolling Government Series 2, GNMA Portfolio has been created as a regulated
investment company for federal tax reasons. For information concerning the
Trust's status as a regulated investment company. See "Trust
Information-Tax Status-Regulated Investment Company."
RISK FACTORS
The Portfolio of the Trust consists of contracts to purchase Ginnie Maes
fully guaranteed as to payments of principal and interest by GNMA. Each
group of Ginnie Maes described herein as having a specified range of
maturities includes individual mortgage-backed securities which have
varying ranges of maturities within each range set forth in the Portfolio.
Current market conditions accord no difference in price among individual
Ginnie Mae securities within certain ranges of stated maturity dates on the
bas is of the difference in the maturity dates of each Ginnie Mae. A
purchase of Ginnie Maes with the same coupon rate and maturity date within
such range will be considered an acquisition of the same security for both
additional deposits and for the reinvestment of principal. In the future,
however, the difference in maturity ranges could affect market value of the
individual Ginnie Maes. At such time, any additional purchases by the Trust
will take into account the maturities of the individual securities. The
mortgages underlying the Ginnie Maes in the Trust have an original stated
maturity of up to 30 years.
The reinvestment of principal by the Trustee in additional Ginnie Maes may
result in Securities being acquired at a market discount or market premium
(see "Trust Information-Risk Factors-General."). See "Trust
Information-Risk Factors-GNMA Securities" for a general discussion of the
risks associated with an investment in GNMA securities.
During the Reinvestment Period, the Sponsor will direct the Trustee to
reinvest principal payments and prepayments into additional securities.
Precise duplication of the Ginnie Maes to be purchased with reinvested
principal may not be possible because fractions of Ginnie Maes may not be
purchased and substantially similar securities may not be available, but
duplication will be the goal of the Sponsor with respect to the purchase of
additional securities. Principal amounts which cannot be reinvested will be
distributed to Unitholders semiannually unless the amount available for
distribution is less than $1.00 per 100 Units. After the Reinvestment
Period, principal will not be reinvested and will be distributed monthly to
Unitholders. See "Trust Information-Unitholders-Distributions to
Unitholders."
During the Reinvestment Period, the pro rata share of cash in the Principal
Account which has not been reinvested or committed for reinvestment will
also be computed as of the 10th day of each month and distributions to the
Unitholders as of the related Record Date will be made on the 20th day of
the same month. After the Reinvestment Period, the pro rata share of cash
in the Principal Account will also be computed as of the 10th day of each
month and distributions to the Unitholders as of the related Record Date
will be made on the 20th day of such month. Proceeds from the disposition
of any of the Securities or amounts representing principal on the
Securities received after such Record Date and prior to the following
Distribution Date will be held in the Principal Account and not distributed
until the next Distribution Date. The Trustee is not required to pay
interest on funds held in the Principal or Interest Account (but may itself
earn interest thereon and therefore benefits from the use of such funds)
nor to make a distribution from the Principal Account unless the amount
available for distribution shall equal at least $1.00 per 100 Units. See
"Trust Information-Unitholders-Distributions to Unitholders."
ROLLING GOVERNMENT SERIES 2, GNMA PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, MODIFIED PASS-THROUGH
MORTGAGE-BACKED SECURITIES
COST OF COST OF PROFIT
PRINCIPAL COUPON YEARS OF STATED SECURITIES TO SECURITIES OR (LOSS) TO
AMOUNT RATE MATURITY SPONSOR (1) TO TRUST (2) SPONSOR
$ % $ $ $
(1) All Securities on the Initial Date of Deposit are represented by the
Sponsor's contracts to purchase such securities. Such contracts were
acquired by the Sponsor on , 1995. Interest will begin accruing to the
benefit of Unitholders from , 1995, the First Settlement Date of the Trust.
The cost of Securities to Sponsor and Profit or (Loss) to Sponsor reflects
portfolio hedging gains and losses.
(2) The cost of the Securities to the Trust represents the offering side
evaluation of the Securities as determined by . The offering side
evaluation is greater than the current bid side evaluation of the
Securities which is the basis on which Redemption Price per Unit is
determined. The aggregate value based on the bid side evaluation at the
opening of business on the Initial Date of Deposit was $ ,
which is $
($ per 1,000 Units; % of the aggregate principal amount)
lower than the aggregate cost of
the securities to the Trust based on the offering side evaluation.
In addition to the information as to the GNMA fully modified pass-through
mortgage-backed Securities set forth above, the Trustee will furnish
Unitholders a statement listing the name of issuer, pool number, interest
rate, maturity date and principal amount for each such Security in the
Portfolio upon written request.
INVESTMENT GRADE SERIES 1, INTERMEDIATE INSURED UTILITY PORTFOLIO
THE TRUST PORTFOLIO
Investment Grade Series 1, Intermediate Insured Utility Portfolio consists
almost entirely of a fixed portfolio of corporate debt obligations
("Bonds") issued after July 18, 1984 by utility companies. The Insured
Utility Portfolio was created to provide a high level of current income.
The Insured Utility Portfolio may also contain zero coupon U.S. Treasury
Obligations.
The selection of Bonds for the Trust was based largely upon the experience
and judgment of the Sponsor. In making such selections the Sponsor
considered the following factors: (i) the price of the Bonds relative to
other issues of similar quality and maturity; (ii) whether the Bonds were
issued by a utility company; (iii) the diversification of the Bonds as to
location of issuer; (iv) the income to the Unitholders of the Trusts; (v)
whether the Bonds were insured or the availability and cost of insurance
for t he scheduled payment of principal and interest on the Bonds; (vi)
whether the Bonds were issued after July 18, 1984; and (vii) the stated
maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds in the Trust's
portfolio other than any U.S. Treasury Obligations are rated "Aaa" by
Moody's and "AAA" by Standard & Poor's. Standard & Poor's states that
"bonds rated AAA have the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and principal is extremely
strong." Moody's states that bonds "which are rated Aaa are judged to be
the best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position
of such issues. Their safety is so absolute that, with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations." See
"Trust Information-Insurance on the Bonds." Subsequent to the Initial Date
of Deposit, a Bond may cease to be so rated. If this should occur, a Trust
would not be required to eliminate the Bond from the Trust, but such event
may be considered in the Sponsor's determination to direct the Trustee to
dispose of such investment. See "Trust Information-Investment Supervision."
TAX STATUS
Investment Grade Series 1, Intermediate Insured Utility Portfolio has been
created as a grantor trust for federal tax reasons. For information
concerning the Trust's status as a grantor trust see "Trust Information-Tax
Status-Grantor Trust."
RISK FACTORS
PUBLIC UTILITY ISSUES
The majority of the Bonds in the Trust are obligations of public utility
issuers. In general, public utilities are regulated monopolies engaged in
the business of supplying light, water, power, gas, heat, transportation or
means of communication. Historically, the utilities industry has provided
investors in securities issued by companies in this industry with high
levels of reliability, stability and relative total return on their
investments. While each of the Bonds in the Trust are insured and "AAA"
rated, an investment in the Trust should nevertheless be made with an
understanding of the characteristics of such issuers and the risks which
such an investment may entail. General problems of such issuers would
include the difficulty in financing large construction programs in an
inflationary period, the limitations on operations and increased costs and
delays attributable to environmental considerations, the difficulty of the
capital 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 the portfolios to make payments of principal and/or interest
on such Bonds. For additional information concerning the risks associated
with an investment in bonds of utility issuers see "Trust Information-Risk
Factors-Public Utility Issues" and "Trust Information-Risk
Factors-Corporate Bonds."
ZERO COUPON U.S. TREASURY OBLIGATIONS
Certain of the Bonds in the Trust may be "zero coupon" U.S. Treasury bonds.
See footnote (6) to the "Portfolio." Zero coupon bonds are purchased at a
deep discount because the buyer receives only the right to receive a final
payment at the maturity of the bond and does not receive any periodic
interest payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount earned during the life of such income on such
obligation at a rate as high as the implicit yield on the discount
obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds
are subject to substantially greater price fluctuations during periods of
changing market interest rates than are securities of comparable quality
which pay interest. See "Trust Information-Risk Factors-U.S. Treasury
Obligations" and "Trust Information-Risk Factors-General" for additional
information concerning the risks of investing in zero coupon U.S. Treasury
bonds.
INVESTMENT GRADE SERIES 1, INTERMEDIATE INSURED UTILITY PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C>
RATING(2)
STANDARD COST OF
AGGREGATE & REDEMPTION BONDS
PRINCIPAL NAME OF ISSUER(1)(5) COUPON MATURITY MOODY'S POOR'S PROVISIONS (3) TO TRUST(4)
</TABLE>
All Bonds in the Trust except for the U.S. Treasury Obligations are insured
only by MBIA. The insurance was obtained either directly by the issuer of
the Bonds or by the Sponsor.
* These Bonds are "when, as and if issued" or "delayed delivery" and have
expected settlement dates after the "First Settlement Date."
(1) Contracts to acquire Bonds were entered into by the Sponsor on , 1995.
All Bonds are represented by regular way contracts, unless otherwise
indicated, for the performance of which an irrevocable letter of credit has
been deposited with the Trustee.
(2) All the Bonds in the Trust except for any U.S. Treasury Obligations are
insured by MBIA and therefore are rated AAA by Standard & Poor's and Aaa by
Moody's. See "Trust Information-Insurance on the Bonds." Also, the Units of
the Trust are rated AAA by Standard & Poor's (see "Trust
Information-Insurance on the Bonds"). A Standard & Poor's rating on the
units of an insured unit investment trust (hereinafter referred to
collectively as "units" and "trusts") is a current assessment of
creditworthiness the respect to the investment held by such trust. This
assessment takes into consideration the financial capacity of the issuers
and of any guarantors, insurers, lessees or mortgagors with respect to such
investments. The assessment, however, does not take into account the extent
to which trust expenses or portfolio asset sales for less than the trust
purchase price will reduce payment to the unitholder of the interest and
principal required to be paid on the portfolio assets. In addition, the
rating is not a recommendation to purchase, sell or hold units, inasmuch as
the rating does not comment as to market price of the units or suitability
for a particular investor. Units rated "AAA" are composed exclusively of
assets that are rated "AAA" by Standard & Poor's and/or certain short-term
investments. Standard & Poor's defines its AAA rating for such assets as
the highest rating assigned by Standard & Poor's to a debt obligation.
Capacity to pay interest and repay principal is very strong. However, unit
ratings may be subject to revision or withdrawal at any time by Standard &
Poor's and each rating should be evaluated independently of any other
rating.
(3) There is shown under this heading the year in which each issue of Bonds
is initially or currently redeemable and the redemption price for that
year; unless otherwise indicated, each issue continues to be redeemable at
declining prices thereafter, but not below par value. The prices at which
the Bonds may be redeemed or called prior to maturity may or may not
include a premium and, in certain cases, may be less than the cost of the
Bonds to the Trust. In addition, certain Bonds in the portfolio may be
redeemed in whole or in part other than by operation of the stated
redemption provisions under certain unusual or extraordinary circumstances
specified in the instruments setting forth the terms and provisions of such
Bonds.
(4) During the initial offering period, evaluations of Bonds are made on
the basis of current offering side evaluations of the Bonds. The aggregate
offering price is greater than the aggregate bid price of the Bonds, which
is the basis on which the Redemption Price will be determined for purposes
of redemption of Units after the initial offering period.
(5) Other information regarding the Bonds in the Trust, at the opening of
business on the Initial Date of Deposit, is as follows:
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
BONDS TO (LOSS) TO INCOME VALUE OF
SPONSOR SPONSOR TO TRUST BONDS
Investment Grade Series 1 $ $ $ $
The Cost of Bonds to Sponsor and Profit or (Loss) to Sponsor reflect
portfolio hedging transaction costs, hedging gains or losses, certain other
carrying costs and the cost of insurance obtained by the Sponsor for
individual Bonds, if any, prior to the date such Bonds are deposited in the
Trust.
"#" indicates that such Bond was issued at an original issue discount. The
tax effect of Bonds issued at an original issue discount is described in
"Trust Information-Tax Status-Grantor Trust."
(6) This Bond was issued at an original issue discount. The tax effect of
Bonds issued at an original issue discount is described in "Trust
Information-Tax Status-Grantor Trust." This Bond has been purchased at a
deep discount from the par value because there is little or no stated
interest income thereon. Bonds which pay no interest are normally described
as "zero coupon" bonds. Over the life of bonds purchased at a deep discount
the value of such bonds will increase such that upon maturity the holders
of such bonds will receive 100% of the principal amount thereof.
Approximately % of the aggregate principal amount of the Bonds in the
Trust were issued at an original issue discount.
INVESTMENT GRADE SERIES 2, CORPORATE PORTFOLIO
THE TRUST PORTFOLIO
Investment Grade Series 2, Corporate Portfolio was formed for the purpose
of providing a high level of current income through investment in a fixed
portfolio consisting primarily of investment grade, corporate debt
obligations issued after July 18, 1984. For foreign investors who are not
United States citizens or residents, interest income from the Corporate
Portfolio may not be subject to federal withholding taxes if certain
conditions are met. See "Trust Information-Tax Status-Grantor Trust."
The Trust may be an appropriate investment vehicle for investors who desire
to participate in a portfolio of intermediate term taxable fixed income
securities issued by corporate obligors with greater diversification than
investors might be able to acquire individually. Diversification of the
Trust assets will not eliminate the risk of loss always inherent in the
ownership of securities. In addition, Bonds of the type deposited in the
Trust often are not available in small amounts.
The selection of Bonds for the Trust was based largely upon the experience
and judgment of the Sponsor. In making such selections the Sponsor
considered the following factors: (a) the price of the Bonds relative to
other issues of similar quality and maturity; (b) the present rating and
credit quality of the issuers of the Bonds and the potential improvement in
the credit quality of such issuers; (c) the diversification of the Bonds as
to location of issuer; (d) the income to the Unitholders of the Trust; (e)
whether the Bonds were issued after July 18, 1984; and (f) the stated
maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds in the Trust are rated
"A" or better by Moody's, Standard & Poor's or Duff & Phelps. See "Trust
Information-Description of Ratings" and "Portfolio" below. Subsequent to
the Initial Date of Deposit, a Bond may cease to be so rated. If this
should occur, the Trust would not be required to eliminate the Bond from
the Trust, but such event may be considered in the Sponsor's determination
to direct the Trustee to dispose of such investment. See "Trust
Information-Investment Supervision."
TAX STATUS
Investment Grade Series 2, Corporate Portfolio has been created as a
grantor trust for federal tax reasons. For information concerning the
Trust's status as a grantor trust see "Trust Information-Tax Status-Grantor
Trust."
RISK FACTORS
An investment in Units of the Trust should be made with an understanding of
the risks that an investment in fixed rate, corporate debt obligations may
entail, including credit risks and the risk that the value of the Units
will decline, and may decline precipitously, with increases in interest
rates. In recent years there have been wide fluctuations in interest rates
and thus in the value of fixed-rate, debt obligations generally. The
Sponsor cannot predict future economic policies or their consequences or ,
therefore, the course or extent of any similar market fluctuations in the
future. The portfolio consists of Bonds that, in many cases, do not have
the benefit of covenants that would prevent the issuer from engaging in
capital restructurings or borrowing transactions in connection with
corporate acquisitions, leveraged buy outs or restructurings that could
have the effect of reducing the ability of the issuer to meet its
obligations and might result in the ratings of the Bonds and the value of
the underlying portfolio being reduced. See "Trust Information-Risk
Factors-Corporate Securities" for additional risk factors concerning
corporate debt obligations.
INVESTMENT GRADE SERIES 2, CORPORATE PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
<TABLE>
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<S> <C> <C> <C> <C> <C> <C> <C>
RATING(2)
STANDARD COST OF
AGGREGATE & REDEMPTION BONDS
PRINCIPAL NAME OF ISSUER(1)(5) COUPON MATURITY MOODY'S POOR'S PROVISIONS (3) TO TRUST(4)
$ $
$ $
</TABLE>
* These Bonds are "when, as and if issued" or "delayed delivery" and have
expected settlement dates after the "First Settlement Date."
(1) Contracts to acquire Bonds were entered into by the Sponsor on
___________________, 1995. All Bonds are represented by regular way
contracts, unless otherwise indicated, for the performance of which an
irrevocable letter of credit has been deposited with the Trustee.
(2) A brief description of the applicable Standard & Poor's, Moody's and
Duff & Phelps, rating symbols and their meanings is set forth under "Trust
Information-Description of Ratings." "N.R." indicates that the issue has
not been rated by that rating agency.
(3) There is shown under this heading the year in which each issue of Bonds
is initially or currently redeemable and the redemption price for that
year; unless otherwise indicated, each issue continues to be redeemable at
declining prices thereafter, but not below par value. The prices at which
the Bonds may be redeemed or called prior to maturity may or may not
include a premium and, in certain cases, may be less than the cost of the
Bonds to the Trust. In addition, certain Bonds in the portfolio may be
redeemed in whole or in part other than by operation of the stated
redemption provisions under certain unusual or extraordinary circumstances
specified in the instruments setting forth the terms and provisions of such
Bonds. "S.F." indicates that a sinking fund is established with respect to
that issue of Bonds.
(4) During the initial offering period, evaluations of Bonds are made on
the basis of current offering side evaluations of the Bonds. The aggregate
offering price is greater than the aggregate bid price of the Bonds, which
is the basis on which the Redemption Price will be determined for purposes
of redemption of Units after the initial offering period.
(5) Other information regarding the Bonds in the Trust, at the opening of
business on the Initial Date of Deposit, is as follows:
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
SECURITIES (LOSS) TO INCOME VALUE OF
TO SPONSOR SPONSOR TO TRUST BONDS
Investment Grade Series 2 $ $ $ $
The Cost of Bonds to Sponsor and Profit or (Loss) to Sponsor reflect
portfolio hedging transaction costs, hedging gains or losses, and certain
other carrying costs.
(6) This Bond was issued at an original issue discount. The tax effect of
Bonds issued at an original issue discount is described in "Trust
Information-Tax Status-Grantor Trust." This Bond has been purchased at a
deep discount from the par value because there is little or no stated
interest income thereon. Bonds which pay no interest are normally described
as "zero coupon" bonds. Over the life of bonds purchased at a deep discount
the value of such bonds will increase such that upon maturity the holders
of such bonds will receive 100% of the principal amount thereof.
Approximately % of the aggregate principal amount of the Bonds in the
Trust were issued at an original issue discount.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
UNITHOLDERS
FIDELITY DEFINED TRUSTS SERIES 1
We have audited the accompanying statements of condition and the related
portfolios of Fidelity Defined Trusts Series 1 (Laddered Government Series
1, Short Treasury Portfolio, Laddered Government Series 2,
Short/Intermediate Treasury Portfolio, Rolling Government Series 1, GNMA
Portfolio, Rolling Government Series 2, Short Treasury Portfolio Investment
Grade Series 1, Intermediate Insured Utility Portfolio and Investment Grade
Series 2, Corporate Portfolio) as of _______________, 1995. The statements
of condition and portfolios are the responsibility of the Sponsor. Our
responsibility is to express an opinion on such financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of Securities owned at
___________________, 1995 and a letter of credit deposited to purchase
Securities 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 our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fidelity Defined Trusts
Series 1 (Laddered Government Series 1, Short Treasury Portfolio, Laddered
Government Series 2, Short/Intermediate Treasury Portfolio, Rolling
Government Series 1, GNMA Portfolio, Rolling Government Series 2, Short
Treasury Portfolio Investment Grade Series 1, Intermediate Insured Utility
Portfolio and Investment Grade Series 2, Corporate Portfolio) as of
_______________________, 1995, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
__________________, 1995
FIDELITY DEFINED TRUSTS SERIES 1
STATEMENTS OF CONDITION
AT THE OPENING OF BUSINESS ON , 1995, THE INITIAL DATE OF DEPOSIT
<TABLE>
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<C> <C> <C> <C> <C> <C> <C>
LADDERED LADDERED ROLLING ROLLING INVESTMENT INVESTMENT
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GRADE GRADE
SERIES 1 SERIES 2 SERIES 1 SERIES 2 SERIES 1 SERIES 2
INVESTMENT IN SECURITIES
Securities deposited in the Trusts (1) (2) $ $ $ $ $ $
Contracts to purchase Securities (1) (2)
Organizational Costs (3)
Accrued interest to First Settlement Date
on Securities (1) (4) Total $ $ $ $ $ $
Number of Units
LIABILITIES AND INTEREST OF
UNITHOLDERS
Liabilities-
Accrued Organizational Costs (3)
Accrued interest payable to Sponsor(1)(4) $ $ $ $ $ $
Interest of Unitholders-
Cost to investors (5)
Less: Gross underwriting
commission (5)
Net interest to Unitholders (1) (4) (5)
Total $ $ $ $ $ $
</TABLE>
NOTES:
(1) The aggregate value of the Securities listed in each "Portfolio" and
their cost to the Trust are the same. The value of the Securities is
determined by on the bases set forth under "Trust
Information-Public Offering of Units-Public Offering Price". The contracts
to purchase Securities are collateralized by an irrevocable letter of
credit of $ which has been deposited with the Trustee. Of this
amount, $ relates to the offering price of Securities to be purchased
and $ relates to accrued interest on such Securities to the expected
dates of delivery.
(2) Insurance coverage providing for the timely payment of principal and
interest on the Securities in an Insured Trust Fund has been obtained
directly by the issuer of such Securities or by the Sponsor from MBIA
Insurance Corporation or other insurers.
(3) Each Trust will bear all or a portion of its organizational costs which
will be deferred and amortized over five years or over the life of the
Trust if the term of such Trust is less than five years. Organizational
costs have been estimated based on a projected size of each Trust of $
. To the extent a Trust is larger or smaller, the estimate will vary.
(4) The Trustee will advance to each Trust the amount of net interest
accrued to the First Settlement Date for distribution to the Sponsor as the
Unitholder of Record.
(5) The aggregate public offering price includes a sales charge for the
Trust as set forth under "Essential Information", assuming all single
transactions involve less than 10,000 Units. For single transactions
involving 10,000 or more Units the sales charge is reduced (see "Trust
Information-Public Offering of Units-Public Offering Price") resulting in
an equal reduction in both the Cost to investors and the Gross underwriting
commission while the Net interest to Unitholders remains unchanged.
TRUST INFORMATION
GENERAL INFORMATION
Because certain of the Securities in certain of the Trusts may from time to
time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will
be distributed to Unitholders and will not be reinvested, no assurance can
be given that a Trust will retain for any length of time its present size
and composition. Neither the Sponsor nor the Trustee shall be liable in any
way for any default, failure or defect in any Security. In the event of a
failure to deliver any Security that has been purchased for a Trust under a
contract, including those securities purchased on a "when, as and if
issued" basis ("Failed Securities"), the Sponsor is authorized under the
Trust Agreement to direct the Trustee to acquire other securities
("Replacement Securities") to make up the original corpus of such Trust.
Securities in certain of the Trusts may have been purchased on a "when, as
and if issued" or delayed delivery basis with delivery expected to take
place after the First Settlement Date. See "Notes to Portfolios" for each
Trust. Accordingly, the delivery of such Securities may be delayed or may
not occur. Interest on these Securities begins accruing to the benefit of
Unitholders on their respective dates of delivery. Unitholders of all
Trusts will be "at risk" with respect to any "when, as and if issued" or
"delayed delivery" Securities included in their respective Trust (i.e., may
derive either gain or loss from fluctuations in the evaluation of such
Securities) from the date they commit for Units.
The Replacement Securities must be purchased within 20 days after delivery
of the notice that a contract to deliver a Security will not be honored and
the purchase price may not exceed the amount of funds reserved for the
purchase of the Failed Securities. The Replacement Securities (i) must be
payable in United States currency, (ii) must be purchased at a price that
results in a yield to maturity and a current return at least equal to that
of the Failed Securities as of the Initial Date of Deposit, (iii) shall not
be "when, as and if issued" or restricted securities, (iv) must satisfy any
rating criteria for Securities originally included in such Trust, (v) not
cause the Units of such Trust to cease to be rated AAA by the appropriate
rating agency if the Units were so rated on the Initial Date of Deposit and
(vi) in the case of Insured Trust Funds must be insured prior to
acquisition by a Trust. In connection with an Insured Utility Portfolio
only, Replacement Securities also must (i) be intermediate or long-term, as
applicable, corporate bonds, debentures, notes or other straight debt
obligations (whether secured or unsecured and whether senior or
subordinated) without equity or other conversion features, with fixed
maturity dates substantially the same as those of the Failed Securities
having no warrants or subscription privileges attached and (ii) be issued
after July 18, 1984 if interest thereon is United States source income.
Whenever a Replacement Security is acquired for a Trust, the Trustee shall,
within five days thereafter, notify all Unitholders of the Trust of the
acquisition of the Replacement Security and shall, on the next monthly
distribution date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the Trust of the
Failed Security exceeded the cost of the Replacement Security. Once all of
the Securities in a Trust are acquired, the Trustee will have no power to
vary the investments of the Trust, i.e., the Trustee will have no
managerial power to take advantage of market variations to improve a
Unitholder's investment.
If the right of limited substitution described in the preceding paragraphs
is not utilized to acquire Replacement Securities in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such
Failed Securities to all Unitholders of the Trust and the Trustee will
distribute the principal and accrued interest attributable to such Failed
Securities not more than 30 days after the date on which the Trustee would
have been required to purchase a Replacement Security. In addition,
Unitholders should be aware that, at the time of receipt of such principal,
they may not be able to reinvest such proceeds in other securities at a
yield equal to or in excess of the yield which such proceeds would have
earned for Unitholders of such Trusts.
Whether or not a Replacement Security is acquired, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) will be paid
to Unitholders of the Trust to the date the Sponsor removes the Failed
Securities from the Trust if the Sponsor determines not to purchase a
Replacement Security or to the date of substitution if a Replacement
Security is purchased. All such interest paid to Unitholders which accrued
after the date of settlement for a purchase of Units will be paid by the
Sponsor. In the event a Replacement Security could not be acquired by a
Trust, the net annual interest income per Unit for such Trust would be
reduced and the Estimated Current Return and Estimated Long-Term Return
might be lowered.
Subsequent to the Initial Date of Deposit, a Security may cease to be rated
or its rating may be reduced below any minimum required as of the initial
Date of Deposit. Neither event requires the elimination of such investment
from a Trust, but may be considered in the Sponsor's determination to
direct the Trustee to dispose of such investment. See "Trust
Information-Investment Supervision."
The Sponsor may not alter the portfolio of a Trust except upon the
occurence of certain extraordinary circumstances or, in the case of a
Rolling Government Series, in connection with a reinvestment of principal.
See "Trust Information-Investment Supervision." Certain of the Securities
may be subject to optional call or mandatory redemption pursuant to sinking
fund provisions, in each case prior to their stated maturity. A bond
subject to optional call is one which is subject to redemption or refunding
prior to maturity at the option of the issuer, often at a premium over par.
A refunding is a method by which a bond issue is redeemed, at or before
maturity, by the proceeds of a new bond issue. A bond subject to sinking
fund redemption is one which is subject to partial call from time to time
at par with proceeds from a fund accumulated for the scheduled retirement
of a portion of an issue to maturity. Special or extraordinary redemption
provisions may provide for redemption at par of all or a portion of an
issue upon the occurrence of certain circumstances, which may be prior to
the optional call dates shown under "Portfolio" for each Trust. Redemption
pursuant to optional call provisions is more likely to occur, and
redemption pursuant to special or extraordinary redemption provisions may
occur, when the Securities have an offering side evaluation which
represents a premium over par, that is, when they are able to be refinanced
at a lower cost. The proceeds from any such call or redemption pursuant to
sinking fund provisions, as well as proceeds from the sale of Securities
and from Securities which mature in accordance with their terms from a
Trust, unless utilized to pay for Units tendered for redemption, will be
distributed to Unitholders of such Trust and will not be used to purchase
additional Securities for such Trust. Accordingly, any such call,
redemption, sale or maturity will reduce the size and diversity of a Trust
and the net annual interest income of such Trust and may reduce the
Estimated Current Return and the Estimated Long-Term Return. See "Trust
Information-Interest, Estimated Long-Term Return and Estimated Current
Return." The call, redemption, sale or maturity of Securities also may have
tax consequences to a Unitholder. See "Trust Information-Tax Status."
Information with respect to the call provisions and maturity dates of the
Securities is contained under "Portfolio" for each Trust.
Each Unit of a Trust represents an undivided fractional interest in the
Securities deposited therein, in the ratio shown under "Essential
Information." Units may be purchased and certificates, if requested, will
be issued in denominations of one Unit or any multiple or fraction thereof,
subject to each Trust's minimum investment requirement of one Unit.
Fractions of Units will be computed to three decimal points. To the extent
that Units of a Trust are redeemed, the principal amount of Securities in
such Trust will be reduced and the undivided fractional interest
represented by each outstanding Unit of such Trust will increase. See
"Trust Information-Redemption."
RISK FACTORS
U.S. TREASURY OBLIGATIONS. U.S. Treasury Obligations are direct obligations
of the United States and are backed by its full faith and credit although
the Units are no so backed. The U.S. Treasury Obligations are not rated but
in the opinion of the Sponsor have credit characteristics comparable to
those of securities rated "AAA" by nationally recognized rating agencies.
An investment in Units of a Trust which contains U.S. Treasury Obligations
should be made with an understanding of the risks which an investment in
fixed rate debt obligations may entail, including the risk that the value
of the Securities and hence the Units will decline with increases in
interest rates. The high inflation of prior years, together with the fiscal
measures adopted to attempt to deal with it, have resulted in wide
fluctuations in interest rates and, thus, in the value of fixed rate debt
obligations generally. The Sponsor cannot predict whether such fluctuations
will continue in the future.
GNMA SECURITIES. An investment in Units of a GNMA Portfolio should be made
with an understanding of the risks which an investment in fixed rate long
term debt obligations may entail, including the risk that the value of the
portfolio and hence of the Units will decline with increases in interest
rates. The value of the underlying Securities will fluctuate inversely with
changes in interest rates. In addition, the potential for appreciation of
the underlying Securities, which might otherwise be expected to occur as a
result of a decline in interest rates, may be limited or negated by
increased principal prepayments in respect of the underlying mortgages. The
high inflation of prior years, together with the fiscal measures adopted to
attempt to deal with it, have resulted in wide fluctuations in interest
rates and, thus, in the value of fixed rate long term obligations
generally. The Sponsor cannot predict whether such fluctuations will
continue in the future.
The Ginnie Maes are backed by the indebtedness secured by underlying
mortgage pools of long-term mortgages on 1- to 4-family dwellings. The pool
of mortgages which is to underlie a particular new issue of Ginnie Maes is
assembled by the proposed issuer of such Ginnie Maes. The issuer is
typically a mortgage banking firm, and in every instance must be a
mortgagee approved by and in good standing with the Federal Housing
Administration ("FHA"). In addition, GNMA imposes its own criteria on the
eligibility of issuers, including a net worth requirement.
During the Reinvestment Period for a GNMA Portfolio, the Sponsor will
direct the Trustee to reinvest principal payments and prepayments into
additional securities. Precise duplication of the Ginnie Maes to be
purchased with reinvested principal may not be possible because fractions
of Ginnie Maes may not be purchased and substantially similar securities
may not be available, but duplication will be the goal of the Sponsor with
respect to the purchase of additional securities. Principal amounts which
cannot be reinvested will be distributed to Unitholders of such Trust
semiannually unless the amount available for distribution is less than
$1.00 per 100 Units. After the Reinvestment Period, principal will not be
reinvested and will be distributed monthly (subject to amount limitations)
to Unitholders.
The mortgages underlying a Ginnie Mae may be prepaid at any time without
penalty. A lower or higher return on Units may occur depending on (i)
whether the price at which the respective Ginnie Maes were acquired by a
Trust is lower or higher than par (which represents the price at which such
Ginnie Maes will be redeemed upon prepayment), (ii) whether principal is
reinvested or distributed to Unitholders and (iii) if reinvestment occurs,
whether the Ginnie Maes purchased by the Trustee with reinvested principal
are purchased at a premium or discount from par. During periods of
declining interest rates, prepayments of Ginnie Maes may occur with
increasing frequency because, among other reasons, mortgagors may be able
to refinance their outstanding mortgages at lower interest rates. In such a
case, (i) the reinvestment of principal may be at prices which result in a
lower return on Units or (ii) principal will be distributed to Unitholders
who cannot reinvest such principal distributions in other securities at an
attractive yield.
The Ginnie Maes in a GNMA Portfolio are guaranteed as to timely payment of
principal and interest by GNMA. Funds received by the issuers on account of
the mortgages backing the Ginnie Maes in a GNMA Portfolio are intended to
be sufficient to make the required payments of principal of and interest on
such Ginnie Maes but, if such funds are insufficient for that purpose, the
guaranty agreements between the issuers and GNMA require the issuers to
make advances sufficient for such payments. If the issuers fail to make
such payments, GNMA will do so. Any statement in this Prospectus that a
particular Security is backed by the full faith and credit of the United
States is based upon the opinion of an Assistant Attorney General of the
United States and should be so construed.
THE GNMA GUARANTIES REFERRED TO HEREIN RELATE ONLY TO PAYMENT OF PRINCIPAL
OF AND INTEREST ON THE GINNIE MAES IN A PORTFOLIO AND NOT THE UNITS OFFERED
HEREBY.
All of the mortgages in the pools relating to the Ginnie Maes in each GNMA
Portfolio are subject to prepayment without any significant premium or
penalty at the option of the mortgagors. It has been the experience of the
mortgage industry that the average life of mortgages comparable to those
contained in a GNMA Portfolios, owing to prepayments, refinancings and
payments from foreclosures is considerably less than the stated maturity
for each series set forth in "Essential Information."
A number of factors, including homeowners' mobility, change in family size
and mortgage market interest rates will affect the average life of the
Ginnie Maes in a Trust. For example, Ginnie Maes issued during a period of
high interest rates will be backed by a pool of mortgage loans bearing
similarly high rates. In general, during a period of declining interest
rates, new mortgage loans with interest rates lower than those charged
during periods of high rates will become available. To the extent a
homeowner has an outstanding mortgage with a high rate, he may refinance
his mortgage at a lower interest rate or he may rapidly repay his old
mortgage. Should this happen, a Ginnie Mae issued with a high interest rate
may experience a rapid prepayment of principal as the underlying mortgage
loans prepay in whole or in part. Accordingly, there can be no assurance
that the prepayment levels which will be actually realized will conform to
the experience of the FHA, other mortgage lenders or other Ginnie Mae
investors. It is not possible to meaningfully predict prepayment levels
regarding the Ginnie Maes in a Trust. Therefore, the termination of a Trust
might be accelerated as a result of prepayments made as described herein.
PUBLIC UTILITY ISSUES. Certain of the Bonds in an Insured Utility Portfolio
are obligations of public utility issuers. In general, public utilities are
regulated monopolies engaged in the business of supplying light, water,
power, heat, transportation or means of communication. Historically, the
utilities industry has provided investors in securities issued by companies
in this industry with high levels of reliability, stability and relative
total return on their investments. However, an investment in an Insured
Utility Portfolio should be made with an understanding of the
characteristics of such issuers and the risks which such an investment may
entail. General problems of such issuers would include the difficulty in
financing large construction programs in an inflationary period, the
limitations on operations and increased costs and delays attributable to
environmental considerations, the difficulty of the capital markets in
absorbing utility debt, the difficulty in obtaining fuel at reasonable
prices and the effect of energy conservation. All of such issuers have been
experiencing certain of these problems in varying degrees. In addition,
federal, state and municipal governmental authorities may from time to time
review existing, and impose additional, regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of certain of the Bonds in an
Insured Utility Portfolio to make payments of principal and/or interest on
such Bonds.
Utilities are generally subject to extensive regulation by state utility
commissions which, for example, establish the rates which may be charged
and the appropriate rate of return on an approved asset base, which must be
approved by the state commissions. Certain utilities have had difficulty
from time to time in persuading regulators, who are subject to political
pressures, to grant rate increases necessary to maintain an adequate return
on investment and voters in many states have the ability to impose limits
on rate adjustments (for example, by initiative or referendum). Any
unexpected limitations could negatively affect the profitability of
utilities whose budgets are planned far in advance. Also, changes in
certain accounting standards currently under consideration by the Federal
Accounting Standards Board could cause significant write-downs of assets
and reductions in earnings for many investor-owned utilities. In addition,
gas pipeline and distribution companies have had difficulties in adjusting
to short and surplus energy supplies, enforcing or being required to comply
with long-term contracts and avoiding litigation from their customers, on
the one hand, or suppliers, on the other hand.
Certain of the issuers of the Bonds in a Trust may own or operate nuclear
generating facilities. Governmental authorities may from time to time
review existing, and impose additional, requirements governing the
licensing, construction and operation of nuclear power plants. Nuclear
generating projects in the electric utility industry have experienced
substantial cost increases, construction delays and licensing difficulties.
These have been caused by various factors, including inflation, high
financing costs, required design changes and rework, allegedly faulty
construction, objections by groups and governmental officials, limits on
the ability to finance, reduced forecasts of energy requirements and
economic conditions. This experience indicates that the risk of significant
cost increases, delays and licensing difficulties remains present through
completion and achievement of commercial operation of any nuclear project.
Also, nuclear generating units in service have experienced unplanned
outages or extensions of scheduled outages due to equipment problems or new
regulatory requirements sometimes followed by a significant delay in
obtaining regulatory approval to return to service. A major accident at a
nuclear plant anywhere, such as the accident at a plant in Chernobyl,
U.S.S.R., could cause the imposition of limits or prohibitions on the
operation, construction or licensing of nuclear units in the United States.
In view of the uncertainties discussed above, there can be no assurance
that any bond issuer's share of the full cost of nuclear units under
construction ultimately will be recovered in rates or of the extent to
which a bond issuer could earn an adequate return on its investment in such
units. The likelihood of a significantly adverse event occurring in any of
the areas of concern described above varies, as does the potential severity
of any adverse impact. It should be recognized, however, that one or more
of such adverse events could occur and individually or collectively could
have a material adverse impact on the financial condition or the results of
operations or on a bond issuer's ability to make interest and principal
payments on its outstanding debt.
Other general problems of the gas, water, telephone and electric utility
industry (including state and local joint action power agencies) include
difficulty in obtaining timely and adequate rate increases, difficulty in
financing large construction programs to provide new or replacement
facilities during an inflationary period, rising costs of rail
transportation to transport fossil fuels, the uncertainty of transmission
service costs for both interstate and intrastate transactions, changes in
tax laws which adversely affect a utility's ability to operate profitably,
increased competition in service costs, reductions in estimates of future
demand for electricity and gas in certain areas of the country,
restrictions on operations and increased cost and delays attributable to
environmental considerations, uncertain availability and increased cost of
capital, unavailability of fuel for electric generation at reasonable
prices, including the steady rise in fuel costs and the costs associated
with conversion to alternate fuel sources such as coal, availability and
cost of natural gas for resale, technical and cost factors and other
problems associated with construction, licensing, regulation and operation
of nuclear facilities for electric generation, including among other
considerations the problems associated with the use of radioactive
materials and the disposal of radioactive wastes, and the effects of energy
conservation. Each of the problems referred to could adversely affect the
ability of the issuers of any utility Bonds in a Trust to make payments due
on these Bonds.
In addition, the ability of state and local joint action power agencies to
make payments on bonds they have issued is dependent in large part on
payments made to them pursuant to power supply or similar agreements.
Courts in Washington and Idaho have held that certain agreements between
Washington Public Power Supply System ("WPPSS") and the WPPSS participants
are unenforceable because the participants did not have the authority to
enter into the agreements. While these decisions are not specifically
applicable to agreements entered into by public entities in other states,
they may cause a reexamination of the legal structure and economic
viability of certain projects financed by joint action power agencies,
which might exacerbate some of the problems referred to above and possibly
lead to legal proceedings questioning the enforceability of agreements upon
which payment of these bonds may depend.
Business conditions of the telephone industry in general may affect the
performance of a Trust. General problems of telephone companies include
regulation of rates for service by the FCC and various state or other
regulatory agencies. However, over the last several years regulation has
been changing, resulting in increased competition. The new approach is more
market oriented, more flexible and more complicated. For example, Federal
and certain state regulators have instituted "price cap" regulation which
couples protection of rate payers for basic services with flexible pricing
for ancillary services. These new approaches to regulation could lead to
greater risks as well as greater rewards for operating telephone companies
such as those in a Trust. Inflation has substantially increased the
operating expenses and cost of plant required for growth, service,
improvement and replacement of existing plant. Continuing cost increases,
to the extent not offset by improved productivity and revenues from
increased business, would result in a decreasing rate of return and a
continuing need for rate increases. Although allowances are generally made
in ratemaking proceedings for cost increases, delays may be experienced in
obtaining the necessary rate increases and there can be no assurance that
the regulatory agencies will grant rate increases adequate to cover
operating and other expenses and debt service requirement. To meet
increasing competition, telephone companies will have to commit substantial
capital, technological and marketing resources. Telephone usage, and
therefore revenues, could also be adversely affected by any sustained
economic recession. New technology, such as cellular service and fiber
optics, will require additional capital outlays. The uncertain outcomes of
future labor agreements may also have a negative impact on the telephone
companies. Each of these problems could adversely affect the ability of the
telephone company issuers of any Bonds in a portfolio to make payments of
principal and interest on their Bonds.
CORPORATE BONDS. An investment in Units of a Corporate Portfolio or an
Insured Utility Portfolio should be made with an understanding of the risks
that an investment in fixed rate, investment grade corporate debt
obligations may entail, including the risk that the value of the Units will
decline with increases in interest rates. In recent years there have been
wide fluctuations in interest rates and thus in the value of fixed-rate,
debt obligations generally. Generally, bonds with longer maturities will
fluctuate in value more than bonds with shorter maturities. A slowdown in
the economy, or a development adversely affecting an issuer's
creditworthiness, may result in the issuer being unable to maintain
earnings or sell assets at the rate and at the prices, respectively, that
are required to produce sufficient cash flow to meet its interest and
principal requirements. The Sponsor cannot predict future economic policies
or their consequences or, therefore, the course or extent of any similar
market fluctuations in the future.
Should the issuer of any Bond default in the payment of principal or
interest, a Trust may incur additional expenses seeking payment on the
defaulted Bond. Because amounts (if any) recovered by a Trust in payment
under the defaulted Bond may not be reflected in the value of the Units
until actually received by a Trust, and depending upon when a Unitholder
purchases or sells his Units, it is possible that a Unitholder would bear a
portion of the cost of recovery without receiving any portion of the
payment recovered.
GENERAL. Certain of the Securities in certain of the Trusts may have been
acquired at a market discount from par value at maturity. The coupon
interest rates on the discount securities at the time they were purchased
and deposited in the Trusts were lower than the current market interest
rates for newly issued bonds of comparable rating and type. If such
interest rates for newly issued comparable securities increase, the market
discount of previously issued securities will become greater, and if such
interest rates for newly issued comparable securities decline, the market
discount of previously issued securities will be reduced, other things
being equal. Investors should also note that the value of securities
purchased at a market discount will increase in value faster than
securities purchased at a market premium if interest rates decrease.
Conversely, if interest rates increase, the value of securities purchased
at a market discount will decrease faster than securities purchased at a
market premium. In addition, if interest rates rise, the prepayment risk of
higher yielding, premium securities and the prepayment benefit for lower
yielding, discount securities will be reduced. A discount security held to
maturity will have a larger portion of its total return in the form of
taxable income and capital gain and loss in the form of tax-exempt interest
income than a comparable security newly issued at current market rates. See
"Trust Information-Tax Status." Market discount attributable to interest
changes does not indicate a lack of market confidence in the issue. Neither
the Sponsor nor the Trustee shall be liable in any way for any default,
failure or defect in any of the Securities.
Certain of the Securities in the Trusts may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the
premium securities at the time they were purchased and deposited in the
Trusts were higher than the current market interest rates for newly issued
securities of comparable rating and type. If such interest rates for newly
issued and otherwise comparable securities decrease, the market premium of
previously issued securities will be increased, and if such interest rates
for newly issued comparable securities increase, the market premium of
previously issued securities will be reduced, other things being equal. The
current returns of securities trading at a market premium are initially
higher than the current returns of comparable securities of a similar type
issued at currently prevailing interest rates because premium securities
tend to decrease in market value as they approach maturity when the face
amount becomes payable. Because part of the purchase price is thus returned
not at maturity but through current income payments, early redemption of a
premium bond at par or early prepayments of principal will result in a
reduction in yield. Redemption pursuant to call provisions generally will,
and redemption pursuant to sinking fund provisions may, occur at times when
the redeemed Securities have an offering side valuation which represents a
premium over par or for original issue discount Securities a premium over
the accreted value. To the extent that the Securities were deposited in the
Trusts at a price higher than the price at which they are redeemed, this
will represent a loss of capital when compared to the original Public
Offering Price of the Units. Because premium securities generally pay a
higher rate of interest than securities priced at or below par, the effect
of the redemption of premium securities would be to reduce Estimated Net
Annual Unit Income by a greater percentage than the par amount of such
securities bears to the total par amount of Securities in a Trust. Although
the actual impact of any such redemptions that may occur will depend upon
the specific Securities that are redeemed, it can be anticipated that the
Estimated Net Annual Unit Income will be significantly reduced after the
dates on which such Securities are eligible for redemption. A Trust may be
required to sell zero coupon bonds prior to maturity (at their current
market price which is likely to be less than their par value) in the event
that all the Securities in the portfolio other than the zero coupon bonds
are called or redeemed in order to pay expenses of a Trust or in case a
Trust is terminated. See "Portfolio" for each Trust for the earliest
scheduled call date and the initial redemption price for each Security.
Certain of the Securities in certain of the Trusts may be "zero coupon"
bonds, i.e., an original issue discount bond that does not provide for the
payment of current interest. Zero coupon bonds are purchased at a deep
discount because the buyer receives only the right to receive a final
payment at the maturity of the bond and does not receive any periodic
interest payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount earned during the life of such obligation. This
implicit reinvestment of earnings at the same rate eliminates the risk of
being unable to reinvest the income on such obligation at a rate as high as
the implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the future.
For this reason, zero coupon bonds are subject to substantially greater
price fluctuations during periods of changing market interest rates than
are securities of comparable quality which pay interest currently. For the
Federal tax consequences of original issue discount securities such as the
zero coupon bonds, see "Trust Information-Tax Status."
To the best of the Sponsor's knowledge, there is no litigation pending as
of the Initial Date of Deposit in respect of any Security which might
reasonably be expected to have a material adverse effect on the Trusts. At
any time after the Initial Date of Deposit, litigation may be instituted on
a variety of grounds with respect to the Securities. The Sponsor is unable
to predict whether any such litigation may be instituted, or if instituted,
whether such litigation might have a material adverse effect on the Trusts.
RATING OF UNITS
Standard & Poor's, a Division of The McGraw-Hill Companies ("Standard &
Poor's") has rated the Units of any Treasury Portfolio or GNMA Portfolio
"AAA." Because the Securities in an Insured Utility Portfolio are insured
as to the scheduled payment of principal and interest and on the basis of
the financial condition and the method of operation of the insurance
companies referred to in "Insurance on the Bonds" below, Standard & Poor's
has also rated the Units of any Insured Utility Portfolio "AAA." This is
the highest rating assigned by Standard & Poor's. Standard & Poor's has
been compensated by the Sponsor for its services in rating Units of the
Trusts.
A Standard & Poor's rating (as described by Standard & Poor's) on the units
of an investment trust (hereinafter referred to collectively as "units" or
"trust") is a current assessment of creditworthiness with respect to the
investments held by such trust. This assessment takes into consideration
the financial capacity of the issuers and of any guarantors, insurers,
lessees, or mortgagors with respect to such investments. The assessment,
however, does not take into account the extent to which trust expenses or
portfolio asset sales for less than the trust's purchase price will reduce
payment to the Unitholder of the interest and principal required to be paid
on the portfolio assets. In addition, the rating is not a recommendation to
purchase, sell, or hold units, inasmuch as the rating does not comment as
to market price of the units or suitability for a particular investor.
Trusts rated "AAA" are composed exclusively of assets that are rated "AAA"
by Standard & Poor's or have, in the opinion of Standard & Poor's, credit
characteristics comparable to assets rated "AAA," or certain short-term
investments. Standard & Poor's defines its "AAA" rating for such assets as
the highest rating assigned by Standard & Poor's to a debt obligation.
Capacity to pay interest and repay principal is very strong.
Securities in an Insured Utility Portfolio for which insurance has been
obtained by the issuer or the Sponsor (all of which were rated "AAA" by
Standard & Poor's and/or "Aaa" by Moody's Investors Service, Inc.
("Moody's")) may or may not have a higher yield than uninsured Securities
rated "AAA" by Standard & Poor's or "Aaa" by Moody's. In selecting
Securities for an Insured Utility Portfolio, the Sponsor has applied the
criteria hereinbefore described.
INSURANCE ON THE BONDS
All Bonds in an Insured Utility Portfolio except for any U.S. Treasury
obligations are insured as to the scheduled payment of interest and
principal either by the issuer of the Bonds or by the Sponsor under a
financial guaranty insurance policy obtained from MBIA Insurance
Corporation ("MBIA"). The premium for each such insurance policy has been
paid in advance by such issuer or the Sponsor and each such policy is
non-cancellable and will remain in force so long as the Bonds are
outstanding and MBIA remains in business. No premiums for such insurance
are paid by an Insured Utility Portfolio. If MBIA is unable to meet its
obligations under its policy or if the rating assigned to the claims-paying
ability of MBIA deteriorates, no other insurer has any obligation to insure
any issue adversely affected by either of these events.
The aforementioned insurance guarantees the scheduled payment of principal
and interest on all of the Bonds in an Insured Utility Portfolio except for
any U.S. Treasury obligations. It does not guarantee the market value of
the Bonds or the value of the Units of the Trust. This insurance is
effective so long as the Bond is outstanding, whether or not held by a
Trust. Therefore, any such insurance may be considered to represent an
element of market value in regard to the Bonds, but the exact effect, if
any, of this insurance on such market value cannot be predicted.
MBIA, formerly known as Municipal Bond Investors Insurance Corporation, is
the principal operating subsidiary of MBIA, Inc., a New York Stock Exchange
listed company. MBIA, Inc. is not obligated to pay the debts of or claims
against MBIA. MBIA is domiciled in the State of New York and licensed to do
business in 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 one
European branch in the Republic of France.
As of March 31, 1995, MBIA had admitted assets of $3.5 billion (unaudited),
total liabilities of $2.4 billion (unaudited), and total capital and
surplus of $1.1 billion (unaudited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1994, MBIA had admitted assets of $3.4
billion (audited), total liabilities of $2.3 billion (audited), and total
capital and surplus of $1.1 billion (audited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance
regulatory authorities. Copies of MBIA Corporation's financial statements
prepared in accordance with statutory accounting practices are available
from MBIA Corporation. The address of MBIA Corporation is 113 King Street,
Armonk, New York 10504.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors Group, Inc.
On January 5, 1990, the Insurer acquired all of the outstanding stock of
Bond Investors Group, Inc., the parent of BIG, now known as MBIA Insurance
Corp. of Illinois. Through a reinsurance agreement, BIG has ceded all of
its net insured risks, as well as its unearned premium and contingency
reserves, to the Insurer and the Insurer has reinsured BIG's net
outstanding exposure.
Moody's rates all bond issues insured by MBIA "Aaa" and short term loans
"MIG 1," both designated to be of the highest quality. Standard & Poor's
rates all new issues by MBIA "AAA".
Because the Bonds in an Insured Utility Portfolio (other than U.S. Treasury
Obligations) are insured as to the scheduled payment of principal and
interest and on the basis of the financial condition and the method of
operation of MBIA, Moody's has assigned to Units in an Insured Utility
Portfolio its "Aaa" investment rating. This is the highest rating assigned
to securities by such rating agency. These ratings should not be construed
as an approval of the offering of the Units by Standard & Poor's or as a
guarantee of the market value of a Trust or the Units thereof.
Bonds in a Trust for which insurance has been obtained by the issuer
thereof or by the Sponsor from MBIA (all of which were rated "Aaa" by
Moody's) may or may not have a higher yield than uninsured bonds rated
"Aaa" by Moody's. In selecting Bonds for the portfolio of a Trust, the
Sponsor has applied the criteria hereinbefore described.
RETIREMENT PLANS
Units of the Trusts may be suitable for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other qualified retirement plans.
Generally, capital gains and income received under each of the foregoing
plans are deferred from federal taxation. All distributions from such plans
are generally treated as ordinary income but may, in some cases, be
eligible for special income averaging or tax-deferred rollover treatment.
Investors considering participation in any such plan should review specific
tax laws related thereto and should consult their attorneys or tax advisor
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions. The
Trusts will waive the $1,000 minimum investment requirement for IRA
accounts. The minimum investment is $250 for tax-deferred plans such as IRA
accounts. Fees and charges with respect to such plans may vary.
TAX STATUS
GRANTOR TRUST
The following discussion applies only to Laddered Government Series and
Investment Grade Series, each of which are organized as grantor trusts for
federal tax purposes. In the opinion of Chapman and Cutler, special counsel
for the Sponsor, under existing law:
1. Each Trust is not an association taxable as a corporation for Federal
income tax purposes.
2. Each Unitholder will be considered the owner of a pro rata portion of
each of the Trust assets for Federal income tax purposes under Subpart E,
Subchapter J of Chapter 1 of the Internal Revenue Code of 1986 (the
"Code"). Each Unitholder will be considered to have received his pro rata
share of income derived from each Trust asset when such income is received
by a Trust. Each Unitholder will also be required to include in taxable
income for Federal income tax purposes, original issue discount with
respect to his interest in any Securities held by a Trust at the same time
and in the same manner as though the Unitholder were the direct owner of
such interest.
3. Each Unitholder will have a taxable event when a Security is disposed of
(whether by sale, exchange, redemption, or payment at maturity) or when the
Unitholder redeems or sells his Units. The cost of the Units to a
Unitholder on the date such Units are purchased is allocated among the
Securities held in a Trust (in accordance with the proportion of the fair
market values of such Securities) in order to determine his tax basis for
his pro rata portion in each Security. Unitholders must reduce the tax
basis of their Units for their share of accrued interest received, if any,
on Securities delivered after the date the Unitholders pay for their Units
and, consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or loss
upon the sale or redemption of Units is measured by comparing the proceeds
of such sale or redemption with the adjusted basis of the Units. If the
Trustee disposes of Securities, gain or loss is recognized to the
Unitholder. The amount of any such gain or loss is measured by comparing
the Unitholder's pro rata share of the total proceeds from such disposition
with his basis for his fractional interest in the asset disposed of. The
basis of each Unit and of each Security which was issued with original
issue discount must be increased by the amount of accrued original issue
discount and the basis of each Unit and of each Security which was
purchased by a Trust at a premium must be reduced by the annual
amortization of security premium which the Unitholder has properly elected
to amortize under Section 171 of the Code. The tax cost reduction
requirements of the Code relating to amortization of security premium may,
under some circumstances, result in the Unitholder realizing a taxable gain
when his Units are sold or redeemed for an amount equal to or less than his
original cost. In general, original issue discount accrues daily under a
constant interest rate method which takes into account the semi-annual
compounding of accrued interest.
Limitations on Deductibility of Trust Expenses by Unitholders-Each
Unitholder's pro rata share of each expense paid by a Trust is deductible
by the Unitholder to the same extent as though the expense had been paid
directly by him, subject to the following limitation. It should be noted
that as a result of the Tax Reform Act of 1986 (the "Act"), certain
miscellaneous itemized deductions, such as investment expenses, tax return
preparation fees and employee business expenses will be deductible by an
individual only to the extent they exceed 2% of such individual's adjusted
gross income. Temporary regulations have been issued which require
Unitholders to treat certain expenses of a Trust as miscellaneous itemized
deductions subject to this limitation.
Acquisition Premium-If a Unitholder's tax basis of his pro rata portion in
any Securities held by a Trust exceeds the amount payable by the issuer of
the Security with respect to such pro rata interest upon the maturity of
the Security, such excess would be considered "acquisition premium" which
may be amortized by the Unitholder at the Unitholder's election as provided
in Section 171 of the Code. Unitholders should consult their tax advisors
regarding whether such election should be made and the manner of amortizing
acquisition premium.
Original Issue Discount-Certain of the Securities in a Trust may have been
acquired with "original issue discount." In the case of any Securities in a
Trust acquired with "original issue discount" that exceeds a "de minimis"
amount as specified in the Code, such discount is includable in taxable
income of the Unitholders on an accrual basis computed daily, without
regard to when payments of interest on such Securities are received. The
Code provides a complex set of rules regarding the accrual of original
issue discount. These rules provide that original issue discount generally
accrues on the basis of a constant compound interest rate over the term of
the Securities. Unitholders should consult their tax advisor as to the
amount of original issue discount which accrues.
Special original issue discount rules apply if the purchase price of the
Security by a Trust exceeds its original issue price plus the amount of
original issue discount which would have previously accrued based upon its
issue price (its "adjusted issue price"). Similarly these special rules
would apply to a Unitholder if the tax basis of his pro rata portion of a
Security issued with original issue discount exceeds his pro rata portion
of its adjusted issue price. Unitholders should also consult their tax
advisor regarding these special rules.
It is possible that a corporate Bond that has been issued at an original
issue discount may be characterized as a "high-yield discount obligation"
within the meaning of Section 163(e)(5) of the Code. To the extent that
such an obligation is issued at a yield in excess of six percentage points
over the applicable Federal rate, a portion of the original issue discount
on such obligation will be characterized as a distribution on stock (e.g.
dividends) for purposes of the dividends received deduction which is
available to certain corporations with respect to certain dividends
received by such corporation.
Market Discount-If a Unitholder's tax basis in his pro rata portion of
Securities is less than the allocable portion of such Security's stated
redemption price at maturity (or, if issued with original issue discount,
the allocable portion of its "revised issue price"), such difference will
constitute market discount unless the amount of market discount is "de
minimis" as specified in the Code. Market discount accrues daily computed
on a straight line basis, unless the Unitholder elects to calculate accrued
market discount under a constant yield method. Unitholders should consult
their tax advisor as to the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on the Securities, on the sale, maturity or
disposition of such Securities by a Trust, and on the sale by a Unitholder
of Units, unless a Unitholder elects to include the accrued market discount
in taxable income as such discount accrues. If a Unitholder does not elect
to annually include accrued market discount in taxable income as it
accrues, deductions for any interest expense incurred by the Unitholder
which is incurred to purchase or carry his Units will be reduced by such
accrued market discount. In general, the portion of any interest expense
which was not currently deductible would ultimately be deductible when the
accrued market discount is included in income. Unitholders should consult
their tax advisor regarding whether an election should be made to include
market discount in income as it accrues and as to the amount of interest
expense which may not be currently deductible.
Computation of the Unitholder's Tax Basis-The tax basis of a Unitholder
with respect to his interest in a Security is increased by the amount of
original issue discount (and market discount, if the Unitholder elects to
include market discount, if any, on the Securities held by a Trust in
income as it accrues) thereon properly included in the Unitholder's gross
income as determined for Federal income tax purposes and reduced by the
amount of any amortized acquisition premium which the Unitholder has
properly elected to amortize under Section 171 of the Code. A Unitholder's
tax basis in his Units will equal his tax basis in his pro rata portion of
all of the assets of a Trust.
Recognition of Taxable Gain or Loss Upon Disposition of Obligations by a
Trust or Disposition of Unit-A Unitholder will recognize taxable capital
gain (or loss) when all or part of his pro rata interest in a Security is
disposed of in a taxable transaction for an amount greater (or less) than
his tax basis therefor. Any gain recognized on a sale or exchange and not
constituting a realization of accrued "market discount," and any loss will,
under current law, generally be capital gain or loss except in the case of
a dealer or financial institution. As previously discussed, gain realized
on the disposition of the interest of a Unitholder in any Security deemed
to have been acquired with market discount will be treated as ordinary
income to the extent the gain does not exceed the amount of accrued market
discount not previously taken into income. Any capital gain or loss arising
from the disposition of a Security by a Trust or the disposition of Units
by a Unitholder will be short-term capital gain or loss unless the
Unitholder has held his Units for more than one year in which case such
capital gain or loss will be long-term. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated
tax rate of 28 percent. However, it should be noted that legislative
proposals are introduced from time to time that affect tax rates and could
affect relative differences at which ordinary income and capital gains are
taxed. The tax cost reduction requirements of the Code relating to
amortization of bond premium may under some circumstances, result in the
Unitholder realizing taxable gain when his Units are sold or redeemed for
an amount equal to or less than his original cost.
If the Unitholder disposes of a Unit, he is deemed thereby to have disposed
of his entire pro rata interest in all Trust assets including his pro rata
portion of all of the Securities represented by the Unit. This may result
in a portion of the gain, if any, on such sale being taxable as ordinary
income under the market discount rules (assuming no election was made by
the Unitholder to include market discount in income as it accrues) as
previously discussed.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates
on ordinary income while capital gains remain subject to a 28 percent
maximum stated rate for taxpayers other than corporations. Because some or
all capital gains are taxed at a comparatively lower rate under the Tax
Act, the Tax Act includes a provision that recharacterizes capital gains as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after
April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on
their investment in Units.
Foreign Investors-A Unitholder who is a foreign investor (i.e., an investor
other than a U.S. citizen or resident of a U.S. corporation, partnership,
estate or trust) will not be subject to United States federal income taxes,
including withholding taxes, on interest income (including any original
issue discount) on, or any gain from the sale or other disposition of, his
pro rata interest in any Security or the sale of his Units provided that
all of the following conditions are met: (i) the interest income or gain is
not effectively connected with the conduct by the foreign investor of a
trade or business within the United States, (ii) either (a) the interest is
United States source income (which is the case for most securities issued
by United States issuers), the Security is issued after July 18, 1984
(which is the case for each Security held by a Trust), the foreign investor
does not own, directly or indirectly, 10% or more of the total combined
voting power of all classes of voting stock of the issuer of the Security
and the foreign investor is not a controlled foreign corporation related
(within the meaning of Section 864(d)(4) of the Code) to the issuer of the
Security, or (b) the interest income is not from sources within the United
States (iii) with respect to any gain, the foreign investor (if an
individual) is not present in the United States for 183 days or more during
his taxable year and (iv) the foreign investor provides all certification
which may be required of his status (foreign investors may contact the
Sponsor to obtain a Form W-8 which must be filed with the Trustee and
refiled every three calendar years thereafter). Foreign investors should
consult their tax advisers with respect to United States tax consequences
of ownership of Units.
It should be noted that the Tax Act includes a provision which eliminates
the exemption from United States taxation, including withholding taxes, for
certain "contingent interest." The provision applies to interest received
after December 31, 1993. No opinion is expressed herein regarding the
potential application of this provision and whether United States taxation
or withholding taxes could be imposed with respect to income derived from
the Units as a result thereof. Unitholders and prospective investors should
consult with their tax advisers regarding the potential effect of this
provision on their investment in Units.
General-Each Unitholder (other than a foreign investor who has properly
provided the certifications described above) will be requested to provide
the Unitholder's taxpayer identification number to the Trustee and to
certify that the Unitholder has not been notified that payments to the
Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by a Trust to such Unitholder will be subject to
back- up withholding.
The foregoing discussion relates only to United States Federal income taxes
and applies only to Laddered Government Series and Investment Grade Series
which are described in this Prospectus; Unitholders may be subject to state
and local taxation in other jurisdictions (including a foreign investor's
country of residence). Unitholders should consult their tax advisers
regarding potential state, local, or foreign taxation with respect to the
Units.
REGULATED INVESTMENT COMPANY
The following discussion applies only to Rolling Government Series, each of
which are structured to qualify as a regulated investment company for
federal tax purposes. In the opinion of Chapman and Cutler, counsel or the
Sponsor, under existing law:
Each Rolling Government Series Trust is an association taxable as a
corporation under the Internal Revenue Code and intends to qualify for and
elect tax treatment as a "regulated investment company" under the Code. By
qualifying for and electing such treatment, such Trust will not be subject
to Federal income tax on net investment income or net capital gains
distributed to Unitholders of such Trust. The Code imposes a 4% excise tax
on certain undistributed income of a regulated investment company that does
not timely distribute certain percentages of its ordinary taxable income
and capital gains by the end of each calendar year. Each Trust intends to
distribute taxable income and capital gains to avoid the imposition of such
tax. Distributions of the entire net investment income of each Trust is
required by the Indenture.
Distributions from a Trust, to the extent of the earnings and profits of
such Trust, will constitute dividends for Federal income tax purposes which
are taxable as ordinary income to Unitholders. Distributions of a Series'
net investment income and any net short-term capital gain will be taxable
as ordinary income to the Unitholders of such Trust. Distributions from
each Trust will not be eligible for the 70% dividends received deduction
for corporations.
Although distributions generally will be treated as distributed when paid,
distributions declared in October, November or December, payable to
Unitholders of record on a specified date in one of those months and paid
during January of the following year will be treated as having been
distributed by each Trust (and received by the Unitholders) on December 31
of the year such distributions are declared.
Distributions which a Trust designates as capital gain dividends will be
taxable to Unitholders thereof as long-term capital gains, regardless of
the length of time the Units have been held by a Unitholder. Distributions
in partial liquidation, reflecting the proceeds of prepayments,
redemptions, maturities (including monthly mortgage payments of principal
in GNMA Portfolios) or sales of Securities from a Trust (exclusive of net
capital gain) will not be taxable to Unitholders of such Trust to the
extent that they represent a return of capital for tax purposes. The
portion of distributions which represents a return of capital will,
however, reduce a Unitholder's basis in his Units, and to the extent they
exceed the basis of his Units will be taxable as a capital gain. A
Unitholder will realize a taxable gain (or loss) when his Units are sold or
redeemed for an amount different from his original cost after reduction for
previous distributors to the extent that they represented a return of
capital. Such gain or loss will constitute either a long-term or short-term
capital gain or loss depending upon the length of time the Unitholder has
held his Units. Any loss of Units held six months or less will be treated
as long-term capital loss to the extent of any long-term capital gains
dividends received (or deemed to have been received) by the Unitholder with
respect to such Units. For taxpayers other than corporations, net capital
gains are presently subject to a maximum stated marginal rate of 28%.
However, it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences at
which ordinary income and capital gains are taxed. A capital loss is
long-term if the asset is held for more than one year and short-term if
held for one year or less.
Under the Code, certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee business
expenses, will be deductible by individuals only to the extent they exceed
2% of adjusted gross income. Miscellaneous itemized deductions subject to
this limitation under present law do not include expenses incurred by a
Trust as long as the Units of such Trust are held by or for 500 or more
persons at all times during the taxable year. In the event the Units of a
Trust are held by fewer than 500 persons, additional taxable income will be
realized by the individual (and other noncorporate) Unitholders in excess
of the distributions received from such Trust.
The Revenue Reconciliation Act of 1993 (the "Act") raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate. Because some or all capital gains are taxed at a comparatively lower
rate under the Act, the Act includes a provision that recharacterizes
capital gains as ordinary income in the case of certain financial
transactions that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Unitholders and prospective investors
should consult with their tax advisor regarding the potential effect of
this provision on their investment in Units.
If a Security has been purchased by a Trust at a market discount (i.e., for
a purchase price less than its outstanding principal amount) unless the
amount of market discount is "de minimis" as specified in the Code, each
payment of principal on the Security will constitute ordinary income to
such Series of the Trust to the extent of any accrued market discount. In
the case of a Ginnie Mae, the amount of market discount that is deemed to
accrue each month shall generally be the amount of discount that bears the
same ratio to the total amount of remaining market discount that the amount
of interest paid during the accrual period (each month) bears to the total
amount of interest remaining to be paid on the Ginnie Mae as of the
beginning of the accrual period.
The market discount rules do not apply to stripped U.S. Treasury
Obligations because they are stripped debt instruments subject to special
original issue discount rules. Unitholders should consult their tax
advisers as to the amount of original issue discount which accrues.
Additional Units of a Trust may be issued after the Initial Date of Deposit
in respect of additional Securities deposited in such Trust by the Sponsor.
Because of possible market interest rate fluctuations, the purchase price
to a Trust of such additional Securities may differ from the purchase price
of the Securities in such Trust on the Initial Date of Deposit. If interest
rates decline and such additional Securities are purchased at a higher
price than the Securities originally deposited, then the amounts includable
in the taxable income of such Trust in proportion to the asset value of
that Trust will be reduced for all Unitholders thereof, not just the
Unitholders of such additional Units. Conversely, if interest rates rise
and such additional Securities are purchased at a lower price than the
Securities originally deposited, then the amounts includable in the taxable
income of such Trust in proportion to the asset value of that Trust will be
increased for all Unitholders thereof, not just the Unitholders of such
additional Units.
Each Unitholder of each Trust shall receive an annual statement describing
the tax status of the distributions paid by such Trust. Foreign Unitholders
should consult their own tax advisers with respect to the tax consequences
or ownership of Units.
It should be remembered that even if distributions are reinvested; they are
still treated as distributions for income tax purposes.
DISTRIBUTION REINVESTMENT
Each Unitholder of a Trust may elect to have distributions of principal
(including capital gains, if any) or interest or both automatically
invested without charge in shares of any mutual fund which is registered in
such Unitholder's state of residence and is advised by Fidelity Management
& Research Company an affiliate of the Sponsor (the "Fidelity Funds"),
other than those Fidelity Funds sold with a contingent deferred sales
charge.
If individuals indicate they wish to participate in the Reinvestment
Program but do not designate a reinvestment fund, the Trustee will contact
such individuals to determine which reinvestment fund or funds they wish to
elect. Since the portfolio securities and investment objectives of such
Fidelity Funds generally will differ significantly from that of the Trusts,
Unitholders should carefully consider the consequences before selecting
such Fidelity Funds for reinvestment. Detailed information with respect to
the investment objectives and the management of the Fidelity Funds is
contained in their respective prospectuses, which can be obtained from the
Sponsor upon request. An investor should read the prospectus of the
reinvestment fund selected prior to making the election to reinvest.
Unitholders who desire to have such distributions automatically reinvested
should inform their broker at the time of purchase or should file with the
Trustee a written notice of election.
Unitholders who are receiving distributions in cash may elect to
participate in distribution reinvestment by filing with the Trustee an
election to have such distributions reinvested without charge. Such
election must be received by the Trustee at least ten days prior to the
Record Date applicable to any distribution in order to be in effect for
such Record Date. Any such election shall remain in effect until a
subsequent notice is received by the Trustee. See "Trust
Information-Unitholders-Distributions to Unitholders."
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Long-Term Return and the Estimated Current Return, if applicable, for each
Trust were as set forth in the "Essential Information" for each Trust.
Estimated Current Return is calculated by dividing the estimated net annual
interest income per Unit by the Public Offering Price. The estimated net
annual interest income per Unit will vary with changes in fees and expenses
of the Trustee, the Sponsor and the Evaluator and with the principal
prepayment (in the case of a Rolling Government Series, GNMA Portfolio),
reinvestment (in the case of any Rolling Government Series), redemption (in
the case of an Investment Grade Series), maturity, exchange or sale of the
Securities while the Public Offering Price will vary with changes in the
offering price of the underlying Securities and accrued interest;
therefore, there is no assurance that the present Estimated Current Return
will be realized in the future. Estimated Long-Term Return is calculated
using a formula which (i) considers the relative weightings, the market
values, yields (which take into account the amortization of premiums and
the accretion of discounts) and estimated retirements or average life of
all of the Securities in a Trust, including the effect of the reinvestment
of principal for the GNMA Portfolio, and (ii) takes into account the
expenses and sales charge associated with each Trust Unit. Since the market
values and estimated retirements of the Securities and the expenses of a
Trust will change, there is no assurance that the present Estimated
Long-Term Return will be realized in the future. Estimated Current Return
and Estimated Long-Term Return are expected to differ because the
calculation of Estimated Long-Term Return reflects the estimated date and
amount of principal returned while Estimated Current Return calculations
include only net annual interest income and Public Offering Price.
In order to acquire certain of the Securities contracted for by a Trust, it
may be necessary for the Sponsor or Trustee to pay on the dates for
delivery of such Securities amounts covering accrued interest on such
Securities which exceed the amount which will be made available in the
letter of credit furnished by the Sponsor on the Initial Date of Deposit.
The Trustee has agreed to pay any amounts necessary to cover any such
excess and will be reimbursed therefor, without interest, when funds become
available from interest payments on the Securities deposited in that Trust.
Payments received in respect of mortgages underlying Ginnie Maes in any
GNMA Portfolio will consist of a portion representing interest and a
portion representing principal. Although the aggregate monthly payment made
by the obligor on each mortgage remains constant (aside from optional
prepayments of principal), in the early years most of each such payment
will represent interest, while in later years, the proportion representing
interest will decline and the proportion representing principal will
increase . However, by reason of optional prepayments, principal payments
in the earlier years on mortgages underlying Ginnie Maes may be
substantially in excess of those required by the amortization schedules of
such mortgages. Therefore, principal payments in later years may be
substantially less since the aggregate unpaid principal balances of such
underlying mortgages may have been greatly reduced. To the extent that the
underlying mortgages bearing higher interest rates in a GNMA Portfolio are
prepaid faster than the other underlying mortgages, the net annual interest
rate per Unit and the Estimated Current Return on the Units of a GNMA
Portfolio can be expected to decline. Monthly payments to the Unitholders
of a GNMA Portfolio will reflect all of these factors.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. Units of a Trust are offered at the Public Offering
Price thereof. During the initial offering period, the Public Offering
Price per Unit is equal to the aggregate of the offering side evaluations
of the Securities in such Trust, plus or minus a pro rata share of cash, if
any, in the Principal account held or owned by such Trust plus accrued
interest plus the applicable sales charge referred to in the tables below
divided by the number of outstanding Units of such Trust. Such price
determination as of the close of business on the day before the Initial
Date of Deposit was made on the basis of an evaluation of the Securities in
each Trust prepared by Kenny S&P Evaluation Services, a firm regularly
engaged in the business of evaluating, quoting or appraising comparable
securities. The Public Offering Price for secondary market transactions, on
the other hand, is based on the aggregate bid side evaluations of the
Securities in a Trust, plus or minus cash, if any, in the Principal Account
held or owned by such Trust, plus accrued interest plus a sales charge
based upon the dollar weighted average maturity of such Trust. Investors
who purchase Units through brokers or dealers pursuant to a current
management agreement which by contract or operation of law does not allow
such broker or dealer to earn an additional commission (other than any fee
or commission paid for maintenance of such investor's account under the
management agreement) on such transactions may purchase such Units at the
current Public Offering Price net of the applicable broker or dealer
concession. See "Trust Information-Public Offering of Units-Public
Distribution of Units" below.
The applicable sales charge per Unit for each Trust will be as set forth in
the following table:
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 4.99 5 TO 9.99 10 TO 14.99 15 OR MORE
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT
PRICE INVESTED PRICE INVESTED PRICE INVESTED PRICE INVESTED
</TABLE>
Rolling Government
Series Treasury
Portfolio
Rolling Government
Series, GNMA
Portfolio
Laddered Government
Series, Treasury
Portfolio
Investment Grade
Series, Insured
Utility Portfolio
Investment Grade
Series, Corporate
Portfolio
In connection with certain quantity purchases during the initial offering
period, the sales charge for each Trust will be reduced by that percentage
set forth in the following table:
PERCENTAGE REDUCTION
NUMBER OF UNITS PURCHASED OF SALES CHARGE
1 to 9,999
10,000 to 24,999
25,000 to 49,999
50,000 to 99,999
100,000 or more
As indicated above, in connection with secondary market transactions the
sales charge is based upon the dollar weighted average maturity of a Trust
and is determined in accordance with the tables set forth below. For
purposes of this computation, Securities will be deemed to mature on their
expressed maturity dates unless: (a) the Securities have been called for
redemption or funds or securities have been placed in escrow to redeem them
on an earlier call date, in which case such call date will be deemed to be
the date upon which they mature; or (b) such Securities are subject to a
"mandatory tender," in which case such mandatory tender will be deemed to
be the date upon which they mature. The effect of this method of sales
charge computation will be that different sales charge rates will be
applied to a Trust based upon the dollar weighted average maturity of such
Trust's portfolio, in accordance with the following schedules.
In connection with secondary market transactions, the sales charge per Unit
will be as set forth in the table below:
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 4.99 5 TO 9.99 10 TO 14.99 15 OR MORE
SALES CHARGE (PERCENT OF PUBLIC OFFERING PRICE)
Rolling Government Series, Treasury Portfolio
Rolling Government Series, GNMA Portfolio
Laddered Government Series, Treasury Portfolio
Investment Grade Series, Insured Utility Portfolio
Investment Grade Series, Corporate Portfolio
In connection with secondary market transactions, the sales charge to each
Trust will be reduced by that percentage set forth in the following table:
PERCENTAGE REDUCTION
NUMBER OF UNITS PURCHASED OF SALES CHARGE
1 to 9,999
10,000 to 24,999
25,000 to 49,999
50,000 to 99,999
100,000 or more
The reduced sales charges resulting from quantity discounts as shown on the
tables above will apply to all purchases of Units on any one day by the
same purchaser from the same broker or dealer and for this purpose
purchases of Units of a Trust will be aggregated with concurrent purchases
of Units of any other unit investment trust that may be offered by the
Sponsor. Additionally, Units purchased in the name of a spouse or child
(under 21) of such purchaser will be deemed to be additional purchases by
such purchaser. The reduced sales charges will also be applicable to a
trust or other fiduciary purchasing for a single trust estate or single
fiduciary account. The Sponsor intends to permit officers, directors and
employees of the Sponsor and Evaluator and at the discretion of the Sponsor
registered representatives of selling firms to purchase Units of a Trust
without a sales charge, although a transaction processing fee may be
imposed on such trades.
Had Units of a Trust been available for sale at the opening of business on
the Initial Date of Deposit, the Public Offering Price would have been as
shown under "Essential Information." The Public Offering Price per Unit of
a Trust on the date of this Prospectus or on any subsequent date will vary
from the amount stated under "Essential Information" in accordance with
fluctuations in the prices of the underlying Securities and the amount of
accrued interest on the Units. On the Initial Date of Deposit, pursuant to
an exemptive order from the Securities and Exchange Commission, the Public
Offering Price at which Units will be sold will not exceed the price
determined as of the opening of business on the Initial Date of Deposit as
shown under "Essential Information"; however, should the value of the
underlying Securities decline, purchasers will, of course, be given the
benefit of such lower price. The aggregate bid and offering side
evaluations of the Securities shall be determined (i) on the basis of
current bid or offering prices of the Securities, (ii) if bid or offering
prices are not available for any particular Security, on the basis of
current bid or offering prices for comparable bonds, (iii) by determining
the value of Securities on the bid or offer side of the market by
appraisal, or (iv) by any combination of the above.
The foregoing evaluations and computations shall be made as of the
evaluation time stated under "Essential Information," on each business day
commencing with the Initial Date of Deposit of the Securities, effective
for all sales made during the preceding 24-hour period.
The interest on the Securities deposited in a Trust, less the related
estimated fees and expenses, is estimated to accrue in the annual amounts
per Unit set forth under "Essential Information." The amount of net
interest income which accrues per Unit may change as Securities mature or
are redeemed, exchanged or sold, or as the expenses of a Trust change or
the number of outstanding Units of a Trust changes.
Although payment is normally made three business days following the order
for purchase, payments may be made prior thereto. A person will become the
owner of Units on the First Settlement Date or any date of settlement
thereafter provided payment has been received. Cash, if any, made available
to the Sponsor prior to the date of settlement for the purchase of Units
may be used on the Sponsor's business and may be deemed to be a benefit to
the Sponsor, subject to the limitations of the Securities Exchange Act of
1934. If a Unitholder desires to have certificates representing Units
purchased, such certificates (if available) will be delivered as soon as
possible following his written request therefor. For information with
respect to redemption of Units purchased, but as to which certificates
requested have not been received, see "Trust Information-Redemption" below.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest
on a security from the last day on which interest thereon was paid.
Interest on Securities generally is paid semi-annually (monthly in the case
of Ginnie Maes, if any) although a Trust accrues such interest daily.
Because of this, a Trust always has an amount of interest earned but not
yet collected by the Trustee. For this reason, with respect to sales
settling subsequent to the First Settlement Date, the Public Offering Price
of Units will have added to it the proportionate share of accrued interest
to the date of settlement. Unitholders will receive on the next
distribution date of a Trust the amount, if any, of accrued interest paid
on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the Public Offering Price in the sale of
Units to the public, the Trustee will advance the amount of accrued
interest as of the First Settlement Date and the same will be distributed
to the Sponsor as the Unitholder of record as of the First Settlement Date.
Consequently, the amount of accrued interest to be added to the Public
Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date.
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by the Trusts and distributed to Unitholders. Therefore,
there will always remain an item of accrued interest that is added to the
value of the Units. If a Unitholder sells or redeems all or a portion of
his Units, he will be entitled to receive his proportionate share of the
accrued interest from the purchaser of his Units. Since the Trustee has the
use of the funds held in the Interest Account for distributions to
Unitholders and since such Account is non-interest-bearing to Unitholders,
the Trustee benefits thereby.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. While the Initial
Public Offering Price of Units will be determined on the basis of the
current offering prices of the Securities in a Trust, the redemption price
per Unit (as well as the secondary market price per Unit) at which Units
may be redeemed (see "Trust Information-Redemption") will be determined on
the basis of the current bid prices of the Securities. As of the opening of
business on the Initial Date of Deposit, the Public Offering Price per Unit
(based on the offering prices of the Securities in a Trust and including
the sales charge) exceeded the redemption price at which Units could have
been redeemed (based upon the current bid prices of the Securities in a
Trust) by the amount shown under "Essential Information." Under current
market conditions the bid prices for U.S. Treasury Obligations are expected
to be approximately 1/8 to 1/4 of 1% lower than the offer price of such
obligations. In the past, bid prices on securities similar to those in the
Trusts have been lower than the offering prices thereof by as much as 1% or
more of principal amount in the case of inactively traded bonds or as
little as 1/2 of 1% in the case of actively traded bonds, but the
difference between such offering and bid prices may be expected to average
approximately 1/2 of 1% of principal amount. For this reason, among others
(including fluctuations in the market prices of the Securities and the fact
that the Public Offering Price includes a sales charge), the amount
realized by a Unitholder upon any redemption of Units may be less than the
price paid for such Units.
PUBLIC DISTRIBUTION OF UNITS. The Sponsor intends to qualify the Units for
sale in a number of states. Units will be sold through dealers who are
members of the National Association of Securities Dealers, Inc. [and
through others.] Sales may be made to or through dealers at prices which
represent discounts from the Public Offering Price as set forth below.
Certain commercial banks are making Units of the Trust Funds available to
their customers on an agency basis. A portion of the sales charge paid by
their customers is retained by or remitted to the banks in the amount shown
in the tables below. Under the Glass-Steagall Act, banks are prohibited
from underwriting Trust Units; however, the Glass-Steagall Act does permit
certain agency transactions and the banking regulators have indicated that
these particular agency transactions are permitted under such Act. In
addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
The Sponsor reserves the right to change the discounts set forth below from
time to time. In addition to such discounts, the Sponsor may, from time to
time, pay or allow an additional discount, in the form of cash or other
compensation, to dealers employing registered representatives who sell,
during a specified time period, a minimum dollar amount of Units of a Trust
and other unit investment trusts created by the Sponsor. The difference
between the discount and the sales charge will be retained by the Sponsor.
The primary market concessions and agency commissions for each Trust are as
follows:
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 4.99 5 TO 9.99 10 TO 14.99 15 OR MORE
PERCENTAGE DISCOUNT PER UNIT
Rolling Government Series, Treasury Portfolio
Rolling Government Series, GNMA Portfolio
Laddered Government Series, Treasury Portfolio
Investment Grade Series, Insured Utility Portfolio
Investment Grade Series, Corporate Portfolio
The secondary market concessions and agency commissions for each Trust are
as follows:
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 4.99 5 TO 9.99 10 TO 14.99 15 OR MORE
PERCENTAGE DISCOUNT PER UNIT
Rolling Government Series, Treasury Portfolio
Rolling Government Series, GNMA Portfolio
Laddered Government Series, Treasury Portfolio
Investment Grade Series, Insured Utility Portfolio
Investment Grade Series, Corporate Portfolio
The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units.
PROFITS OF SPONSOR. The Sponsor will receive gross sales charges equal to
the percentage of the Public Offering Price of the Units as stated under
"Public Offering Price" and will pay a fixed portion of such sales charges
to dealers and agents. In addition, the Sponsor may realize a profit or a
loss resulting from the difference between the purchase prices of the
Securities to the Sponsor and the cost of such Securities to a Trust, which
is based on the offering side evaluation of the Securities. See "Portfolio"
for each Trust. The Sponsor may also realize profits or losses with respect
to Securities deposited in a Trust which were acquired from underwriting
syndicates of which the Sponsor was a member. An underwriter or
underwriting syndicate purchases securities from the issuer on a negotiated
or competitive bid basis, as principal, with the motive of marketing such
securities to investors at a profit. The Sponsor may realize additional
profits or losses during the initial offering period on unsold Units as a
result of changes in the daily evaluation of the Securities in a Trust.
MARKET FOR UNITS
After the initial offering period, while not obligated to do so, the
Sponsor intends to, and certain of the dealers may, subject to change at
any time, maintain a market for Units of the Trusts offered hereby and to
continuously offer to purchase said Units at prices, determined by the
Evaluator, based on the aggregate bid prices of the underlying Securities
in such Trusts, together with accrued interest to the expected dates of
settlement. To the extent that a market is maintained during the initial
offering period, the prices at which Units will be repurchased will be
based upon the aggregate offering side evaluation of the Securities in the
Trusts. The aggregate bid prices of the underlying Securities in each Trust
are expected to be less than the related aggregate offering prices (which
is the evaluation method used during the initial public offering period).
ACCORDINGLY, UNITHOLDERS WHO WISH TO DISPOSE OF THEIR UNITS SHOULD INQUIRE
OF THEIR BANK OR BROKER AS TO CURRENT MARKET PRICES IN ORDER TO DETERMINE
WHETHER THERE IS IN EXISTENCE ANY PRICE IN EXCESS OF THE REDEMPTION PRICE
AND, IF SO, THE AMOUNT THEREOF.
The offering price of any Units resold by the Sponsor will be in accord
with that described in the currently effective Prospectus describing such
Units. Any profit or loss resulting from the resale of such Units will
belong to the Sponsor. The Sponsor may suspend or discontinue purchases of
Units of any Trust if the supply of Units exceeds demand, or for other
business reasons.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary market
described above may cause Units to be redeemed by the Trustee by making a
written request to the Trustee, United States Trust Company of New York,
770 Broadway, 10003 and, in the case of Units evidenced by a certificate,
by tendering such certificate to the Trustee, properly endorsed or
accompanied by a written instrument or instruments of transfer in a form
satisfactory to the Trustee. Unitholders must sign the request, and such
certificate or transfer instrument, exactly as their names appear on the
records of the Trustee and on any certificate representing the Units to be
redeemed. If the amount of the redemption is $25,000 or less and the
proceeds are payable to the Unitholder(s) of record at the address of
record, no signature guarantee is necessary for redemptions by individual
account owners (including joint owners). Additional documentation may be
requested, and a signature guarantee is always required, from corporations,
executors, administrators, trustees, guardians or associations. The
signatures must be guaranteed by a participant in the Securities Transfer
Agents Medallion Program ("STAMP") or such other guarantee program in
addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. A certificate should only be sent by registered or certified mail
for the protection of the Unitholder. Since tender of the certificate is
required for redemption when one has been issued, Units represented by a
certificate cannot be redeemed until the certificate representing such
Units has been received by the purchasers.
Redemption shall be made by the Trustee on the third business day following
the day on which a tender for redemption is received (the "Redemption
Date") by payment of cash equivalent to the Redemption Price for such
Trust, determined as set forth below under "Computation of Redemption
Price," as of the evaluation time stated under "Essential Information,"
next following such tender, multiplied by the number of Units being
redeemed. Any Units redeemed shall be cancelled and any undivided
fractional interest in the Trust extinguished. The price received upon
redemption might be more or less than the amount paid by the Unitholder
depending on the value of the Securities in the Trust at the time of
redemption.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a certain percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and may
be recovered by the Unitholder only when filing a tax return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification
number from the selling broker. However, any time a Unitholder elects to
tender Units for redemption, such Unitholder should make sure that the
Trustee has been provided a certified tax identification number in order to
avoid this possible "back-up withholding." In the event the Trustee has not
been previously provided such number, one must be provided at the time
redemption is requested.
Any amounts paid on redemption representing interest shall be withdrawn
from the Interest Account for such Trust to the extent that funds are
available for such purpose. All other amounts paid on redemption shall be
withdrawn from the Principal Account for such Trust. The Trustee is
empowered to sell Securities for a Trust in order to make funds available
for the redemption of Units of such Trust. Such sale may be required when
Securities would not otherwise be sold and might result in lower prices
than might otherwise be realized. To the extent Securities are sold, the
size and diversity of a Trust will be reduced.
In the case of a Treasury Portfolio or a GNMA Portfolio, Securities will be
sold by the Trustee so as to maintain, as closely as practicable, the
original percentage relationship between the principal amounts of the
Securities in such Trusts. The Securities to be sold for purposes of
redeeming Units will be selected from a list supplied by the Sponsor. The
Securities will be chosen for this list by the Sponsor on the basis of such
market and credit factors as it may determine are in the best interests of
such Trusts. Provision is made under the related Trust Agreements for the
Sponsor to specify minimum face amounts in which blocks of Securities are
to be sold in order to obtain the best price available. While such minimum
amounts may vary from time to time in accordance with market conditions, it
is anticipated that the minimum face amounts which would be specified would
range from $25,000 to $100,000. Sales may be required at a time when the
Securities would not otherwise be sold and might result in lower prices
than might otherwise be realized. Moreover, due to the minimum principal
amount in which U.S. Treasury Obligations and Ginnie Maes may be required
to be sold, the proceeds of such sales may exceed the amount necessary for
payment of Units redeemed. To the extent not used to meet other redemption
requests in such Trusts, such excess proceeds will be distributed pro rata
to all remaining Unitholders of record of such Trusts, unless reinvested in
substitute Securities. See "Trust Information-Investment Supervision."
The Trustee is irrevocably authorized in its discretion, if the Sponsor
does not elect to purchase any Unit tendered for redemption, in lieu of
redeeming such Units, to sell such Units in the over-the-counter market for
the account of tendering Unitholders at prices which will return to the
Unitholders amounts in cash, net after brokerage commissions, transfer
taxes and other charges, equal to or in excess of the Redemption Price for
such Units. In the event of any such sale, the Trustee shall pay the net
proceeds thereof to the Unitholders on the day they would otherwise be
entitled to receive payment of the Redemption Price.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or during which (as determined by
the Securities and Exchange Commission) trading on the New York Stock
Exchange is restricted; (2) for any period during which an emergency exists
as a result of which disposal by the Trustee of Securities is not
reasonably practicable or it is not reasonably practicable to fairly
determine the value of the underlying Securities in accordance with the
Trust Agreements; or (3) for such other period as the Securities and
Exchange Commission may by order permit. The Trustee is not liable to any
person in any way for any loss or damage which may result from any such
suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The Redemption Price for Units of each
Trust is computed by the Evaluator as of the evaluation time stated under
"Essential Information" next occurring after the tendering of a Unit for
redemption and on any other business day desired by it, by:
A. adding: (1) the cash on hand in the Trust other than cash deposited in
the Trust to purchase Securities not applied to the purchase of such
Securities; (2) the aggregate value of each issue of the Securities
(including "when issued" contracts, if any) held in the Trust as determined
by the Evaluator on the basis of bid prices therefor; and (3) interest
accrued and unpaid on the Securities in the Trust as of the date of
computation;
B. deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the Trust and for which no deductions
have been previously made for the purpose of additions to the Reserve
Account described under "Trust Information-Trust Expenses"; (2) an amount
representing estimated accrued expenses of the Trust, including but not
limited to fees and expenses of the Trustee (including legal and auditing
fees and any insurance costs), the Evaluator, the Sponsor and bond counsel
, if any; (3) cash held for distribution to Unitholders of record as of the
business day prior to the evaluation being made; and (4) other liabilities
incurred by the Trust; and
C. finally dividing the results of such computation by the number of Units
of the Trust outstanding as of the date thereof.
UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of Units of a Trust will not be evidenced by
certificates unless a Unitholder, the Unitholder's registered broker/dealer
or the clearing agent for such broker/dealer makes a written request to the
Trustee. Certificates, if issued, will be so noted on the confirmation
statement sent to the Underwriter and broker. Non-receipt of such
certificate(s) must be reported to the Trustee within one year; otherwise,
a 2% surety bond fee will be required for replacement.
Units are transferable by making a written request to the Trustee and, in
the case of Units evidenced by a certificate, by presenting and
surrendering such certificate to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer which should
be sent registered or certified mail for the protection of the Unitholder.
Unitholders must sign such written request, and such certificate or
transfer instrument, exactly as their names appear on the records of the
Trustee and on any certificate representing the Units to be transferred.
Such signatures must be guaranteed as provided in "Trust
Information-Redemption."
Units may be purchased and certificates, if requested will be issued in
denominations of one Unit subject to each Trust's minimum investment
requirement of 100 Units or any whole Unit multiple thereof subject to any
minimum requirement established by the Sponsor from time to time. Any
certificate issued will be numbered serially for identification, issued in
fully registered form and will be transferable only on the books of the
Trustee. The Trustee may require a Unitholder to pay a reasonable fee, to
be determined in the sole discretion of the Trustee, for each certificate
re-issued or transferred and to pay any governmental charge that may be
imposed in connection with each such transfer or interchange. The Trustee
at the present time does not intend to charge for the normal transfer or
interchange of certificates. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity (generally amounting to 3% of the market value of the Units),
affidavit of loss, evidence of ownership and payment of expenses incurred.
DISTRIBUTIONS TO UNITHOLDERS. Interest received by each Trust, including
any portion of the proceeds from a disposition of Securities which
represents accrued interest, is credited by the Trustee to the Interest
Account for such Trust. All other receipts are credited by the Trustee to a
separate Principal Account for the Trust. The Trustee normally has no cash
for distribution to Unitholders until it receives interest payments on the
Securities in the Trust. Since interest usually is paid semi-annually
(monthly in the case of a GNMA Portfolio), during the initial months of the
Trusts, the Interest Account of each Trust, consisting of accrued but
uncollected interest and collected interest (cash), will be predominantly
the uncollected accrued interest that is not available for distribution. On
the dates set forth under "Essential Information" for each Trust, the
Trustee will commence distributions, in part from funds advanced by the
Trustee.
Thereafter, assuming the Trust retains its original size and composition,
after deduction of the fees and expenses of the Trustee, the Sponsor and
Evaluator and reimbursements (without interest) to the Trustee for any
amounts advanced to a Trust, the Trustee will normally distribute on each
Interest Distribution Date (the twentieth of the month) or shortly
thereafter to Unitholders of record of such Trust on the preceding Record
Date (which is the tenth day of each month). Unitholders of the Trusts will
receive an amount substantially equal to one-twelfth of such holders' pro
rata share of the estimated net annual interest income to the Interest
Account of such Trust. However, interest earned at any point in time will
be greater than the amount actually received by the Trustee and distributed
to the Unitholders. Therefore, there will always remain an item of accrued
interest that is added to the daily value of the Units. If Unitholders of a
Trust sell or redeem all or a portion of their Units, they will be paid
their proportionate share of the accrued interest of such Trust to, but not
including, the fifth business day after the date of a sale or to the date
of tender in the case of a redemption.
In connection with GNMA Portfolios only, the terms of the Ginnie Maes
provide for payment to the holders thereof (including a GNMA Portfolio) on
the fifteenth day of each month of amounts collected by or due to the
issuers thereof with respect to the underlying mortgages during the
preceding month. The Trustee will collect the interest due a GNMA Portfolio
on the Securities therein as it becomes payable and credit such interest to
a separate Interest Account for such GNMA Portfolio created by the Trust
Agreement. Distributions will be made to each Unitholder of record of a
GNMA Portfolio on the appropriate Distribution Date (see "Essential
Information") and will consist of an amount substantially equal to such
Unitholder's pro rata share of the cash balances, if any, in the Interest
Account and the Principal Account of such GNMA Portfolio, computed as of
the close of business on the preceding Record Date.
In order to equalize distributions and keep the undistributed interest
income of the Trusts at a low level, all Unitholders of record in such
Trust on the first Record Date will receive an interest distribution on the
first Interest Distribution Date. Because the period of time between the
first Interest Distribution Date and the regular distribution dates may be
a full period, the first regular distributions may be partial
distributions.
Unitholders of a Treasury Portfolio which contains Stripped Treasury
Securities should note that Stripped Treasury Securities are sold at a deep
discount because the buyer of those securities obtains only the right to
receive a future fixed payment on the security and not any rights to
periodic interest payments thereon. Purchasers of these Securities acquire,
in effect, discount obligations that are economically identical to the
"zero-coupon bonds" that have been issued by corporations. Zero coupon
bonds are debt obligations which do not make any periodic payments of
interest prior to maturity and accordingly are issued at a deep discount.
Under general accepted accounting principles, a holder of a security
purchased at a discount normally must report as an item of income for
financial accounting purposes the portion of the discount attributable to
the applicable reporting period. The calculation of this attributable
income would be made on the "interest" method which generally will result
in a lesser amount of includable income in earlier periods and a
corresponding larger amount in later periods. For Federal income tax
purposes, the inclusion will be on a basis that reflects the effective
compounding of accrued but unpaid interest effectively represented by the
discount. Although this treatment is similar to the "interest" method
described above, the "interest" method may differ to the extent that
generally accepted accounting principles permit or require the inclusion of
interest on the basis of a compounding period other than the semi-annual
period. See "Trust Information-Tax Status."
Persons who purchase Units between a Record Date and a Distribution Date
will receive their first distribution on the second Distribution Date
following their purchase of Units. Since interest on Securities in the
Trusts is payable at varying intervals, usually in semi-annual
installments, and distributions of income are made to Unitholders at
different intervals from receipt of interest, the interest accruing to a
Trust may not be equal to the amount of money received and available for
distribution from t he Interest Account. Therefore, on each Distribution
Date the amount of interest actually deposited in the Interest Account of a
Trust and available for distribution may be slightly more or less than the
interest distribution made. In order to eliminate fluctuations in interest
distributions resulting from such variances, the Trustee is authorized by
the Trust Agreements to advance such amounts as may be necessary to provide
interest distributions of approximately equal amounts. The Trustee will be
reimbursed, without interest, for any such advances from funds available in
the Interest Account for such Trust.
The Trustee will distribute on each Distribution Date or shortly
thereafter, to each Unitholder of record of a Trust on the preceding Record
Date, an amount substantially equal to such Unitholder's pro rata share of
the cash balance, if any, in the Principal Account of such Trust computed
as of the close of business on the preceding Record Date. However, no
distribution will be required if the balance in the Principal Account is
less than $1.00 per 100 Units. Notwithstanding the foregoing, the Trustee
will make a distribution to Unitholders of all principal relating to
maturing U.S. Treasury Obligations in a Trust within twelve business days
of the date of such maturity unless such principal is to be reinvested in
connection with a Rolling Government Series.
STATEMENTS TO UNITHOLDERS. With each distribution, the Trustee will furnish
or cause to be furnished to each Unitholder a statement of the amount of
interest and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit.
The accounts of each Trust are required to be audited annually, at the
Trust's expense, by independent auditors designated by the Sponsor, unless
the Sponsor determines that such an audit would not be in the best interest
of the Unitholders of such Trust. The accountants' report will be furnished
by the Trustee to any Unitholder of such Trust upon written request. Within
a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each person who at any time during the calendar
year was a Unitholder of a Trust a statement, covering the calendar year,
setting forth for the applicable Trust:
A. As to the Interest Account:
1. The amount of interest received on the Securities;
2. The amount paid from the Interest Account representing accrued interest
of any Units redeemed;
3. The deductions from the Interest Account for applicable taxes, if any,
fees and expenses (including auditing fees) of the Trustee, the Sponsor,
the Evaluator, and, if any, of bond counsel;
4. Any amounts credited by the Trustee to the Reserve Account;
5. The net amount remaining after such payments and deductions, expressed
both as a total dollar amount and a dollar amount per Unit outstanding on
the last business day of such calendar year; and
B. As to the Principal Account:
1. The dates of the maturity, liquidation or redemption of any of the
Securities and the net proceeds received therefrom excluding any portion
credited to the Interest Account;
2. The amount paid from the Principal Account representing the principal of
any Units redeemed;
3. The deductions from the Principal Account for payment of applicable
taxes, if any, fees and expenses (including auditing fees) of the Trustee,
the Sponsor, the Evaluator, and, if any, of bond counsel;
4. The amount of when-issued interest treated as a return of capital, if
any;
5. Any amounts credited by the Trustee to the Reserve Account;
6. The net amount remaining after distributions of principal and
deductions, expressed both as a dollar amount and as a dollar amount per
Unit outstanding on the last business day of the calendar year; and
C. The following information:
1. A list of the Securities as of the last business day of such calendar
year;
2. The number of Units outstanding on the last business day of such
calendar year;
3. The Redemption Price based on the last evaluation made during such
calendar year;
4. The amount actually distributed during such calendar year from the
Interest and Principal Accounts separately stated, expressed both as total
dollar amounts and as dollar amounts per Unit outstanding on the Record
Dates for each such distribution.
RIGHTS OF UNITHOLDERS. A Unitholder may at any time tender Units to the
Trustee for redemption. The death or incapacity of any Unitholder will not
operate to terminate a Trust nor entitle legal representatives or heirs to
claim an accounting or to bring any action or proceeding in any court for
partition or winding up of a Trust. No Unitholder shall have the right to
control the operation and management of any Trust in any manner, except to
vote with respect to the amendment of the Trust Agreements or termination
of any Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolios of the Trusts by the purchase,
sale or substitution of Securities, except in the circumstances noted
herein. Thus, with the exception of the redemption or maturity of
Securities in accordance with their terms (and reinvestments made in
connection with a Rolling Government Series), the assets of the Trusts will
remain unchanged under normal circumstances.
The Sponsor may direct the Trustee to dispose of Securities the value of
which has been affected by certain adverse events including institution of
certain legal proceedings or decline in price or the occurrence of other
market factors, including advance refunding, so that in the opinion of the
Sponsor the retention of such Securities in a Trust would be detrimental to
the interest of the Unitholders. In addition, the Sponsor will instruct the
Trustee to dispose of certain Securities and to take such further action as
may be needed from time to time to ensure that a Rolling Government Series
continues to satisfy the qualifications of a regulated investment company,
including the requirements with respect to diversification under Section
851 of the Internal Revenue Code. The proceeds from any such sales,
exclusive of any portion which represents accrued interest, will be
credited to the Principal Account of such Trust for distribution to the
Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer made by
an issuer of Securities to issue new obligations in exchange or
substitution for any of such Securities pursuant to a refunding financing
plan, except that the Sponsor may instruct the Trustee to accept or reject
such an offer or to take any other action with respect thereto as the
Sponsor may deem proper if (i) the issuer is in default with respect to
such Securities or (ii) in the written opinion of the Sponsor the issuer
will probably default with respect to such Securities in the reasonably
foreseeable future. Any obligation so received in exchange or substitution
will be held by the Trustee subject to the terms and conditions of the
Trust Agreement to the same extent as Securities originally deposited
thereunder. Within five days after deposit of obligations in exchange or
substitution for underlying Securities, the Trustee is required to give
notice thereof to each Unitholder, identifying the Securities eliminated
and the Securities substituted therefor. The Trustee may sell Securities,
designated by the Sponsor, from a Trust for the purpose of redeeming Units
of such Trust tendered for redemption and the payment of expenses.
TRUST ADMINISTRATION
THE TRUSTEE. The Trustee is United States Trust Company of New York with
its principal place of business at 45 Wall Street, New York, New York 10005
and its unit investment trust offices at 770 Broadway, New York, New York
10003. Unitholders who have questions regarding the Trusts may call the
Customer Service Help Line at 1-800- . The Trustee is a member of the
New York Clearing House Association and is subject to supervision and
examination by the Comptroller of the Currency, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve
System.
The Trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of any Trust. For information relating to the
responsibilities of the Trust under the Trust Agreements, reference is made
to the material set forth under "Trust Information-Unitholders."
In accordance with the Trust Agreements, the Trustee shall keep records of
all transactions at its office. Such records shall include the name and
address of, and the number of Units held by, every Unitholder of each
Trust. Such books and records shall be open to inspection by any Unitholder
of such Trust at all reasonable times during usual business hours. The
Trustee shall make such annual or other reports as may from time to time be
required under any applicable state or Federal statute, rule or regulation.
The Trustee shall keep a certified copy or duplicate original of the Trust
Agreements on file in its office available for inspection at all reasonable
times during usual business hours by any Unitholder, together with a
current list of the Securities held in each Trust. Pursuant to the Trust
Agreements, the Trustee may employ one or more agents for the purpose of
custody and safeguarding of Securities comprising the Trusts. Under the
Trust Agreements, the Trustee or any successor trustee may resign and be
discharged of its duties created by the Trust Agreements by executing an
instrument in writing and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of
resignation to all Unitholders then of record, not less than 60 days before
the date specified in such notice when such resignation is to take effect.
The Sponsor upon receiving notice of such resignation is obligated to
appoint a successor trustee promptly. If, upon such resignation, no
successor trustee has been appointed and has accepted the appointment
within 30 days after notification, the retiring Trustee may apply to a
court of competent jurisdiction for the appointment of a successor. The
Sponsor may at any time remove the Trustee, with or without cause, and
appoint a successor trustee as provided in the Trust Agreements. Notice of
such removal and appointment shall be mailed to each Unitholder by the
Sponsor. Upon execution of a written acceptance of such appointment by such
successor trustee, all the rights, powers, duties and obligations of the
original Trustee shall vest in the successor. The Trustee shall be a
corporation organized under the laws of the United States, or any state
thereof, which is authorized under such laws to exercise trust powers. The
Trustee shall have at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
THE EVALUATOR. National Financial Services Corporation, the Sponsor, also
serves as Evaluator. The Evaluator may resign or be removed by the Trustee
in which event the Trustee is to use its best efforts to appoint a
satisfactory successor. Such resignation or removal shall become effective
upon acceptance of appointment by the successor evaluator. If upon
resignation of the Evaluator no successor has accepted appointment within
30 days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor. Notice of such
resignation or removal and appointment shall be mailed by the Trustee to
each Unitholder.
AMENDMENT AND TERMINATION. The Trust Agreements may be amended by the
Trustee and the Sponsor without the consent of any of the Unitholders: (i)
to cure any ambiguity or to correct or supplement any provision which may
be defective or inconsistent; (ii) to change any provision thereof as may
be required by the Securities and Exchange Commission or any successor
governmental agency; or (iii) to make such provisions as shall not
adversely affect the interests of the Unitholders. The Trust Agreements
with respect to the Trusts may also be amended in any respect by the
Sponsor and the Trustee, or any of the provisions thereof may be waived,
with the consent of the holders of Units representing 66 2/3% of the Units
then outstanding of such Trust, provided that no such amendment or waiver
will reduce the interest of any Unitholder thereof without the consent of
such Unitholder or reduce the percentage of Units required to consent to
any such amendment or waiver without the consent of all Unitholders of such
Trust. In no event shall any Trust Agreement be amended to increase the
number of Units of a Trust issuable thereunder or to permit, except in
accordance with the provisions of such Trust Agreement, the acquisition of
any Securities in addition to or in substitution for those initially
deposited in a Trust. The Trustee shall promptly notify Unitholders of the
substance of any such amendment.
The Trust Agreements provide that the Trusts shall terminate upon the
maturity, redemption or other disposition of the last of the Securities
held in a Trust. If the value of a Trust shall be less than the applicable
minimum value stated under "Essential Information," the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, terminate the
Trust. A Trust may be terminated at any time by the Unitholders
representing 66 2/3% of the Units thereof then outstanding. In the event of
termination of a Trust, written notice thereof will be sent by the Trustee
to all Unitholders of such Trust. Within a reasonable period after
termination, the Trustee will sell any Securities remaining in such Trust
and, after paying all expenses and charges incurred by the Trust, will
distribute to Unitholders thereof (upon surrender for cancellation of
certificates for Units, if issued) their pro rata share of the balances
remaining in the Interest and Principal Accounts of such Trust.
LIMITATIONS ON LIABILITY. The Sponsor: The Sponsor is liable for the
performance of its obligations arising from its responsibilities under the
Trust Agreements, but will be under no liability to the Unitholders for
taking any action or refraining from any action in good faith pursuant to
the Trust Agreements or for errors in judgment, except in cases of its own
gross negligence, bad faith or willful misconduct. The Sponsor shall not be
liable or responsible in any way for depreciation or loss incurred by
reason of the sale of any Securities.
The Trustee: The Trust Agreements provide that the Trustee shall be under
no liability for any action taken in good faith in reliance upon prima
facie properly executed documents or for the disposition of monies,
Securities or certificates except by reason of its own gross negligence,
bad faith or willful misconduct, nor shall the Trustee be liable or
responsible in any way for depreciation or loss incurred by reason of the
sale by the Trustee of any Securities. In the event that the Sponsor shall
fail to act, the Trustee may act and shall not be liable for any such
action taken by it in good faith. The Trustee shall not be personally
liable for any taxes or other governmental charges imposed upon or in
respect of the Securities or upon the interest thereon. In addition, the
Trust Agreements contain other customary provisions limiting the liability
of the Trustee.
The Evaluator: The Trustee and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. The Trust Agreements provide that the determinations made
by the Evaluator shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator shall be
under no liability to the Trustee or Unitholders for errors in judgment,
but shall be liable only for its gross negligence, lack of good faith or
willful misconduct.
TRUST EXPENSES
The Sponsor will charge the Trusts a surveillance fee for services
performed for the Trusts in an amount not to exceed that amount set forth
in "Essential Information" but in no event will such compensation, when
combined with all compensation received from other unit investment trusts
for which the Sponsor both acts as sponsor and provides portfolio
surveillance, exceed the aggregate cost to the Sponsor for providing such
services. Such fee shall be based on the total number of Units of the
related Trust outstanding as of the January Record Date for any annual
period. The Sponsor will receive a portion of the sales commissions paid in
connection with the purchase of Units and will share in profits, if any,
related to the deposit of Securities in the Trusts.
The Trustee receives for its services fees set forth under "Essential
Information." The Trustee fee which is calculated monthly is based on the
largest aggregate principal amount of Securities in a Trust at any time
during the period. In no event shall the Trustee be paid less than $2,000
per Trust in any one year. Funds that are available for future
distributions, redemptions and payment of expenses are held in accounts
which are non-interest bearing to Unitholders and are available for use by
the Trustee pursuant to normal trust procedures; however, the Trustee is
also authorized by the Trust Agreements to make from time to time certain
non-interest bearing advances to the Trusts. During the first year the
Trustee has agreed to lower its fees and absorb expenses by the amount set
forth under "Essential Information." The Trustee's fee will not be
increased in future years in order to make up this reduction in the
Trustee's fee. The Trustee's fee is payable on or before each Distribution
Date.
For evaluation of Securities in each Trust, the Evaluator shall receive a
fee, payable monthly, calculated on the basis of that annual rate set forth
under "Essential Information," based upon the largest aggregate principal
amount of Securities in such Trust at any time during such monthly period.
The Trustee's and Evaluator's fees are deducted first from the Interest
Account of a Trust to the extent funds are available and then from the
Principal Account. Such fees may be increased without approval of
Unitholders by amounts not exceeding a proportionate increase in the
Consumer Price Index entitled "All Services Less Rent of Shelter,"
published by the United States Department of Labor, or any equivalent index
substituted therefor. In addition, the Trustee's fee may be periodically
adjusted in response to fluctuations in short-term interest rates
(reflecting the cost to the Trustee of advancing funds to a Trust to meet
scheduled distributions).
Expenses incurred in establishing the Trusts, including the cost of the
initial preparation of documents relating to the Trusts, federal and state
registration fees, the initial fees and expenses of the Trustee, legal
expenses and any other out-of-pocket expenses, will be paid by the Trusts
and amortized over the life of the Trusts. The following additional charges
are or may be incurred by the Trusts: (i) fees for the Trustee's
extraordinary services; (ii) expenses of the Trustee (including legal and
auditing expenses and insurance costs for an Insured Utility Portfolio, but
not including any fees and expenses charged by any agent for custody and
safeguarding of Securities) and of bond counsel, if any; (iii) various
governmental charges; (iv) expenses and costs of any action taken by the
Trustee to protect a Trust or the rights and interests of the Unitholders;
(v) indemnification of the Trustee for any loss, liability or expense
incurred by it in the administration of a Trust not resulting from gross
negligence, bad faith or willful misconduct on its part; (vi)
indemnification of the Sponsor for any loss, liability or expense incurred
in acting in that capacity without gross negligence, bad faith or willful
misconduct; and (vii) expenditures incurred in contacting Unitholders upon
termination of the Trusts. The fees and expenses set forth herein are
payable out of the appropriate Trust and, when owing to the Trustee, are
secured by a lien on such Trust. Fees or charges relating to a Trust shall
be allocated to each Trust in the same ratio as the principal amount of
such Trust bears to the total principal amount of all Trusts. Fees or
charges relating solely to a particular Trust shall be charged only to such
Trust.
Fees and expenses of the Trusts shall be deducted from the Interest Account
thereof, or, to the extent funds are not available in such Account, from
the Principal Accounts. The Trustee may withdraw from the Principal Account
or the interest Account of any Trust such amounts, if any, as it deems
necessary to establish a reserve for any taxes or other governmental
charges or other extraordinary expenses payable out of the Trust. Amounts
so withdrawn shall be credited to a separate account maintained for a Trust
known as the Reserve Account and shall not be considered a part of the
Trust when determining the value of the Units until such time as the
Trustee shall return all or any part of such amounts to the appropriate
account.
THE SPONSOR
NFSC is a registered broker and dealer and a member of The New York Stock
Exchange, Inc., and various other national and regional exchanges. As a
securities broker and dealer, NFSC is engaged in various securities
trading, brokerage and clearing activities serving a diverse group of
domestic corporations, institutional and individual investors, and brokers
and dealers.
NFSC is a wholly owned subsidiary of Fidelity Brokerage Services, Inc.
("FBSI"). NFSC was incorporated in Massachusetts, June 3, 1981. FBSI is a
wholly owned subsidiary of FMR Corp. ("FMR"). Edward C. Johnson 3d owns
approximately 12% and Abigail P. Johnson owns approximately 24.5% of the
issued and outstanding shares of the Voting Common Stock of FMR. Members
of the Edward C. Johnson 3d family and trusts for their benefit control up
to 49% of the voting shares of FMR.
If at any time the Sponsor shall fail to perform any of its duties under
the Trust Agreements or shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or shall have its affairs taken over by
public authorities, then the Trustee may (a) appoint a successor sponsor at
rates of compensation deemed by the Trustee to be reasonable and not
exceeding such reasonable amounts as may be prescribed by the Securities
and Exchange Commission, or (b) terminate the Trust Agreements and
liquidate the Trusts as provided therein, or (c) continue to act as Trustee
without terminating the Trust Agreements.
The foregoing financial information with regard to the Sponsor relates to
the Sponsor only and not to these Trusts. Such information is included in
this Prospectus only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations with respect to the Trusts. More comprehensive
financial information can be obtained upon request from the Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The statements of condition and the related portfolios at the Initial Date
of Deposit included in this Prospectus have been audited by Deloitte &
Touche LLP independent certified public accountants, as set forth in their
report in the Prospectus, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per 100 Units estimated distributions of
interest and principal to Unitholders. The tables assume no changes in
Trust expenses, no redemptions or sales of the underlying Securities prior
to maturity and the receipt of all principal due upon maturity. To the
extent the foregoing assumptions change actual distributions will vary.
FIDELITY DEFINED TRUSTS
LADDERED GOVERNMENT SERIES 1
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
FIDELITY DEFINED TRUSTS
LADDERED GOVERNMENT SERIES 2
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
FIDELITY DEFINED TRUSTS
ROLLING GOVERNMENT SERIES 1
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
FIDELITY DEFINED TRUSTS
INVESTMENT GRADE SERIES 1
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
FIDELITY DEFINED TRUSTS
INVESTMENT GRADE SERIES 2
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
DESCRIPTION OF RATINGS*
STANDARD & POOR'S-A brief description of the applicable Standard & Poor's
rating symbols and their meanings follow:
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific debt obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees. The bond rating is not a recommendation to purchase,
sell or hold a security, inasmuch as it does not comment as to market price
or suitability for a particular investor. The ratings are based on current
information furnished by the issuer and obtained by Standard & Poor's from
other sources it considers reliable. Standard & Poor's does not perform an
audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn
as a result of changes in, or unavailability of, such information, or for
other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement, under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA-Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
* As described by the rating company itself.
Plus (+) or Minus (-): The ratings from "AA" to "A" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes no
comment on the likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgment with respect to
such likelihood and risk.
MOODY'S INVESTORS SERVICE, INC.-A brief description of the applicable
Moody's rating symbols and their meanings follow:
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues. Their safety is so absolute that with the occasional exception of
oversupply in a few specific instances, characteristically, their market
value is affected solely by money market fluctuations.
Aa-Bonds which are rated Aa are judged to be a high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater amplitude or there
may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Their market value is virtually
immune to all but money market influences, with the occasional exception of
oversupply in a few specific instances.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future. The market value of A-rated bonds may be influenced to some degree
by economic performance during a sustained period of depressed business
conditions, but, during periods of normalcy, A-rated bonds frequently move
in parallel with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
A1-Bonds which are rated A1 offer the maximum in security within their
quality group, can be bought for possible upgrading in quality, and
additionally, afford the investor an opportunity to gauge more precisely
the relative attractiveness of offerings in the marketplace.
Conditional Ratings: Bonds rated "Con(-)" are ones for which the security
depends upon the completion of some act or the fulfillment of some
condition. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed, or (d) payments to
which some other limiting conditions attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination of
basis of condition.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic
rating classification from Aa through B in certain areas of its bond rating
system. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end
of its generic rating category.
DUFF & PHELPS CREDIT RATING CO. - A brief description of the applicable
Duff & Phelps Credit Rating Co. rating symbols and their meanings follow:
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks
related to such factors as competition, government action, regulation,
technological obsolescence, demand shifts, cost structure, and management
depth and expertise. The projected viability of the obligor at the trough
of the cycle is a critical determination.
AAA - Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA - High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A - Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
BBB - Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic
cycles.
BB - Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or
down frequently within this category.
B - Below investment grade and possessing risk that obligations will not be
met when due. Financial protection factors will fluctuate widely according
to economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC - Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD - Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
TABLE OF CONTENTS PAGE
SUMMARY 2
ESSENTIAL INFORMATION 4
THE TRUSTS 7
LADDERED GOVERNMENT SERIES 1, SHORT
TREASURY PORTFOLIO AND LADDERED
GOVERNMENT SERIES 2,
SHORT/INTERMEDIATE TREASURY PORTFOLIO 9
ROLLING GOVERNMENT SERIES 1, SHORT
TREASURY PORTFOLIO 11
ROLLING GOVERNMENT SERIES 2,
GNMA PORTFOLIO 14
INVESTMENT GRADE SERIES 1, INTERMEDIATE
INSURED UTILITY PORTFOLIO 17
INVESTMENT GRADE SERIES 2,
CORPORATE PORTFOLIO 21
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS 24
STATEMENTS OF CONDITION 25
TRUST INFORMATION A-1
General Information A-1
Risk Factors A-3
Rating of Units A-8
Insurance on the Bonds A-9
Retirement Plans A-10
Tax Status A-10
Distribution Reinvestment A-16
Interest, Estimated Long-Term Return and
Estimated Current Return A-16
Public Offering of Units A-17
Market For Units A-22
Redemption of Units A-22
Unitholders A-24
Investment Supervision A-28
Trust Administration A-28
Trust Expenses A-30
The Sponsor A-32
Legal Opinions A-32
Independent Certified Public Accountants A-32
ESTIMATED CASH FLOWS TO UNITHOLDERS B-1
Description of Ratings B-3
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C. UNDER THE SECURITIES
ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, AND TO WHICH REFERENCE
IS MADE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUSTS, THE TRUSTEE, OR THE SPONSOR. THE TRUSTS ARE
REGISTERED AS UNIT INVESTMENT TRUSTS UNDER THE INVESTMENT COMPANY ACT OF
1940. SUCH REGISTRATION DOES NOT IMPLY THAT THE TRUSTS OR THE UNITS HAVE
BEEN GUARANTEED, SPONSORED, RECOMMENDED OR APPROVED BY THE UNITED STATES OR
ANY STATE OR ANY AGENCY OR OFFICER THEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT
LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, rating services
and legal counsel
The following exhibits:
1.1 Proposed form of Trust Agreement (to be filed by amendment).
3.1 Opinion and consent of counsel as to legality of securities being
registered (to be filed by amendment).
3.2 Opinion of counsel as to Federal income tax status of securities being
registered (to be filed by amendment).
4.1 Consent of Independent Auditors (to be filed by amendment).
7.1 Powers of Attorney
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Fidelity Defined Trusts, Series 1 has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Boston and State of Massachusetts on the 29th day
of August, 1995.
Fidelity Defined Trusts, Series 1
(Registrant)
By: National Financial Services Corporation
(Depositor)
David J. Pearlman
Senior Legal Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on August 29, 1995.
Signature Title
James H. Messenger President and Chairman of the Board
Frederick J. Knapp Director
Robert P. Mazzarella Director
Sherif A. Nada Director
Gordon R. Watson Director
Shaugn Stanley Vice President, Finance and Chief
Financial Officer
Roger T. Servison Director
David J. Pearlman
(Attorney-in-fact)*
_______________________________
*An executed copy of the related power of attorney is filed herewith as
Exhibit 7.1.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, director or
officer of National Financial Services Corporation, a Massachusetts
corporation, hereby constitutes and appoints David J. Pearlman, David C.
Weinstein and Arthur S. Loring, and each of them (with full power to each
of them to act alone) his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and affix his seal thereto and file one or
more Registration Statements on Form S-6 under the Securities Act of 1933,
including any amendment or amendments thereto, with all exhibits, and any
and all other documents required to be filed with respect to any series of
Fidelity Defined Trusts; any other unit investment trust sponsored by
National Financial Services Corporation and any predecessors, affiliates or
successors thereof whether or not in existence at the date hereof and which
may be created after the date hereof with any regulatory authority, federal
or state, relating to the registration thereof or the issuance of units of
fractional undivided interests therein, without limitation, granting unto
said attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all
intents and purposes as he might or could do if personally present, hereby
ratifying and conforming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Signed this 20th day of June, 1995.
/s/Frederick J. Knapp
Frederick J. Knapp
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, director or
officer of National Financial Services Corporation, a Massachusetts
corporation, hereby constitutes and appoints David J. Pearlman, David C.
Weinstein and Arthur S. Loring, and each of them (with full power to each
of them to act alone) his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and affix his seal thereto and file one or
more Registration Statements on Form S-6 under the Securities Act of 1933,
including any amendment or amendments thereto, with all exhibits, and any
and all other documents required to be filed with respect to any series of
Fidelity Defined Trusts; any other unit investment trust sponsored by
National Financial Services Corporation and any predecessors, affiliates or
successors thereof whether or not in existence at the date hereof and which
may be created after the date hereof with any regulatory authority, federal
or state, relating to the registration thereof or the issuance of units of
fractional undivided interests therein, without limitation, granting unto
said attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all
intents and purposes as he might or could do if personally present, hereby
ratifying and conforming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Signed this 28th day of June, 1995.
/s/Robert P. Mazzarella
Robert P. Mazzarella
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, director or
officer of National Financial Services Corporation, a Massachusetts
corporation, hereby constitutes and appoints David J. Pearlman, David C.
Weinstein and Arthur S. Loring, and each of them (with full power to each
of them to act alone) his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and affix his seal thereto and file one or
more Registration Statements on Form S-6 under the Securities Act of 1933,
including any amendment or amendments thereto, with all exhibits, and any
and all other documents required to be filed with respect to any series of
Fidelity Defined Trusts; any other unit investment trust sponsored by
National Financial Services Corporation and any predecessors, affiliates or
successors thereof whether or not in existence at the date hereof and which
may be created after the date hereof with any regulatory authority, federal
or state, relating to the registration thereof or the issuance of units of
fractional undivided interests therein, without limitation, granting unto
said attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all
intents and purposes as he might or could do if personally present, hereby
ratifying and conforming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Signed this 21st day of June, 1995.
/s/James H. Messenger
James H. Messenger
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, director or
officer of National Financial Services Corporation, a Massachusetts
corporation, hereby constitutes and appoints David J. Pearlman, David C.
Weinstein and Arthur S. Loring, and each of them (with full power to each
of them to act alone) his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and affix his seal thereto and file one or
more Registration Statements on Form S-6 under the Securities Act of 1933,
including any amendment or amendments thereto, with all exhibits, and any
and all other documents required to be filed with respect to any series of
Fidelity Defined Trusts; any other unit investment trust sponsored by
National Financial Services Corporation and any predecessors, affiliates or
successors thereof whether or not in existence at the date hereof and which
may be created after the date hereof with any regulatory authority, federal
or state, relating to the registration thereof or the issuance of units of
fractional undivided interests therein, without limitation, granting unto
said attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all
intents and purposes as he might or could do if personally present, hereby
ratifying and conforming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Signed this 21st day of June, 1995.
/s/Sherif A. Nada
Sherif A. Nada
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, director or
officer of National Financial Services Corporation, a Massachusetts
corporation, hereby constitutes and appoints David J. Pearlman, David C.
Weinstein and Arthur S. Loring, and each of them (with full power to each
of them to act alone) his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and affix his seal thereto and file one or
more Registration Statements on Form S-6 under the Securities Act of 1933,
including any amendment or amendments thereto, with all exhibits, and any
and all other documents required to be filed with respect to any series of
Fidelity Defined Trusts; any other unit investment trust sponsored by
National Financial Services Corporation and any predecessors, affiliates or
successors thereof whether or not in existence at the date hereof and which
may be created after the date hereof with any regulatory authority, federal
or state, relating to the registration thereof or the issuance of units of
fractional undivided interests therein, without limitation, granting unto
said attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all
intents and purposes as he might or could do if personally present, hereby
ratifying and conforming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Signed this 26th day of June, 1995.
/s/Gordon R. Watson
Gordon R. Watson
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, director or
officer of National Financial Services Corporation, a Massachusetts
corporation, hereby constitutes and appoints David J. Pearlman, David C.
Weinstein and Arthur S. Loring, and each of them (with full power to each
of them to act alone) his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and affix his seal thereto and file one or
more Registration Statements on Form S-6 under the Securities Act of 1933,
including any amendment or amendments thereto, with all exhibits, and any
and all other documents required to be filed with respect to any series of
Fidelity Defined Trusts; any other unit investment trust sponsored by
National Financial Services Corporation and any predecessors, affiliates or
successors thereof whether or not in existence at the date hereof and which
may be created after the date hereof with any regulatory authority, federal
or state, relating to the registration thereof or the issuance of units of
fractional undivided interests therein, without limitation, granting unto
said attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all
intents and purposes as he might or could do if personally present, hereby
ratifying and conforming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Signed this 28th day of June, 1995.
/s/Shaugn Stanley
Shaugn Stanley
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, director or
officer of National Financial Services Corporation, a Massachusetts
corporation, hereby constitutes and appoints David J. Pearlman, David C.
Weinstein and Arthur S. Loring, and each of them (with full power to each
of them to act alone) his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and affix his seal thereto and file one or
more Registration Statements on Form S-6 under the Securities Act of 1933,
including any amendment or amendments thereto, with all exhibits, and any
and all other documents required to be filed with respect to any series of
Fidelity Defined Trusts; any other unit investment trust sponsored by
National Financial Services Corporation and any predecessors, affiliates or
successors thereof whether or not in existence at the date hereof and which
may be created after the date hereof with any regulatory authority, federal
or state, relating to the registration thereof or the issuance of units of
fractional undivided interests therein, without limitation, granting unto
said attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all
intents and purposes as he might or could do if personally present, hereby
ratifying and conforming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Signed this 24th day of July, 1995.
/s/Roger T. Servison
Roger T. Servison
